As filed with the Securities and Exchange Commission on April 28, 2000.
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. 12
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INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 573-9354
James H. Bluck
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
(Name and Address of Agent for Service)
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<PAGE>
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
PROSPECTUS
* * * * * * * * * * * * * *
May 1, 2000
* * * * * * * * * * * * * *
A NO-LOAD FUND
* * * * * * * * * * * * * *
PRIMARY OBJECTIVE:
Capital Appreciation
SECONDARY OBJECTIVE:
Income
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY.
THE OFFER AND SALE OF THE SECURITIES OFFERED BY MEANS OF THIS PROSPECTUS HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SHARES OF THE
FUND MAY BE OFFERED AND SOLD ONLY TO ELIGIBLE INSTITUTIONS WHOSE PRINCIPAL
OFFICES ARE LOCATED IN THE STATE OF NEW YORK AND MAY NOT BE TRANSFERRED, EXCEPT
TO ANOTHER ELIGIBLE INSTITUTION WHOSE PRINCIPAL OFFICE IS LOCATED IN THE STATE
OF NEW YORK.
This Prospectus does not constitute an offer in any state or jurisdiction
outside the State of New York.
ADDITIONAL INFORMATION AND SHAREHOLDER INQUIRIES
A current Statement of Additional Information ("SAI") which provides more detail
about the Fund is on file with the Securities and Exchange Commission as part of
the Fund's registration statement on Form N-1A. The SAI is incorporated herein
by reference, which means that it is legally considered part of this Prospectus.
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
The SAI, annual report and semi-annual report are available without charge upon
request. To obtain a copy of the current SAI, annual or semi-annual report or
other information about the Fund or to make shareholder inquiries:
Call: 800-527-3713
Write to: Shay Financial Services, Inc.
230 West Monroe Street, Suite 2810, Chicago, Illinois 60606
You may view and copy the SAI and other information about the Fund by visiting
the Securities and Exchange Commission's Public Reference Room in Washington,
DC, or by visiting the EDGAR Database on the Commission's Internet site at
http://www.sec.gov. Copies of this information may also be obtained, upon
payment of a duplicating fee, by electronic request at the following E-mail
address: [email protected], or by writing to the Commission's Public Reference
Section, Washington, DC 20549-0102. You may also call the Commission at
1-202-942-8090 for information about the operation of the Commission's Public
Reference Room.
YOU SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
PAGE PAGE
<S> <C> <C> <C>
Key Points............................ 2 Redeeming Shares...................... 10
Performance Summary................... 4 Understanding Performance............. 12
Fees and Expenses of the Fund......... 5 Dividends, Distributions and
Eligible Institutions................. 6 Federal Income Tax Status........... 12
Investment Objective and Strategies... 6 Portfolio Management.................. 13
Principal Risks....................... 7 Administrator, Transfer Agent
Share Price -- Net Asset Value........ 8 and Custodian....................... 14
Purchase of Fund Shares............... 8 Distributor........................... 14
Share Purchase Procedures............. 10
</TABLE>
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KEY POINTS
ELIGIBLE INVESTMENT FOR NEW YORK SAVINGS BANKS: The Fund is designed as an
investment vehicle for New York savings banks under Subdivision 26(e) of Section
235 of the New York Banking Law and certain other Eligible Institutions, as
defined below.
ELIGIBLE INSTITUTIONS: Shares of the Fund may be purchased and owned only by,
and may be transferred only to, Eligible Institutions that have their principal
offices within the State of New York. An "Eligible 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 federal savings association organized under the
laws of the United States, (iii) a holding company owning a majority of the
outstanding shares of such a savings bank, savings and loan association or
savings association, (iv) a life insurance department of any such savings bank,
savings and loan association or savings association, (v) a wholly- or
majority-owned subsidiary of any such savings bank, savings and loan association
or savings association, including without limitation a life insurance
subsidiary, (vi) a pension trust, fund, plan or agreement participated in by one
or more such savings banks, savings and loan associations, savings associations
or holding companies to provide retirement benefits, death benefits or
disability benefits for any or all of its or their active officers and employees
or (vii) any insurance company, including without limitation SBLI Mutual Life
Insurance Company of New York, Inc. and any of its subsidiaries or any trust or
other entity holding for the benefit of any of the foregoing or the
policyholders of any such insurance company or subsidiary.
ELIGIBLE INVESTMENTS BY THE FUND: In order to maintain the Fund as an eligible
investment for New York savings banks under Subdivision 26(e) of Section 235 of
the New York Banking Law, the Fund will invest only in securities in which a
savings bank may invest.
OBJECTIVE: The Fund's primary investment objective is to achieve capital
appreciation. The objective of income is secondary.
PRINCIPAL STRATEGIES: The Fund seeks to achieve these objectives by investing in
a diversified portfolio of equity securities consisting primarily of common
stocks of U.S.-based companies with the potential for appreciation in light of
their growth, cash flow, earnings and dividend prospects, the reasonable prices
of their securities and their potential for capital appreciation in the opinion
of the Fund's Investment Adviser. The equity securities in which the Fund
invests consist primarily of dividend-paying common stocks of
large-capitalization companies, i.e., companies with market capitalizations in
excess of $5 billion. There is no assurance that the Fund in fact will achieve
these objectives.
RISKS: All investments in equity mutual funds, like the Fund, involve risk.
Simply defined, risk is the possibility that you will lose money or not make
money. Below is a summary of the principal risk factors for the Fund.
o MARKET AND INVESTMENT RISKS. The value of the Fund's shares will fluctuate in
accordance with the value of the securities held in its portfolio. Declines
are possible in the overall stock market or in the particular securities or
types of securities held by the Fund, and it is possible to lose money as a
result of your investment.
<PAGE>
o PORTFOLIO MANAGEMENT RISKS. The Investment Adviser's skill will affect the
ability of the Fund to achieve its investment objective. The strategies
employed by the Fund may not match the performance of other strategies at
different times or under different market or economic conditions.
Accordingly, the Fund's performance for any period may differ from the
performance of the overall market or from other investments that may be
available to you.
o LIMITATIONS ON THE AMOUNT OF REDEMPTIONS. The amount that can be withdrawn
from the Fund by a shareholder on any day is limited to the greater of 2,500
shares or 10% of the total number of shares owned by the shareholder at the
time the request for redemption is made.
o REGULATORY RISKS. All of the Fund's shareholders are financial institutions
(or subsidiaries of, or holding companies for, financial institutions) that
are regulated by state and/or federal law. Changes in federal and state
regulations in effect from time to time may affect the types of securities
and other instruments in which the Fund may invest and, therefore, could
adversely affect the ability of the Fund to achieve its investment
objectives. Regulatory changes also may affect the ability of Eligible
Institutions to invest in the Fund, which could result in a reduction in the
size of the Fund and have other adverse effects on the Fund.
INVESTMENTS NOT INSURED OR GUARANTEED: An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE>
PERFORMANCE SUMMARY
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from
year-to-year over a 10-year period and by showing how the Fund's average annual
returns for one, three, five, and ten years compare to those of a broad-based
securities market index. All returns assume reinvestment of dividends. How the
Fund has performed in the past is not necessarily an indication of how the Fund
will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS (AS OF DECEMBER 31 OF EACH YEAR)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------- ------ ------ ------ ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(7.21%) 15.91% 10.23% 20.50% (0.80%) 24.90% 20.82% 28.64% 28.85% 6.51%
</TABLE>
Best Quarter: 4th Quarter, 1998 +21.31%
Worst Quarter: 3rd Quarter, 1990 -17.10%
AVERAGE ANNUAL TOTAL RETURNS (YEARS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional Investors Capital
Appreciation Fund, Inc............... 6.51% 20.86% 21.65% 14.21%
S&P 500 Index*....................... 21.04% 27.56% 28.56% 18.21%
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 Stocks,
which is a commonly recognized unmanaged price index of 500 widely held
common stocks. Unlike the Fund's returns, index returns do not reflect any
fees or expenses.
</TABLE>
<PAGE>
FEES AND EXPENSES OF THE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES (fees paid directly from your investment)............. NONE
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)*
Management Fees.................................................... 0.72%
Distribution or Service (12b-1) Fees................................. NONE
Other Expenses....................................................... 0.39%
Administration, Transfer Agent and Custodian Fees........... 0.14%
Professional and Directors' Expenses........................ 0.21%
Insurance, Printing and Miscellaneous Expenses.............. 0.04%
Total Annual Fund Operating Expenses................................. 1.11%
__________________
* Annual fund operating expense figures are for the fiscal year ended December
31, 1999, and are expressed as a percentage of the Fund's average net
assets. The expenses have been restated for purposes of this example to
reflect an increase in the fees payable to directors of the Fund.
EXAMPLE
This Example may help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated. The Example also assumes that your investment has a 5% return
each year, all dividends and distributions are reinvested and the Fund's
operating expenses described in the preceding table remain the same as a
percentage of net assets. Based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- -----------
$113 $353 $612 $1,352
<PAGE>
ELIGIBLE INSTITUTIONS
The Fund is designed as an investment vehicle for New York savings banks
under Subdivision 26(e) of Section 235 of the New York Banking Law and certain
other Eligible Institutions, as defined below. Shares of the Fund may be
purchased and owned only by, and may be transferred only to, Eligible
Institutions that are resident in the State of New York. An Eligible Institution
will be deemed to be a resident of the State of New York only if it has its
principal office within the State of New York. An "Eligible Institution" means:
o a savings bank or savings and loan association which is organized under the
laws of the State of New York,
o a federal savings association organized under the laws of the United States,
o a holding company owning a majority of the outstanding shares of such a
savings bank, savings and loan association or savings association,
o a life insurance department of any such savings bank, savings and loan
association or savings association,
o a wholly- or majority-owned subsidiary of any such savings bank, savings and
loan association or savings association, including without limitation a life
insurance subsidiary,
o a pension trust, fund, plan or agreement participated in by one or more such
savings banks, savings and loan associations, savings associations or
holding companies to provide retirement benefits, death benefits or
disability benefits for any or all of its or their active officers and
employees, or
o any insurance company, including without limitation SBLI Mutual Life
Insurance Company of New York, Inc. and any of its subsidiaries or any trust
or other entity holding for the benefit of any of the foregoing or the
policyholders of any such insurance company or subsidiary.
Federal law may further restrict the ability of certain Eligible
Institutions to invest in the Fund.
<PAGE>
Each Eligible 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 AND STRATEGIES
INVESTMENT OBJECTIVES
The primary investment objective of the Fund is to achieve capital
appreciation for its shareholders. The objective of income is secondary. There
is no assurance that the Fund will, in fact, achieve these objectives.
The Board of Directors may change the Fund's investment objectives without
shareholder approval whenever in its judgment economic or market conditions
warrant.
ELIGIBLE INVESTMENTS
In order to maintain the Fund as an eligible investment for New York
savings banks under Subdivision 26(e) of Section 235 of the New York Banking
Law, 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
<PAGE>
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.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in equity securities of U.S.-based companies
whose growth, cash flow, earnings and dividend prospects are promising and whose
securities are reasonably priced and have the potential for capital appreciation
in the opinion of its Investment Adviser. Specifically, the Investment Adviser
looks for companies with strong balance sheets and sustainable earnings growth.
In evaluating the prospects for a company's growth and earnings, the Investment
Adviser considers, among other things, the company's historical performance and
growth strategy, the growth rate of the industries in which it operates and the
markets into which it sells, the nature of its competitive environment,
technological developments and trends in market share. In attempting to
determine reasonable price levels for a company's securities, the Investment
Adviser utilizes a variety of measurement methods, including discounted cash
flow analysis of expected earnings streams and an evaluation of the company's
price-to-earnings ratio.
The equity securities in which the Fund invests consist primarily of
dividend-paying common stocks of large-capitalization companies, i.e., companies
with market capitalizations in excess of $5 billion. The Fund may invest up to
<PAGE>
25% of its assets in equity securities of smaller companies. The equity
securities in which the Fund may invest also include common stocks that do not
pay dividends, preferred stocks and corporate debt securities convertible into
common stock.
It is the Fund's policy to invest substantially all of its assets in equity
securities and, to the extent reasonably practicable, at least 80% of its assets
in common stock. At most times, the Fund holds no more liquid reserves than it
believes necessary to provide for redemptions. However, if the Fund's Investment
Adviser deems it beneficial for defensive purposes during adverse market,
economic or other conditions, and subject to restrictions, if any, imposed by
the New York Banking Law, the Fund may invest up to 100% of its assets
temporarily in non-equity securities, such as investment grade corporate bonds,
commercial paper and government securities. In taking this action, the Fund
would reduce its exposure to fluctuations and risks in the market for equity
securities and would increase its exposure to fluctuations and risks of the
market for debt securities. These defensive actions would reduce the benefit
from any upswing in the equity markets and, if the Investment Adviser does not
correctly anticipate fluctuations in the equity and debt securities markets, may
not contribute to the achievement of the Fund's investment objective.
To a limited extent, the Fund also may engage in other investment
practices.
More information about the Fund's investments and strategies is provided in
the Statement of Additional Information.
PRINCIPAL RISKS
All investments in equity mutual funds, like the Fund, involve risk. Simply
defined, risk is the possibility that you will lose money or not make money. The
principal risk factors for the Fund are discussed below. Before you invest,
please make sure you understand the risks that apply to your investment.
<PAGE>
MARKET AND INVESTMENT RISKS
The value of the Fund's shares will fluctuate in accordance with the value
of the securities held in its portfolio so that your shares, when redeemed, may
be worth more or less than their original cost. Declines are possible in the
overall stock market or in the particular securities or types of securities held
by the Fund, and it is possible to lose money as a result of your investment.
The Fund may invest up to 25% of its assets in the securities of companies
with market capitalizations of less than $5 billion. These companies carry
additional risks because their earnings tend to be less predictable, their share
prices more volatile and their securities less liquid than the securities of
larger companies.
PORTFOLIO MANAGEMENT RISKS
The Investment Adviser's skill in choosing appropriate investments for the
Fund will affect the ability of the Fund to achieve its investment objective,
and the investment strategies employed by the Fund may not match the performance
of other strategies at different times or under different market or economic
conditions. Accordingly, the Fund's performance for any period may differ from
the performance of the overall market or from other investments that may be
available to you.
REGULATORY RISKS
All of the Fund's shareholders are financial institutions (or subsidiaries
of, or holding companies for, financial institutions) that are regulated by
state and/or federal law. Changes in federal and state regulations in effect
from time to time may affect the type of securities and other instruments in
which the Fund may invest and, therefore, could adversely affect the ability of
the Fund to achieve its investment objectives.
The ability of Eligible Institutions to invest in the Fund (and the amounts
that they may invest) is subject to both federal and state regulation. Further
regulatory restrictions on the ability of Eligible Institutions to invest in the
Fund (or on the size of their investments) could result in a reduction in the
size of the Fund and an increase the Fund's expense ratio, affect the Fund's
<PAGE>
ability to achieve economies of scale, result in a reduction in the Fund's
investment returns and adversely affect the ability of the Fund to achieve its
investment objectives.
SHARE PRICE -- NET ASSET VALUE
The price of the Fund's shares is also referred to as their NET ASSET VALUE
or NAV. The net asset value per share of the Fund is determined by computing the
total value of all securities and other assets of the Fund, subtracting all of
its liabilities and then dividing by the total number of shares of the Fund
outstanding:
Net Asset Value = Total Assets - Liabilities
------------------------------
Number of Shares Outstanding
The Fund determines net asset value per share of the Fund as of 4:00 P.M.,
New York time. Shares will not be priced on days on which the New York Stock
Exchange is closed for trading.
The Fund uses market prices in valuing portfolio securities, but may use
fair value estimates if reliable market prices are unavailable.
PURCHASE OF FUND SHARES
Investors purchase shares at the Fund's next-determined net asset value
after the Fund receives your order to purchase. Orders to purchase shares are
not binding on the Fund until accepted by the Fund. The Fund reserves the right
to reject any purchase order.
Investors in the Fund pay no shareholder transaction fees, such as sales
loads or exchange fees, when purchasing shares.
PROCEDURES FOR OPENING AN ACCOUNT WITH THE FUND
Accounts with the Fund may be established by telephone. To open an account,
telephone the Fund's Distributor, Shay Financial Services Inc., at 800-527-3713.
PROCEDURES FOR PURCHASING SHARES
Eligible Institutions may submit purchase orders by telephone for their
initial investment in the Fund or any subsequent investment. To make an
investment in the Fund, follow the instructions below under the heading "SHARE
PURCHASE PROCEDURES."
<PAGE>
NEXT-DAY SETTLEMENT
The Fund permits next-day settlement for shares purchased by telephone.
Next-day settlement permits an Eligible Institution to place an order by
telephone to purchase Fund shares at the net asset value per share next
determined after receipt of the order to purchase and to deliver payment for the
order by wire transfer the following business day. Payment must be in the form
of federal funds or other immediately available funds and must be received by
The Bank of New York prior to 4:00 P.M. New York City time on the next business
day after submission of the order to purchase, or the order will be canceled.
A purchase order is binding upon the investor. If the Fund must cancel your
order because payment was not timely received, you will be responsible for the
difference between the price of the shares when ordered and the price of the
shares when the order is canceled, and for any fees or other losses and expenses
incurred by the Fund. The Fund may redeem shares from your account in an amount
equal to the amount of the difference in share price and the fees and other
losses and expenses incurred, if any, and may retain the proceeds of the
redemption in satisfaction of your liability to the Fund. You will continue to
be responsible for any deficiency. In addition, the Fund may prohibit or
restrict you from electing next-day settlement in the future or from making
future purchases of the Fund's shares.
Any funds received by the Fund in respect of a canceled purchase order will
be returned upon instructions from the sender without any liability to the Fund,
the Investment Adviser, the Distributor or the Custodian. If it is not possible
<PAGE>
to return the funds the same day, you will not have use of the funds until the
next business day when it is possible to effect the return payment. The Fund
reserves the right to reject any purchase order.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
You 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. The Fund will
so reinvest your dividends and capital gains distributions unless you make a
contrary election at the time you open your account. You may change an election
at any time prior to a record date for a dividend or distribution by notifying
the Fund in writing.
SHARE CERTIFICATES
The Fund will not issue certificates representing the Fund's shares unless
you make a request in writing directly to the Fund's Administrator. Wire and
telephone redemptions of shares held in certificate form are not permitted.
<PAGE>
SHARE PURCHASE PROCEDURES
INITIAL PURCHASE
----------------
TO OPEN AN ACCOUNT Call the Fund at 800-527-3713.
OR OBTAIN INFORMATION
MINIMUM INVESTMENT $20,000 minimum for initial investments. There is no
minimum for subsequent investments.
BY TELEPHONE 1. Call 800-527-3713 to submit a purchase order by
telephone and indicate the amount of the investment or
the number of shares you desire to purchase. All
purchases made by telephone must be paid by wire
transfer.
2. Wire funds using the wire instructions below.
Immediately available funds must be received by 4:00
P.M. New York City time on the next business day after
the order is submitted or the order will be canceled.
METHOD OF PAYMENT All payments must be made by wire transfer.
AND WIRE INSTRUCTIONS
First, call 800-527-3713 to notify the Fund that you
intend to purchase shares by wire and to verify wire
instructions. Then, wire funds care of The Bank of New
York, New York, NY:
ABA#: 021000018
A/C 8900403179
From: (NAME OF INVESTOR/SHAREHOLDER)
TIN: (SHAREHOLDER'S TAXPAYER IDENTIFICATION NUMBER)
Account Number: (INVESTOR'S ACCOUNT NUMBER IN THE FUND)
For purchase of: Institutional Investors Capital
Appreciation Fund
Amount: (AMOUNT TO BE INVESTED)
Ref. 110AF and (SHAREHOLDER NAME AND ACCOUNT NUMBER)
REDEEMING SHARES
You may withdraw any part of your account at any time by redeeming shares
(subject to the conditions and limited exceptions described below). You must
provide the Fund with certified resolutions of your Board of Directors or Board
of Trustees (or other documentation satisfactory to the Fund) identifying
persons who are authorized to effect redemptions on your behalf.
Investors in the Fund pay no shareholder transaction fees, such as
redemption fees or exchange fees, when redeeming shares.
You may make redemption requests in writing or by telephone. If share
certificates were issued to you for the shares to be redeemed, the share
certificates must accompany the redemption request. Procedures for redeeming
shares are described below.
Shares are redeemed at their net asset value per share next determined
after receipt by the Fund of the request for redemption and all other necessary
documentation, including share certificates, if any, for the shares being
redeemed, except for certain large redemptions described below under "LIMITATION
ON THE AMOUNT OF REDEMPTIONS."
<PAGE>
Redemption requests should be directed to the Fund's Distributor:
By telephone: 800-527-3713
By mail or
overnight courier Shay Financial Services, Inc.
re: Institutional Investors Capital
Appreciation Fund, Inc.
230 West Monroe Street
Suite 2810
Chicago, IL 60606
Upon the receipt of such request in proper form as described below, you
will receive from the Fund the net asset value of the redeemed shares which will
be determined in accordance with the procedures described below under
"LIMITATION ON THE AMOUNT OF REDEMPTIONS."
LIMITATION ON THE AMOUNT OF REDEMPTIONS
The amount that you can redeem from the Fund on any day is limited to the
greater of 2,500 shares or 10% of the total number of shares you own at the time
the request for redemption is made.
If a request for redemption exceeds the greater of 2,500 shares or 10% of
the total number of shares you own, the redemption price for shares up to this
limit will be the net asset value per share next determined after receipt by the
<PAGE>
Fund of the request for redemption and all other necessary documentation. The
computation of net asset value of any excess number of shares included in your
redemption notice 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 2,500 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
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.
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 BISYS. 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.
TELEPHONE REDEMPTIONS
You may redeem shares by telephone by calling the Fund at 800-527-3713.
Telephone redemption instructions must include your Institutional Investors
Capital Appreciation Fund account number and the dollar amount or number of
shares to be redeemed.
Telephone redemption requests are not available for shares for which share
certificates have been issued.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures may include, among other
things, matching the name and title of the person making a redemption request to
the list of persons authorized by the shareholder to effect transactions in its
account. The Fund reserves the right to refuse a telephone redemption if it
believes it advisable to do so. Assuming the Fund's security procedures are
followed, neither the Fund nor the Fund's Administrator, Transfer Agent or
Distributor will be responsible for the authenticity of redemption instructions
<PAGE>
received by telephone and believed to be genuine, and the investor will bear any
loss. The Fund may record all calls.
During periods of substantial economic or market change, telephone
redemptions may be difficult to complete. Shares may be redeemed by mail if you
are unable to contact the Fund by telephone.
WRITTEN REDEMPTION REQUESTS
To be in good order, written redemption requests must be signed EXACTLY as
the account is registered by ALL persons in whose names the account is held and
must include the following information and documents:
o the account number from which shares are to be redeemed,
o the dollar value or number of shares to be redeemed,
o the shareholder's phone number,
o the signatures of the account owner EXACTLY as registered on the account,
o any certificates you are holding for the shares being redeemed.
PAYMENT (WIRING) OF REDEMPTION PROCEEDS
Redemption proceeds will be wired to your bank or other account shown on
the Fund's records.
Changes in the bank account for delivery of redemption proceeds must be
made by written instructions signed by an authorized person.
EXCEPTIONS TO OBLIGATION TO REDEEM
Redemptions may be suspended, and the date of payment postponed, if:
o trading on the New York Stock Exchange is suspended or restricted,
o an emergency makes determination of net asset value or disposition of
portfolio securities not reasonably practicable, or
o the Securities and Exchange Commission by order permits suspension for the
protection of shareholders.
Redemptions also may be limited, and the date of payment postponed, as
described above under "LIMITATION ON THE AMOUNT OF REDEMPTIONS."
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
<PAGE>
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. 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 to be redeemed 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 recommenced.
REDEMPTION IN KIND
The Fund reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- 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. The Statement of Additional Information contains supplementary
details concerning redemption in kind.
UNDERSTANDING PERFORMANCE
From time to time the Fund reports performance information in the form of
total return and average annual total return. See, for example, "PERFORMANCE
SUMMARY" at page 4 of this Prospectus. Total return shows the change in the
value of an investment in the Fund over a specified period of time (such as one,
three, five or ten years), assuming reinvestment of all dividends and
distributions and after 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 period. The performance
information reported by the Fund does not take into account any federal or state
income taxes that you may pay.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX STATUS
DIVIDEND POLICY
The Fund pays dividends of net investment income, if any, quarterly. The
Fund usually makes distributions of net long-term capital gains, if any,
realized during a fiscal year in December of that fiscal year.
The Fund's dividend distribution will vary with the amount of dividend and
other investment income received, and the expenses incurred, by the Fund. In
periods of relatively low dividend and interest rates, the Fund's dividend and
interest income may not exceed the Fund's expenses, so that dividend
distributions may not occur or may be low.
TAX STATUS; TREATMENT OF DIVIDENDS, DISTRIBUTIONS, GAINS AND LOSSES
TAX STATUS OF THE FUND. The Fund has elected to qualify, and intends to
remain qualified, as a regulated investment company under Subchapter M of the
Internal Revenue Code. The Fund intends to distribute all of its net investment
income and capital gains to shareholders. Assuming that it is so qualified and
makes such distributions, the Fund will not be subject to federal income tax on
the net investment income and capital gains distributed. If the Fund failed to
qualify as a regulated investment company or failed to meet certain 90%
distribution requirements, it would be taxed as an ordinary corporation. Even if
it meets these qualifications, if the Fund did not distribute 98% of its
ordinary income and 98% of its capital gain net income, it would be subject to a
non-deductible 4% excise tax on the amount required to be but not distributed.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. 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 non-corporate shareholders will be taxable
as long-term capital gains to such shareholders, whether or not reinvested and
regardless of the length of time a shareholder has owned its shares. Long-term
capital gains earned by corporate shareholders will be taxed at the same rate as
ordinary income. A portion of dividends paid from net investment income
attributable to dividends from domestic corporations 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.
<PAGE>
The Fund expects to pay dividends quarterly and capital gain distributions
annually, but there can be no assurance that there will be such dividends or
distributions. Dividends or capital gains distributions declared in October,
November or December with a record date in such a month and paid during the
following January will be taxable as if received by shareholders on December 31
of the calendar year in which such dividends or distributions are declared. 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.
Shareholders buying shares immediately prior to a distribution should note
that the distribution will be taxable to them even though the price of the
shares will have included the amount of the forthcoming distribution.
TAXATION OF GAINS AND LOSSES UPON SALE OR REDEMPTION. Any gain or loss
realized upon a sale or redemption of Fund shares held as capital assets by a
non-corporate shareholder will generally be treated as long-term capital gain or
loss subject to tax at a maximum rate of 20% 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.
OTHER. You should consult your own tax advisers for specific questions
about the federal, state or local income tax implications of an investment in
the Fund.
PORTFOLIO MANAGEMENT
INVESTMENT ADVISER
Shay Assets Management, Inc. (the "Investment Adviser") makes the
investment decisions for the Fund, subject to policies established by the Fund's
Board of Directors, and is responsible for placing purchase and sale orders for
portfolio securities and other investments.
<PAGE>
Shay Assets Management, Inc. is a registered investment adviser under the
Investment Advisers Act of 1940 and serves as investment adviser to Asset
Management Fund, a registered investment company comprising five fixed-income
portfolios with aggregate net assets of approximately $1.1 billion at December
31, 1999, and as investment adviser to M.S.B. Fund, Inc., which had net assets
at December 31, 1999, of approximately $68 million.
The Investment Adviser's principal office is located at 230 West Monroe
Street, Chicago, Illinois 60606. The Investment Adviser is controlled by Rodger
D. Shay, who is a Vice President of the Fund. Shay Assets Management, Inc.,
together with its predecessor, Shay Assets Management Co., has served as the
Fund's investment adviser since May 19, 1995.
INVESTMENT ADVISER'S FEE
The Fund pays the Investment Adviser a graduated investment management fee.
The fee is 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
to the extent the expenses of the Fund (exclusive of legal, audit and directors'
fees) exceed 1.10% of the Fund's average daily net assets during any fiscal
year. This limitation did not result in any reduction of the Investment
Adviser's fee during 1999. The total amount paid by the Fund in 1999 in respect
of investment advisory services was 0.72% of the Fund's average net assets.
PORTFOLIO MANAGERS
The individuals with primary responsibility for the management of the
Fund's portfolio are John J. McCabe and Mark Trautman. Mr. McCabe and Mr.
Trautman have been responsible for the Fund's investments since 1991 and 1993
respectively, first as employees of the Fund's prior investment adviser,
Nationar, and currently as Portfolio Managers of Shay Assets Management, Inc.
Mr. McCabe is Senior Vice President of the Investment Adviser and joined
the Investment Adviser in May 1995. Mr. McCabe previously served as Senior Vice
President and Chief Investment Officer of Nationar, the Fund's former investment
adviser, from August 1991 through May 1995, and in that capacity had
responsibility for the Fund's investments. Mr. McCabe is a director and past
President of the New York Society of Security Analysts, a past director of the
<PAGE>
Financial Analysts Federation and a member and founding Governor of The
Association for Investment Management and Research.
Mr. Trautman is Vice President of the Investment Adviser and joined the
Investment Adviser in May 1995. Prior to May 20, 1995, Mr. Trautman served as
Director of Mutual Funds Investment for the Fund's former investment adviser,
Nationar, and in that capacity had responsibility for the Fund's investments. He
also has served as Portfolio Manager for M.S.B. Fund, Inc. since March 1993.
From January 1992 through March 1993 he served as Senior Equity Analyst for the
two funds.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
ADMINISTRATOR AND TRANSFER AGENT. The Fund appointed BISYS Fund Services
Ohio, Inc. ("BISYS" or the "Administrator"), 3435 Stelzer Road, Columbus, Ohio
<PAGE>
43219, as its administrator effective August 1, 1999. BISYS also serves as the
transfer agent and registrar and dividend paying agent for the Fund's shares.
CUSTODIAN. The Bank of New York ("BONY" or the "Custodian"), New York, New
York, is the custodian of the Fund's investments.
DISTRIBUTOR
Shay Financial Services, Inc. (the "Distributor") acts as the distributor
of the Fund. The Distributor's principal office is located at 230 West Monroe
Street, Chicago, Illinois 60606. The Distributor is controlled by Rodger D.
Shay, a Vice President of the Fund. The Fund has authorized the Distributor 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 for these activities.
<PAGE>
INSTITUTIONAL
INVESTORS
CAPITAL
APPRECIATION
FUND, INC.
-----------------------------------------
| |
PRIMARY OBJECTIVE: | STATEMENT OF ADDITIONAL |
Capital Appreciation | INFORMATION |
| |
| May 1, 2000 |
SECONDARY OBJECTIVE: | |
Income | |
| This Statement of Additional |
| Information is not a prospectus. |
THE OFFER AND SALE OF THE | You should read this document in |
SECURITIES OFFERED BY MEANS OF | conjunction with the Prospectus of |
THIS STATEMENT OF ADDITIONAL | the Fund, dated May 1, 2000. This |
INFORMATION HAVE NOT BEEN | document incorporates by reference |
REGISTERED UNDER THE SECURITIES | the Prospectus and the financial |
ACT OF 1933, AS AMENDED. SHARES | statements, accompanying notes and |
OF THE FUND MAY BE OFFERED AND | report of independent auditors |
SOLD ONLY TO ELIGIBLE | appearing in the Annual Report. |
INSTITUTIONS WHOSE PRINCIPAL | You may obtain a copy of the |
OFFICES ARE LOCATED IN THE STATE | Prospectus and the Annual Report |
OF NEW YORK AND MAY NOT BE | from the Fund without charge at |
TRANSFERRED, EXCEPT TO ANOTHER | the above address or by calling |
ELIGIBLE INSTITUTION WHOSE | 800-527-3713. |
PRINCIPAL OFFICE IS LOCATED IN | |
THE STATE OF NEW YORK. | |
| |
------------------------------------------
<PAGE>
CONTENTS
PAGE
The Fund............................................................. 1
Investment Objective, Policies, and Risks............................ 1
Investment Objectives............................................. 1
Risks............................................................. 1
Investments under Abnormal Market Conditions...................... 2
Fundamental Investment Policies-- Investment Restrictions
Regarding Portfolio Securities................................. 2
Other Investment Restrictions..................................... 3
Issuance of Senior Securities..................................... 3
Writing Covered Call Options...................................... 4
Portfolio Turnover................................................ 5
Purchase and Redemption of Shares.................................... 6
Performance Information.............................................. 8
Income Tax Status, Dividends and Distributions....................... 8
Officers and Directors of the Fund................................... 9
Certain Other Affiliations and Business Relationships............. 15
Compensation of Directors and Officers............................ 15
Management Ownership of Fund Securities........................... 17
Control Persons and Principal Holders of Securities.................. 17
Code of Ethics....................................................... 18
Investment Advisory and Other Services............................... 18
Investment Adviser................................................ 19
Administrator, Transfer Agent and Custodian....................... 20
Distributor....................................................... 20
Independent Auditors................................................. 21
Purchase and Sale of Portfolio Securities............................ 21
Expenses of the Fund................................................. 22
Description of Capital Stock......................................... 22
General Information.................................................. 23
Financial Statements................................................. 23
<PAGE>
THE FUND
Institutional Investors Capital Appreciation Fund, Inc. (the "Fund")
is a diversified, open-end management investment company. The Fund was
incorporated under the laws of the State of New York on October 29, 1952.
INVESTMENT OBJECTIVES, POLICIES, AND RISKS
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 common stocks
of companies whose growth, earnings and dividend prospects are promising and
whose securities are reasonably priced and have potential for capital
appreciation, in the opinion of its investment adviser.
RISKS
All investments in equity mutual funds, like the Fund, involve risk.
MARKET AND INVESTMENT RISKS. The value of the Fund's shares will
fluctuate in accordance with the value of the securities held in its portfolio
so that your shares, when redeemed, may be worth more or less than their
original cost. Declines are possible in the overall stock market or in the
particular securities or types of securities held by the Fund.
The Fund may invest up to 25% of its assets in the securities of
companies with market capitalizations of less than $5 billion. These companies
carry additional risks because their earnings tend to be less predictable, their
share prices more volatile and their securities less liquid than the securities
of larger companies.
Investments in mutual funds are not bank deposits and are not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund may invest from time-to-time in convertible debt securities
and may, under abnormal market conditions, invest up to 100% of its assets in
fixed income securities. See "INVESTMENTS UNDER ABNORMAL MARKET CONDITIONS" in
this Statement of Additional Information. Investments in fixed income securities
expose the Fund to the risk that interest or principal may not be paid in a
timely manner. In addition, prices of fixed income securities tend to move
inversely with changes in interest rates. An increase in interest rates will
result in a drop in the prices of fixed income securities, which could adversely
affect the Fund's share price.
PORTFOLIO MANAGEMENT RISKS. The Investment Adviser's skill in
choosing appropriate investments for the Fund will affect the ability of the
Fund to achieve its investment objective, and the investment strategies employed
by the Fund may not match the performance of other strategies at different times
or under different market or economic conditions. Accordingly, the Fund's
performance for any period may differ from the performance of the overall market
or from other investments that may be available to you.
<PAGE>
INVESTMENTS UNDER ABNORMAL MARKET CONDITIONS
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in equity securities. However, if the Fund's
Investment Adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in short-term non-equity securities, such as investment grade
corporate bonds, commercial paper and government securities. In taking this
action, the Fund would reduce its exposure to fluctuations and risks in the
market for equity securities and would increase its exposure to fluctuations and
risks of the market for debt securities. These defensive actions would reduce
the benefit from any upswing in the equity markets and, if the Investment
Adviser does not correctly anticipate fluctuations in the equity and debt
securities markets, may not contribute to the achievement of the Fund's
investment objective.
FUNDAMENTAL INVESTMENT POLICIES -- INVESTMENT RESTRICTIONS REGARDING PORTFOLIO
SECURITIES
The following restrictions are fundamental policies and cannot be
changed without approval of a majority of the Fund's outstanding voting
securities. As a matter of fundamental policy, the Fund may not:
o 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;
o 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;
o 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;
o invest in any issuer for the purpose of exercising control of
management;
o underwrite securities of other issuers;
o purchase or sell real estate or real estate mortgage loans;
o deal in commodities or commodities contracts;
o 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);
o 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;
o 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
<PAGE>
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;
o 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
o 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.
OTHER INVESTMENT RESTRICTIONS
In addition to the restrictions identified above as "Fundamental
Policies", the Fund may not:
o 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;
o 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)
<PAGE>
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;
o participate on a joint or joint and several basis in any trading
account in securities; or
o invest in the securities of issuers which, together with any
predecessors, have a record of less than three years of continuous
operation.
ISSUANCE OF SENIOR SECURITIES
The Fund does not issue senior securities, except that it may borrow
money for temporary administrative or liquidity (but not leveraging) purposes,
as described above under "FUNDAMENTAL INVESTMENT POLICIES." The Fund may borrow
only from banks up to an amount not in excess of 5% of the value of the Fund's
total assets at the time of the loan, repayable in not more than 60 days. This
policy is a fundamental investment policy of the Fund and may not be altered,
amended, or repealed except as authorized by the vote of a majority of the
outstanding shares of the Fund.
WRITING COVERED CALL OPTIONS
COVERED CALL OPTIONS. The Fund may engage in writing (i.e., 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
purchaser exercises the option. 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, 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). If the price of XYZ
declined to $40 per share the call would likely not 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 the Fund writes an option, 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
<PAGE>
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.
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. In general, brokerage commissions associated with buying
and selling call options are higher than those associated with other securities
transactions.
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
turnover rate, and the Fund believes 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. The Board of Directors may change these
restrictions whenever such changes appear to be in the best interest of the
Fund.
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 annual
portfolio turnover rate was 27%, 22% and 20% in 1997, 1998 and 1999,
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 the Fund's
investment objectives and policies in the light of market conditions require
more frequent trades.
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
PROCEDURE FOR PURCHASING AND REDEEMING SHARES. Shares are purchased
through the Fund's Distributor, Shay Financial Services, Inc., or by sending
money directly to the Fund. Procedures for purchasing and selling shares are
described in the Prospectus.
PURCHASE AND REDEMPTION AT NET ASSET VALUE. Investors may purchase
shares of the Fund at the Fund's net asset value per share next determined after
receipt of an order for purchase as described in the Prospectus.
Investors may redeem shares of the Fund at the Fund's net asset
value per share. However, the amount that can be redeemed from the Fund by a
shareholder on any day is limited to the greater of 2,500 shares or 10% of the
total number of shares owned by the shareholder at the time the request for
redemption is made.
If a request for redemption exceeds the greater of 2,500 shares or
10% of the total number of shares owned by the shareholder, the redemption price
for shares up to this limit will be the net asset value per share next
determined after receipt by the Fund of the request for redemption and all other
necessary documentation. 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 2,500 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 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.
DETERMINATION OF NET ASSET VALUE. Net asset value per share of the
Fund is determined as of 4:00 P.M., New York time. The Fund computes its net
asset value once daily on days the New York Stock Exchange is open for trading.
Purchase orders received prior to 4:00 P.M., New York time, on a trading day are
executed at the net asset value per share computed as of 4:00 P.M., New York
time, on such day. Orders received after 4:00 P.M., New York time, on a trading
day or on a day which is not a trading day are executed at the net asset value
per share computed as of 4:00 P.M., New York time, on the next trading day.
The net asset value per share of the Fund is determined by computing
the total value of all securities and other assets of the Fund, subtracting all
of its liabilities and then dividing by the total number of shares of the Fund
outstanding. For purposes of such computation, a security listed on a national
securities exchange or 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 will be valued at the mean of the last bid and asked
prices on such day on such exchange or system.
<PAGE>
Securities not listed on a national securities exchange or on the
NASDAQ National Market System but traded in an over-the-counter market are
valued at the average 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, which the Board of Directors
has determined to be fair 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 is 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.
PROCEDURE FOR PURCHASING AND REDEEMING SHARES. Shares are purchased
through the Fund's Distributor, Shay Financial Services, Inc., or by sending
money directly to the Fund. Procedures for purchasing and selling shares are
described in the Prospectus.
REDEMPTION IN KIND. The Fund reserves the right to make redemption
payments, in whole or in part, in kind, in securities or other assets of the
Fund. Payment in kind will be made only 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. In making a redemption in kind, the Fund reserves the right to
select from each portfolio holding a number of shares which will reflect the
portfolio make-up and the value of which (determined on the same basis used to
compute the net asset value of the shares being redeemed) will approximate the
value of the Fund shares being redeemed or to select from one or more portfolio
investments shares approximately equal in value to the total value of the Fund
shares being redeemed. Any shortfall will be made up in cash. Whenever delivery
of securities or other assets is to be made for a redemption in kind, 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 the Fund may require.
Investors receiving an in-kind redemption payment will incur a
brokerage charge on the disposition of the securities through a broker.
<PAGE>
PERFORMANCE INFORMATION
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,
1999, and the average annual total return for such periods.
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
TOTAL RETURN DATA
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1999
-------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- --------- --------- ----------
<S> <C> <C> <C> <C>
Total Return.................... 6.51% 76.54% 166.40% 277.47%
Average Annual Total Return..... 6.51% 20.86% 21.65% 14.21%
</TABLE>
Total return shows the percentage change in the value of an
investment in the Fund over the specified periods, 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. For example, as indicated in the table above, a 21.65%
average annual rate of return would produce a total return of 166.40% over a
five-year period. The performance information reported above does not take into
account any federal or state income taxes that may be payable by an investor.
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. Comparisons
of total returns on a year-to-year basis may facilitate an understanding of how
changing market conditions affect the Fund. 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.
INCOME TAX STATUS, DIVIDENDS AND DISTRIBUTIONS
The Fund has elected to qualify, and intends to remain qualified, as
a regulated investment company under Subchapter M of the Internal Revenue Code.
It is the Fund's policy to distribute all of its net investment income (income
from dividends and interest, less expenses) and net short-term capital gain, if
any, as ordinary 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. If the Fund should fail to qualify for
Subchapter M status, it would be subject to federal corporate income tax on its
net investment income and capital gains. In addition, distributions to
shareholders would be taxed as corporate dividends at ordinary income rates. No
portion of the dividends would be afforded capital gains treatment. In the event
the Fund fails to distribute to shareholders in a calendar year an amount equal
<PAGE>
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
non-deductible 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 dividends paid by the Fund out of
qualifying 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 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 dividends will be eligible for the 70%
dividends-received deduction. 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.
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. 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.
OFFICERS AND DIRECTORS OF THE FUND
The directors of the Fund, in addition to reviewing the actions of
the Fund's Investment Adviser, decide upon matters of general policy at their
regular meetings. The Fund's officers supervise the business operations of the
Fund.
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, their positions with the Fund, 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>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- ------------------------ -----------------------------------------
<S> <C> <C>
HARRY P. DOHERTY (Age 57)*+ President, Director Chairman of the Board and Chief Executive Officer,
15 Beach Street (2003) Staten Island Bancorp, Inc., and Chairman and Chief
Staten Island, NY 10304 Executive Officer of its principal subsidiary, Staten
Island Savings Bank.
JOSEPH L. MANCINO (Age 62)* Executive Vice Chairman of the Board and Chief Executive Officer, The
1400 Old Northern Boulevard President, Roslyn Savings Bank.
Roslyn, NY 11576 Director (2001)
MICHAEL R. KALLET (Age 49)* Vice President, President and Chief Executive Officer, Oneida Savings
182 Main Street Director (2002) Bank.
Oneida, NY 13421
RALPH F. BROUTY (Age 70) Director Former Chairman of the Board and Chief Executive
111 Clinton Street (2003) Officer, Watertown Savings Bank.
Watertown, NY 13601
ROBERT P. CAPONE (Age 45) Director Chairman of the Board, President and Chief Executive
10 Bank Street (2002) Officer, Community Mutual Savings Bank.
White Plains, NY 10606
TIMOTHY A. DEMPSEY (Age 66) Director Chairman of the Board and Chief Executive Officer,
18 Oakland Avenue (2001) Warwick Community Bancorp, Inc. and Chairman of the
P.O. Box 591 Board and Chief Executive Officer of its principal
Warwick, NY 10990-0501 subsidiary, The Warwick Savings Bank.
JOSEPH R. FICALORA (Age 53) Director Chairman, President and Chief Executive Officer, Queens
38-25 Main Street (2001) County Bancorp, Inc. and President of Queens County
Flushing, NY 11354 Savings Bank, its principal subsidiary.
</TABLE>
______________________
* These directors are regarded as interested persons under the Investment
Company Act of 1940 by virtue of their positions as officers of the Fund.
+ This director may be regarded as an "interested person" under the
Investment Company Act of 1940 because he is a director of America's
Community Bankers. See "CERTAIN OTHER AFFILIATIONS AND BUSINESS
RELATIONSHIPS."
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- ------------------------ -----------------------------------------
<S> <C> <C>
CHRIS C. GAGAS (Age 69) Director Chairman of the Board, PathFinder Bank.
214 West First Street (2002)
Oswego, NY 13126
STEPHEN J. KELLY (Age 46) Director President and Chief Executive Officer, Rhinebeck
23 Montgomery Street (2003) Savings Bank.
Rhinebeck, NY 12572
CLIFFORD E. KELSEY, JR. Director Director and former President and Chief Executive
(Age 67) (2001) Officer, Goshen Savings Bank.
1 South Church Street
Goshen, NY 10924
ROBERT E. KERNAN, JR. (Age 57) Director Chairman of the Board, President and Chief Executive
19 Cayuga Street (2002) Officer, The Seneca Falls Savings Bank.
Seneca Falls, NY 13148
WILLIAM A. McKENNA, JR. Director Chairman of the Board, President and Chief Executive
(Age 63) (2003) Officer, Ridgewood Savings Bank.
71-02 Forest Avenue
Ridgewood, NY 11385
CLIFFORD M. MILLER (Age 58) Director Chairman of the Board, President and Chief Executive
180 Schwenk Drive (2002) Officer, Ulster Savings Bank.
Kingston, NY 12401
VINCENT F. PALAGIANO (Age 59) Director Chairman of the Board and Chief Executive Officer, The
209 Havemeyer Street (2003) Dime Savings Bank of Williamsburgh.
Brooklyn, NY 11211
CHARLES M. SPROCK (Age 60) Director Chairman of the Board, President and Chief Executive
100 West Dominick Street (2001) Officer, The Rome Savings Bank.
Rome, NY 13340
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- ------------------------ -----------------------------------------
<S> <C> <C>
RODGER D. SHAY (Age 63) Vice President and Mr. Shay has been Chairman and the sole director of the
1000 Brickell Avenue Assistant Secretary Fund's investment adviser, Shay Assets Management, Inc.,
Miami, FL 33131 since November 1997 and previously served as its President
and as a director from 1990 to 1997. Mr. Shay also has
served as Chairman and the sole director of the Fund's
distributor, Shay Financial Services, Inc., since November
1997 and previously served as its President and as a
director from 1990 to 1997. Mr. Shay held similar
positions with Shay Assets Management Co. and Shay
Financial Services Co., which served as the Fund's
investment adviser and distributor, respectively, from
1995 through December 1997. Mr. Shay has been the
Chairman, sole director and President of Shay Investment
Services, Inc., an enterprise which owns 100% of Shay
Assets Management, Inc., and Shay Financial Services,
Inc., since 1990. He serves or has previously served in
the following capacities: Chairman and a Director, Asset
Management Fund, a registered investment company; Vice
President and Assistant Secretary of M.S.B. Fund, Inc., a
registered investment company; and Director, First Home
Savings Bank, S.L.A. since 1990. 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- ------------------------ -----------------------------------------
<S> <C> <C>
EDWARD E. SAMMONS, JR. Vice President and Mr. Sammons has been President of the Fund's investment
(Age 60) Secretary adviser, Shay Assets Management, Inc., since November 1997
230 West Monroe Street and previously served as its Executive Vice President from
Suite 2810 1990 to 1997. Mr. Sammons also has served as Executive
Chicago, IL 60606 Vice President of the Fund's distributor, Shay Financial
Services, Inc., since 1990. He also held the position of
Executive Vice President with Shay Assets Management Co.
and Shay Financial Services Co. from 1990 through December
1997. These companies served as the Fund's investment
adviser and distributor, respectively, from 1995 through
December 1997. Mr. Sammons has served as Executive Vice
President of Shay Investment Services, Inc., since
September 1990. He serves or has previously served in the
following capacities: President and Treasurer of Asset
Management Fund, a registered investment company; Vice
President and Secretary of M.S.B. Fund, 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.
JOHN J. MCCABE (Age 56) Vice President Mr. McCabe has been a Senior Vice President of Shay Assets
200 Park Avenue, 45th Floor Management, Inc. since June 1995 and held the comparable
New York, NY 10166 position with Shay Assets Management Co. through December
1997. From August 1991 through May 1995, he was Senior
Vice President and Chief Investment Officer of Nationar.
He also serves as a Vice President of M.S.B. Fund, Inc. He
previously 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE AND ADDRESS OF TERM AS A DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- --------------------- ------------------------ -----------------------------------------
<S> <C> <C>
MARK F. TRAUTMAN (Age 34) Vice President Mr. Trautman has been a Vice President of Shay Assets
200 Park Avenue, 45th Floor Management, Inc. since June 1995 and held the comparable
New York, NY 10166 position with Shay Assets Management Co. through December
1997. He 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 a Vice President and Portfolio Manager for
M.S.B. Fund, Inc. 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. He is also
a member of The New York Society of Security Analysts and
The Association for Investment Management and Research.
STEVEN D. PIERCE (Age 34) Treasurer Mr. Pierce has been Director of Financial Services of
3425 Stelzer Road BISYS Fund Services, Inc. since 1998. Mr. Pierce also
Columbus, OH 43219 serves as Treasurer of M.S.B. Fund, Inc. and Asset
Management Fund and as an officer to other mutual funds
registered under the Investment Company Act of 1940 who
are clients of BISYS. From 1996 to 1998, Mr. Pierce was
the Manager of Financial Operations at CNA Insurance. From
1994 to 1996, he was a Trust Officer at First Chicago NBD
Corporation. From 1989 to 1994, he was a Senior Financial
Accountant at Kemper Financial Services.
ALAINA V. METZ (Age 33) Assistant Secretary Ms. Metz has been the Chief Administrative Officer of the
3425 Stelzer Road Blue Sky Compliance Department at BISYS Fund Services,
Columbus, OH 43219 Inc. since 1995. Ms. Metz also serves as Assistant
Secretary of M.S.B. Fund, Inc. and Asset Management Fund.
From 1989 to 1995, Ms. Metz served as Supervisor for
Alliance Capital Management, L.P.
</TABLE>
<PAGE>
Harry P. Doherty, Timothy A. Dempsey, Joseph R. Ficalora and William
A. McKenna also 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 Pierce and Ms. Metz also
are officers of M.S.B. Fund, Inc. Ms. Metz also is an officer of Asset
Management Fund, a registered investment company affiliated with the Fund by
virtue of having a common investment adviser.
The Fund has an Executive Committee, composed of Messrs. Doherty,
Kallet, Mancino and McKenna, which meets from time to time, as necessary,
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 the intervals between meetings of the Board of
Directors.
Each of the directors of the Fund is an officer or director of an
Eligible Institution or of a holding company which controls one or more Eligible
Institutions. Any of such Eligible 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 Institutions are not
restricted by the Fund as to the number of shares of the Fund that they may
purchase or hold. (See "CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.")
Messrs. Clifford M. Miller, Harry P. Doherty and Joseph L. Mancino
are directors of SBLI Mutual Insurance Company of New York, which as of March
31, 2000, owned approximately 8% of the outstanding shares of the Fund.
CERTAIN OTHER AFFILIATIONS AND BUSINESS RELATIONSHIPS
Certain officers and directors of the Fund are also officers,
employees, directors or shareholders of Shay Assets Management, Inc. ("SAMI")
and Shay Financial Services, Inc. ("SFSI"). Messrs. Rodger D. Shay, Edward E.
Sammons, Jr., John J. McCabe and Mark F. Trautman, who are officers of the Fund,
are officers and employees of SAMI. Mr. Shay is the sole director of SAMI, SFSI
and Shay Investment Services, Inc. ("SISI"), which is the sole stockholder of
SAMI and SFSI. Mr. Shay also is the majority stockholder of SISI.
Harry P. Doherty, who is a director of the Fund, also is a director
of America's Community Bankers (the "Association"), which, prior to December
1997, owned a 50% interest in the Fund's Investment Adviser. The Association and
its affiliates receive certain royalty and other payments from SISI and its
affiliates.
COMPENSATION OF DIRECTORS AND OFFICERS
Directors of the Fund receive compensation for their services as
directors of the Fund consisting of:
o a $10,000 annual retainer per director, payable in four quarterly
installments
o a per-meeting fee of $1,000 for each meeting of the Board of Directors
attended in person
<PAGE>
o a per-meeting fee of $250 for each meeting of a Board committee
attended in person on a date on which a meeting of the Board of
Directors is not held.
The Board of Directors holds its regular meetings quarterly. Directors do not
receive any additional fee for telephonic meetings. Directors are also
reimbursed for reasonable expenses incurred in attending meetings or otherwise
incurred in connection with their attention to the affairs of the Fund.
In recognition of the additional responsibilities and duties
performed by the President of the Fund, the President receives an additional
annual retainer of $2,000, payable in four quarterly installments, which is in
addition to the 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.
No pension or retirement benefits are paid to directors, advisory board members,
or executive officers.
The total compensation paid to the directors and officers for
service during 1999 was $62,500.00. The total amount of expenses incurred during
1999 for which the directors were reimbursed was $9,074.58. The Fund does not
provide officers or directors, directly or indirectly, with any pension or
retirement benefits.
The following table sets forth the aggregate compensation received
by each director of the Fund from the Fund and any other investment company
having the same Investment Adviser for services as a director or officer during
1999. Such compensation does not include reimbursements to the directors for
their expenses incurred in connection with their activities as directors.
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL COMPENSATION FROM
THE FUND AND AND FUND
AGGREGATE COMPENSATION COMPLEX (3 FUNDS) PAID TO
NAME OF DIRECTOR FROM THE FUND DIRECTORS
- ---------------- -------------------------- ------------------------------
<S> <C> <C>
Ralph F. Brouty $4,250 $4,250
Robert P. Capone $3,750 $3,750
Timothy A. Dempsey $4,250 $9,250 (1)
Harry P. Doherty $5,750 $10,750 (1)
Joseph R. Ficalora $1,750 $8,250 (1)
Chris C. Gagas $4,250 $4,250
Edward P. Henson* $1,250 $1,250
Michael R. Kallet $4,250 $4,250
Stephen J. Kelly $4,250 $4,250
Clifford E. Kelsey, Jr. $4,250 $4,250
Robert E. Kernan, Jr. $3,750 $3,750
Joseph L. Mancino $4,250 $4,250
William A. McKenna, Jr. $4,250 $8,750 (1)
Clifford M. Miller $3,000 $3,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL COMPENSATION FROM
THE FUND AND AND FUND
AGGREGATE COMPENSATION COMPLEX (3 FUNDS) PAID TO
NAME OF DIRECTOR FROM THE FUND DIRECTORS
- ---------------- -------------------------- ------------------------------
<S> <C> <C>
Vincent F. Palagiano $4,250 $4,250
Charles M. Sprock $4,250 $4,250
John M. Tsimbinos* $750 $750
</TABLE>
________________
(1) Includes compensation received as a director or officer of one other
investment company having the same Investment Adviser as the Fund.
* Retired as a director effective April 1999.
MANAGEMENT OWNERSHIP OF FUND SECURITIES
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 Institution, and it is expected that such Eligible Institutions may,
from time to time, purchase shares of the Fund. All such directors disclaim
beneficial ownership of any such shares. The Eligible Institutions with which
the directors are affiliated owned approximately 98.66% of the outstanding
shares of the Fund at March 31, 2000.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2000, Staten Island Bancorp, directly or indirectly
through its subsidiary Staten Island Savings Bank, 15 Beach Street, Staten
Island, New York, owned approximately 30% of the outstanding shares of the Fund.
As a result of such ownership, Staten Island Bancorp, which is organized as a
New York savings bank, is deemed to be a controlling person of the Fund. Staten
Island Bancorp's holding, if it were maintained on the record date of any
meeting of shareholders of the Fund, would enable Staten Island Bancorp 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 Bancorp to determine the
outcome of each such vote. Harry P. Doherty, who is Chairman and Chief Executive
Officer of Staten Island Bancorp, also is a director and the President of the
Fund.
<PAGE>
As of March 31, 2000, 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, directly or indirectly through subsidiaries:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OWNERSHIP
- ---------------- --------------------
<S> <C>
Staten Island Bancorp 30%
15 Beach Street
Staten Island, NY 10304
Ridgewood Savings Bank 18%
71-02 Forest Avenue
Ridgewood, NY 11385
Watertown Savings Bank 9%
111 Clinton Street
Watertown, NY 13601
The Roslyn Savings Bank 8%
1400 Old Northern Boulevard
Roslyn, NY 11576
SBLI Mutual Insurance Company of New York 8%
460 West 34th Street
New York, NY 10001
</TABLE>
CODE OF ETHICS
The Fund, the Investment Adviser and the Distributor have adopted a
joint Code of Ethics that governs the conduct of employees of the Fund, the
Investment Adviser and the Distributor who may have access to information about
the Fund's securities transactions. The Code recognizes that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests of
shareholders ahead of their own interests. Among other things, the Code requires
pre-clearance of trading of initial public offerings and limited offerings by
investment personnel and requires reporting of personal securities transactions.
Violations of the code are subject to review by the directors and could result
in penalties.
INVESTMENT ADVISORY AND OTHER SERVICES
Shay Assets Management, Inc. serves as the Investment Adviser of the
Fund; BISYS Fund Services Ohio, Inc. serves as its administrator and transfer
agent; and The Bank of New York is the custodian for the Fund.
<PAGE>
INVESTMENT ADVISER
Shay Assets Management, Inc. (the Fund's "Investment Adviser") makes
investment decisions for the Fund and is responsible for placing purchase and
sale orders for portfolio securities and other investments. Under the investment
advisory agreement between the Investment Adviser and the Fund (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, such as 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. These limitations did not result in any reduction of the Investment
Adviser's fee in 1999. The total amounts paid by the Fund for the years ended
December 31, 1997, 1998 and 1999, respectively, in respect of investment
advisory services were $621,810, $777,312, and $840,430, respectively,
representing 0.75%, 0.74% and 0.72% of the Fund's average daily net assets
(after all fee reductions and expense limitations). The Investment Adviser pays
for the Fund's legal counsel to prepare the minutes of meetings of the Board of
Directors and its committees to the extent not prepared by the Fund's
administrator.
The Investment Adviser is a registered investment adviser under the
Investment Advisers Act of 1940 and serves as investment adviser to Asset
Management Fund, a registered investment company comprising five fixed-income
portfolios with aggregate net assets of approximately $1.1 billion at December
31, 1999, and M.S.B. Fund, Inc., a registered investment company with net assets
of approximately $68 million as of December 31, 1999.
The Investment Adviser, Shay Assets Management, Inc., is a Florida
corporation that is controlled by Rodger D. Shay. The Investment Adviser is a
wholly-owned subsidiary of Shay Investment Services, Inc., which is the holding
company for the Fund's Investment Adviser and Distributor and certain other
related companies engaged primarily in securities-related businesses. Rodger D.
Shay is the majority stockholder of Shay Investment Services, Inc. The
Investment Adviser's principal office is located at 230 West Monroe Street,
Suite 2810, Chicago, Illinois 60606.
Shay Assets Management, Inc. (together with its predecessor, Shay
Assets Management Co.) has served as the Fund's Investment Adviser since May 19,
1995. The Fund's current Investment Advisory Agreement with Shay Assets
Management, Inc. was approved by the shareholders of the Fund on November 13,
1997.
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 (i) a breach of
<PAGE>
fiduciary duty with respect to the receipt of compensation for services, (ii) a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or (iii) 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 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.
Certain directors and officers of the Fund are directors, officers
or employees of the Investment Adviser and its affiliates. See "OFFICERS AND
DIRECTORS OF THE FUND."
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
BISYS Fund Services Ohio, Inc. ("BISYS"), 3435 Stelzer Road,
Columbus, Ohio 43219, is the Fund's administrator. Pursuant to the terms of the
Administration and Fund Accounting Agreements between the Fund and BISYS, BISYS
performs various administrative services for the Fund, including (i) maintenance
of the Fund's 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.
The Fund pays BISYS for its services 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. Prior to August 1, 1999, PFPC, Inc. ("PFPC") served as
the Fund's administrator. The amounts paid to PFPC for such services for the
years ended December 31, 1997 and 1998, were $84,732 and $105,462, respectively.
The amount paid to PFPC during 1999 was $69,572. The amount paid to BISYS for
the period ended December 31, 1999 was $48,520. BISYS has served as the Fund's
administrator and fund accountant since August 1, 1999, and as the Fund's
transfer agent since September 13, 1999. Certain employees of BISYS also are
officers of the Fund. See "OFFICERS AND DIRECTORS OF THE FUND."
CUSTODIAN. The Bank of New York ("BONY"), One Wall Street, New York,
New York, is the custodian of the Fund's investments. BONY has served as the
Fund's custodian since July 30, 1999.
DISTRIBUTOR
Shay Financial Services, Inc. (the "Distributor") is the distributor
of the Fund. The Distributor is a Florida corporation that is controlled by
<PAGE>
Rodger D. Shay, who is a Vice President of the Fund. The principal business
address of the Distributor is 230 West Monroe Street, Chicago, Illinois 60606.
The Fund has authorized the Distributor to undertake certain
activities in connection with the continuous offer and sale of shares of the
Fund, including informing potential investors about the Fund through written
materials, seminars and personal contacts. The Distributor is obligated to use
its best efforts to effect sales of shares of the Fund, but has no obligation to
sell any particular number of shares. The Distributor does not receive any
compensation from the Fund in connection with such activities.
Certain directors and officers of the Fund also are directors,
officers or employees of the Distributor and its affiliates. See "OFFICERS AND
DIRECTORS OF THE FUND."
INDEPENDENT AUDITORS
Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, serves as
the Fund's independent auditors and in that capacity audited the Fund's annual
financial statements for the year ended December 31, 1999.
PURCHASE AND SALE OF PORTFOLIO SECURITIES
The primary aim of the Fund in the allocation of portfolio
transactions to various brokers is the attainment of best price and execution
consistent with obtaining investment research services 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. Transactions in portfolio securities were effected during the calendar
year 1999 through a total of 2 brokers, drawn from a list of brokers selected by
the Investment Adviser on the basis of their ability to provide efficient
execution of portfolio transactions and investment research and statistical
information. A large majority of the Fund's portfolio transactions are 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.
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.
In 1999, brokerage commissions of $29,925 (attributable to purchases
of $7,128,092 and proceeds from sales of $24,136,432) were paid to brokers who
provided investment research and statistical information to the Investment
Adviser. The research and statistical information provided to the Investment
Adviser consist primarily of written and electronic reports and presentations
analyzing specific companies, industry sectors, the stock market and the
economy. To the extent that the Investment Adviser uses such research and
information in rendering investment advice to the Fund, the research and
information tend to reduce the Investment Adviser's expenses. The Investment
<PAGE>
Adviser may use research services and statistical information furnished by
brokers through which the Fund effects securities transactions in servicing all
of its accounts, and the Investment Adviser may not use all such services in
connection with the Fund. The total amounts of brokerage commissions paid in
1997, 1998 and 1999 were $52,668, $50,104 and $43,193, respectively. The
Investment Adviser monitors the reasonableness of commissions paid by the Fund
based on its experience in the market, and the Board of Directors periodically
reviews the reasonableness of such commissions as well.
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. The Fund does not maintain joint or joint and several trading
accounts in securities.
EXPENSES OF THE FUND
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 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. Annual and semi-annual reports
to shareholders include a statement of operational expenses.
DESCRIPTION OF CAPITAL STOCK
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.
Shares of stock of the Fund may not be sold or transferred to or be
owned by, any person other than an Eligible Institution.
<PAGE>
GENERAL INFORMATION
Statements contained in the Prospectus and this Statement of
Additional Information as to the contents of any contract or agreement or other
document referred to are not necessarily complete. In each instance, reference
is made to the copy of such contract, agreement or other document filed as an
exhibit to the Registration Statement of which the Prospectus and this Statement
of Additional Information form a part, each such statement being qualified in
all respects by such reference.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year
ended December 31, 1999, 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, 1999 (the "Annual Report") are incorporated herein by
reference. Except as set forth above, this Statement of Additional Information
does not incorporate any other portion of the Annual Report. Arthur Andersen LLP
has audited such financial statements, and the financial statements are
incorporated by reference in reliance on the report of Arthur Andersen LLP and
the authority of such firm as experts in accounting and auditing.
The Fund will provide a copy of the Annual Report without charge to
each person to whom this Statement of Additional Information is delivered.
Investors should direct requests in writing to the Fund's Distributor, Shay
Financial Services, Inc., at 230 West Monroe Street, Chicago, Illinois 60606, or
by telephone at 800-527-3713.
<PAGE>
PART C. OTHER INFORMATION
-----------------
ITEM 23. EXHIBITS
(a) Restated Certificate of Incorporation of the Registrant.
Previously filed with Amendment No. 9 as Exhibit 1.
(b) By-Laws. Previously filed with Amendment No. 10 as Exhibit 2.
(c) Instruments Defining Rights of Security Holders
(1) Form of Certificate for Common Stock. Previously filed
with Amendment No. 2 as Exhibit 4.
(2) Articles Third, Fourth, Ninth, Tenth and Eleventh of
Certificate of Incorporation (See Exhibit (a))
(3) Articles II, VIII, IX and XVI of By-Laws (See Exhibit
(b))
(d) Investment Advisory Agreement dated as of December 9, 1997,
between the Registrant and Shay Assets Management, Inc.
Previously filed with Amendment No. 10 as Exhibit 5.
(e) Distribution Agreement dated as of December 9, 1997, between
the Registrant and Shay Financial Services, Inc. Previously
filed with Amendment No. 10 as Exhibit 9(c).
(f) Not Applicable.
(g) Custody Agreement
(1) Custodian Services Agreement dated as of July 30, 1999,
between the Registrant and The Bank of New York.
(2) Domestic Custodian Fee Schedule dated as of August 25,
1999, between the Registrant and The Bank of New York.
(3) Cash Management Agreement dated as of July 30, 1999,
between the Registrant and The Bank of New York.
(h) Other Material Contracts
(1) Administration Agreement dated as of August 1, 1999,
between the Registrant and BISYS Fund Services Ohio,
Inc.
(2) Transfer Agency Agreement dated as of September 13,
1999, between the Registrant and BISYS Fund Services
Ohio, Inc.
<PAGE>
(3) Fund Accounting Agreement dated as of August 1, 1999,
between the Registrant and BISYS Fund Services Ohio,
Inc.
(4) Omnibus Fee Agreement dated as of August 1, 1999,
between the Registrant and BISYS Fund Services Ohio,
Inc.
(i) Not Applicable.
(j) Not Applicable.
(k) Not Applicable.
(l) Not applicable.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
(p) Code of Ethics
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
As of March 31, 2000, Staten Island Bancorp, directly or indirectly
through its subsidiary Staten Island Savings Bank, 15 Beach Street, Staten
Island, New York, owned approximately 30% of the outstanding shares of the Fund.
As a result of such ownership, Staten Island Bancorp, which is organized as a
New York mutual savings bank, is deemed to be a controlling person of the Fund.
Staten Island Bank Investment Corporation, Staten Island Bank Mortgage
Corporation and Staten Island Funding Corporation, New York corporations and
wholly-owned subsidiaries of Staten Island Savings Bank, are deemed to be under
common control with the Registrant.
ITEM 25. INDEMNIFICATION
Sections 721-726 of the New York Business Corporation Law provide
that a New York corporation shall have the power and, in certain cases, the
obligation to indemnify officers or directors against certain liabilities.
Article XVII of the by-laws of the Registrant provides that the Registrant shall
indemnify directors or officers to the full extent permitted by New York law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
<PAGE>
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
In addition, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission, indemnification by the Registrant of its
directors and officers against liabilities arising out of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their respective offices is against public policy and, therefore,
unenforceable. In the event that any questions arise as to the lawfulness of
indemnification under the Investment Company Act of 1940 or the advancement of
legal fees or other expenses incurred by its officers and directors, the
Registrant will not advance such expenses or provide such indemnification unless
there has been a determination by a court, by a vote of a majority of a quorum
consisting of disinterested, non-party directors, or by independent legal
counsel in a written opinion or by other reasonable and fair means that such
indemnification or advancement would not violate Section 17 of the Investment
Company Act of 1940 and the rules and regulations thereunder.
In addition, the Registrant has entered into a Directors and
Officers Liability Insurance Policy covering the period August 1, 1999 to July
31, 2000. Such policy insures against loss which any directors or officers of
the Registrant are obligated to pay by reason of claims based on 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 directors or officers. The policy does not
protect or purport to protect any director or officer against any loss arising
from fines or penalties imposed by law or matters which may be deemed
uninsurable under the law.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Incorporated herein by reference from the Statement of Additional
Information are the following: the description of the business of Shay Assets
Management, Inc. (the "Investment Adviser"), contained in the section entitled
"Investment Advisory and Other Services;" the information concerning the
organization and controlling persons of Shay Financial Services, Inc. (the
"Distributor") contained in the section entitled "Investment Advisory and Other
Services;" and the biographical information pertaining to Messrs. Shay, Sammons,
McCabe and Trautman contained in the section entitled "Officers and Directors of
the Fund."
The Investment Adviser is located at 230 West Monroe Street, Suite
2810, Chicago, Illinois, 60606 and at 1000 Brickell Avenue, Miami, Florida,
33131, and also has offices in New York City and Summit, New Jersey. The
Investment Adviser is a wholly-owned subsidiary of Shay Investment Services,
Inc. ("SISI"). SISI is owned by Rodger D. Shay, Sr., Arthur M. Berardelli,
Barbara M. Quesep and Rodger D. Shay, Jr. each of whom owned 5% or more of its
shares at March 31, 2000. Rodger D. Shay, Sr. is the controlling shareholder of
<PAGE>
the Investment Adviser. Shay Financial Services, Inc. ("SFSI") and First
Financial Trust Company ("FFTC") are also wholly-owned subsidiaries of SISI.
Rodger D. Shay, Sr. is the Chairman of the Investment Adviser, SISI,
and SFSI. Edward E. Sammons, Jr. is President of the Investment Adviser and
Executive Vice President of SISI and SFSI. Rodger D. Shay, Jr. is the President
of SFSI and Executive Vice President of the Investment Adviser. Roy R. Hingston
and Robert T. Podraza are also Vice Presidents of the Investment Adviser, SISI
and SFSI.
SFSI is a securities broker-dealer registered with the Securities
and Exchange Commission. FFTC is a Texas trust company which provides custodial
services, primarily for institutional customers of SFSI.
Effective December 8, 1997, the Investment Adviser began rendering
investment adviser services to the Fund and two other registered investment
companies, Asset Management Fund ("AMF") and M.S.B. Fund, Inc. In addition, the
Investment Adviser acts as investment adviser to several savings banks located
in New York State on a non-discretionary basis.
From its inception in August 1990 to December 7, 1997, the
Investment Adviser was a 50% general partner and the managing partner of Shay
Assets Management Co. ("SAMC"), the Fund's prior investment adviser. SAMC was
the investment adviser for the Fund and M.S.B. Fund, Inc. from May 19, 1995 to
December 7, 1997, for AMF from September 1, 1990 to December 7, 1997, and for
the Institutional Investors Tax-Advantaged Income Fund, Inc. from May 19, 1995
to March 15, 1996, and was the Sub-Adviser, providing portfolio management
services, for the U.S. Mortgage Securities Portfolio of Nationar Funds, Inc.
from June 1994 to February 1995. In addition, SAMC acted as investment adviser
to several savings banks located in New York State on a non-discretionary basis.
SAMC was dissolved on December 7, 1997, with its assets, liabilities, and
business (including investment advisory services to the Fund) being transferred
to the Investment Adviser.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The Distributor, Shay Financial Services, Inc., serves as the
principal distributor for M.S.B. Fund, Inc. and Asset Management Fund in
addition to serving Institutional Investors Capital Appreciation Fund, Inc.
(b) Rodger D. Shay, Sr. is the Chairman and sole director of the
Distributor. He also serves as an officer of the Registrant. Edward E. Sammons,
Jr. is the Executive Vice President of the Distributor and an officer of the
Registrant. Other information about Messrs. Shay and Sammons required by this
Item 27 is incorporated herein by reference to Item 26 and the information set
forth beneath the caption "OFFICERS AND DIRECTORS OF THE FUND" in the Statement
of Additional Information. Set forth below are the names, principal business
addresses and positions and offices with the Distributor of the other officers
of the Distributor.
<PAGE>
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR POSITIONS AND OFFICES
OFFICER OF THE DISTRIBUTOR PRINCIPAL BUSINESS ADDRESS WITH DISTRIBUTOR
- -------------------------- -------------------------- -----------------------
<S> <C> <C>
Robert T. Podraza 230 West Monroe Street Chief Financial Officer
Chicago, IL 60606 and Chief Operating
Officer
Rodger D. Shay, Jr. 230 West Monroe Street President
Chicago, IL 60606
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The 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
Investment Adviser, Shay Assets Management, Inc., 230 West Monroe Street, Suite
2810, Chicago, Illinois 60606; 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, Inc., 230 West Monroe Street, Suite 2810,
Chicago, Illinois 60606; 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 BISYS Fund
Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. 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 28th day of April, 2000.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /S/ MARK F. TRAUTMAN
-----------------------------------------
Mark F. Trautman
Vice President
CONFORMED
CUSTODY AGREEMENT
Agreement made as of this 30th day of July, 1999, between INSTITUTIONAL
INVESTORS CAPITAL APPRECIATION FUND, INC., a New York corporation organized and
existing under the laws of the State of New York, having its principal office
and place of business at 200 Park Avenue, New York, New York 10017 (hereinafter
called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized
to do a banking business, having its principal office and place of business at
One Wall Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether or
not such person is an officer or employee of the Fund, duly authorized by the
Board of Directors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time, to the extent of the authority indicated in
Appendix A or such Certificate.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
<PAGE>
4. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received by the Custodian and signed on behalf of the Fund by
any two Authorized Persons, and the term Certificate shall also include
Instructions.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or any
other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Directors specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified month at an agreed
upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
<PAGE>
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructional communications transmitted by
electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from an Authorized Person or from a person reasonably believed by
the Custodian to be an Authorized Person, provided that notwithstanding any
other provision in this Custody Agreement, no Oral Instruction with respect to a
<PAGE>
purchase or sale of a Security shall be deemed received by the Custodian unless
and until the Custodian receives a trade ticket, advice, or similar document
including specific information matching the information orally communicated.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks
and other securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund listed
on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of capital stock of the Fund, each of
which is, in the case of a Fund having Series, allocated to a particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
<PAGE>
28. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and money at any time owned by the Fund during the period of this
Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart from
the assets of the Custodian, and the Custodian shall by separate recordation on
its books and records segregate, keep and maintain the assets of the Series
separate and apart from the assets of any other Series or person, except that
all cash shall be maintained as a demand deposit. The Custodian will not be
responsible for the safekeeping of any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
<PAGE>
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Directors, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
<PAGE>
money held by the Custodian for the Fund. The Custodian shall furnish such other
reports for such additional compensation as the Fund and the Custodian may
mutually agree upon, provided, first, that such reports are not identical with,
or similar to, reports generally furnished by The Bank of New York to mutual
fund customers under its standard agreements (including, without limitation, a
Fund Accounting Agreement or a Cash Management Agreement), and second, such
reports are limited to information maintained by the Custodian hereunder.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due or payable;
(b) give notice to the Fund and present payment and collect the
amount payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such call
appears in one or more of the publications listed in Appendix C annexed hereto,
which may be amended at any time by the Custodian upon prior notification to the
Fund, but without consent;
(c) present for payment and collect the amount payable upon all
Securities which mature;
(d) surrender Securities in temporary form for definitive Securities;
<PAGE>
(e) execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly
or through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any conversion privilege and receive and hold hereunder specifically allocated
to such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate 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 hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
<PAGE>
(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
<PAGE>
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale of
any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, a Certificate, and (ii)
with respect to each sale of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest, if any; (d) the date of sale; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate against
payment of the total amount payable to the Fund upon such sale, provided that
the same conforms to the total amount payable as set forth in such Certificate
or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the total amount payable by the Fund in
connection with such purchase; (h) the name of the Clearing Member through whom
<PAGE>
such Option was purchased; and (i) the name of the broker to whom payment is to
be made. The Custodian shall pay, upon receipt of a Clearing Member's statement
confirming the purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of money held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
<PAGE>
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
<PAGE>
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding
paragraph is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the Put Option;
(c) the Clearing Member from whom the underlying Securities are to be received;
(d) the total amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically allocated
to such Series, if any, to be withdrawn from the Senior Security Account. Upon
the return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the money held for the account of the Series to which
such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Account for such
<PAGE>
Series; and (k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make the
deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
<PAGE>
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures Contract(s); (g)
the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series; (h) the name of the
broker, dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be paid
and the name of the broker, dealer, or futures commission merchant to whom such
amount is to be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the money specifically
allocated to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
<PAGE>
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such futures commission merchant.
<PAGE>
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian shall pay out
of the money specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) the
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Futures Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e)the name of
the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
<PAGE>
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
<PAGE>
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and, (b) make such withdrawals from and/or in the case
of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures
Contract Option described in this Article shall be subject to Article VI hereof.
10. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
<PAGE>
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a) the Series for
which such short sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
<PAGE>
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each such
<PAGE>
loan: (a) the Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities, (c) the number of
shares or the principal amount loaned, (d) the date of loan and delivery, (e)
the total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium, if any,
separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book- Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
<PAGE>
2. The Custodian shall make deliveries or payments from a Margin Account to
the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and
to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
<PAGE>
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Directors of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions and shall furnish to the Custodian Oral Instructions
or a Certificate setting forth the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
Share of such Series to the shareholders of record as of that date and the total
amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions or
Certificate, as the case may be, the Custodian shall pay out of the money held
for the account of each Series the total amount payable to the Dividend Agent
and any sub-dividend agent or co-dividend agent of the Fund with respect to such
Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price;
and
(b) the amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
<PAGE>
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
<PAGE>
and shall bear interest from the date incurred at a rate per annum (based on a
360- day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien, security
interest, and security entitlement in and to any property including any
investment property or any financial asset specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement,(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
<PAGE>
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Fund acknowledges that the Custodian
and its suppliers have title and exclusive proprietary rights to the Software,
including any trade secrets or other ideas, concepts, know how, methodologies,
or information incorporated therein and the exclusive rights to any copyrights,
trademarks and patents (including registrations and applications for
registration of either) or statutory or legal protections available with respect
thereof. The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action with respect to
the Software inconsistent with the foregoing acknowledgments, nor shall the Fund
attempt to decompile, reverse engineer or modify the Software. The Fund may not
copy, sell, lease or provide, directly or indirectly, any of the Software or any
portion thereof to any other person or entity without the Custodian's prior
written consent. The Fund may not remove any statutory copyright notice, or
other notice including the software or on any media containing the Software. The
Fund shall reproduce any such notice on any reproduction of the Software and
shall add statutory copyright notice or other notice to the Software or media
upon the Bank's request. Custodian agrees to provide reasonable training,
instruction manuals and access to Custodian's "help desk" in connection with the
Fund's user support necessary to use of the Software. At the Fund's request,
Custodian agrees to permit reasonable testing of the Software by the Fund.
<PAGE>
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made available
to the Fund by utilizing the Software (other than data bases relating solely to
the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Fund shall install new
releases of the Software as the Custodian may direct. The Fund agrees not to
modify or attempt to modify the Software without the Custodian's prior written
consent. The Fund acknowledges that any modifications to the Software, whether
by the Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. THE CUSTODIAN AND ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES OR
REPRESENTATIONS OF ANY KIND WITH REGARD TO THE SOFTWARE OR THE METHOD(S) BY
WHICH THE FUND MAY TRANSMIT INSTRUCTIONS TO THE CUSTODIAN, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND
OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
<PAGE>
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Fund involves an
automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian Instructions
hereunder, it shall be the Fund's sole responsibility to ensure that only
persons duly authorized by the Fund transmit such Instructions to the Custodian.
The Fund will cause all persons transmitting Instructions to the Custodian to
treat applicable user and authorization codes, passwords and authentication keys
with extreme care, and irrevocably authorizes the Custodian to act in accordance
with and rely upon Instructions received by it pursuant hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is fully
informed of the protections and risks associated with the various methods of
transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian that
this Agreement has been duly approved by a resolution of its Board of Directors,
and that its transmission of Instructions pursuant hereto shall at all times
comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
<PAGE>
11. Custodian will indemnify and hold harmless the Fund with respect to any
liability, damages, loss or claim incurred by or brought against Fund by reason
any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Fund's use of the Software in the
form provided under this Section. Custodian at its own expense will defend such
action or claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that the Fund has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder. The Fund shall provide prompt written notice of any such action or
claim to the Custodian upon the Fund's receipt of notice of such claim or
action, and the Fund shall reasonably cooperate with and assist Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Fund.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Securities for which the primary market is outside the United
States ("Foreign Securities") and other assets, the foreign banking
institutions, foreign branches of U.S. banks, and foreign securities
depositories and clearing agencies designated on Schedule I hereto ("Foreign
Sub-Custodians"). The Fund may designate any additional foreign sub-custodian
with which the Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate
from the Fund, the Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's assets and such
Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Directors, or its
third party foreign custody manager as defined in Rule 17f-5 under the
<PAGE>
Investment Company Act of 1940, as amended, if any, has determined that use of
such Foreign Sub-Custodian satisfies the requirements of such Investment Company
Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each Series of
the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms
of the applicable Foreign Sub-Custodian agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices, reports
or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the contrary,
with respect to any losses or damages arising out of or relating to any actions
or omissions of any Foreign Sub-Custodian the sole responsibility and liability
of the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
<PAGE>
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
9. Notwithstanding any other provision in this Custody Agreement, the
Custodian shall not utilize any Foreign Sub-Custodian unless and until it
receives a certified resolution of the Fund's board specifically approving each
Foreign Sub-Custodian the Custodian is to utilize.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and such receipt and delivery may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with such receipts and deliveries, which
responsibility and liability shall continue until the Currency to be received by
the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
<PAGE>
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither
the Custodian nor its nominee shall be liable for any loss or damage, including
reasonable counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any third party for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion of counsel
to the Fund, at the expense of the Fund, or of its own counsel at its own
expense, and shall be fully protected with respect to anything done or omitted
by it in good faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any negligence or
willful misconduct on the part of the Custodian or any of its employees or
agents.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
<PAGE>
(c) the legality of the declaration or payment of any dividend by
the Fund;
(d) the legality of any borrowing by the Fund using Securities as
collateral;
(e) the legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Fund until
the Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository or notice appears in one or more of the publications listed in
Appendix C. In no event shall the Custodian have any responsibility or liability
<PAGE>
for the failure of the Depository to collect, or for the late collection or late
crediting by the Depository of any amount payable upon Securities deposited in
the Depository which may mature or be redeemed, retired, called or otherwise
become payable. However, upon receipt of a Certificate from the Fund of an
overdue amount on Securities held in the Depository the Custodian shall make a
claim against the Depository on behalf of the Fund, except that the Custodian
shall not be under any obligation to appear in, prosecute or defend any action,
suit or proceeding in respect to any Securities held by the Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund or to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or SubCustodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it or by any Foreign
Sub-Custodian, for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to
the Custodian all out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund. The Custodian may
charge such compensation and any expenses with respect to a Series incurred by
<PAGE>
the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series, net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund, but only if the Fund specifically agrees pursuant to
paragraph 7 of this Article or Article XVI to pay such expenses.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian hereinabove provided
for. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the Custodian shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
<PAGE>
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund and the Fund's administrator (as
identified in Written Instructions) with any report obtained by the Custodian on
the system of internal accounting control of the Book- Entry System, the
Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including reasonable attorney's fees, howsoever arising or incurred because of
or in connection with this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any such liability,
claim, loss and demand arising out of the Custodian's own negligence or willful
misconduct, bad faith, reckless disregard of its duties, provided that prior to
confessing any claim against it which may be the subject to this
indemnification, the Custodian shall give the Fund written notice of and
reasonable opportunity to defend against said claim in its own name or in the
name of the Custodian. The Fund shall be entitled to participate at its own
expense or, if it acknowledges its responsibility to indemnify the Custodian, it
may elect to assume the defense of any suits brought to enforce any claims
subject to this indemnity provision. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to the Custodian, whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the Custodian shall bear the fees and expenses of any
additional counsel retained by it. If the Fund does not elect to assume the
defense of a suit, it will reimburse the Custodian for reasonable fees and
expenses of any counsel retained by the Custodian.
15. Unless otherwise instructed by a Certificate, Oral Instructions or
Written Instructions, the Custodian shall settle all purchases and sales only on
a delivery versus payment basis. Subject to the foregoing provisions of this
Agreement, including, without limitation, those contained in Article XVI and
XVII the Custodian may deliver and receive Securities, and receipts with respect
to such Securities, and arrange for payments to be made and received by the
Custodian in accordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is instructed to
<PAGE>
deliver Securities against payment, delivery of such Securities and receipt of
payment therefor may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to instructions of the Fund,
which responsibility and liability shall continue until final payment in full
has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, at least 30 days before
the termination date the Fund shall deliver to the Custodian by a copy of a
resolution of the Board of Directors of the Fund, certified by the Secretary or
any Assistant Secretary, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by the Custodian, the Fund shall, on
or before the termination date, deliver to the Custodian a copy of a resolution
of the Board of Directors of the Fund, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and money then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
Upon any termination of this Custody Agreement the Custodian will cooperate with
the Fund and use commercially reasonable efforts to assist in the conversion,
and the Fund shall pay to the Custodian the Custodian's normal transaction
charges and shall reimburse the Custodian for its reasonable out-of-pocket
expenses provided for in this Agreement.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
<PAGE>
System which cannot be delivered to the Fund) and money then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons of the Fund. The Fund
agrees to furnish to the Custodian a new Certificate in similar form in the
event that any such present Authorized Person ceases to be an Authorized Person
of the Fund, or in the event that other or additional Authorized Persons are
elected or appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement or Oral Instructions upon the signatures of the Authorized Persons as
set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. (a) The Custodian warrants that it will use commercially reasonable
efforts to ensure that the computer software and hardware systems ("Systems")
that are owned by the Custodian and used to provide services under this
Agreement are 2000 Compliant or will be made 2000 Compliant before December 31,
1999. With respect to software that the Custodian licenses from third parties
and uses in providing such services ("Third Party Software"), the Custodian
warrants that it has used or will use commercially reasonable efforts to test
the same by September 30, 1999 to certify, in accordance with the Custodian's
standard practices, that the Third Party Software is 2000 Compliant. If the
Custodian cannot certify any Third Party Software as 2000 Compliant, the
Custodian will use commercially reasonable efforts to replace such Third Party
Software with software that is warranted or certified by its vendor as 2000
Compliant, if such replacement is available, compatible with the Custodian's
Systems an deemed by the Custodian as appropriate under the circumstances. In
the event that the Custodian uses third party service providers to provide
services or any portion thereof ("Third Party Services"), the Custodian warrants
that it has in place a program under which it will use commercially reasonable
<PAGE>
efforts to contact such service providers and obtain from them assurances that
the Systems that they use in providing services are 2000 Compliant. As used
herein, the term "2000 Compliant" means that the Systems will function without
material error caused by the introduction of dates falling on or after January
1, 2000. Notwithstanding the foregoing, the Fund acknowledges and agrees that
the Custodian cannot and does not warrant that the Systems, Third Party Software
or Third Party Services will continue to interface with the hardware, firmware,
software (including operating systems), records or data used by the Fund or
third parties, nor does the Custodian make any warranties hereunder with respect
to any public utility, communications service provider, correspondent bank,
securities or commodities exchange, or funds transfer network.
(b) The Fund hereby makes the same warranty with respect to the
computer software and hardware systems it owns or the services it acquires from
third parties that the Custodian has made in (a).
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
[SEAL] By: /S/ EDWARD E. SAMMONS, JR.
-----------------------------
Attest:
/S/ [ILLEGIBLE]
- ---------------
THE BANK OF NEW YORK
[SEAL] By: /S/ STEPHEN E. GRUNSTON
-----------------------------
Name: Stephen E. Grunston
Title: Vice President
Attest:
/S/ [ILLEGIBLE]
- ---------------
<PAGE>
APPENDIX A
I, , and I,
, of INSTITUTIONAL INVESTORS
CAPITAL APPRECIATION FUND, INC., a New York corporation (the "Fund"), do hereby
certify that:
The following persons have been duly authorized in conformity with the
Fund's Declaration of Trust and By-Laws to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name Position Signature
-------------------- ------------------- -----------------
<PAGE>
APPENDIX B
SERIES
<PAGE>
APPENDIX C
I, _________________, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of INSTITUTIONAL INVESTORS CAPITAL APPRECIATION
FUND, INC., a New York corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., as of the day of
, 1999.
___________________________________
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of INSTITUTIONAL INVESTORS CAPITAL APPRECIATION
FUND, INC., a New York corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with settlements
of purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., as of the day of
, 1999.
___________________________________
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of INSTITUTIONAL INVESTORS CAPITAL APPRECIATION
FUND, INC., a New York corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as Depository, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., as of the day of
, 1999.
___________________________________
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of INSTITUTIONAL INVESTORS CAPITAL APPRECIATION
FUND, INC., a New York corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it receives
a Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., as of the day of
, 1999.
___________________________________
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she is the duly
elected and acting of INSTITUTIONAL INVESTORS CAPITAL APPRECIATION
FUND, INC., a New York corporation (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times present
and that such resolutions have not been modified or rescinded and are in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of
, 1999 (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to act in accordance with, and to rely on
Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use
of such access codes only to Authorized Persons of the Fund as defined in
the Custody Agreement, shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of user and
access codes, passwords and authentication keys, and shall use Instructions
only in a manner that does not contravene the Investment Company Act of
1940, as amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., as of the day of
, 1999.
___________________________________
[SEAL]
CONFORMED
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
SAFEKEEPING/INCOME COLLECTION/REPORTING/AFFIRMATIONS
1 basis point on the first $250 million in average net assets for each
portfolio.
3/4 basis point on the next $250 million in average net assets for each
portfolio.
1/2 basis point on the excess over $500 million in average net assets for each
portfolio.
CUSTODIAN TRANSACTION CHARGES
$6 Book Entry Settlements/Paydowns - DTC/FRB/PTC
$15 Physicals, options, futures
$40 Eurodollar C/D's
MISCELLANEOUS TRANSACTION CHARGES
$6 Federal Reserve Wires not related to securities transactions, and official
check requests.
EARNINGS CREDIT ON BALANCES/INTEREST FOR OVERDRAFTS
Earnings credits are provided to each Fund on 100% of the daily balance in the
domestic custodian accounts after reduction for Federal Reserve requirements,
computed at the Federal Reserve Funds rate, less 1/2% on the day of the balance.
Overdrafts, excluding bank errors will cause a reduction of earnings credits
daily, computed at 1/2% above the Federal Funds rate on the day of the
overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after the
Fund's fiscal year-end.
OUT-OF-POCKET EXPENSES
Out-of-Pocket expenses traditionally include, but are not limited to, Federal
Reserve charges related to securities transactions, postage and insurance on
physical transfer items, attendance at closings, telecommunication charges, etc.
These expenses will be billed as they are incurred with no mark-up.
<PAGE>
BILLING CYCLE
The above fees are billed monthly.
INSTITUTIONAL INVESTORS CAPITAL THE BANK OF NEW YORK
APPRECIATION FUND, INC.
Approved by: /S/ EDWARD E. SAMMONS, JR. Submitted by: /S/ [ILLEGIBLE]
---------------------------- ----------------------
Date: August 25, 1999 Date: July 30, 1999
CONFORMED
CASH MANAGEMENT AND RELATED SERVICES AGREEMENT, dated as of July 30, 1999
between each mutual fund and/or portfolio series of each mutual fund listed on
Schedule A hereto (each a "Fund", collectively the "Funds"), and The Bank of New
York (the "Bank").
W I T N E S S E T H :
That in consideration of the mutual agreements and covenants herein
contained, the Bank and each Fund hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, unless the context otherwise requires, the
following words shall have the meanings set forth below:
1. Account" shall mean an account in the name of a Fund or such Fund's
transfer agent for the benefit of such Fund for receiving and disbursing money
as provided in this Agreement.
2. "Account Available Balance" shall mean with respect to an Account for
any given day during a calendar month a positive or negative dollar amount equal
to (A) if such day is a Business Day, the Account Available Balance as of the
close of the last preceding Business Day plus a positive or negative dollar
amount equal to the difference, if any, between the Chargeable Credits with
respect to such day and such Account and the Chargeable Debits with respect to
such day and such Account, and (B) if such day is not a Business Day, the
Account Available Balance as of close of the last preceding Business Day, except
that both (A) and (B) shall be reduced by the United States Federal Reserve
reserve requirements then applicable to the Bank with respect to such Account.
The Account Available Balance of an Account shall be zero on the date
immediately preceding the first date on which an entry, consisting of either a
Chargeable Credit or Chargeable Debit, is first made to such Account hereunder.
3. "ACCESS" shall mean any on-line communication system provided by the
Bank hereunder whereby either the receiver of such communication is able to
verify by codes or otherwise with a reasonable degree of certainty the identity
of the sender of such communication, or the sender is required to provide a
password or other identification code.
4. "Authorized Person" shall mean either (A) any person duly authorized by
corporate resolutions of the board of directors or board of trustees of a Fund
(each, a "Board") to give Oral and/or Written Instructions on behalf of such
Fund, such persons to be designated in a certificate, substantially in the form
of Exhibit A, which contains a specimen signature of such person, or (B) any
person sending or transmitting any instruction or direction through ACCESS.
5. "Business Day" shall mean any day on which the Federal Reserve Bank of
New York is open for business, except for any such day on which the Bank is
required by law or regulation to be closed, or elects to be closed.
<PAGE>
6. "Calendar Month Earnings Credit" shall mean with respect to an Account
for any calendar month the dollar amount, whether positive or negative, equal to
the sum of the Gross Calendar Month Earnings Credit with respect to such Account
for such calendar month and the Monthly Overdraft Charges with respect to such
Account for such calendar month.
7. "Chargeable Credits" shall mean with respect to an Account for any given
day during a calendar month a positive amount of dollars equal to the sum, if
any, of (A) the aggregate dollar amount of Federal Funds credited to such
Account by the Bank in accordance with the then applicable availability schedule
of the Federal Reserve Bank of New York, and (B) the aggregate dollar amount of
Bank internal transfers of Federal Funds to such Account.
8. "Chargeable Debits" shall mean with respect to an Account for any given
day during a calendar month a negative dollar amount equal to the sum, if any,
of (A) the aggregate dollar amount of Federal Funds relating to such Account
charged against the Bank by the Federal Reserve Bank of New York on or as of
such day, and (B) the aggregate dollar amount of drafts drawn on such Account
which are deposited in the Bank by customers of the Bank on such day, or Bank
internal transfers from, or charges to, such Account.
9. "Daily Earnings" shall mean with respect to an Account for any day
during a calendar month a positive dollar amount equal to the product of (A) the
positive Account Available Balance, if any, of such Account for such day,
multiplied by (B) the Daily Earnings Rate for such day. The Daily Earnings with
respect to an Account for any day during a calendar month on which the Account
Available Balance of such Account is negative shall be zero.
10. "Daily Earnings Rate" shall mean for any day during a calendar month
one three hundred and sixty-fifth of the 91 day U.S. Treasury Bill discount rate
of the Monday auction first preceding such day (whether or not such day is a
Monday, and whether or not such Monday auction was in the immediately prior
month), as such Monday auction 91 day U.S. Treasury Bill discount rate is
reported in The Wall Street Journal.
11. "Daily Overdraft Charges" shall mean with respect to an Account for any
day during any calendar month a negative dollar amount equal to the product, if
any, of (A) the negative Account Available Balance, if any, with respect to such
Account for such day during such calendar month, multiplied by (B) the Overdraft
Rate.
12. "Federal Funds" shall mean immediately available same day funds.
13. "Gross Calendar Month Earnings Credit" shall mean with respect to an
Account for any calendar month a positive dollar amount equal to the aggregate
sum of the Daily Earnings of such Account for such calendar month.
14. "Monthly Overdraft Charges" shall mean with respect to an Account for
any calendar month a negative dollar amount equal to the aggregate sum of the
Daily Overdraft Charges with respect to such Account for such calendar month
which have not been previously paid to the Bank by the Fund to which such
Account relates.
15. "Omnibus Account" shall mean an account at the Bank for the benefit of
the Funds into which money (A) to be deposited into an Account is initially
<PAGE>
credited pending its transfer to such Account pursuant to Article III hereof, or
(B) transferred from an Account pursuant to Article III is deposited pending its
disbursement pursuant to Article III.
16. "Oral Instructions" shall mean verbal instructions actually received by
the Bank from an Authorized Person or from a person reasonably believed by the
Bank to be an Authorized Person.
17. "Overdraft Rate" shall mean with respect to an Account for any calendar
day during any calendar month a rate equal to one three hundred and sixtieth of
the fed funds rate on such date plus 100 basis points (1.00 percent).
18. "Shareholder" shall mean any record holder of any Shares, as identified
to the Bank from time to time pursuant to this Agreement.
19. "Shares" shall mean all or any part of each class of the shares of
capital stock, beneficial interest, or limited partnership interest of a Fund,
as the case may be, which are authorized and/or issued from time to time.
20. "Written Instructions" shall mean written instructions actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person by letter, memorandum, telegram,
cable, telex, facsimile or through ACCESS.
ARTICLE II
APPOINTMENT OF BANK; REPRESENTATIONS AND WARRANTIES
1. APPOINTMENT; ESTABLISHMENT OF ACCOUNTS. Each Fund hereby appoints the
Bank as its agent for the term of this Agreement to perform the cash management
services set forth herein and in Schedule I attached hereto and made a part
hereof (as such Schedule may be amended or supplemented from time to time by
mutual agreement) which are selected by such Fund from time to time. The Bank
hereby accepts appointment as such agent for each Fund and agrees to establish
and maintain one or more Accounts and/or Omnibus Accounts as the parties shall
determine are necessary to receive and disburse money as provided in this
Agreement.
2. REPRESENTATIONS AND WARRANTIES. Each Fund hereby represents and warrants
only as to itself, and not jointly, to the Bank, which representations and
warranties shall be deemed to be continuing and to be reaffirmed upon delivery
to the Bank of any Oral or Written Instructions, that:
(a) It is duly organized and existing under the laws of the jurisdiction of
its organization, with full power to carry on its business as now conducted, to
enter into this Agreement and to perform its obligations hereunder;
(b) This Agreement has been duly authorized, executed and delivered by the
Fund in accordance with all requisite corporate action and constitutes a valid
and legally binding obligation of the Fund enforceable in accordance with its
terms, except to the extent such enforcement may be limited by general equity
principles or bankruptcy principles; and
(c) It is conducting its business in compliance with all applicable laws
and regulations in all material respects, both state and federal, and has
<PAGE>
obtained all regulatory licenses, approvals and consents necessary to carry on
its business as now conducted; there is no statute, regulation, rule, order or
judgment binding on it and no provision of its charter or by-laws, nor of any
mortgage, indenture, credit agreement or other contract binding on it or
affecting its property which would prohibit its execution or performance of this
Agreement.
3. BOARD RESOLUTIONS. Each Fund shall provide the Bank with a certified
copy of a resolution of its Board appointing the Bank as its agent to act
hereunder and providing for the creation of such Fund's Account(s), the
utilization by such Fund of one or more Omnibus Accounts and the execution by
such Fund of this Agreement, it being understood that receipt of the same by the
Bank shall be a condition precedent to the Bank's establishing an Account for
such Fund or such Fund's utilization of an Omnibus Account.
ARTICLE III
CASH MANAGEMENT SERVICES
1. RECEIPT OF MONEY. The Bank shall receive money for credit to an Account
only:
(i) by personal presentment by a Fund, but not by a Shareholder of such
Fund, of drafts at the branch or branches in Manhattan identified
from time to time by the Bank to such Fund, provided such
presentment is in accordance with the time frames specified by the
Bank to such Fund;
(ii) by mailing of drafts to a post office box designated by the Bank
for such purpose, provided such drafts are accompanied by a
properly completed investment stub;
(iii) by wire transfer to an account maintained at the Federal Reserve
Bank of New York as identified in writing by the Bank to a Fund;
(iv) by transfer to an account identified in writing by the Bank to a
Fund through the New York Automated Clearing House;
(v) by transfer from another Account maintained by such Fund with the
Bank under this Agreement;
(vi) by transfer from another account maintained by such Fund with the
Bank, including such Fund's custodian account under its Custody
Agreement with the Bank as Custodian; or
(vii) by transfer from any other account maintained with the Bank.
All money received by the Bank shall be credited upon receipt, but subject to
final payment and receipt by the Bank of immediately available funds, and
receipt by the Bank of such forms, documents and information previously
specified to the Funds as reasonably required by the Bank from time to time and
received in the appropriate time frames. If an Omnibus Account has been
established for the Funds, such money shall be initially credited to the Omnibus
Account pending its allocation to, and deposit in, an Account. The Bank shall be
entitled to reverse any credits previously made to a Fund's Account or an
Omnibus Account where money is not finally collected or where a credit to such
account was in error.
<PAGE>
2. DISBURSEMENT OF MONEY. The Bank shall disburse money credited to an
Account only:
(i) pursuant to Written Instructions of such Fund transmitted through
ACCESS (except as otherwise provided in Article V, Section 7
hereof), to transfer funds as directed by such Fund (including
transfers through the Federal Reserve Bank of New York transfer
wire and the New York Automated Clearing House);
(ii) in payment of drafts drawn by an Authorized Person or Shareholder
(as appropriate for the particular Account), subject to the terms
hereof; or
(iii) in payment of charges to such Account representing amounts payable
to the Bank, and chargeable against such Account, as provided in
this Agreement.
The Bank shall be required to disburse money in accordance with the foregoing
only insofar as such money is immediately available and on deposit with the
Bank. If an Omnibus Account has been established for the Funds, such money shall
be credited to the Omnibus Account pending such disbursement. All instructions
directing the disbursement of money credited to an Account or Omnibus Account
under this Agreement (whether through ACCESS or by Oral Instructions pursuant to
Article V hereof) must identify an account to which such money shall be
transferred, and include all other information previously specified to the Funds
as reasonably required by the Bank from time to time. It is understood and
agreed that with respect to any such instructions, when instructed to credit or
pay a party by both name and a unique numeric or alpha-numeric identifier (E.G.,
ABA number or account number), the Bank and any other financial institution
participating in the funds transfer may rely solely on the unique identifier,
even if it identifies a party different than the party named. Such reliance on a
unique identifier shall apply to beneficiaries named in such instructions as
well as any financial institution which is designated in such instruction to act
as an intermediary in a funds transfer.
3. REDEMPTION DRAFTS; SHAREHOLDER INFORMATION. (a) Each Fund shall be
entitled to supply its Shareholders with redemption drafts, but only in a form
and substance agreed to by the Bank. The Bank agrees to give each Fund sixty
(60) days prior notice of any changes to the form or substance of redemption
drafts required by the Bank, provided that if such change is required by
applicable rules or procedures of the Federal Reserve or any clearinghouse
through which such drafts may be presented, the Bank may give less than sixty
(60) days prior notice of such change. Any such notice shall be given promptly
by the Bank.
(a) Each Fund which has elected to permit redemption drafts will promptly
furnish to the Bank (i) the name, mailing address and telephone number of each
Shareholder of such Fund, and (ii) specimen signatures for all individuals
authorized to draw redemption drafts (whether on their own behalf or on behalf
of third parties). Each Fund will promptly advise the Bank of individuals no
longer authorized to draw redemption drafts, and those individuals newly
authorized. Such information shall be provided to the Bank in a mutually agreed
upon format.
4. REDEMPTION DRAFT RETURNS. A Fund may give the Bank Oral or Written
Instructions from time to time to return unpaid redemption drafts of the Fund to
the presenting financial institution for any reason, and the Bank shall use
reasonable efforts to comply with such Oral or Written Instructions provided
that such compliance would not prejudice or impair any rights or privileges of
the Bank under prevailing draft return procedures and would not be contrary to
prevailing industry rules, procedures, customs or practices. Notwithstanding the
<PAGE>
foregoing, or any other provision in this Agreement or Schedule I hereto, the
Bank (i) may return redemption drafts with unauthorized or missing signatures to
the presenting financial institution in accordance with prevailing banking
industry draft return procedures, and (ii) shall have no obligation to request
Oral or Written Instructions from a Fund with respect to any redemption drafts.
ARTICLE IV
ADVANCES, OVERDRAFTS OR INDEBTEDNESS
1. If the Bank in its sole discretion advances funds, or if there shall
arise for whatever reason an overdraft or other indebtedness in connection with
any Account or Omnibus Account, such advance, overdraft or indebtedness shall be
deemed a loan made by the Bank to the Fund to which the Account relates, or in
the case of an Omnibus Account, to which such advance, overdraft or indebtedness
relates, payable on demand and bearing interest from the date incurred at the
Overdraft Rate, such Overdraft Rate to be adjusted on the effective date of any
change in the fed funds rate constituting a part thereof. In the event of any
advance, overdraft or other indebtedness in connection with an Omnibus Account,
the Bank shall be furnished promptly (and in any event by 12:00 noon on the next
Business Day after such advance, overdraft or indebtedness) with Written
Instructions identifying each Fund to which such advance, overdraft or
indebtedness relates, and the amount allocable to such Fund(s).
2. Each Fund hereby agrees with respect to its Account(s), any Omnibus
Account(s) and any advances, overdrafts or other indebtedness that the Bank
shall have a continuing lien and security interest in and to any property at any
time held by it for the benefit of the Fund either hereunder or under such
Fund's Custody Agreement with the Bank, or in which the Fund may have an
interest which is then in the Bank's possession or control or in possession or
control of any third party acting in the Bank's behalf, including in its behalf
as Custodian under the Fund's Custody Agreement with the Bank. Each Fund
authorizes the Bank, in its sole discretion, at any time to charge any advance,
overdraft or indebtedness together with interest due thereon at the Overdraft
Rate against any balance standing to the Fund's credit on the books of the Bank,
including those books maintained by the Bank in its capacity as Custodian for
the Fund under its Custody Agreement with the Fund.
3. Each Fund agrees that upon allocation of all advances, overdrafts or
indebtedness to its account pursuant to paragraph 1 above, its total borrowings
from all sources (including the Bank) shall be in conformity with the
requirements and limitations set forth in the Investment Company Act of 1940, as
amended, and the Fund's Prospectus. Each Fund shall promptly (and in any event
within one Business Day) notify the Bank in writing whenever it fails to comply
with any of the foregoing requirements.
ARTICLE V
ACCESS; CALL-BACK SECURITY PROCEDURE
1. SERVICES GENERALLY. Each Fund shall be permitted to utilize ACCESS to
obtain direct on-line access to its Accounts and Omnibus Accounts. ACCESS shall
permit each Fund at the times mutually agreed upon by the Bank and such Fund to
receive reports, make inquiries, instruct the Bank to disburse money in
accordance with Article III, and perform such other functions as are more fully
set forth in Schedule I hereto.
2. PERMITTED USE; PROPRIETARY INFORMATION; EQUIPMENT. (a) Upon delivery to
a Fund of software enabling such Fund to utilize ACCESS (the "Software"), the
<PAGE>
Bank grants to the Fund a personal, nontransferable and nonexclusive license to
use the Software solely for the purpose of transmitting Written Instructions,
receiving reports, making inquiries or otherwise communicating with the Bank in
connection with the Account(s) or the Omnibus Account. Each Fund shall use the
Software solely for its own internal and proper business purposes and not in the
operation of a service bureau. Except as set forth herein, no license or right
of any kind is granted to any Fund with respect to the Software. Each Fund
acknowledges that the Bank and its suppliers retain and have title and exclusive
proprietary rights to the Software, including any trade secrets or other ideas,
concepts, know-how, methodologies, or information incorporated therein and the
exclusive rights to any copyrights, trademarks and patents (including
registrations and applications for registration of either), or other statutory
or legal protections available in respect thereof. Each Fund further
acknowledges that all or a part of the Software may be copyrighted or
trademarked (or a registration or claim made therefor) by the Bank or its
suppliers. No Fund shall take any action with respect to the Software
inconsistent with the foregoing acknowledgments, nor shall any Fund attempt to
decompile, reverse engineer or modify the Software. No Fund may copy, sell,
lease or provide, directly or indirectly, any of the Software or any portion
thereof to any other person or entity without the Bank's prior written consent.
No Fund may remove any statutory copyright notice or other notice included in
the Software or on any media containing the Software. Each Fund shall reproduce
any such notice on any reproduction of the Software and shall add any statutory
copyright notice or other notice to the Software or media upon the Bank's
request.
(b) Each Fund acknowledges that all data bases made available as part of,
or through ACCESS, and any proprietary data, processes, information and
documentation (other than any such which are or become part of the public domain
or are legally required to be made available to the public and other than
information concerning any Fund) (collectively, the "Information"), are the
exclusive and confidential property of the Bank. Each Fund shall keep the
Information confidential by using the same care and discretion that each Fund
uses with respect to its own confidential property and trade secrets, and shall
neither make nor permit any disclosure without the express prior written consent
of the Bank, provided that nothing herein shall limit the right of each Fund to
make such disclosure of Information as may be required by statute, rule,
regulation or judicial process. The Bank acknowledges that all information
concerning the Funds ("Fund Information") is the exclusive and confidential
property of the Fund to which it pertains. The Bank shall keep the Fund
Information confidential by using the same care and discretion that the Bank
uses with respect to its own confidential property and trade secrets, and shall
not authorize any disclosure without the express prior written consent of such
Fund, provided that the Bank may without any prior consent disclose the same to
its internal and external accountants, auditors, and counsel, to its and each
respective Fund's regulators, and to any other person or entity whenever the
Bank is advised by its counsel that it may be liable for a failure to make such
disclosure.
(c) Each Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize ACCESS and receive the services thereby, and the
Bank shall not be responsible for the reliability or availability of any such
equipment or any services used in connection with ACCESS.
(d) Upon termination of this Agreement for any reason, each Fund shall
return to the Bank any and all copies of the Information which are in such
Fund's possession or under its control, or distributed to third parties. The
provisions of this Article shall not affect the copyright status of any of the
Information which may be copyrighted and shall apply to all Information whether
or not copyrighted.
3. MODIFICATIONS. The Bank reserves the right to modify ACCESS or the
Software from time to time without notice to any Fund. Each Fund agrees not to
<PAGE>
modify or attempt to modify ACCESS or the Software without the Bank's prior
written consent. Each Fund acknowledges that ACCESS and the Software are the
property of the Bank and, accordingly, each Fund agrees that any modifications
to ACCESS or the Software, whether by such Fund or the Bank and whether with or
without the Bank's consent, shall become the property of the Bank.
4. NO REPRESENTATIONS OR WARRANTIES. The Bank and its manufacturers and
suppliers make no warranties or representations, express or implied, in fact or
in law, including but not limited to warranties of merchantability and fitness
for a particular purpose, in connection with any Fund's use of ACCESS or the
Software, except that the Bank represents and warrants that the execution and
delivery and performance of this Agreement have been duly authorized by the
Bank, that it has the right to use and grant to each Fund the license to use
ACCESS and the Software granted under this Agreement, and that the use by each
Fund in accordance with such license will not constitute an infringement or a
misappropriation of any copyright, patent, trade secret or any other
intellectual property rights of any third party.
5. SECURITY; RELIANCE; UNAUTHORIZED USE. Each Fund will, and will cause all
persons utilizing ACCESS to, treat the user and authorization codes, passwords
and authentication keys applicable to ACCESS with extreme care. The Bank is
hereby irrevocably authorized to act in accordance with and rely on Written
Instructions received by it through ACCESS subject, however, to the right of a
Fund to timely give countermanding Written Instructions. Each Fund acknowledges
that it is its sole responsibility to assure that only Authorized Persons use
ACCESS and that the Bank shall not be responsible nor liable for any
unauthorized use thereof, and agrees that the security procedures to be followed
in connection with the Fund's transmission of Written Instructions through
ACCESS provide to it a commercially reasonable degree of protection in light of
its particular needs and circumstances.
6. LIMITATIONS OF LIABILITY. (a) Except as otherwise specifically provided
in Section 6(b) below, the Bank shall have no liability for any losses, damages,
injuries, claims, costs or expenses of a Fund arising out of or in connection
with any failure, malfunction or other problem relating to any Fund's use of
ACCESS, except for money damages suffered as the direct result of the negligence
of the Bank in an amount not exceeding, in the aggregate for all such losses,
damages, injuries, claims, costs and expenses of a Fund arising during any
month, the total charges paid by such Fund to the Bank for ACCESS and services
hereunder which caused such loss, damage, injury, claim, cost or expense during
the 12 months preceding the month in question, or such lesser number of months
as a Fund has used ACCESS if such Fund has not received 12 months use of ACCESS;
provided however, that the Bank shall have no liability under this Section 6(a)
if a Fund fails to comply with the provisions of Section 6(d), except to the
extent of losses arising prior to the date the Fund should have complied with
said Section 6(d) which could not have been mitigated if such Fund had complied.
(b) The Bank's liability for its negligence in executing or failing to
execute a Fund's Written Instructions received through ACCESS shall be only with
respect to a transfer, or failure to transfer, funds not in accordance with such
Written Instructions after such instructions have been duly acknowledged by the
Bank, and shall be contingent upon the Fund complying with the provisions of
Section 6(d) below, and shall be limited to (i) restoration of the principal
amount mistransferred, if and to the extent that the Bank would be required to
make such restoration under applicable law, and (ii) the lesser of (A) a Fund's
actual pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred, as the case may
be, or (B) compensation for the loss of the use of the mistransferred funds or
the funds which were not transferred, as the case may be, at a rate per annum
equal to the average Federal Funds rate as computed from the Federal Reserve
<PAGE>
Bank of New York's daily determination of the effective rate for Federal Funds,
for the period during which a Fund has lost use of such funds. In no event shall
the Bank have any liability for failing to execute Written Instructions for the
transfer of funds which are received by it through ACCESS other than through the
applicable transfer module for the particular instructions.
(c) Without limiting the generality of the foregoing, it is hereby agreed
that in no event shall the Bank or any manufacturer or supplier of its computer
equipment, software or services be responsible for any special, indirect,
incidental or consequential damages which a Fund may incur arising out of or in
connection with ACCESS or the services provided thereby, even if the Bank or
such manufacturer or supplier has been advised of the possibility of such
damages and regardless of the form of action.
(d) Each Fund shall notify the Bank of any errors, omissions or
interruptions in, or delay or unavailability of, ACCESS as promptly as
practicable, and in any event within one Business Day after the earliest of (i)
discovery thereof, (ii) the date discovery should have occurred through the
exercise of reasonable care, and (iii) in the case of any error, the date of the
earliest notice to such Fund which reflects such error.
(e) ACCESS is designed to promptly and automatically acknowledge the Bank's
receipt of each Written Instruction communicated through ACCESS, and in the
absence of such acknowledgement the Bank shall not be liable for any failure to
act in accordance with such Written Instruction and the Funds may not claim that
such Written Instruction was received by the Bank.
7. FUNDS TRANSFER BACK-UP PROCEDURE. (a) In the event ACCESS is inoperable
and a Fund is unable to utilize ACCESS for the transmission of Written
Instructions to the Bank to transfer funds, the Fund may give Oral Instructions
or Written Instructions regarding funds transfers, it being expressly understood
and agreed that the Bank's acting pursuant to such Oral Instructions shall be
contingent upon the Bank's verification of the authenticity thereof pursuant to
the Call-Back Security Procedure set forth on Schedule III hereto (the
"Procedure"). In this regard, each Fund shall deliver to the Bank a Funds
Transfer Telephone Instruction Authorization in the form of Schedule III-A
hereto, identifying the individuals authorized to deliver and/or confirm all
such Oral Instructions. Each Fund understands and agrees that the Procedure is
intended to determine whether Oral Instructions received pursuant to this
Section are authorized but is not intended to detect any errors contained in
such instructions. Each Fund hereby accepts the Procedure and confirms its
belief that the Procedure is commercially reasonable.
(b) The Bank shall have no liability whatsoever for any funds transfer
executed in accordance with Oral Instructions delivered and confirmed pursuant
to this Section 7 and Schedule III hereto. The Bank's liability for its
negligence in executing or failing to execute any such Oral Instructions shall
be determined by reference to Section 6(b) of this Article.
(c) The Bank reserves the right to suspend acceptance of Oral Instructions
pursuant to this Section 7 if conditions exist which the Bank, in its sole
discretion, believes have created an unacceptable security risk.
8. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. EACH FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE BANK DELIVERED THE SOFTWARE TO ANY FUND
OUTSIDE OF THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES
IN ACCORDANCE WITH THE EXPORT ADMINISTRATION REGULATIONS. DIVERSION CONTRARY TO
<PAGE>
U.S. LAW IS PROHIBITED. Each Fund hereby authorizes the Bank to report its name
and address to government agencies to which the Bank is required to provide such
information by law.
9. ENCRYPTION. Customer acknowledges and agrees that encryption may not be
available for every communication through ACCESS, or for all data. Customer
agrees that Custodian may deactivate any encryption features at any time,
without notice or liability to Customer, for the purpose of maintaining,
repairing or troubleshooting ACCESS or the Software.
ARTICLE VI
CONCERNING THE BANK
1. STANDARD OF CARE; PRESENTMENT OF CLAIMS. Except as otherwise provided
herein, the Bank shall not be liable for any costs, expenses, damages,
liabilities or claims (including attorney's fees) incurred by a Fund, except
those costs, expenses, damages, liabilities or claims arising out of the Bank's
own negligence, bad faith or willful misconduct. Notwithstanding the foregoing
or anything contained in Schedule I hereto, the Bank shall not be liable for any
loss or damage, including attorney's fees, resulting from the Bank paying any
redemption draft containing a forged drawer signature, unless such loss or
damage arises out of the Bank's negligence, bad faith or willful misconduct. All
claims against the Bank hereunder shall be made by the respective Fund as
promptly as practicable, and in any event within 6 months from the date of the
action or inaction on which such claim is based, and shall include reasonable
documentation evidencing such claim and loss.
2. NO LIABILITY. The Bank shall have no obligation hereunder for costs,
expenses, damages, liabilities or claims, including attorney's fees, which are
sustained or incurred by reason of any action or inaction by the Federal Reserve
wire transfer system or the New York Automated Clearing House. Notwithstanding
any other provision elsewhere contained in this Agreement, in no event shall the
Bank be liable to any Fund or any third party for special, indirect or
consequential damages, or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed of the possibility
of such damages and regardless of the form of action.
3. INDEMNIFICATION. Each Fund shall indemnify and exonerate, save and hold
harmless the Bank from and against any and all costs, expenses, damages,
liabilities or claims, including reasonable attorney's fees and expenses, which
the Bank may sustain or incur or which may be asserted against the Bank by
reason of or as a result of any action taken or omitted by the Bank in
connection with its performance under this Agreement with respect to a Fund,
except those costs, expenses, damages, liabilities or claims arising out of the
Bank's own negligence, bad faith or wilful misconduct. This indemnity shall be a
continuing obligation of each Fund notwithstanding the termination of this
Agreement, any Account or Omnibus Account with respect to a Fund.
4. NO OBLIGATION TO INQUIRE. Without limiting the generality of the
foregoing, the Bank shall in no event be under any obligation to inquire into,
and shall not be liable for:
(a) the due authority of any Authorized Person acting on behalf of a Fund
in connection with this Agreement;
<PAGE>
(b) the genuineness of any drawer signature on any draft deposited in any
Account or Omnibus Account, or whether such signature is a forgery, other than
the signature of the drawer of any draft drawn on the Bank;
(c) the existence or genuineness of any endorsement or any marking
purporting to be an endorsement on any draft deposited in any Account or Omnibus
Account, or whether such endorsement or marking is a forgery, it being expressly
understood that all risks associated with the acceptance by the Bank of any
draft payable to a payee other than a Fund for deposit in any Account or Omnibus
Account pursuant to Oral or Written Instructions by the Fund shall be borne by
such Fund;
(d) any discrepancy between the pre-printed investment stub (other than a
substitute stub created by the Bank) and the payee either named on a draft or
written on the face thereof, provided the Bank has acted in accordance with the
investment stub;
(e) any discrepancy between the written amount for which any draft is drawn
and the Magnetic Incription Character Recognition ("MICR") code enscribed
thereon by any bank other than the Bank on any draft presented, provided the
Bank has acted in accordance with the MICR code;
(f) any disbursement directed by a Fund, regardless of the purpose
therefor;
(g) any determination of the Share balance of any Shareholder whose name is
signed on any redemption draft;
(h) any determination of length of time any Shares have been owned by any
Shareholder or the method of payment utilized to purchase such Shares by such
Shareholder;
(i) any claims, liens, attachments, stays or stop payment orders with
respect to any Shares, proceeds, or money, other than a stop payment order
placed by a Fund on a draft drawn by such Fund on its Account or an Omnibus
Account;
(j) the propriety and/or legality of any transaction in any Account or
Omnibus Account;
(k) the lack of authority of any person signing as a drawer of a draft,
provided such person and his specimen signature are specified in the certificate
of authorized signatures last received by the Bank; or
(l) whether any redemption draft equals or exceeds any minimum amount.
5. RELIANCE UPON INSTRUCTIONS. The Bank shall be entitled to rely upon any
Written or Oral Instructions received by the Bank. Each Fund agrees, except as
otherwise provided in any Schedule attached hereto, to forward to the Bank
Written Instructions confirming Oral Instructions in such manner so that such
Written Instructions are received by the Bank by the close of business on the
same day that such Oral Instructions are given to the Bank. Each Fund agrees
that the fact that such confirming Written Instructions are not timely received
or that contrary Written Instructions are received by the Bank shall in no way
affect the validity or enforceability of transactions previously authorized.
6. FORCE MAJEURE. The Bank shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
<PAGE>
arising out of or caused, directly or indirectly, by circumstances beyond its
control, including acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; epidemics; riots; interruptions, loss or
malfunctions of utilities, computers (hardware or software), transportation, or
communications service; mechanical breakdowns; interruption or loss of ACCESS
(except as otherwise provided in Section 7 of Article V); accidents; acts of
civil or military authority; governmental actions; labor disputes; or inability
to obtain labor, material, equipment or transportation.
7. NO IMPLIED DUTIES; PERFORMANCE ACCORDING TO APPLICABLE LAW. The Bank
shall have no duties or responsibilities except such duties and responsibilities
as are specifically set forth in this Agreement and Schedule I hereto, and no
covenant or obligation shall be implied against the Bank. The Bank's duties and
responsibilities hereunder shall be performed in accordance with applicable
laws, regulations and rules, including but not limited to Federal Reserve
Regulation CC and the Operating Rules of the New York Automated Clearing House,
and the Bank shall have no obligation to take actions which in the reasonable
opinion of the Bank are either inconsistent with, or prejudice or impair the
Bank's rights under, any such laws, regulations and rules.
8. REQUESTS FOR INSTRUCTIONS. At any time the Bank may apply to an officer
of a Fund for Oral or Written Instructions with respect to any matter arising in
connection with the Bank's duties and obligations hereunder, and the Bank shall
not be liable for any action taken or permitted by it in good faith in
accordance with such Oral or Written Instructions. Such application for Oral or
Written Instructions may, at the option of the Bank, set forth in writing any
action proposed to be taken or omitted by the Bank with respect to its duties or
obligations hereunder and the date on or after which such action shall be taken,
and the Bank shall not be liable for any action taken or omitted in accordance
with a proposal included in any such application on or after the date specified
therein (which shall be at least 5 days after the date of such Fund's receipt of
such application) unless, prior to taking or omitting any such action, the Bank
has received Oral or Written Instructions in response to such application
specifying the action to be taken or omitted. The Bank may apply for and obtain
the advice and opinion of counsel to the Fund or of its own counsel, at the
expense of the Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or opinion.
9. DELEGATION OF DUTIES. The Bank may delegate any of its duties and
obligations hereunder to any delegee and may employ agents or attorneys-in-fact;
provided however, that no such delegation or employment by the Bank shall
discharge the Bank from its obligations hereunder. The Bank shall have no
liability or responsibility whatsoever if any delegee, agent or attorney-in-fact
shall have been selected by a Fund and approved by a resolution of its board.
Notwithstanding the foregoing, nothing contained in this paragraph shall
obligate the Bank to effect any delegation or to employ any agent or
attorney-in-fact.
10. FEES; INVOICES. (a) For its services hereunder, each Fund agrees to pay
the Bank with respect to the Bank's services to such Fund (i) its reasonable
out-of-pocket expenses, (ii) the monthly fees and compensation set forth on
Schedule II attached hereto, and (iii) any negative Calendar Month Earnings
Credits, and such other amounts as may be mutually agreed upon from time to
time. The Bank shall provide each Fund with a monthly activity analysis
detailing service volumes, and including average Account Available Balances and
average ledger balances, and all fees owing for such month.
(b) The Bank shall monthly submit periodic detailed invoices specifying the
amount of all out-of-pocket expenses, fees, compensation and negative Calendar
Month Earnings Credits then due hereunder. The Bank may, and is hereby
authorized by each Fund, to charge such amounts to an Omnibus Account or the
<PAGE>
appropriate Fund's Account(s), but only if such amounts remain unpaid for
fifteen (15) days after the end of the period to which such amounts relate.
11. APPLICATION OF CALENDAR MONTH EARNINGS CREDITS. (a) Any positive
Calendar Month Earnings Credit for a calendar month shall be applied only as
follows and only in the specified order:
(i) First, applied against such compensation, fees, but not
out-of-pocket expenses, payable by such Fund to the Bank under this
Agreement for such month; and
(ii) Second, applied against such compensation, fees, and negative
Calendar Month Earnings Credits, but not out-of-pocket expenses,
payable by such Fund to the Bank under this Agreement for any
subsequent month in the same calendar year.
(b) Except as provided above, in no event may any Calendar Month Earnings
Credit be applied to any month other than the month in which it was earned.
Calendar Month Earnings Credits may not be transferred to, or utilized by, any
other Fund, person or entity. The portion, if any, of any Calendar Month
Earnings Credit not used by a Fund may be carried, but only forward; provided,
however, that in no event may any Calendar Month Earnings Credit, including
those earned during the fourth calendar quarter, be carried beyond the end of
the calendar year in which earned.
ARTICLE VII
TERMINATION
1. NOTICE. This Agreement may be terminated as to any Fund by either the
Bank giving to such Fund, or such Fund giving to the Bank, a notice in writing
specifying the date of such termination, which date shall be not less than 90
days after the date of the giving of such notice. Notwithstanding the foregoing,
the Bank reserves the right to terminate this Agreement as to any Fund (a) at
any time upon 30 days prior written notice if the condition precedent set forth
in Article II, paragraph 3 is unfulfilled with respect to such Fund, and (b)
upon notice if such Fund either (i) fails to comply with Article IV, Section 3,
or (ii) borrows funds from the Bank in an amount exceeding the Bank's legal
lending limit. Any Fund may terminate this Agreement with respect to such Fund
at any time upon not less than 30 days' prior written notice to the Bank and, in
the event of a material breach of this Agreement by the Bank, may terminate this
Agreement with 10 days' prior written notice.
2. OBLIGATIONS UPON TERMINATION. Upon termination, with respect to a Fund,
the Bank's sole obligations, which shall arise only after, and not before, such
Fund which is the subject of such termination has paid to the Bank all
out-of-pocket expenses, fees, compensation, negative Calendar Month Earnings
Credits and other amounts owed by such Fund to the Bank, shall be (i) to deliver
to the affected Fund(s) such records, if any, as may be owned by such Fund(s),
in the form and manner kept by the Bank on such date of termination, and (ii) to
pay to the affected Fund(s) any monies held for their account hereunder.
Notwithstanding any such termination, this Agreement shall continue in full
force and effect as to all transactions whose processing has been commenced by
the Bank prior to such termination until the completion of such processing.
<PAGE>
ARTICLE VIII
MISCELLANEOUS
1. CERTIFICATES OF AUTHORIZED PERSONS. Each Fund agrees to furnish to the
Bank a new certificate of Authorized Persons in the event that any present
Authorized Person of such Fund ceases to be an Authorized Person or in the event
that any other Authorized Persons are appointed and authorized. Until such new
certificate is received, the Bank shall be fully protected in acting under the
provisions of this Agreement upon Oral or Written Instructions or signatures of
the present Authorized Persons as set forth in the last delivered certificate.
2. NOTICES. (a) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Bank, shall be sufficiently given
if addressed to the Bank and received by it at its offices at 90 Washington
Street, 22nd Floor, New York, New York 10286, ATTENTION: Division Manager -
Mutual Funds, or at such other place as the Bank may from time to time designate
in writing.
(b) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to a Fund shall be sufficiently given if addressed to
a Fund and received by it at c/o Shay Assets Management Inc., 230 West Monroe
Street, Chicago, Ill. 60606, or at such other place as such Fund may from time
to time designate in writing.
3. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to the
Bank hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of the Bank to exercise, and
no delay in exercising, any right will operate as a waiver thereof, nor will any
single or partial exercise by the Bank of any right preclude any other or future
exercise thereof or the exercise of any other right.
4. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or obligations
shall not in any way be affected or impaired thereby, and if any provision is
inapplicable to any person or circumstances, it shall nevertheless remain
applicable to all other persons and circumstances.
5. AMENDMENTS. This Agreement may not be amended or modified in any manner
except by a written agreement executed by the Bank and each Fund to be bound
thereby, and, except in the case of an amendment to Schedule I hereto,
authorized or approved by a resolution of each Fund's Board.
6. HEADINGS. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provisions
hereof.
7. APPLICABLE LAW; CONSENT TO JURISDICTION; JURY TRIAL WAIVER. This
Agreement shall be construed in accordance with the laws of the State of New
York without giving effect to conflict of laws principles thereof. Each party
hereby consents to the jurisdiction of a state or federal court situated in New
York City, New York in connection with any dispute arising hereunder and hereby
waives its right to trial by jury.
8. NO THIRD PARTY BENEFICIARIES. The provisions of this Agreement are
intended to benefit only the Bank and each Fund and their respective permitted
successors and assigns, and no right shall be granted to any other person by
virtue of this Agreement.
<PAGE>
9. SUCCESSORS AND ASSIGNS. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by either party
without the written consent of the other party and in the case of an assignment
by any Fund, such assignment must be authorized or approved by a resolution of
such Fund's Board. No merger, reorganization or consolidation by the Bank shall
be deemed to constitute an assignment.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
11. SEVERAL OBLIGATIONS. The parties acknowledge that the obligations of
the Funds are several and not joint, that no Fund shall be liable for any amount
owing by another Fund and that the Funds have executed one instrument for
convenience only.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective corporate officers, thereunto duly authorized, as of the day
and year first above written.
By: /S/ EDWARD E. SAMMONS, JR.
------------------------------
on behalf of each Fund identified
on Schedule A attached hereto
THE BANK OF NEW YORK
By: /S/ STEPHEN E. GRUNSTON
------------------------------
Title:
<PAGE>
SCHEDULE A
NAME OF FUND
------------
Institutional Investors Capital Appreciation Fund, Inc.
<PAGE>
EXHIBIT A
I, of Institutional Investors Capital Appreciation Fund, Inc. (the
"Fund"), a New York corporation do hereby certify that:
The following individuals have been duly authorized by the Board of
Directors of the Fund in conformity with the Fund's Certificate of Incorporation
and By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund for purposes of the Fund's Cash Management and Related Services Agreement,
and the signatures set forth opposite their respective names are their true and
correct signatures.
Name Signature
- -------------------------------------- ----------------------------------
- -------------------------------------- ----------------------------------
- -------------------------------------- ----------------------------------
- -------------------------------------- ----------------------------------
- -------------------------------------- ----------------------------------
----------------------------------
[Title of Officer]
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1999, by and between
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., (the "Company"), a New
York corporation having its principal place of business at 200 Park Avenue, New
York, New York, 10166, and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio
corporation having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Company desires BISYS to perform certain services, and BISYS
is willing to provide such services, for the current investment portfolio of the
Company, and any additional investment portfolios that may hereafter be created
(individually, the "Portfolio," and collectively, the "Portfolios"), on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and BISYS hereby agree as follows:
ARTICLE 1. RETENTION OF BISYS. The Company hereby retains BISYS to act as
Administrator of the Portfolios and to furnish the Portfolios with the
management and administrative services as set forth in Article 2 below. BISYS
hereby accepts such employment to perform the duties set forth below.
BISYS shall, for all purposes herein, be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Company in any way and shall not be deemed
an agent of the Company.
ARTICLE 2. ADMINISTRATIVE SERVICES. BISYS shall perform or supervise the
performance by others of other administrative services in connection with the
operations of the Portfolios, and, on behalf of the Company, will investigate,
assist in the selection of and conduct relations with custodians, depositories,
accountants, legal counsel, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and persons in any other capacity deemed to be
necessary or desirable for the Portfolios' operations. BISYS shall provide the
Board of Directors of the Company (hereafter referred to as the "Directors")
with such reports regarding investment performance as they may reasonably
request but shall have no responsibility for supervising the performance by any
investment adviser or sub-adviser of its responsibilities.
BISYS agrees to perform the services described herein in accordance with
all applicable laws, rules and regulations (including, where applicable,
Generally Accepted Accounting Principles) and in accordance with any reasonable
instructions of the Company and the Company's Certificate of Incorporation,
Bylaws, Prospectus and Statement of Additional Information.
<PAGE>
BISYS shall provide the Company with regulatory reporting, all necessary
office space, equipment, personnel, compensation and facilities (including
facilities for Shareholders' and Directors' meetings) for handling the affairs
of the Company and such other services as BISYS shall, from time to time,
determine to be necessary to perform its obligations under this Agreement. In
addition, at the request of the Directors, BISYS shall make reports to the
Company's Directors concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, BISYS shall:
(a) calculate contractual Company expenses and control all
disbursements for the Company, and as appropriate compute the
Company's yields, total return, expense ratios, portfolio turnover
rate and, if required, portfolio average dollar-weighted maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements and
proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of shares of common stock
of the Company ("Shares") as may be required in order to comply with
Federal and state securities law) as may be necessary or desirable
to register the Company's Shares with state securities authorities,
monitor the sale of Company Shares for compliance with state
securities laws, and prepare and file with the appropriate state
securities authorities the registration statements and reports for
the Company and the Company's Shares and all amendments thereto, as
may be necessary or convenient to register and keep effective the
Company and the Company's Shares with state securities authorities
to enable the Company to make a continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's
investment adviser, communications to Shareholders, including the
annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other reports
to Company Shareholders, and supervise and facilitate the proxy
solicitation process for all shareholder meetings, including the
tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among
others, the Company's investment adviser, distributor, custodian,
transfer agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination
to information services covering the investment company industry;
<PAGE>
(h) coordinate, provide the necessary financial/tax data for and
supervise, the preparation of the Company's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Company, including,
without limitation, the Company's investment adviser, distributor,
custodian, fund accountant, transfer agent, outside legal counsel
and independent public accountants, including monitoring of all
applicable contractual fee or expense limitations and at the request
of the Directors, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of
the Company's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives, policies
and structure;
(l) provide individuals reasonably acceptable to the Company's
Directors to serve as officers of the Company, (without
compensation, reimbursement of expenses or indemnification from the
Company, other than as set forth in this Agreement), who will be
responsible for the management of certain of the Company's affairs
as determined by the Company's Directors;
(m) advise the Company and its Directors on matters concerning the
Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Company in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under
the 1940 Act as such bonds and policies are approved by the
Company's Directors and make all necessary filings with the SEC;
(o) monitor and advise the Company and its Portfolios on their
registered investment company status under the Internal Revenue Code
of 1986, as amended;
(p) perform all administrative services and functions of the
Company to the extent administrative services and functions are not
provided to the Company pursuant to the Company's investment
advisory agreement, distribution agreement, custodian agreement,
transfer agent agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the Company
and BISYS shall determine desirable; and
<PAGE>
(r) prepare and file with the SEC in a timely manner (in order to
avoid interest charges) the semi-annual report for the Company on
Form N-SAR and all required notices pursuant to Rule 24f-2.
Without limiting the foregoing, the services to be provided by BISYS
hereunder shall include the services listed in the detailed service listing
attached hereto as Schedule B. BISYS shall perform such other services for the
Company that the Company may from time to time reasonably request; provided,
however, that, to the extent that the performance of any of such other services
requires BISYS to incur material additional costs, and BISYS notifies the
Company thereof promptly after such request, such services shall be provided in
exchange for such additional compensation that is agreed upon by the parties.
Such services may include performing internal audit examinations; mailing the
annual reports of the Portfolios; preparing an annual list of Shareholders; and
mailing notices of Shareholders' meetings, proxies and proxy statements, for all
of which the Company will pay BISYS's out-of-pocket expenses.
BISYS 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 and shall, at no additional expense to the
Company, take reasonable steps to minimize service interruptions.
BISYS shall provide on a timely basis to the Company's investment adviser,
transfer agent, accounting agent, distributor and custodian and other persons
providing services to the Company such information as such persons may
reasonably request in connection with the performance of their respective duties
and obligations with respect to the Company. BISYS will report to the Board of
Directors of the Company at each meeting of the Board of Directors and will keep
the Board of Directors informed of material developments affecting the Company.
BISYS will comply with any performance standards that may be agreed to by
BISYS and the Company from time to time.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) BISYS. BISYS shall furnish at its own expense the executive,
supervisory and clerical personnel necessary to perform its obligations under
this Agreement. BISYS shall also provide the items which it is obligated to
provide under this Agreement, and shall pay all compensation, if any, of
officers of the Company as well as all Directors of the Company who are
affiliated persons of BISYS or any affiliated corporation of BISYS; provided,
however, that unless otherwise specifically provided, BISYS shall not be
obligated to pay the compensation of any employee of the Company retained by the
Directors of the Company to perform services on behalf of the Company.
(B) THE COMPANY. The Company assumes and shall pay or cause to be paid all
other expenses of the Company not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
<PAGE>
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of BISYS or the Investment Adviser to the Company or any
affiliated corporation of BISYS or the Investment Adviser, insurance, interest,
brokerage costs, litigation and other extraordinary or nonrecurring expenses,
and all fees and charges of investment advisers to the Company.
ARTICLE 4. COMPENSATION OF BISYS.
(A) ADMINISTRATION FEE. For the services to be rendered, the facilities
furnished and the expenses assumed by BISYS pursuant to this Agreement, the
Company shall pay to BISYS compensation at an annual rate specified in the
Omnibus Fee Agreement between the Company and BISYS dated as of August 1, 1999
(the "Fee Agreement"). Such compensation shall be calculated and accrued daily,
and paid to BISYS monthly. The Company shall also reimburse BISYS for its
reasonable out-of-pocket expenses, including the travel and lodging expenses
incurred by officers and employees of BISYS in connection with attendance at
Board meetings.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, BISYS's compensation for that part
of the month in which this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above. Payment of
BISYS's compensation for the preceding month shall be made promptly.
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS' actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or made to BISYS by the Company or an investment adviser of the Company and on
any records provided by any fund accountant or custodian thereof; provided,
however, that BISYS shall not be protected in relying on any information,
records, instructions or requests given, made or prepared by BISYS or any
affiliate of BISYS or any officer of the Company that is an officer or employee
of BISYS or any affiliate of BISYS; and provided, further, that this
indemnification shall not apply to actions or omissions of BISYS in cases of its
own bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties; and further provided that prior to confessing any
claim against it which may be the subject of this indemnification, BISYS shall
<PAGE>
give the Company written notice of and a reasonable opportunity to defend
against said claim in its own name or in the name of BISYS.
Notwithstanding the foregoing, BISYS agrees to indemnify and hold harmless
the Company, its employees, agents, directors, officers and nominees from and
against any and all actions, suits, demands and claims, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character arising out of or in any way relating to BISYS's bad faith,
willful malfeasance or misfeasance, negligence, or reckless disregard by it of
its obligations and duties, with respect to the performance of services under
this Agreement.
The indemnifying party shall be entitled to participate at its own expense
or, if it acknowledges its responsibility to indemnify the other party, it may
elect to assume the defense of any suit brought to enforce any claims subject to
this indemnity provision. If the indemnifying party elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
indemnifying party and satisfactory to the indemnified party, whose approval
shall not be unreasonably withheld. In the event that the indemnifying party
elects to assume the defense of any suit and retain counsel, the indemnified
party shall bear the fees and expenses of any additional counsel retained by it.
If the indemnifying party does not elect to assume the defense of a suit, it
will reimburse the indemnified party for the reasonable fees and expenses of any
counsel retained by the indemnified party.
ARTICLE 6. ACTIVITIES OF BISYS. The services of BISYS rendered to the
Company are not to be deemed to be exclusive. BISYS is free to render such
services to others and to have other businesses and interests. It is understood
that directors, officers, employees and Shareholders of the Company are or may
be or become interested in BISYS, as officers, employees or otherwise and that
partners, officers and employees of BISYS and its counsel are or may be or
become similarly interested in the Company, and that BISYS may be or become
interested in the Company as a Shareholder or otherwise.
ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall be
as specified in Schedule A hereto. In the event either party gives notice of the
termination of this Agreement as provided in Schedule A, BISYS will cooperate
and use all reasonable efforts to assist with the conversion of the data and
records maintained by it hereunder to, and the assumption of the services
provided by it hereunder by, a replacement provider of administrative services.
ARTICLE 8. ASSIGNMENT. This Agreement shall not be assignable by either
party, nor may BISYS subcontract or delegate any of its duties hereunder,
without the written consent of the other party; provided, however, that BISYS
may, at its expense, with the prior written consent of the Company subcontract
with any entity or person concerning the provision of the services contemplated
hereunder. BISYS shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that BISYS shall be responsible, to the extent provided in Article 5 hereof, for
all acts of such subcontractor as if such acts were its own. This Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto and
<PAGE>
their respective successors and permitted assigns. BISYS will give the Company
prompt written notice of the appointment of any such subcontractor. Any
assignment not in compliance with this Agreement shall be void.
ARTICLE 9. AMENDMENTS. This Agreement may be amended by the parties hereto
only if such amendment is specifically approved (i) by the vote of a majority of
the Directors of the Company, and (ii) by the vote of a majority of the
Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Directors meeting called for the
purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and BISYS may
conclusively assume that any special procedure which has been approved by the
Company does not conflict with or violate any requirements of its Certificate of
Incorporation or then current prospectuses, or any rule, regulation or
requirement of any regulatory body.
ARTICLE 10. CERTAIN RECORDS. BISYS shall maintain customary records in
connection with its duties as specified in this Agreement, and, without limiting
the foregoing, BISYS shall maintain such books and records as the Company may be
required to maintain under the 1940 Act and the rules and regulations thereunder
that are not required to be maintained by the Company's investment adviser,
distributor, transfer agent, fund accountant or custodian, including, without
limitation, books and records relating to the operations of the Company prior to
the date of this Agreement, to the extent provided to BISYS. All such records,
including any records required to be maintained and preserved pursuant to Rules
31a-1 and 31a-2 under the 1940 Act, which are prepared or maintained by BISYS on
behalf of the Company shall be prepared and maintained at the expense of BISYS,
but shall be the property of the Company and will be made available to or
surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify the Company and follow the Company's
instructions as to permitting or refusing such inspection; provided that BISYS
may exhibit such records to any person in any case where it is advised by its
counsel that it may be held liable for failure to do so, unless (in cases
involving potential exposure only to civil liability) the Company has agreed to
indemnify BISYS against such liability. BISYS will promptly notify the Company
of any such request.
ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: if to the Company at 200 Park Avenue, New York, New
York, 10166; if to BISYS at 3435 Stelzer Road, Columbus, Ohio 43219; or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
<PAGE>
ARTICLE 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Ohio and the applicable provisions of the 1940 Act
or the rules and regulations thereunder. To the extent that the applicable laws
of the State of Ohio, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, or such rules and regulations the latter
shall control.
ARTICLE 14. MULTIPLE ORIGINALS. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 15. INSTRUCTIONS, APPROVAL OR CONSENT BY THE COMPANY; IMPUTATION.
Any reference herein to any instructions, approval or consent of the Company
shall not include any instructions, approval or consent given by any officer of
the Company that is an officer, employee or agent of BISYS or any affiliate of
BISYS, unless specifically authorized by the Board of Directors of the Company.
No information known to any such officer of the Company shall be imputed to the
Company for purposes of this Agreement.
ARTICLE 16. YEAR 2000. BISYS agrees to perform comprehensive tests on the
systems it utilizes to provide the services hereunder to identify any
operational issues caused by the century change. BISYS agrees to use all
commercially reasonable efforts to implement by December 31, 1999, all necessary
updates and changes to such systems, if any, to accommodate the turn of the
century. BISYS agrees to provide to the Company monthly updates on the status of
its Year 2000 readiness project and to make its personnel reasonably available
to address any questions. In particular and, without limiting the foregoing,
BISYS shall notify the Company of any circumstances known to BISYS which are
likely to cause BISYS's systems to be Year 2000 non-compliant and which would
likely have an adverse effect on the Portfolios.
In the event that the Company reasonably determines that any of the
systems BISYS utilizes to perform services hereunder will not be Year 2000
compliant and that such lack of compliance will have an adverse effect on the
Company, the Company shall provide written notice to BISYS describing, in
reasonable detail, any defect or problem relating to such system(s) promptly
upon becoming aware of any such defect or problem. BISYS agrees to use all
commercially reasonable efforts to cure any defect or deficiency that relates to
the turn of the century in any system that BISYS utilizes to provide services
hereunder. This paragraph does not alter the obligations of BISYS under the
preceding paragraph.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /S/ EDWARD E. SAMMONS JR.
----------------------------
Title: VICE PRESIDENT
--------------------------
BISYS FUND SERVICES OHIO, INC.
By: /S/ WILLIAM J. TOMKO
----------------------------
Title: PRESIDENT
--------------------------
<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF AUGUST 1, 1999
BETWEEN
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
Portfolios: This Agreement shall apply to all Portfolios of Institutional
Investors Capital Appreciation Fund, Inc. either now or hereafter
created (individually, the "Portfolio", and collectively, the
"Portfolios").
Term: Pursuant to Article 7, the term of this Agreement shall commence
on August 1, 1999 and shall remain in effect through July 31,
2004 ("Initial Term"). Thereafter, unless otherwise terminated
as provided herein, this Agreement shall be renewed automatically
for successive one-year periods ("Rollover Periods"). This
Agreement may be terminated without penalty (i) by provision of
90 days advance written notice of nonrenewal prior to the end of
the Initial Term or any Rollover Period, as the case may be, (ii)
by mutual agreement of the parties or (iii) for "cause," as
defined below, upon the provision of 90 days advance written
notice by the party alleging cause. Notwithstanding the
foregoing, after July 31, 2001, either party may terminate this
Agreement at any time and without penalty, upon the provision of
90 days advance written notice to the other party.
For purposes of this Agreement, "cause" shall mean (a) a material
breach of this Agreement that has not been remedied for thirty (30)
days following written notice of such breach from the non-breaching
party; (b) a series of negligent acts or omissions or breaches of
this Agreement which, in the aggregate, constitute, in the
reasonable judgment of the Company's Directors, a serious failure to
perform satisfactorily BISYS's obligations hereunder, (c) a service
standard deficiency (as defined by the parties in the service
standards that are agreed to by BISYS and the Company from time to
time); (d) a final, unappealable judicial, regulatory or
administrative ruling or order in which the party to be terminated
has been found guilty of criminal or unethical behavior in the
conduct of its business; or (e) financial difficulties on the part
of the party to be terminated which are evidenced by the
authorization or commencement of, or involvement by way of pleading,
answer, consent or acquiescence in, a voluntary or involuntary case
under Title 11 of the United States Code, as from time to time is in
effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of
debtors or to the modification or alteration of the rights of
creditors.
<PAGE>
Notwithstanding the foregoing, after such termination for so long as
BISYS, with the written consent of the Company, in fact continues to
perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of this
Agreement, including without limitation the provisions dealing with
indemnification, shall continue in full force and effect.
Compensation due BISYS and unpaid by the Company upon such
termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled to collect
from the Company, in addition to the compensation described in this
Schedule A, the amount of all of BISYS's cash disbursements for
services in connection with BISYS's activities in effecting such
termination, including without limitation, the delivery to the
Company and/or its designees of the Company's property, records,
instruments and documents.
If, for any reason other than nonrenewal, mutual agreement of the
parties or "cause," as defined above, during the first two years of
the Initial Term of this Agreement, BISYS is replaced as
administrator, then the Company shall make a one-time cash payment,
in consideration of the fee structure and services to be provided
under this Agreement, and not as a penalty, to BISYS equal to the
balance due BISYS for the remainder of such two-year period,
assuming for purposes of calculation of the payment that such
balance shall be based upon the average amount of the Company's
assets for the twelve months prior to the date BISYS is replaced.
In the event the Company is merged into another legal entity in part
or in whole pursuant to any form of business reorganization
(including without limitation a purchase of assets) or is liquidated
in part or in whole prior to the expiration of the then-current term
during the first two years of the Initial Term of this Agreement,
the parties acknowledge and agree that the Company shall be entitled
to terminate this Agreement; provided, however, that the liquidated
damages provision set forth above shall be applicable in those
instances in which BISYS is not retained by the other party to such
business reorganization or any successor entity to provide
administration services consistent with this Agreement. The one-time
cash payment referenced above shall be due and payable on the day
prior to the first day in which BISYS is replaced.
The parties further acknowledge and agree that, in the event BISYS
is replaced, as set forth above, (i) a determination of actual
damages incurred by BISYS would be extremely difficult, and (ii) the
liquidated damages provision contained herein is intended to
adequately compensate BISYS for damages incurred and is not intended
to constitute any form of penalty.
<PAGE>
SCHEDULE B
TO THE ADMINISTRATION AGREEMENT
DATED AS OF AUGUST 1, 1999
BETWEEN
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
DETAIL SERVICE LISTING
ADMINISTRATION
1. Maintain and manage annual regulatory filing calendar.
2. Manage the process of printing and distributing prospectuses and prospectus
supplements. This includes, but is not limited to, decisions regarding
quantities and layout, price negotiation, invoice control and management of
the mailing process.
3. Manage the process of printing and distributing proxy materials. This
includes, but is not limited to, decisions regarding quantities, compilation
of shareholder data, price negotiation and management of the mailing process.
4. Prepare and file Form N24-F2.
5. Obtain tax identification numbers from the IRS for each Fund portfolio.
6. Assist Fund in obtaining Fund ratings from NRSROs.
7. Obtain Fund CUSIPs.
8. Assist in the completion of trustee/officer questionnaires.
9. Assist the Fund in the preparation of appropriate documentation and
records relating to the contribution of seed money capital.
10.Maintain books and records on behalf of the Fund, as agreed upon by the
parties.
11.Make available persons to serve as officers of the Fund.
COMPLIANCE
1. Review monthly compliance reports that are prepared by the investment
adviser(s).
2. Perform independent monthly portfolio compliance testing.
3. Prepare quarterly tax compliance checklist for use by investment
adviser(s).
4. Notify appropriate Fund officers of mark-to-market issues pursuant to
Board-approved procedures.
5. Provide appropriate assistance with respect to SEC inspections including (i)
rendering advice regarding proposed responses (ii) compiling data and other
information in response to SEC requests for information and (iii)
communicating with SEC staff members, as necessary.
6. Provide appropriate assistance with respect to audits conducted by the Fund's
independent accountants including (i) compiling data and other information
and (ii) communicating with independent accountants, as necessary.
7. Consult with and advise, on a proactive basis, Fund portfolio managers with
respect to compliance matters.
<PAGE>
8. Prepare quarterly brokerage allocation compliance checklist and supporting
documentation for use by investment adviser(s).
9. Provide on-site compliance training for investment advisory personnel, as
requested.
10.Preparation of Fund-specific compliance manual.
TAX AND FINANCIAL SERVICES
1. Prepare semi-annual/annual financial statements.
2. Prepare and file Form N-SAR
3. Calculate/distribute all standard performance information
4. Prepare annual Fund expense budget and monthly accrual analyses
5. Validate/approve Fund expenses to be paid
6. Register Fund portfolios with NASDAQ
7. Prepare financial materials for Board books.
8. Calculate declaration of income/capital gain distributions in compliance with
income/excise tax distribution requirements.
9. Review all dividend declarations to ensure that such distributions are not
"preferential" under the Internal Revenue Code.
10.Review and file federal and state income tax returns and federal excise tax
returns within statutory deadlines.
11.Prepare/distribute year-end shareholder tax information letters and Forms
1099-MISC for trustee fees/vendor payments within 30 days of calendar
year-end.
12.Provide on-site compliance/consulting for portfolio managers focused on the
impact of changes in tax laws and managing a tax-efficient mutual fund.
13.Provide on-site consulting services for conversions.
14.Provide expense budgeting consulting to review expense ratios/fee waivers.
15.Leverage BISYS' relationships with all "Big 5" accounting firms for clients'
benefit.
16.Produce and coordinate the printing and distribution of semi-annual/annual
reports.
17. Calculate Funds performance information.
BLUE SKY
1. Qualify the Fund and its shares with appropriate state blue sky authorities
upon client authorization.
2. Amend and renew sales permits as required.
3. Monitor the sales of shares in individual states on a daily basis upon
receipt of sales information and, when required, report sales to appropriate
states.
4. Maintain Fund blue sky filing calendars.
5. Address all blue sky audit and examination issues.
6. Conduct blue sky fee analysis, upon request.
7. Produce checks required for state filing fees.
LEGAL SERVICES
GENERAL
1. Maintain files of registration statements, Fund contracts, Fund proxies and
other Fund legal documents.
2. Provide legal consultation with respect to product development issues.
<PAGE>
3. Provide assistance concerning matters pertaining to Federal securities laws,
bank regulatory issues, tax-related issues and ERISA issues.
4. Provide information concerning current legal and regulatory developments.
5. Provide comments, as appropriate, concerning regulatory agency proposals.
6. Maintain appropriate insurance coverage on behalf of the Fund in the form of
(i) a Directors & Officers/Errors & Omissions professional liability and (ii)
a Fidelity Bond.
7. Prepare memoranda and other correspondence that outlines the terms and
conditions of the insurance policies described in item 6 above.
BOARD MEETING MATTERS
1. Maintain calendar and files for all Board meetings, including the maintenance
of Fund minute books and corporate records (e.g., Articles of
Incorporation/Declaration of Trust, Bylaws).
2. Provide appropriate personnel to attend Board meetings.
3. Produce and distribute Board books.
4. Prepare relevant sections of Board materials.
5. Record minutes of Board meetings. (Counsel to the Fund will prepare
agendas and resolutions.)
REGISTRATION STATEMENTS
1. Manage the process of updating the registration statement by (i) reviewing or
recommending proposed disclosure changes, (ii) compiling data for purposes of
updating information, (iii) receiving disclosure comments and communicating
them to counsel to the Fund and to the financial printer and (iv) overseeing
the printing process and approving revisions that are made by the financial
printer. (Counsel to the Fund will draft and file the registration
statement.)
2. Prepare periodic supplements to Fund prospectuses or, if the parties agree,
review such supplements that are prepared by counsel to the Fund.
PROXY MATERIALS
1. Review proxy statements that are prepared by counsel to the Fund.
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 13th day of September, 1999, by and
between INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC. (the "Company"),
a New York corporation having its principal place of business at 200 Park
Avenue, New York, New York 10166 and BISYS FUND SERVICES OHIO, INC. ("BISYS"),
an Ohio corporation having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain services for the
current investment portfolio of the Company and any additional investment
portfolios that may hereafter be created (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES.
BISYS shall perform for the Company the transfer agent services set
forth in Schedule A hereto. BISYS also agrees to perform for the Company such
additional services that the Company may from time to time reasonably request;
provided, however, that, to the extent that the performance of any of such other
services requires BISYS to incur material additional costs, and BISYS notifies
the Company thereof promptly after such request, such services shall be provided
in exchange for such additional compensation that is agreed upon by the parties.
BISYS agrees to perform the services described herein in accordance
with all applicable laws, rules and regulations (including, where applicable,
Generally Acceptable Accounting Principles) and in accordance with any
reasonable instructions of the Company and the Company's Certificate of
Incorporation, Bylaws, Prospectus and Statement of Additional
Information..
BISYS may, with the prior written consent of the Company, appoint in
writing other parties qualified to perform transfer agency services reasonably
acceptable to the Company (individually, a "Sub-transfer Agent") to carry out
some or all of its responsibilities under this Agreement with respect to a Fund;
provided, however, that the Sub-transfer Agent shall be the agent of BISYS and
not the agent of the Company or such Fund, and that BISYS shall be fully
responsible for the acts of such Sub-transfer Agent as if such acts were its own
and shall not be relieved of any of its responsibilities hereunder by the
appointment of such Sub-transfer Agent.
BISYS shall provide on a timely basis to the Company's investment
adviser, administrator, accounting agent, distributor and custodian and other
persons providing services to the Company such information as such persons may
reasonably request in connection with the performance of their respective duties
and obligations with respect to the Company. BISYS will report to the Board of
<PAGE>
Directors of the Company at each meeting of the Board of Directors and will keep
the Board of Directors informed of material developments affecting the Company.
BISYS will comply with any performance standards that may be agreed
to by BISYS and the Company from time to time.
2. FEES.
The Company shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in the
Omnibus Fee Agreement between the Company and BISYS dated as of August 1, 1999
(the "Fee Agreement"). Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
3. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 2 hereof,
the Company agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company and in
delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Company, the Company's investment
adviser or custodian, dealers, shareholders or others as
required for BISYS to perform the services to be provided
hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other forms of printed material which
shall be required by BISYS for the performance of the services
to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) Sales taxes paid on behalf of the Company;
(f) Expenses associated with the tracking of "as-of" trades;
(g) All systems-related expenses associated with the provision of
special reports and services pursuant to Schedule B attached
hereto; and
(h) Any expenses BISYS shall incur at the written direction of an
officer of the Company thereunto duly authorized.
<PAGE>
4. EFFECTIVE DATE.
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. TERM.
This Agreement shall continue in effect unless earlier terminated by
either party hereto as provided hereunder, until September 12, 2004 (the
"Initial Term"). Thereafter, unless otherwise terminated as provided herein,
this Agreement shall be renewed automatically for successive one-year periods
("Rollover Periods"). This Agreement may be terminated without penalty (i) by
provision of 90 days advance written notice of nonrenewal prior to the end of
the Initial Term or any Rollover Period, as the case may be, (ii) by mutual
agreement of the parties or (iii) for "cause," as defined below, upon the
provision of 90 days advance written notice by the party alleging cause.
Notwithstanding the foregoing, after September 12, 2001, either party may
terminate this Agreement, at any time and without penalty, upon the provision of
90 days advance written notice to the other party.
For purposes of this Agreement, "cause" shall mean (a) a material
breach of this Agreement that has not been remedied for thirty (30) days
following written notice of such breach from the non-breaching party; (b) a
series of negligent acts or omissions or other breaches of this Agreement which,
in the aggregate, constitutes, in the reasonable judgment of the Company's
Directors, a serious failure to perform satisfactorily BISYS's obligations
hereunder; (c) a service standard deficiency (as defined by the parties in the
service standards that are agreed to by BISYS and the Company from time to
time); (d) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; or (e) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors.
After such termination, for so long as BISYS, with the written
consent of the Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Company upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Company, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' cash disbursements in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Company and/or its distributor or investment adviser and/or other parties, of
the Company's property, records, instruments and documents.
<PAGE>
If, for any reason other than nonrenewal, mutual agreement of the
parties or "cause," as defined above, during the first two years of the Initial
Term of this Agreement, BISYS is replaced as transfer agent, then the Company
shall make a one-time cash payment, in consideration of the fee structure and
services to be provided under this Agreement, and not as a penalty, to BISYS
equal to the balance due BISYS for the remainder of such two-year period
assuming for purposes of calculation of the payment that such balance shall be
based upon the average number of Company shareholder accounts for the twelve
months prior to the date BISYS is replaced.
In the event the Company is merged into another legal entity in part
or in whole pursuant to any form of business reorganization (including without
limitation a purchase of assets) or is liquidated in part or in whole prior to
the expiration of the first two years of the Initial Term of this Agreement, the
parties acknowledge and agree that the Company shall be entitled to terminate
this Agreement; provided, however, that the liquidated damages provision set
forth above shall be applicable in those instances in which BISYS is not
retained by the other party to such business reorganization or any successor
entity to provide transfer agency services consistent with this Agreement. The
one-time cash payment referenced above shall be due and payable on the day prior
to the first day in which BISYS is replaced.
The parties further acknowledge and agree that, in the event BISYS
is replaced as set forth above, (i) a determination of actual damages incurred
by BISYS would be extremely difficult, and (ii) the liquidated damages provision
contained herein is intended to adequately compensate BISYS for damages incurred
and is not intended to constitute any form of penalty.
In the event that either party gives notice of the termination of
this Agreement as provided in this Section, BISYS will cooperate and use all
reasonable efforts to assist with the conversion of the data and records
maintained by it hereunder to, and the assumption of the services provided by it
hereunder by, a replacement provider of transfer agency services.
6. UNCONTROLLABLE EVENTS.
BISYS 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 and shall, at no additional expense to the
Company, take reasonable steps to minimize service interruptions.
BISYS assumes no responsibility hereunder, and shall not be liable
for any damage, loss of data, delay or any other loss whatsoever caused by
events beyond its reasonable control; provided that such damage, loss, delay or
other loss is not caused by BISYS' own willful misfeasance, bad faith,
negligence or reckless disregard of its obligations under, or other
noncompliance with this Agreement.
7. LEGAL ADVICE.
BISYS shall notify the Company at any time BISYS believes that it is
in need of the advice of counsel (other than counsel in the regular employ of
<PAGE>
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Company, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing and BISYS shall in no event be liable to the Company or
any Fund or any shareholder or beneficial owner of the Company for any action
reasonably taken pursuant to such advice.
8. INSTRUCTIONS.
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Fund, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication, believed by BISYS to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Company
(other than BISYS or any of its affiliates or an officer of the Company that is
an officer or employee of BISYS or any of its affiliates), or by the shareholder
or shareholder's agent, as the case may be, and shall be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by it
hereunder a certificate signed by an officer of the Company (other than an
officer of the Company that is an officer or employee of BISYS or any of its
affiliates) or any other person authorized by the Company's Board of Directors
(hereafter referred to as the "Directors") or by the shareholder or
shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS will comply with
the terms of the Prospectuses and the Statement of Additional Information of the
Company to the extent such terms address the manner in which the services
described herein are performed unless BISYS receives written instructions to the
contrary in a timely manner from the Company.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS' actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or made to BISYS by the Company, the investment adviser and on any records
provided by any fund accountant (other than BISYS) or custodian thereof;
provided, however, that BISYS shall not be protected in relying on any
information, records, instructions or requests given or made to or prepared by
BISYS or any affiliate of BISYS or any officer of the Company that is an officer
or employee of BISYS or any affiliate of BISYS; and provided, further, that this
indemnification shall not apply to actions or omissions of BISYS in cases of its
own bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties; and further provided that prior to confessing any
claim against it which may be the subject of this indemnification, BISYS shall
<PAGE>
give the Company written notice of and reasonable opportunity to defend against
said claim in its own name or in the name of BISYS.
Notwithstanding the foregoing, BISYS agrees to indemnify and hold
harmless the Company, its employees, agents, directors, officers and nominees
from and against any and all actions, suits, demands and claims, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every nature and character arising out of or in any way relating to
BISYS's bad faith, willful malfeasance or misfeasance, negligence, or reckless
disregard by it of its obligations and duties with respect to the performance of
services under this Agreement.
The indemnifying party shall be entitled to participate at its own
expense or, if it acknowledges its responsibility to indemnify the other party,
it may elect to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the indemnifying party elects to assume
the defense of any such claim, the defense shall be conducted by counsel chosen
by the indemnifying party and satisfactory to the indemnified party, whose
approval shall not be unreasonably withheld. In the event that the indemnifying
party elects to assume the defense of any suit and retain counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of a suit, it will reimburse the indemnified party for the reasonable fees and
expenses of any counsel retained by the indemnified party.
10. RECORD RETENTION AND CONFIDENTIALITY.
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Company and to make such
books and records available for inspection by the Company or by the Securities
and Exchange Commission (the "Commission") at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
Company and its shareholders, except when requested to divulge such information
by duly-constituted authorities or court process, or requested by a shareholder
or shareholder's agent with respect to information concerning an account as to
which such shareholder has either a legal or beneficial interest or when
requested by the Company, the shareholder, or shareholder's agent, or the dealer
of record as to such account. BISYS will promptly notify the Company of any such
requests by duly constituted authorities or court process.
11. REPORTS.
BISYS will furnish to the Company and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Company in writing,
such reports at such times as are prescribed in Schedule B attached hereto, or
<PAGE>
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
B. The Company agrees to examine each such report or copy promptly and will
report or cause to be reported any errors or discrepancies therein of which the
Company is aware.
12. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Company unless the Company authorizes in writing the destruction of such
records and documents.
14. BANK ACCOUNTS.
The Company and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Company, as are
necessary in order that BISYS may perform the services required to be performed
hereunder. To the extent that the performance of such services shall require
BISYS directly to disburse amounts for payment of dividends, redemption proceeds
or other purposes, the Company and Funds shall provide such bank or banks with
all instructions and authorizations necessary for BISYS to effect such
disbursements.
15. REPRESENTATIONS OF THE COMPANY.
The Company certifies to BISYS that: (a) by virtue of its
Certificate of Incorporation, shares of each Fund which are redeemed by the
Company may be sold by the Company from its treasury, and (b) this Agreement has
been duly authorized by the Company and, when executed and delivered by the
Company, will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
<PAGE>
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Company and BISYS' records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
BISYS agrees to perform comprehensive tests on the systems it
utilizes to provide the services hereunder to identify any operational issues
caused by the century change. BISYS agrees to use all commercially reasonable
efforts to implement by December 31, 1999 all necessary updates and changes to
such systems, if any, to accommodate the turn of the century. BISYS agrees to
provide to the Company monthly updates on the status of its Year 2000 readiness
project and to make its personnel reasonably available to address any questions.
In particular and, without limiting the foregoing, BISYS shall notify the
Company of any circumstances known to BISYS which are likely to cause BISYS's
systems to be Year 2000 non-compliant and which would likely have an adverse
effect on the Funds.
In the event that the Company reasonably determines that any of the
systems BISYS utilizes to perform services hereunder will not be Year 2000
compliant and that such lack of compliance will have an adverse effect on the
Company, the Company shall provide written notice to BISYS describing, in
reasonable detail, any defect or problem relating to such system(s) promptly
upon becoming aware of any such defect or problem. BISYS agrees to use all
commercially reasonable efforts to cure any defect or deficiency that relates to
the turn of the century in any system that BISYS utilizes to provide services
hereunder. This paragraph does not alter the obligations of BISYS under the
preceding paragraph.
17. INSURANCE.
BISYS shall notify the Company should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Company of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Company from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS.
The Company has furnished to BISYS the following:
(a) Copies of the Certificate of Incorporation of the Company and
of any amendments thereto, certified by the proper official of
the state in which such Certificate has been filed.
(b) Copies of the following documents:
1. The Company's Bylaws and any amendments thereto;
<PAGE>
2. Certified copies of resolutions of the Directors
covering the following matters:
A. Approval of this Agreement and authorization of a
specified officer of the Company to execute and
deliver this Agreement and authorization for
specified officers of the Company to instruct
BISYS hereunder; and
B. Authorization of BISYS to act as Transfer Agent
for the Company on behalf of the Funds.
(c) A list of all officers of the Company, together with specimen
signatures of those officers, who are authorized to instruct
BISYS in all matters.
(d) Two copies of the following (if such documents are employed by
the Company):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Company or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest or common
stock of the Company authorized, issued, and outstanding as of
the Effective Date of BISYS' appointment as Transfer Agent (or
as of the date on which BISYS' services are commenced,
whichever is the later date) and as to receipt of full
consideration by the Company for all shares outstanding, such
statement to be certified by the Treasurer of the Company.
19. INFORMATION FURNISHED BY BISYS.
BISYS has furnished to the Company the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Company.
<PAGE>
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13 under the Exchange
Act.
20. AMENDMENTS TO DOCUMENTS.
The Company shall furnish BISYS written copies of any amendments to,
or changes in, any of the items referred to in Section 18 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Company which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Company pursuant to Sections 18
and 20 of this Agreement and the Company hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Company first obtains
BISYS' written consent to and approval of such amendments or changes.
22. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Sections 1, 10 and
11, hereof, BISYS bears no responsibility under this Agreement for the
preparation, contents, and distribution of each prospectus of the Company as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the 1940 Act, and any other laws, rules and
regulations of governmental authorities having jurisdiction. BISYS shall have no
obligation to take cognizance of any laws relating to the sale of the Company's
shares. The Company represents and warrants that no shares of the Company will
be offered to the public until the Company's registration statement under the
1940 Act has been declared or becomes effective.
23. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: if to the Company at 200 Park Avenue, New York,
New York, 10166; if to BISYS at 3435 Stelzer Road, Columbus, Ohio 43219; or at
such other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
<PAGE>
24. HEADINGS.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
25. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns. Any assignment not
in compliance with this Agreement shall be void.
26. GOVERNING LAW.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
27. INSTRUCTIONS, APPROVAL OR CONSENT BY THE COMPANY; IMPUTATION.
Any reference herein to any instructions, approval or consent of the
Company shall not include any instructions, approval or consent given by any
officer of the Company that is an officer, employee or agent of BISYS or any
affiliate of BISYS, unless specifically authorized by the Board of Directors of
the Company. No information known to any such officer of the Company shall be
imputed to the Company for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /S/ EDWARD E. SAMMONS JR.
------------------------------
Title: VICE PRESIDENT
----------------------------
BISYS FUND SERVICES OHIO, INC.
By: /S/ WILLIAM J. TOMKO
------------------------------
Title: PRESIDENT
----------------------------
<PAGE>
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
DATED AS OF SEPTEMBER 13, 1999
BETWEEN
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
1. SHAREHOLDER TRANSACTIONS
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. SHAREHOLDER INFORMATION SERVICES
a. Make information available to shareholder servicing unit and other
remote access units regarding trade date, share price, current
holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
3. COMPLIANCE REPORTING
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in which
the Fund is registered.
<PAGE>
b. Prepare and distribute appropriate Internal Revenue Service forms
for corresponding Fund and shareholder income and capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING (IF APPLICABLE)
a. Provide reports for tracking rights of accumulation and purchases
made under a Letter of Intent.
b. Account for separation of shareholder investments from transaction
sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. SHAREHOLDER ACCOUNT MAINTENANCE
a. Maintain all shareholder records for each account in the Company.
b. Issue customer statements on a scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
DATED AS OF SEPTEMBER 13, 1999
BETWEEN
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
8. Such special reports and additional information that the parties may agree
upon, from time to time.
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1999, by and between
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., (the "Company"), a New
York corporation having its principal place of business at 200 Park Avenue, New
York, New York, 10166 and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio
corporation having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain fund accounting
services for the current investment portfolio of the Company and any additional
investment portfolio that may hereafter be created (individually referred to
herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT.
BISYS agrees to perform the services described herein in accordance
with all applicable laws, rules and regulations (including, where applicable,
Generally Acceptable Accounting Principles), and in accordance with any
reasonable instructions of the Company and the Company's Certificate of
Incorporation, Bylaws, Prospectus and Statement of Additional Information.
(a) MAINTENANCE OF BOOKS AND RECORDS. BISYS will keep and maintain
the following books and records of each Fund pursuant to Rule
31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in detail
of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and
credits, as required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(i) of the
Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
<PAGE>
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8)
of the Rule.
(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES. In addition to the
maintenance of the books and records specified above, BISYS
shall perform the following accounting services daily for each
Fund:
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection
1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then obtain
such prices from each Fund's investment adviser or its
designee, as approved by the Company's Board of
Directors (hereafter referred to as "Directors");
(iii) Verify and reconcile with the Funds' custodian all daily
trade activity;
(iv) Compute, as appropriate, each Fund's net income and
capital gains, dividend payables, dividend factors,
7-day yields, 7-day effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to release
to shareholders, check and confirm the net asset values
and dividend factors for reasonableness and deviations,
and distribute net asset values and yields to NASDAQ;
(vi) Report to the Company the daily market pricing of
securities in any money market Funds, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii)Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested
by the Company;
(ix) Update fund accounting system to reflect rate changes,
as received from a Fund's investment adviser, on
variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to instructions
received from the Company's Administrator;
<PAGE>
(xii) Determine the outstanding receivables and payables for
all (1) security trades, (2) Fund share transactions and
(3) income and expense accounts;
(xiii)Provide accounting reports in connection with the
Company's regular annual audit and other audits and
examinations by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall agree
upon, as set forth in a separate schedule.
(c) SPECIAL REPORTS AND SERVICES.
(i) BISYS shall provide additional special reports and other
similar services upon the request of the Company or the
Company's investment adviser.
(ii) To the extent that the provision of any such reports or
services requires BISYS to incur material additional
costs and BISYS notifies the Company thereof promptly
after such requests, such reports or services shall be
provided in exchange for such additional compensation
that is agreed upon by the parties.
(d) ADDITIONAL ACCOUNTING SERVICES. BISYS shall also perform the
following additional accounting services for each Fund:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon request
of the Company. The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information (including financial
statements and schedules and pertinent statistical
information) for the following:
(A) federal and state income tax returns and federal
excise tax returns;
(B) the Company's semi-annual reports with the
Securities and Exchange Commission ("SEC") on
Form N-SAR;
(C) the Company's annual, semi-annual and quarterly
(if any) shareholder reports;
(D) registration statements on Form N-1A and other
filings relating to the registration or sale of
shares;
<PAGE>
(E) the Administrator's monitoring of the Company's
status as a regulated investment company under
Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Company's auditors; and
(G) examinations performed by the SEC.
BISYS shall provide on a timely basis to the Company's investment
adviser, administrator, transfer agent, distributor and custodian and other
persons providing services to the Company such information as such persons may
reasonably request in connection with the performance of their respective duties
and obligations with respect to the Company. BISYS will report to the Board of
Directors of the Company at each meeting of the Board of Directors and will keep
the Board of Directors informed of material developments affecting the Company.
BISYS will comply with any performance standards that may be agreed
to by BISYS and the Company from time to time.
2. SUBCONTRACTING.
BISYS may, at its expense, with the prior written consent of the
Company, subcontract with any entity or person concerning the provision of the
services contemplated hereunder; provided, however, that BISYS shall not be
relieved of any of its obligations under this Agreement by the appointment of
such subcontractor and provided further, that BISYS shall be responsible, to the
extent provided in Section 7 hereof, for all acts of such subcontractor as if
such acts were its own; and provided, further, that no such services shall be
subcontracted without the prior written consent of the Company.
3. COMPENSATION.
The Company shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in the
Omnibus Fee Agreement between the Company and BISYS dated as of August 1, 1999
(the "Fee Agreement").
4. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 3 hereof,
the Company agrees to reimburse BISYS for its out-of-pocket expenses in
providing services hereunder, including without limitation the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Company, the Company's investment
adviser or custodian, dealers or others as required for BISYS
to perform the services to be provided hereunder;
<PAGE>
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) All systems-related expenses associated with the provision of
special reports and services pursuant to Section 1(c) herein;
(f) Any expenses BISYS shall incur at the written direction of an
officer of the Company thereunto duly authorized; and
(g) Any additional expenses reasonably incurred by BISYS in the
performance of its duties and obligations under this
Agreement.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Fund as of
the date first written above (the "Effective Date").
6. TERM.
This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
July 31, 2004 (the "Initial Term"). Thereafter, unless otherwise terminated as
provided herein, this Agreement shall be renewed automatically for successive
one-year periods ("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of 90 days advance written notice of nonrenewal prior
to the end of the Initial Term or any Rollover Period, as the case may be, (ii)
by mutual agreement of the parties or (iii) for "cause," as defined below, upon
the provision of 90 days advance written notice by the party alleging cause.
Notwithstanding the foregoing, after July 31, 2001, either party may terminate
this Agreement, at any time and without penalty, upon the provision of 90 days
advance written notice to the other party.
For purposes of this Agreement, "cause" shall mean (a) a material
breach of this Agreement that has not been remedied for thirty (30) days
following written notice of such breach from the non-breaching party; (b) a
series of negligent acts or omissions or other breaches of this Agreement which,
in the aggregate, constitute, in the reasonable judgment of the Company's
directors, a serious failure to perform satisfactorily BISYS's obligations
hereunder; (c) a service standard deficiency (as defined by the parties in the
service standards that are agreed to by BISYS and the Company from time to
time); (d) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated had been found guilty of criminal
or unethical behavior in the conduct of its business; or (e) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors.
<PAGE>
After such termination for so long as BISYS, with the written
consent of the Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect.
Compensation due BISYS and unpaid by the Company upon such termination shall be
immediately due and payable upon and notwithstanding such termination. BISYS
shall be entitled to collect from the Company, in addition to the compensation
described under Sections 3 and 4 hereof, the amount of all of BISYS's cash
disbursements for services in connection with BISYS's activities in effecting
such termination, including without limitation, the delivery to the Company
and/or its designees of the Company's property, records, instruments and
documents.
If, for any reason other than nonrenewal, mutual agreement of the
parties or "cause," as defined above, during the first two years of the Initial
Term of this Agreement, BISYS is replaced as fund accountant, then the Company
shall make a one-time cash payment, in consideration of the fee structure and
services to be provided under this Agreement, and not as a penalty, to BISYS
equal to the balance due BISYS for the remainder of such two-year period
assuming for purposes of calculation of the payment that such balance shall be
based upon the average amount of the Company's assets for the twelve months
prior to the date BISYS is replaced.
In the event the Company is merged into another legal entity in part
or in whole pursuant to any form of business reorganization (including without
limitation a purchase of assets) or is liquidated in part or in whole prior to
the expiration of the first two years of the Initial Term of this Agreement, the
parties acknowledge and agree that the Company shall be entitled to terminate
this Agreement; provided, however, that the liquidated damages provision set
forth above shall be applicable in those instances in which BISYS is not
retained by the other party to such business reorganization or any successor
entity to provide fund accounting services consistent with this Agreement. The
one-time cash payment referenced above shall be due and payable on the day prior
to the first day in which BISYS is replaced or a third party is added.
The parties further acknowledge and agree that, in the event BISYS
is replaced, as set forth above, (i) a determination of actual damages incurred
by BISYS would be extremely difficult, and (ii) the liquidated damages provision
contained herein is intended to adequately compensate BISYS for damages incurred
and is not intended to constitute any form of penalty.
In the event either party gives notice of the termination of this
Agreement as provided in this Section, BISYS will cooperate and use all
reasonable efforts to assist with the conversation of the data and records
maintained by it hereunder to, and the assumption of the services provided by it
hereunder by, a replacement provider of fund accounting services.
7. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless BISYS, its employees,
<PAGE>
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS's actions taken or nonactions with
respect to the performance of services under this Agreement with respect to such
Fund or based, if applicable, upon reasonable reliance on information, records,
instructions or requests with respect to such Fund given or made to BISYS by a
duly authorized representative of the Company; provided, however, that BISYS
shall not be protected in relying on any information, records, instructions or
requests given or made to or prepared by BISYS or any affiliate of BISYS or any
officer of the Company that is an officer or employee of BISYS or any affiliate
of BISYS; and provided, further, that, this indemnification shall not apply to
actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against it which
may be the subject of this indemnification, BISYS shall give the Company written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of BISYS.
Notwithstanding the foregoing, BISYS agrees to indemnify and hold
harmless the Company, its employees, agents, directors, officers and nominees
from and against any and all actions, suits, demands and claims, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other
expenses of every nature and character arising out of or in any way relating to
BISYS's bad faith, willful malfeasance or misfeasance, negligence, or reckless
disregard by it of its obligations and duties with respect to the performance of
services under this Agreement.
The indemnifying party shall be entitled to participate at its own
expense or, if it acknowledges its responsibility to indemnify the other party,
it may elect to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the indemnifying party elects to assume
the defense of any such claim, the defense shall be conducted by counsel chosen
by the indemnifying party and satisfactory to the indemnified party, whose
approval shall not be unreasonably withheld. In the event that the indemnifying
party elects to assume the defense of any suit and retain counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of a suit, it will reimburse the indemnified party for the reasonable fees and
expenses of any counsel retained by the indemnified party.
8. RECORD RETENTION AND CONFIDENTIALITY.
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company and BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Company and to make such
books and records available for inspection by the Company or by the Securities
<PAGE>
and Exchange Commission at reasonable times and otherwise to keep confidential
all books and records and other information relative to the Company and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process. BISYS will promptly notify the
Company of any such request.
9. UNCONTROLLABLE EVENTS.
BISYS 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 and shall, at no additional expense to the
Company, take reasonable steps to minimize service interruptions. BISYS assumes
no responsibility hereunder, and shall not be liable, for any damage, loss of
data, delay or any other loss whatsoever caused by events beyond its reasonable
control; provided that such damage, delay or other loss is not caused by BISYS'
own willful misfeasance, bad faith, negligence or reckless disregard of its
obligations under, or other noncompliance with this Agreement.
10. REPORTS.
BISYS will furnish to the Company and to its properly authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Company in writing,
such reports and at such times as are prescribed pursuant to the terms and the
conditions of this Agreement to be provided or completed by BISYS, or as
subsequently agreed upon by the parties pursuant to an amendment hereto. The
Company agrees to examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein of which the Company is
aware.
11. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
12. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain BISYS's files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Company unless the Company authorizes in writing the destruction of such
records and documents.
<PAGE>
13. REPRESENTATIONS OF THE COMPANY.
The Company certifies to BISYS that this Agreement has been duly
authorized by the Company and, when executed and delivered by the Company, will
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (1) the various procedures and
systems which BISYS has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Company and BISYS's records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as are required for the
secure performance of its obligations hereunder, and (2) this Agreement has been
duly authorized by BISYS and, when executed and delivered by BISYS, will
constitute a legal, valid and binding obligation of BISYS, enforceable against
BISYS in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
BISYS agrees to perform comprehensive tests on the systems it
utilizes to provide the services hereunder to identify any operational issues
caused by the century change. BISYS agrees to use all commercially reasonable
efforts to implement by December 31, 1999 all necessary updates and changes to
such systems, if any, to accommodate the turn of the century. BISYS agrees to
provide to the Company monthly updates on the status of its Year 2000 readiness
project and to make its personnel reasonably available to address any questions.
In particular and, without limiting the foregoing, BISYS shall notify the
Company of any circumstances known to BISYS which are likely to cause BISYS's
systems to be Year 2000 non-compliant and which would likely have an adverse
effect on the Funds.
In the event that the Company reasonably determines that any of the
systems BISYS utilizes to perform services hereunder will not be Year 2000
compliant and that such lack of compliance will have an adverse effect on the
Company, the Company shall provide written notice to BISYS describing, in
reasonable detail, any defect or problem relating to such system(s) promptly
upon becoming aware of any such defect or problem. BISYS agrees to use all
commercially reasonable efforts to cure any defect or deficiency that relates to
the turn of the century in any system that BISYS utilizes to provide services
hereunder. This paragraph does not alter the obligations of BISYS under the
preceding paragraph.
15. INSURANCE.
BISYS shall notify the Company should any of its insurance coverage
be canceled or reduced. Such notification shall include the date of change and
the reasons therefor. BISYS shall notify the Company of any material claims
against it with respect to services performed under this Agreement, whether or
not they may be covered by insurance, and shall notify the Company from time to
<PAGE>
time as may be appropriate of the total outstanding claims made by BISYS under
its insurance coverage.
16. INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS.
The Company has furnished to BISYS the following:
(a) Copies of the Articles of Incorporation of the Company and of
any amendments thereto, certified by the proper official of
the state in which such document has been filed.
(b) Copies of the following documents:
(i) The Company's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Directors
covering the approval of this Agreement, authorization
of a specified officer of the Company to execute and
deliver this Agreement and authorization for specified
officers of the Company to instruct BISYS thereunder.
(c) A list of all the officers of the Company, together with
specimen signatures of those officers who are authorized to
instruct BISYS in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
17. INFORMATION FURNISHED BY BISYS.
(a) BISYS has furnished to the Company the following:
(i) BISYS's Articles of Incorporation; and
(ii) BISYS's Bylaws and any amendments thereto.
(b) BISYS shall, upon request, furnish certified copies of
corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement; and
(ii) Authorization of BISYS to act as fund accountant for the
Company and to provide accounting services for the
Company.
<PAGE>
18. AMENDMENTS TO DOCUMENTS.
The Company shall furnish BISYS written copies of any amendments to,
or changes in, any of the items referred to in Section 16 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or Statements of Additional
Information of the Company which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS's approval of such amendments or changes.
19. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Sections 1, 2, 7, 8
and 10 hereof, BISYS bears no responsibility under this Agreement for the
preparation, contents and distribution of each prospectus of the Company as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the 1940 Act and any other laws, rules and
regulations of governmental authorities having jurisdiction. The Company
represents and warrants that no shares of the Company will be offered to the
public until the Company's registration statement under the 1940 Act has been
declared or becomes effective.
20. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: if to the Company at 200 Park Avenue, New York,
New York 10166; if to BISYS at 3435 Stelzer Road, Columbus, Ohio 43219; or at
such other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
21. HEADINGS.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
22. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Any assignment not in compliance with this
Agreement shall be void.
23. GOVERNING LAW.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
<PAGE>
24. INSTRUCTIONS, APPROVAL OR CONSENT BY THE COMPANY; IMPUTATION.
Any reference herein to any instructions, approval or consent of the
Company shall not include any instructions, approval or consent given by any
officer of the Company that is an officer, employee or agent of BISYS or any
affiliate of BISYS, unless specifically authorized by the Board of Directors of
the Company. No information known to any such officer of the Company shall be
imputed to the Company for purposes of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed all as of the day and year first above written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /S/ EDWARD E. SAMMONS JR.
-----------------------------
Title: VICE PRESIDENT
---------------------------
BISYS FUND SERVICES OHIO, INC.
By: /S/ WILLIAM J. TOMKO
-----------------------------
Title: PRESIDENT
---------------------------
OMNIBUS FEE AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1999, by and between
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC. (the "Company"), a New
York corporation having its principal place of business at 200 Park Avenue, New
York, New York, 10166 and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio
corporation having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
consisting of several series of shares of beneficial interest ("Shares");
WHEREAS, the Company and BISYS have entered into an Administration
Agreement dated as of August 1, 1999, a Fund Accounting Agreement dated as of
August 1, 1999 and a Transfer Agency Agreement dated as of September 13, 1999,
concerning the provision of administration, fund accounting and transfer agency
services, respectively, for the current investment portfolio of the Company and
any additional investment portfolios that may hereafter be created (individually
referred to herein as a "Fund" and collectively as the "Funds"); and
WHEREAS, the parties desire to set forth the compensation payable to BISYS
by the Company under the Administration Agreement, Fund Accounting Agreement and
Transfer Agency Agreement (collectively the "Service Agreements") in a separate
written document.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. The parties have agreed that a single integrated fee shall be paid by
the Company as compensation to BISYS for such services performed under the
Service Agreements. The aggregate amount of the compensation due and payable to
BISYS for such services is set forth in Schedule A hereto. Such compensation
shall be payable during the term of the Service Agreements. In addition to the
foregoing, BISYS shall be reimbursed for certain out-of-pocket expenses, as more
fully set forth in the Service Agreements.
2. This Agreement shall be governed by, and its provisions shall be
construed in accordance with, the laws of the State of Ohio.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
fully executed as of the day and year first written above.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /S/ EDWARD E. SAMMONS JR.
-----------------------------
Title: VICE PRESIDENT
---------------------------
BISYS FUND SERVICES OHIO, INC.
By: /S/ WILLIAM J. TOMKO
-----------------------------
Title: PRESIDENT
---------------------------
<PAGE>
SCHEDULE A
TO THE OMNIBUS FEE AGREEMENT
DATED THIS 1ST DAY OF AUGUST, 1999
BETWEEN
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
AND
BISYS FUND SERVICES OHIO, INC.
FEES
1. ASSET-BASED FEES
The Company shall pay to BISYS on the first business day of each month, or
at such time(s) as BISYS shall request and the parties hereto shall agree, a fee
computed daily at the annual rate of:
Ten one-hundredths of one percent (.10%)
of each Fund's average daily net assets
up to $200 million;
Seven and one-half one-hundredths of one
percent (.075%) of each Fund's average
daily net assets in excess of $200 million
up to $400 million;
Five one-hundredths of one percent (.05%)
of each Fund's average daily net assets in
excess of $400 million up to $600 million;
and
Three one-hundredths of one percent (.03%)
of each Fund's average daily net assets in
excess of $600 million.
2. ANNUAL MINIMUM FEES
The asset-based fees described herein shall be subject to the following
per Fund annual minimum fee of $80,400.
3. PER ACCOUNT FEES
BISYS shall be entitled to receive a $ 15.00 per account per Fund annual
processing fee. Such fee shall be subject to a monthly minimum fee of $1,500.
The per account fees will not begin to accrue until September 13, 1999.
<PAGE>
4. REIMBURSEMENT OF EXPENSES
The fees set forth above shall be in addition to the payment of
out-of-pocket expenses, as provided for in the Service Agreements.
ASSET MANAGEMENT FUND
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
M.S.B. FUND, INC.
SHAY ASSETS MANAGEMENT, INC.
SHAY FINANCIAL SERVICES, INC.
CODE OF ETHICS
1. PURPOSE
This Code of Ethics has been adopted by the Board of Directors/Trustees of
Asset Management Fund, Institutional Investors Capital Appreciation Fund, Inc.,
M.S.B. Fund, Inc., Shay Assets Management, Inc. and Shay Financial Services,
Inc. in accordance with Rule 17j-1 under the Investment Company Act of 1940 (the
"Act"). Rule 17j-1 under the Act generally proscribes fraudulent or manipulative
practices with respect to purchases or sales of securities held or to be
acquired by investment companies, if effected by associated persons of such
companies. The purpose of this Code of Ethics is to provide regulations and
procedures consistent with the Act and Rule 17j-1 designed to give effect to the
general prohibitions set forth in Rule 17j- 1(b) as follows:
It is unlawful for any affiliated person of or principal underwriter for
an investment company registered under the Act, or any affiliated person of an
investment adviser of or principal underwriter for a registered investment
company, in connection with the purchase or sale, directly or indirectly, by
such person of a security held or to be acquired by the investment company:
(1) to employ any device, scheme or artifice to defraud the
investment company;
(2) to make any untrue statement of a material fact to the
investment company or omit to state a material fact necessary
in order to make the statements made to the investment
company, in light of the circumstances under which they are
made, not misleading;
(3) to engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit on the
registered investment company; or
(4) to engage in any manipulative practice with respect to the
investment company.
2. DEFINITIONS
(a) "Access Person" means with respect to a Fund (i) any trustee,
director, officer, general partner or Advisory Person of the Fund or the
Adviser; and (ii) any director, officer or general partner of the Distributor
who, in the ordinary course of business, makes, participates in or obtains
information regarding, the purchase or sale of Covered Securities by the Fund,
<PAGE>
or whose functions or duties in the ordinary course of business relate to the
making of any recommendation to the Fund regarding the purchase or sale of
Covered Securities.
(b) "Adviser" means Shay Assets Management, Inc.
(c) "Advisory Person" of a Fund or the Adviser means (i) any employee of
the Fund or Adviser (or of any company in a control relationship to the Fund or
Adviser), who, in connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale of a
Covered Security by the Fund, or whose functions relate to the making of any
recommendations with respect to the purchase or sale of Covered Securities; and
(ii) any natural person in a control relationship to the Fund or Adviser who
obtains information concerning recommendations made to the Fund with regard to
the purchase or sale of Covered Securities by the Fund.
(d) "Beneficial ownership" shall be interpreted in the same manner as it
would be in Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, except
that the determination of direct or indirect beneficial ownership shall apply to
all securities which an Access Person has or acquires (see Annex A).
(e) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
(f) "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it shall not include (i) direct obligations of the
Government of the United States; (ii) banker's acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements; and (iii) shares issued by registered open-end
investment companies.
(g) "Disinterested Director" means a director or trustee of a Fund who is
not an "interested person" of the Adviser or Distributor within the meaning of
Section 2(a)(19) of the Act. For purposes of this Code, trustees shall be
referred to as directors.
(h) "Distributor" means Shay Financial Services, Inc.
(i) "Ethics Committee" shall mean, with respect to each Fund, the Adviser
or the Distributor, the person or persons appointed or designated by the Adviser
to administer this Code of Ethics.
(j) "Funds" means Asset Management Fund; Institutional Investors Capital
Appreciation Fund, Inc.; and M.S.B. Fund, Inc. "Fund" means any of the Funds.
(k) "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act of 1934.
<PAGE>
(l) "Investment Department Personnel" means with respect to any Fund (i)
any employee of the Fund or the Adviser (or of any company in a control
relationship to the Fund or the Adviser) who, in connection with his or her
regular functions or duties, makes or participates in making recommendations
regarding the purchase or sale of securities by the Fund or assists in the
trading process; and (ii) any natural person who controls the Fund or the
Adviser and who obtains information concerning recommendations made to the Fund
regarding the purchase or sale of securities by the Fund, but shall not include
any person who is an officer or director of a Fund who is not also an officer,
director, partner or employee of the Adviser or Distributor or of any affiliate
of the Adviser or Distributor.
(m) "Limited Offering" means an offering that is exempt from registration
under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or
pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act of 1933.
(n) "Security Held or to be Acquired" by a Fund means: (i) any Covered
Security which, within the most recent 15 days (A) is or has been held by the
Fund or (B) is being or has been considered by the Fund or its Adviser for
purchase by the Fund; and (ii) any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security described in clause
(n)(i).
(o) "Purchase or Sale of a Covered Security" includes, inter alia, the
writing of an option to purchase or sell a Covered Security.
(p) For purposes of this Code, (i) securities or instruments that are
convertible into or exchangeable for a security shall be considered to be the
same security as the security into which they are convertible or exchangeable,
(ii) options and warrants with respect to a security shall be considered to be
the same security as the security for which they are exercisable and (iii)
securities and instruments that otherwise are economically related to a security
shall be considered to be the same security as such other security.
3. PROHIBITED PURCHASES AND SALES
(a) (i) No Access Person of a Fund shall purchase or sell, directly or
indirectly, any Covered Security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership and which to
his or her actual knowledge at the time of such purchase or sale:
(A) is being considered for purchase or sale by the Fund; or
(B) is being purchased or sold by the Fund,
"until either the Fund's transactions have been completed or consideration of
such transaction is abandoned."
(ii) No Investment Department Personnel shall purchase or sell,
directly or indirectly, any Covered Security in which he or she has, or by
<PAGE>
reason of such transaction acquires, any direct or indirect beneficial ownership
and which to his or her actual knowledge at the time of such purchase or sale;
(A) is being considered for purchase or sale by any Fund; or
(B) is being purchased or sold by any Fund
until either the Fund's transactions have been completed or consideration of
such transactions is abandoned.
(b) No Access Person of a Fund shall reveal to any other person (except in
the normal course of his or her duties on behalf of the Fund) any information
regarding securities transactions by the Fund or consideration by the Fund or
the Adviser of any securities transactions, other than information that is
contained in reports to shareholders of the Fund or otherwise is publicly
available.
(c) No Access Person of a Fund shall recommend any securities transactions
by the Fund without having disclosed his or her interest, if any, in such
securities or the issuer thereof, including without limitation (i) his or her
direct or indirect beneficial ownership of any securities of such issuer, (ii)
any contemplated transaction by such person in such securities, (iii) any
position with such issuer or its affiliates and (iv) any present or proposed
business relationship between such issuer or its affiliates, on the one hand,
and such person or any party in which such person has a significant interest, on
the other.
(d) No Investment Department Personnel may acquire beneficial ownership,
directly or indirectly, in any security in an Initial Public Offering or in a
Limited Offering without the express prior approval of the Ethics Committee.
Investment Department Personnel who have been authorized to acquire a security
in an Initial Public Offering or in a Limited Offering pursuant to this
subsection must disclose that investment if they participate in any subsequent
consideration by the Adviser of an investment in the issuer of that security.
The Adviser's investment decision with respect to such a security must be
independently reviewed by investment personnel with no personal interest in the
issuer of the security.
(e) No Investment Department Personnel of a Fund may execute a securities
transaction on a day during which the Fund has a pending "buy" or "sell" order
in that same security (other than transactions for the account of other bona
fide advisory clients of the Adviser) until that order is executed or withdrawn.
In addition, a portfolio manager of a Fund may not buy or sell a security within
seven calendar days before or after a portfolio that he or she manages trades in
that security; provided, however, a portfolio manager may sell a security within
seven calendar days after the portfolio executed a sales transaction in that
same security if the portfolio no longer has a position in that security. Any
profits realized by Investment Department Personnel in contravention of this
subsection must be disgorged, as determined by the Ethics Committee, to either
the Fund or a charitable entity. Any payments to a charity will be directed by
the Ethics Committee in a manner that does not produce any benefits to the
Adviser or the person violating the Code.
<PAGE>
4. EXEMPTED TRANSACTIONS
The prohibitions of Section 3 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
(b) Purchases or sales which are non-volitional on the part of the
Access Person.
(c) Purchases which are part of an automatic dividend reinvestment plan.
(d) Purchases effected upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights
so acquired.
(e) Purchases or sales which are determined by the Ethics Committee for
the applicable Fund to be only remotely potentially harmful to the
Fund because they would be very unlikely to affect the market for
the securities involved, or because they clearly are not related
economically to the securities to be purchased, sold or held by a
Fund.
(f) Purchases or sales of securities which are not eligible for purchase
or sale by the applicable Fund, except that Section 3(d) of this
Code shall continue to apply.
5. PREFERENTIAL TREATMENT, GIFTS AND ENTERTAINMENT
No Access Person of a Fund, other than a Disinterested Director, may seek
or accept gifts, favors, preferential treatment or valuable consideration of
more than a DE MINIMIS nature from any broker-dealer or other company or person
that does business with or has proposed doing business with the Fund or any
company in a control relationship with the Fund. No Disinterested Director of a
Fund may seek or accept gifts, favors, preferential treatment or valuable
consideration of more than a DE MINIMIS nature, because of his or her
association with the Fund, from a broker/dealer or other company or person that
does business with or has proposed doing business with the Fund or any company
in a control relationship with the Fund. For purposes of this subsection, DE
MINIMIS is defined as reasonable and customary business entertainment, such as
lunch or dinner or tickets to sporting or cultural events, but does not include
trips or similar activities.
6. SERVICE AS A DIRECTOR
Investment Department Personnel are prohibited from serving on the board
of directors of any publicly traded company, absent prior authorization by the
Ethics Committee based upon a determination that the board service would be
consistent with the interests of the Funds and that adequate procedures exist to
ensure isolation from those making investment decisions.
<PAGE>
7. REPORTING
(a) Unless excepted by Section 7(b) of this Code, every Access Person of a
Fund or of the Adviser or the Distributor of such Fund must report to the Ethics
Committee for such Fund:
(1) INITIAL HOLDINGS REPORTS. No later than 10 days after the
person becomes an Access Person, the following information:
(A) The title, number of shares and principal amount of each
Covered Security in which the Access Person had any
direct or indirect beneficial ownership as of the date
the person became an Access Person;
(B) The name of any broker, dealer or bank with whom the
Access Person maintained an account in which any
securities were held for the direct or indirect benefit
of the Access Person as of the date the person became an
Access Person; and
(C) The date that the report is submitted by the Access
Person.
(2) QUARTERLY TRANSACTION REPORTS. No later than 10 days after the
end of a calendar quarter the following information:
(A) With respect to any transaction during the quarter in a
Covered Security in which the Access Person had any
direct or indirect beneficial ownership:
(i) The date of the transaction, the title, the
interest rate and maturity date (if applicable),
the number of shares and the principal amount of
each Covered Security involved;
(ii) The nature of the transaction (I.E., purchase,
sale or any other type of acquisition or
disposition);
(iii) The price of the Covered Security at which the
transaction was effected;
(iv) The name of the broker, dealer or bank with or
through which the transaction was effected; and
(v) The date that the report is submitted by the
Access Person.
(B) With respect to any account established by the Access
Person in which any securities were held during the
quarter for the direct or indirect benefit of the Access
Person:
<PAGE>
(i) The name of the broker, dealer or bank with whom
the Access Person established the account;
(ii) The date the account was established; and
(iii) The date that the report is submitted by the
Access Person.
(3) ANNUAL HOLDINGS REPORTS. Annually, the following information
(which information must be current as of a date no more than
30 days before the report is submitted):
(A) The title, number of shares and principal amount of each
Covered Security in which the Access Person had any
direct or indirect beneficial ownership;
(B) The name of any broker, dealer or bank with whom the
Access Person maintains an account in which any
securities are held for the direct or indirect benefit
of the Access Person; and
(C) The date that the report is submitted by the Access
Person.
(b) Exceptions from Reporting Requirements
(1) A person need not make a report under Section 7(a) of this
Code with respect to transactions effected for, and Covered
Securities held in, any account over which the person has no
direct or indirect influence or control.
(2) A director of a Fund who is not an "interested person" of the
Fund within the meaning of Section 2(a)(19) of the Act, and
who would be required to make a report solely by reason of
being a Fund director, need not make:
(A) An initial holdings report under Section 7(a)(1) of this
Code and an annual holdings report under Section 7(a)(3)
of this Code; and
(B) A quarterly transaction report under Section 7(a)(2)
of this Code, unless the director knew or, in the
ordinary course of fulfilling his or her official
duties as a Fund director, should have known that
during the 15-day period immediately before or after
his or her transaction in a Covered Security, the
Fund purchased or sold the Covered Security, or the
Fund or its Adviser considered purchasing or selling
the Covered Security.
(3) An Access Person to a Fund's principal underwriter need not
make a report to the principal underwriter under Section 7(a)
of this Code if:
<PAGE>
(A) The principal underwriter is not an affiliated person of
any Fund or the Adviser; and
(B) The principal underwriter has no officer, director or
general partner who serves as an officer, trustee,
director or general partner of the Fund or of the
Adviser.
(4) An Access Person of the Adviser need not make a quarterly
transaction report to the Adviser under Section 7(a)(2) of
this Code if all the information in the report would duplicate
information recorded under Rule 204-2(a)(12) or 204-2(a)(13)
under the Investment Advisers Act of 1940.
(5) An Access Person need not make a quarterly transaction report
under Section 7(a)(2) of this Code if the report would
duplicate information contained in broker trade confirmations
or account statements received by the Compliance Officer with
respect to the Access Person in the time period required by
Section 7(a)(2) of this Code, if all of the information
required by that Section is contained in the broker trade
confirmations or account statements, or in the records of the
Fund, the Adviser or the Distributor.
(c) Any report required by Section 7(a) of this Code may contain a
statement that the report will not be construed as an admission that the person
making the report has any direct or indirect beneficial ownership in the Covered
Security to which the report relates.
8. REVIEW OF REPORTS
The Ethics Committee must review the reports submitted pursuant to Section
7(a) of this Code and monitor personal trading activity of all Access Persons
for compliance with this Code.
9. NOTIFICATION OF REPORTING OBLIGATION
Each Fund and the Adviser and the principal underwriter of each Fund must
identify all of their respective Access Persons who are required to make reports
pursuant to Section 7(a) of this Code and must inform those Access Persons of
their reporting obligations.
10. REPORTING OF VIOLATIONS; SANCTIONS
(a) The Adviser shall provide a written report to the Board of Directors
of each Fund, and the Board of Directors shall consider, at least quarterly any
issues arising under this Code or related compliance procedures since the most
recent prior report, including but not limited to any material violations of
this Code or related compliance procedures and the nature of any action taken by
the Ethics Committee in respect of such violation.
(b) Upon discovering a violation of this Code by any officer, director,
employee or general partner of the Adviser or Distributor or of any company
that, directly or indirectly, controls or is under common control with the
<PAGE>
Adviser or Distributor, the Ethics Committee may impose such sanctions as it
deems appropriate, including, INTER ALIA, a letter of censure or suspension,
termination of the employment of the violator or disgorgement of profits.
(c) With respect to a violation of this Code by any officer, director, or
employee of a Fund, the Board of Directors of the Fund may impose such sanctions
as it deems appropriate, including INTER ALIA, a letter of censure, suspension
of any officer or employee, termination of the employment of the violator or
disgorgement of profits.
11. MISCELLANEOUS
(a) Management of each Fund and the Adviser and the Distributor shall
certify to the Board of Directors of such Fund, no less frequently than
annually, that the Fund, Adviser or Distributor, as applicable, has adopted such
procedures as are reasonably necessary to prevent Access Persons who are
directors, officers, general partners or controlling persons of the Adviser or
Distributor from violating this Code of Ethics and to monitor compliance with
this Code of Ethics by access persons who are officers, directors or employees
of the Fund.
(b) The Ethics Committee on behalf of the Funds, Adviser and Distributor
shall prepare an annual report to the Board of Directors of each Fund that (i)
summarizes existing procedures concerning personal investing and any changes in
the procedures made during the past year, (ii) identifies any violations
requiring significant remedial action during the past year, and (iii) identifies
any recommended changes in existing restrictions or procedures based upon the
Fund's experience under this Code of Ethics, evolving industry practices, or
developments in applicable laws or regulations.
(c) RECORDKEEPING: The Adviser shall maintain the following records in the
manner specified for the benefit of the Funds:
(1) A copy of this Code and any amendment thereof and a copy of
each code of ethics which is or at any time within the past
five years has been in effect with respect to a Fund or the
Adviser or Distributor shall be preserved in an easily
accessible place;
(2) A record of any violation of this Code, as in effect from time
to time, and of any action taken as a result of such
violation, shall be preserved in an easily accessible place
for a period of not less than five years following the end of
the fiscal year in which the violation occurs;
(3) A copy of each report made by an Access Person pursuant to
this Code (including any information provided pursuant to
Section 7(b)(5)) shall be preserved by the entity receiving
the report for a period of not less than five years from the
end of the fiscal year in which it is made, the first two
years in an easily accessible place;
<PAGE>
(4) A list of all persons who are, or within the past five years
have been, required to make reports pursuant to this Code
shall be maintained in an easily accessible place;
(5) A list of the names of all persons who are, or within the past
five years, have been, responsible for reviewing the reports
filed pursuant to Section 7 of this Code shall be maintained
in an easily accessible place;
(6) A record of any approvals granted pursuant to Section 3(d)
shall be preserved for a period of five years from the end of
the fiscal year in which such approval is given; and
(7) A copy of each report made pursuant to Section 11(b) of this
Code must be maintained for at least five years after the end
of the fiscal year in which it was made, the first two years
in an easily accessible place.
***********************
I acknowledge that I have read the Code of Ethics (a copy of which has
been supplied to me, which I will retain for future reference) and agree to
comply in all respects with the terms and provisions thereof. I have disclosed
or reported all personal securities transactions required to be disclosed or
reported by this Code of Ethics.
Print Name
Date Signature
<PAGE>
ANNEX A
The term "beneficial ownership" of securities would include not only
ownership of securities held by an Access Person for his or her own benefit,
whether in bearer form or registered in his or her own name or otherwise, but
also ownership of securities held for his or her benefit by others (regardless
of whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he or she has only a
remainder interest), and securities held for his or her account by pledgees,
securities owned by a partnership in which he or she is a member, and securities
owned by any corporation which he or she should regard as a personal holding
corporation and securities in which the Access Person otherwise has a direct or
indirect pecuniary interest as defined in Rule 16a-1(2) under the Securities
Exchange Act of 1934. It would exclude securities held by a corporation or
similar entity in which the Access Person is a shareholder if the Access Person
is not a controlling shareholder of the corporation or entity and the Access
Person does not have or share investment control over the entity's portfolio.
Correspondingly, this term would exclude securities held by an Access Person for
the benefit of someone else.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which an Access Person is a legatee or beneficiary
unless there is a specific legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an Access Person where such person enjoys "benefits
substantially equivalent to ownership." The SEC has said that although the final
determination of beneficial ownership is a question to be determined in the
light of the facts of the particular case, generally a person is regarded as the
beneficial owner of securities held in the name of his or her spouse and their
minor children. Absent special circumstances such relationship ordinarily
results in such person obtaining benefits substantially equivalent to ownership,
E.G., application of the income derived from such securities to maintain a
common home, to meet expenses which such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
An Access Person also may be regarded as the beneficial owner of
securities held in the name of another person, if by reason of any contract,
understanding, relationship, agreement or other arrangement, he or she obtains
therefrom benefits substantially equivalent to those of ownership. Moreover, the
fact that the holder is a relative or relative of a spouse and sharing the same
home as an Access Person may in itself indicate that the Access Person would
obtain benefits substantially equivalent to those of ownership from securities
held in the name of such relative. Thus, absent countervailing facts, it is
expected that securities held by relatives who share the same home as an Access
Person will be treated as being beneficially owned by the Access Person.
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An Access Person also is regarded as the beneficial owner of securities
held in the name of a spouse, children, or other person, even though he or she
does not obtain therefrom the aforementioned benefits of ownership, if he or she
can vest or revest title in him/herself at once or at some future time.
