SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ......... ( )
Post-Effective Amendment No. 66 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 66
INVESTORS RESEARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3916 State Street, Suite 3C, Santa Barbara, California 93105
(Address of Principal Executive Offices)
Registrant's Telephone Number: (805) 569-3253
Hugh J. Haferkamp, Esq.
222 E. Carrillo Street, Suite 207, Santa Barbara, California 93101
(Name and Address of Agent for Service)
Copies to:
Dr. Francis S. Johnson
President
Investors Research Fund, Inc.
3916 State Street, Suite 3C
Santa Barbara, CA 93105
Approximate Date of Proposed Public Offering: January 30, 1996
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1) 485A-POS
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
PART A - PROSPECTUS
PART B - STATEMENT OF ADDITIONAL INFORMATION
PART C - OTHER INFORMATION
END OF FISCAL YEAR: September 30, 1995
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<PAGE>
INVESTORS RESEARCH FUND, INC.
Cross Reference Sheet showing
Location in Registration Statement of Information
Required by the Items of Form N-lA
Item on Form N-lA Page in
Required by Registration
17 C.F.R. 23.404(a) Caption or Subcaption Statement
PART A
1 Cover Page 6, 45
2 Synopsis 10 -13
3 Condensed Financial Information 4
4 General Description of Registrant 10
5 Management of the Fund 14 - 15
A. Responsibilities of the Board 14 - 15
B. Investment Adviser 16
C. Transfer Agent 45
D. Registrant's Expenses 18, 17
6 Capital Stock and Other Securities 10
7 Purchase of Securities Being Offered 20
A. Principal Underwriter 21, 45
B. Determination of Public Offering Price 19
C. Special Purchase Arrangements 18 - 24
8 Redemption or Repurchase 24
A. Redemption Procedures 24, 25
9 Legal Proceedings N/A
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<PAGE>
Item on Form N-lA Page in
Required by Registration
17 C.F.R. 23.404(a) Caption or Subcaption Statement
PART B
10 Cover Page 6, 45
11 Table of Contents 7
12 General Information and History 10 - 13
13 Investment Objectives and Policies
A. Investment Policies 11 -12
B. Short Sales, etc. 12
C. Borrowing of Money 11
D. Concentration of Investments 11
E. Making of Loans 12
F. Portfolio Turnover Variation 13
14 Management of the Registrant 14
A. Table of Directors and Officers 14
15 Control Persons and Principal Holders of Securities 14
A. Securities of Registrant Owned by Directors
and Officers 14
16 Investment Advisory and Other Services 16, 17
A. Controlling Persons of the Investment Adviser 16, 48
B. Affiliated Persons 16, 48
C. Method of Computing the Advisory Fee 17
1. Total Dollar Amounts 17
2. Expense Limitations 17
D. Management Related Service Contract 50
E. Custodian 30, 42, 45
F. Independent Public Accountant 30, 45
17 Brokerage Allocation and Other Practices 18
A. Effecting Transactions in Portfolio Securities 18
B. Brokerage Commissions 18
C. Selection of Brokers 18
18 Capital Stock and other Securities 10
A. Capital Stock 10
19 Purchase, Redemption and Pricing of Securities
Being Offered 20 - 26
A. Methods of Purchasing Registrants Securities 20 - 22
B. Method of Determining Offering Price 20, 21
20 Tax Status 26
21 Underwriters 21, 42
A. Principal Underwriter Arrangements 21, 42
B. Principal Underwriter's Commissions 18, 21
22 Calculation of Performance Data 52
23 Financial Statements 35 - 44, 53
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<PAGE>
Item on Form N-lA Page in
Required by Registration
17 C.F.R. 23.404(a) Caption or Subcaption Statement
PART C
24 Financial Statements and Exhibits
A. Financial Statements - Index 47
B. Exhibit - Indexed 47
(Certain exhibits have been incorporated
by reference)
25 Persons Controlled By or Under Common Control
with Registrant 48
26 Number of Holders of Securities 48
27 Indemnification 48
28 Business and Other Connections of Investment Adviser 48
29 Principal Underwriters 48, 49
A. Personnel 49
B. Commissions and Other Compensation 49
30 Location of Accounts and Records 49, 50
31 Management Services 50
32 Undertakings N/A
Report and Consent of Independent Accountants 54
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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART A
PROSPECTUS
AND
PART B
STATEMENT OF ADDITIONAL INFORMATION
INVESTORS RESEARCH FUND, INC.
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<PAGE>
This Prospectus Sets Forth Information That
A Prospective Investor Should Know Before Investing.
In this single document appears the
information that some mutual funds place
in two separate documents.
PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION
January 30, 1996
Please Read And Retain This Prospectus for Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
WHAT IS INVESTORS RESEARCH FUND, INC.?
Investors Research Fund, Inc. is a diversified management investment company of
the open-end type, commonly known as a mutual fund. The Fund's principal
investment objective is to provide continuous management of money over the long
term and under all market conditions with primary emphasis on investments in
common stocks or short term cash equivalents. It is called an open-end
investment company because it continuously offers and sells shares of its stock
to the public and it has a legal duty, upon demand of the shareholder, to take
back the shares held by the shareholder and pay the shareholder the net asset
value of the shares. (See discussion of computation of net asset value and
redemption, pages 19 and 24). This "open endedness" characterizes a type of
investment company commonly called a mutual fund, and this prospectus describes
INVESTORS RESEARCH FUND, INC. The Fund's investment adviser is Lakeview
Securities Corporation (See page 17).
HOW IS THE RETAIL OFFERING PRICE DETERMINED?
The retail offering price is determined once daily as of the close of the New
York Stock Exchange on each day the Exchange is open for trading, and is the net
asset value plus a selling commission equal to 5 3/4% of the maximum retail
offering price, with lower sales charges on purchases of $25,000 or more. There
is no minimum or subsequent investment required. (See How to Buy Shares on page
20). The advisory fee is a maximum of 0.5% of average annual net assets
depending on total operating expense. (See page 17.)
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<PAGE>
Table of Contents
What Is Investors Research Fund, Inc? .................................... 6
Fund Expenses ............................................................. 8
Financial Highlights ...................................................... 9
General Description of the Fund ........................................... 10
Capital Stock and Shareholder's Rights .................................... 10
Investment Objectives, Policies and Techniques
(How the Fund operates) ................................................. 11
Restrictions (What the Fund may not do) ................................... 12
Borrowing and Leverage .................................................... 12
Portfolio Activity ........................................................ 13
The Management of The Fund (Officers and Directors of The Fund) ........... 14
The Investment Adviser .................................................... 16
Personal Investing By Fund Personnel ...................................... 17
The Fund Does Not Utilize Derivatives ..................................... 18
Portfolio Brokerage (Who receives it?) .................................... 18
Management's Discussion and Analysis of Investment Performance ............ 19
Computation of Net Asset Value and Maximum Offering Price
of the Company's Shares ................................................. 19
Net Asset Value ........................................................... 20
How to Buy Shares ......................................................... 20
Sales Charges ............................................................. 21
Intended Quantity Investment Statement of Intention ....................... 22
Investment Accumulation Plan .............................................. 22
Pre-Authorized Check Plan ................................................. 22
Check-a-Month Payment Plan ................................................ 22
Certificate Shareholders Reinvestment Privileges .......................... 22
Handling Investing and Redemption Transactions Through Your
Bank or Savings Institution ................................................23
Retirement Plan for the Self-Employed (Keogh Plan) ........................ 23
Individual Retirement Account ............................................. 24
403 (b) Retirement Account ................................................ 24
Retirement Plans: General ................................................ 24
Redemption of Shares ...................................................... 24
Reinvestment of Redemption Proceeds ....................................... 26
Income Dividends, Capital Gain Distribution and Taxes ..................... 26
Plan of Distribution Under Rule 12b-1 ..................................... 26
Terms and Conditions of Statement of Intention ............................ 27
Terms of Escrow ........................................................... 27
Requirement that Purchase Comply with Rule 22d-1 .......................... 27
Investment Plans - Application Form ....................................... 28
Performance Information ................................................... 30
Shareholder's Inquiries ................................................... 30
Illustration of an Assumed Investment of $10,000 in
Investors Research Fund ................................................. 31
Regular Investing Over the Past 36 1/2 Years in
Investors Research Fund ................................................. 32
Assuming $100 per Month ................................................... 32
Comparison to Standard Indicators ......................................... 33
Report of Independent Accountants ......................................... 34
Statement of Assets and Liabilities ....................................... 35
Securities in the Fund (the Fund's Portfolio) ............................. 36
Statement of Operations - including realized and unrealized capital
gains or (losses) on investments ........................................ 39
Statements of Changes in Net Assets (two years) ........................... 40
Notes to Financial Statements ............................................. 41
Selected Per Share Data and Ratios ........................................ 44
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<PAGE>
FUND EXPENSES:
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the 1995
fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases .................................. 5.75%
For lower Sales Load applicable to larger investments see page 21.
Sales Load imposed on reinvested dividends ....................... None
Redemption Fees .................................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percent of average net assets)
Investment Advisory Fees .......................................... 0.50%
12b-1 Fee ......................................................... 0.17%
Custody, shareholder records keeping, accounting and legal ....... 0.51%
Salaries, insurance, printing and postage ........................ 0.27%
Regulatory fees and misc ......................................... 0.15%
-----
Total other expenses .............................................. 0.93%
-----
TOTAL FUND OPERATING EXPENSES ..................................... 1.60%
=====
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. Sales load is a direct cost and is paid only once. Annual operating
expenses recur every year. For further information concerning Fund operating
expenses please see Statement of Operations on page 39. There is a maximum 12b-1
service charge of 0.25%.There is no redemption fee.
The following example illustrates the cumulative expenses that you would pay on
a $1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the table
preceding, this Fund charges no redemption fees of any kind.
1 3 5 10
year years years years
----- ----- ----- -----
$ 73 $ 105 $ 140 $ 237
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
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<PAGE>
Investors Research Fund, Inc.
Financial Highlights
The following information for the fiscal year ended September 30, 1995 has been
audited by Timpson Garcia, independent auditors, whose report was unqualified
and is incorporated on page 34 and should be read in conjunction with the
financial statements and notes thereto included elsewhere herein.
* The information for all other years, 1986 through 1992, reclassified for
comparative purposes with the addition of "total return" and "net assets, end of
year" were audited by other auditors whose reports expressed unqualified
opinions on all years.
<TABLE>
<CAPTION>
Year Ended September 30
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data 1995 1994 1993 1992* 1991* 1990* 1989* 1988* 1987* 1986*
(for one share outstanding ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
throughout each year) (1)
Net asset value, beginning of $4.62 $5.18 $5.74 $5.65 $5.31 $6.38 $4.77 $6.93 $6.29 $4.95
year ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Income from investment
operations
Net investment income $0.07 $0.06 $0.05 $0.05 $0.11 $0.18 $0.13 $0.13 $0.06 $0.02
Net realized and unrealized
gains (losses) on securities 0.25 (0.15) 0.43 0.17 1.10 (1.16) 1.65 (1.58) 1.88 1.75
Total from investment $ 0.32 $(0.09) $0.48 $0.22 $1.21 ($0.98) $1.78 ($1.45) $1.94 $1.77
operations ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions to
shareholders:
Dividends from net
investment income $(0.50) $(0.05) $(0.07) $(0.07) $(0.23) $(0.09) $(0.17) $(0.06) $(0.03) $(0.11)
Distribution from capital (0.34) (0.42) (0.97) (0.06) (0.64) -- -- (0.65) (1.27) (0.32)
gains ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total distributions $(0.84) $(0.47) $(1.04) $(0.13) $(0.87) $(0.09) $(0.17) $(0.71) $(1.30) $(0.43)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value, end of year $4.10 $4.62 $5.18 $5.74 $5.65 $5.31 $6.38 $4.77 $6.93 $6.29
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Total return (2) 7.7% (1.8)% 9.6% 3.5% 26.2% (15.5)% 38.6% 21.2% 37.8% 38.0%
==== ==== ==== ==== ===== ==== ===== ===== ===== =====
Ratios and Supplemental Data
Net assets, end of year (in $32 $36 $48 $61 $65 $58 $82 $71 $95 $60
millions)
Ratios to average net assets:
Expenses 1.60% 1.47% 1.05% 0.91% 0.90% 0.85% 0.84% 0.76% 0.79% 0.80%
Net investment income 1.52% 1.39% 1.12% 0.99% 2.00% 3.12% 2.49% 2.28% 0.96% 0.46%
Portfolio turnover rate (3) 248.44% 234.77% 109.92% 67.31% 46.86% 72.10% 48.11% 76.84% 100.55% 84.90%
<FN>
(1) Fund changed investment adviser on January 1, 1994.
(2) Sales loads are not reflected in total return.
(3) Portfolio turnover rates for the years 1986 through 1993 have been restated
to exclude U.S. Treasury Bills.
</FN>
</TABLE>
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<PAGE>
GENERAL DESCRIPTION of the FUND:
(What is the Fund and what does it do?)
The Fund (Investors Research Fund, Inc.) is an investment company, an
arrangement by which a number of persons invest in a corporation that itself
invests in securities. Each shareholder's proportional share of all securities
owned by the Fund is a direct ratio of the number of shares of the Fund which he
owns compared to the total number of shares (called shares outstanding) that all
shareholders together own. Simply stated, therefore, the Fund is really a
diversified portfolio of securities in many different companies, and the shares
of the Fund do not represent a single security as would be the case if someone
purchased shares in XYZ manufacturing company.
The Fund is called an open-end investment company because it continuously offers
and sells shares of its stock to the public and, upon demand of the shareholder,
it has a legal duty to take back the shares held by the shareholder and pay the
shareholder the net asset value of the shares. (See discussion of computation of
net asset value and redemption, pages 19 and 24). This "open-endedness"
characterizes a type of investment company commonly called a mutual fund, and
this prospectus describes INVESTORS RESEARCH FUND, INC.
The Fund is a corporation incorporated in the State of Delaware. It commenced
operations on March 3, 1959 and thus has been in business continuously for 37
years.
Mutual funds operate within their objectives and policies, and this mutual
fund's investment objectives and policies are described on pages 11 and 12.
With respect to the management of its portfolio, the Fund has employed and
receives investment advice and portfolio management from Lakeview Securities
Corporation, an independent corporation which is neither owned nor controlled by
the Fund. By contract the Fund pays an advisory fee for these services. The fee
is 1/2 of 1% of the Company's average net assets on an annual basis. (See page
16 for a discussion of the investment adviser and the advisory contract.)
In addition to the advisory fee, the Fund pays other expenses including legal
and accounting fees, costs of qualifying the shares of the Fund for sale under
applicable federal and state laws, wire and telephone services, custodian and
transfer agent's fees, costs of shareholder meetings, costs of independent audit
and preparation of reports to shareholders, reports, taxes and fees to many
government regulatory agencies, interest expense and taxes on security trades.
The Fund also pays brokerage commissions on all security trades, but these are a
part of the capital cost of securities purchased and sold rather than an item of
expense.
Should the total of these expenses (excluding interest, taxes, and certain other
expenses) exceed 2 1/2% of the Fund's average annual net assets, the adviser
must reimburse the difference. The adviser exercises no responsibility or
control over any of these expenses (see page 16).
The value of shares in the Fund fluctuates because the value of the securities
in which the Fund invests fluctuates. When the Fund sells any part of its
portfolio securities it may realize a profit or a loss, depending on whether it
sells them for more or less than their cost. The Fund usually receives dividend
or interest income from its investments. (For an explanation of the significance
of these transactions for federal tax purposes see Dividends, Distributions, and
Taxes on page 26.)
CAPITAL STOCK and SHAREHOLDER'S RIGHTS:
The Fund is authorized to issue twenty million shares of Capital Stock, $1 par
value. Each share is fully paid and nonassessable, and each has equal voting,
dividend and redemption rights. There are no preemptive or conversion rights or
sinking fund provisions. Shareholders enjoy cumulative voting in the election of
directors. Cumulative voting entitles each shareholder to as many votes as shall
equal the number of his shares multiplied by the number of directors to be
elected, and all of such votes may be cast for a single director or distributed
among the number to be voted for.
The Fund's shares are sold to the public at net asset value plus a sales
commission. The sales commission is divided between the Fund's principal
underwriter and dealers who sell the Fund's shares. (See discussion of How to
Buy Shares on page 20). The net asset value all goes to the Fund for its
investment operations.
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<PAGE>
INVESTMENT OBJECTIVES POLICIES AND TECHNIQUES:
(How the Fund operates)
Every reader-investor enjoys the privilege of buying and selling individual
securities of manufacturing companies and thereby managing his own portfolio
without having to pay the fees and expenses that a mutual fund charges.
Therefore, the key question for the reader-investor is to decide for himself
whether he believes the Fund can manage a diversified portfolio better than he
can do it for himself. In considering this question, the reader will be
interested in the objectives, policies and results of the Fund's management
operations, and these now follow.
Objectives: The Fund's investment objective is to provide continuous management
of money over the long term and under all market conditions, With the dual
purpose of making the shareholder's money grow during rising stock markets, and
defending the shareholder's capital during falling stock markets.
Policies and Techniques To implement its objectives, the Fund utilizes the
investment approach formulated primarily by Richard W. Arms, Jr., known as
Equivolume Charting, with some modifications. The primary modification factors
dividends into the selection process, a technique that examines a stock's
dividend level and evaluates it in the light of the dividend's relation to the
market dividend level, to the relevant sector dividend level, and to the stock's
own dividend history. Stocks which are identified for purchase by that technique
are then evaluated and confirmed for purchase on the basis of the fundamentals
of the stock issues being investigated. The dividend screening modification is
based upon the recognition that, over a period of time, dividends have created
almost 50% of the total return on common stocks.
The Fund is authorized to use the technique of borrowing money from banks for
addi tional common stock purchases when markets are rising. (see Borrowing and
Leverage on page 12). During such rising markets it is the Fund's policy to
limit purchases substantially to common stocks. Conversely, during declining
markets it is the Fund's policy to defend capital through the technique of
purchasing cash equivalents up to 60% of total net assets; the balance of assets
may be invested in common stocks, preferred stocks, bonds, or debentures.
As this prospectus goes to print, the Fund still has a fundamental policy that
its adviser may employ leverage techniques in an effort to increase its returns
to shareholders. However, because of the increase in volatility of the markets
during the past several years, the Fund has not used its borrowing power to
invest in stocks. The Board of Directors has resolved, subject to a vote of the
shareholders, that the fundamental policy should be rescinded and the use of
leverage terminated. The adviser has been instructed by the Board of Directors
that, prior to the annual meeting of shareholders, it is not to consider use of
the Fund's line of credit to purchase stocks.
The potential buyer of shares of this Fund should be aware that leverage
techniques, if they were to be employed, do involve risk because the successful
use of them depends on the accuracy of the Fund's perceptions concerning the
trends of the market. The Fund cannot, of course, guarantee that its perceptions
of market trends will be accurate. if borrowed funds were to be utilized and the
anticipated market action did not take place, there could be an exposure to loss
exceeding the decrease in value of the Fund's portfolio because loans might have
to be repaid before the negative trend was reversed. When trends exist, the Fund
believes that they can be recognized and will try to recognize them as early as
possible, but it should be borne in mind that a change in trend may be
recognized only after it has occurred.
The techniques of employing leverage do not reduce the normal risks of market
fluctuations, and the Fund's practice of attempting to recognize and act upon
market trends often has entailed more frequent portfolio changes (with attendant
costs) than some other Funds (see Portfolio activity on page 13).
Concentration of Investments. Types of Securities and Standards: As a part of
its portfolio policy the Fund invest up to 25% of its net assets in any one
industry group. Emphasis is to be placed on the common stocks of seasoned
companies with established records of successful enterprise, rather than on
stocks of newer enterprises. In the selection of common stocks for purchase, the
possibilities of price appreciation are foremost. However, current income
through receipt of interest or dividends is an important factor in our adviser's
selection process.
In trying to achieve its investment objectives, the Fund attempts to choose
stocks for purchase that represent major industries which in themselves reflect
rising price trends. The Fund also recognizes the logic of fundamental analysis
of such factors as per-share earnings, and these factors are to be considered in
choosing its portfolio stocks. How ever, the Fund accepts market action as the
most significant standard in the selection and retention of securities, and
reserves freedom of action in portfolio turnover consistent with protection of
each share's net asset value.
- 11 -
<PAGE>
Policies Deemed Fundamental: The Fund's portfolio policies with respect to
concentration of investments in any one industry, and with respect to the
technique of using leverage in both rising and falling markets, are deemed to be
fundamental policies, and cannot be changed without shareholder action. While
aimed at safeguarding the shareholder's interests in both rising and declining
stock markets, the reader should realize that there can be no assurance that the
Fund will in fact achieve its objectives.
The Fund may borrow up to 25 percent of the market value of its net assets with
which to purchase additional securities. Such borrowings may be only from banks
and only if immediately thereafter the value of the total assets of the Fund
exceed by 300 percent all amounts borrowed and unpaid. If due to market
fluctuations or other reasons the value of the Fund's assets becomes at any time
less than three times the amount of its outstanding bank debt the Fund within
three business days is required to reduce its bank debt to the extent necessary
to meet the required 300 percent asset coverage. This might require the Fund to
sell assets at an unfavorable time.
Interest on monies borrowed will be an expense of the Fund which it would not
otherwise incur so that the Fund is expected to have little or no net investment
income during periods when the Fund's borrowing is substantial. Any investment
gains made with additional monies borrowed in excess of interest paid will cause
the net asset value of the Fund shares to rise faster than would otherwise be
the case. On the other hand, if the investment performance of additional monies
fails to cover their cost to the Fund, the net asset value of the Fund will
decrease faster than would otherwise be the case. This is a speculative factor
known as leverage. No assurance can be given that the Fund will be able to
borrow money at any particular time in the future, or extend any loan on the
expiration of its term.
PLEASE NOTE: As noted above, the Board of Directors has voted to discontinue the
use of leverage by borrowing money and to revoke and terminate the "Borrowing
and Leverage" policy described herein. The Fund's bank line of credit previously
maintained for leverage purposes was discontinued in September 1995. The Board's
recommendation that the fundamental borrowing and leverage policy be terminated
will be submitted to the shareholders at the March 26, 1996 annual meeting.
After the annual meeting, the decision of the shareholders will be available
through the Fund's headquarters.
The Fund is also subject to the following restrictions which cannot be changed
without the approval of a majority (any number over 50%) of the Fund's
outstanding voting securities.
RESTRICTIONS:
(What the Fund may not do)
1. May not purchase any securities on margin. May not lend money or securities.
It may, however, purchase notes, bonds, certificates of deposit or evidences of
indebtedness of a type commonly distributed by financial institutions.
2. May not issue any senior securities other than notes to evidence bank
borrowing.
3. May not sell any securities short, or distribute or underwrite securities
of others.
4. May not purchase the securities of any company which has not been in
continuous operation for three years or more.
5. May not invest more than 5 percent of the value of its gross assets in
securities of any one issuer, other than those of the U.S. Government.
6. May not own more than 10 percent of the outstanding voting, or any other
class of, securities of a single issuer.
7. May not purchase and sell commodities and commodity contracts, or real
estate.
8. May not purchase the securities of any other mutual fund.
9. May not invest in any companies for the purpose of exercising control or
management.
10. May not own the securities of any company in which any officer or director
of this Fund has a substantial financial interest.
11. May not trade in securities with Directors and Officers.
12.May not invest in restricted equity securities, commonly known as "letter
stock," warrants, oil, gas and other mineral leases, and illiquid securities and
also may not invest or engage in arbitrage transactions or in puts, calls,
straddles or spreads.
13. The Fund may not issue any shares for any consideration other than cash.
- 12 -
<PAGE>
PORTFOLIO ACTIVITY
In implementing its policy of continuous money management, the Fund's practice
of attempting to recognize and act upon market trends may entail more frequent
portfolio changes than some other funds.
Excluding U.S. Government and other short term maturity direct obligations, for
the last three fiscal years the portfolio turnover of the Fund as a ratio to
total assets amounted to 109.92%, 234.77% and 248.44%. See table on page 18. A
100% turnover rate would occur if all the securities in the Fund's portfolio
were replaced in a period of one year. The Fund borrows money to purchase common
stocks when market uptrends can be recognized, and conversely, sells common
stocks when market downtrends can be recognized. These policies are applied to
changes in market trends regardless of whether they may be long-term (more than
six months) or short-term (less than six months) as the Fund accepts market
performance as the controlling standard in the purchase, retention or sale of
securities.
The effect of these policies may involve heavier brokerage commission costs
which must be borne by the Fund's shareholders. Brokerage commissions are not,
however, paid as separate expense of the Fund, and have no effect on dividends
which may be paid by the Fund from ordinary investment income. Instead, they are
a part of the capital cost of securities purchased and a reduction in proceeds
from securities sold, and thus reduce net realized profits or increase net
realized losses of the Fund. Portfolio turnover may also be affected by the
amount and timing of purchases and redemptions of shares of the Fund, but the
Fund has no control over this factor.
During the last two fiscal years, the turnover rate for the Fund's portfolio has
been considerably higher than in the periods preceding the last two years. There
were several factors driving that turnover rate. One was that the markets during
those recent periods were such that changes in sector leadership occurred more
often than usual, dictating more rapid changes in portfolio holdings. Another
reason was that the adviser has been attempting to increase representation of
very high quality companies in the portfolio. Although the previous portfolio
was of good quality, the adviser want to hold "household name" stocks with good
dividend returns and low risk ratings. Yet another factor is that the Arms
Equivolume charting system has an inherent tendency to increase turnover
somewhat because of its utilization of support and resistance levels appearing
in the charting analysis of market action.
It is to be noted that, notwithstanding the increased turnover rate, the total
broker's commissions paid the last two years have been lower than those paid
previously. That is because the current adviser has been able to secure reduced
sales commissions from the brokers it utilizes.
The Fund's portfolio turnover rate may continue to fluctuate from year to year
as it has in the past. The management believes that the turnover rate may be
greater than that of many other mutual funds, and expects that it will continue
to be comparatively greater. However, in its entire operating history (nearly 37
years) the Fund has never realized excessive short term profits that would have
jeopardized the Fund's relief from income tax liability under sub-Chapter M of
the Internal Revenue Code. The management believes it is improbable that this
will ever occur.
- 13 -
<PAGE>
THE MANAGEMENT of the FUND; OFFICERS AND DIRECTORS OF THE FUND:
The officers and directors of the Fund, their principal occupations for the past
five years, mailing address and number of shares owned on September 30, 1995 are
as follows:
Francis S. Johnson,* President and Director, is a retired dental surgeon in
Santa Barbara, California, and past president of the Santa Barbara-Ventura
County Research and Education Group. (A non-profit association.) Dr. Johnson has
served as an officer of the Fund for 25 years and had been a member of the
Fund's executive Committee for 25 years. 4439 Shadow Hills Boulevard, Santa
Barbara, CA 93105 (161,849 shares)
Christopher M. Hill, * Vice-President, Director, and Member of the Executive
Committee,** is President of Ogilvy, Gilbert, Norris & Hill, Insurance. 418
Chapala Street, Santa Barbara, CA 93101 (350 shares)
Michael A. Marshall, Secretary-Treasurer, Director and Member of the Executive
Commitee**, is Senior Vice-President and Manager of the Montecito Office of The
Prudential John Douglas Company. 1290 Coast Village Road, Santa Barbara, CA
93108 (4,100 shares)
Gertrude B. Calden, Director and Member of the Executive Committee,** is
Emeritus Director, Foundation for Santa Barbara City College and has served
under three Presidents on the National Advisory Council on Adult Education. 819
East Pedregosa Street, Santa Barbara, CA 93103 (13,958 shares)
James A. Corradi, Director, Retired business executive, former General Manager
of Hope Ranch Park Homes Association, and former Board President of Cook College
at Rutgers University. 17 Via Alicia, Santa Barbara, CA 93108
Fredric J. French, * Director, (elected January 19, 1996), is President of the
Arms Companies, the Investment Portfolio Management Division of Lakeview
Securities Corporation, investment adviser to the Fund; formerly Vice-President
and Senior Portfolio Strategist of The Arms Companies since November, 1992.
Please see page 16 for a more extensive biography. 6201 Uptown Blvd., NE,
Aluquerque, NM 87110 (490 shares)
Karen Klinger, Director and Member of the Executive Committee,** is Director of
the Applied Companies, manufacturers of military and industrial refrigeration
systems, air conditioning equipment and high pressure devices utilized in the
aircraft and aerospace industries. 4603 Via Gennita, Santa Barbara, CA 93111
(339 shares)
Robert P. Moseson,* Director, is President and Director of Lakeview Securities
Corporation, investment adviser to the Fund. He is also President and Director
of Performance Analytics, Inc., an investment consulting firm which is
affiliated with Lakeview Securities. 333 West Wacker Drive, Chicago, IL 60606
(5,254 shares)
Richard A. Nightingale, Director, is a Certified Public Accountant. He is
President and Managing Director of Damitz, Brooks, Nightingale, Turner &
Morrisset, Certified Public Accountants. 200 East Carrillo Street, Santa
Barbara, CA 93101 (2,664 shares)
Mark Schniepp, Director, is Director of the Economics Forecast Project at the
University of California, Santa Barbara. 2116 Cliff Drive, Santa Barbara, CA
93109
Dan B. Secord, Director, (joined the Board December 1995) is in private practice
of obstetrics and gynecology since 1969. Staff Santa Barbara Cottage Hospital
and currently on the Creditials Committee of the medical staff. Vice Chairman,
Santa Barbara City Planning Commission. 2329 Oak Park Lane, Santa Barbara, CA
93105
Mark L. Sills, Director, is an independant computer and operations management
consultant. 3751 Lincolnwood Drive, Santa Barbara, CA 93110 (14,133 shares)
All directors are paid by the Fund; however, no compensation is paid to
directors affiliated with the adviser.
*Are "interested persons" as defined in Section 2(a) (19) of the Investment
Company Act of 1940 as amended.
On September 30, 1995, the officers and directors and their families
collectively owned 203,137 shares of the Fund with a value of approximately $1
million.
- 14 -
<PAGE>
The Board of Directors oversees and controls all operations of the Fund,
including: Recommending and monitoring the Investment Adviser; determining that
the investment policies of the Fund are carried out; the employment and
termination of all employees, consultants, agents and service providers; and
declaration of dividends.
The Board of Directors also monitors and controls custodial and shareholder
record keeping expenses, audit, accounting and legal fees. Directors fees are
set directly by the Board of Directors. Taxes, postage and regulatory fees of
the Securities and Exchange Commission and state regulatory bodies are
determined unilaterally by government agencies.
**The Board of Directors has established an Executive Committee whose function
is to take action between the regular meetings of the Board. The Committee has
all of the powers and authority of the full Board in the management of the
business of the Fund except the power to declare dividends and to adopt, amend
or rescind By-Laws.
The Board of Directors has also established an Audit Committee. That committee's
function are to supervise and oversee audits by the Fund's independent
accountants, review the auditor's audit plans and procedures, and to review the
auditor's recommendations concerning the Fund's accounting records, procedures
and internal controls Messrs. Corradi, Marshall and Nightingale currently
comprise the Audit Committee
COMPENSATION TABLE
Pension or Estimated
Retirment Annual Total
Benefits Benefits Compensation
Aggregate Accrued as Upon Paid to
Name, Position Compensation Expenses Retirement Directors
Francis S. Johnson $19,250 $ 0 $ 0 $ 1,250
President
Christopher M. Hill $ 1,250 $ 0 $ 0 $ 1,250
Vice-President
Michael A. Marshall $ 1,250 $ 0 $ 0 $ 1,250
Secretary-Treasurer
Gertrude B. Calden $ 1,250 $ 0 $ 0 $ 1,250
Director
James A. Corradi $ 750 $ 0 $ 0 $ 750
Director
Federic J. French $ 0 $ 0 $ 0 $ 0
Director
Karen Klinger $ 1,000 $ 0 $ 0 $ 1,000
Director
Robert P. Moseson $ 0 $ 0 $ 0 $ 0
Director
Richard A. Nightingale $ 1,000 $ 0 $ 0 $ 1,000
Director
Mark Schniepp $ 1,000 $ 0 $ 0 $ 1,000
Director
Dan B. Secord $ 0 $ 0 $ 0 $ 0
Director
Mark L. Sills $ 0 $ 0 $ 0 $ 0
Director
- 15 -
<PAGE>
INVESTMENT ADVISER:
Lakeview Securities Corporation, 333 West Wacker Drive, Chicago, Illinois 60610,
is an investment advisory firm which is neither owned nor controlled by the
Fund. Messrs. Robert Moseson and Leslie Golembo, by virtue of stock ownership,
qualify as controlling persons of Lakeview Securities. Respectively, they serve
as president and chief executive officer of Lakeview Securities. Mr. Moseson and
Mr. Golembo also own and control Performance Analytics, Inc., an investment
consulting firm which is also based in Chicago. Since 1986, Performance
Analytics has specialized in providing investment advice, investment management
evaluation services, and management consulting services to a broad range of
institutional investors. The Fund, however, is not a customer or client of
Performance Analytics, Inc.
Lakeview Securities has been employed by the Fund and is its investment adviser.
The existing investment advisory contract was solicited by the adviser,
recommended by the Board of Directors, and approved on November 29, 1993 by vote
of the holders of a majority of the outstanding shares of the Fund. The contract
may be terminated by either party without penalty on sixty (60) days written
notice, is automatically terminated if assigned, and must be submitted annually
for approval (a) by the Board of Directors of the Fund, or (b) by a vote of a
majority of the outstanding voting securities of the Fund, provided that in
either event the continuance of the contract is also approved by the vote of a
majority of the Directors who are not interested persons of the Fund. That vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
Primary responsibility for the day-to-day management of the Fund's investment
portfolio is that of The Arms Companies Division of Lakeview Securities.
Fredric J. French is President of that division, which is headquartered in
Albuquerque, New Mexico, and is the portfolio manager for the Fund. In addition
to serving as portfolio manger for Investors Research Fund, Inc., The Arms
Companies division serve as an investment adviser to large equity investment
funds and to securities investment programs that specialize in investing in the
S & P 500 futures market.
Lakeview Securities Corporation ("Lakeview") has served as investment adviser to
Investors Research Fund since January 1, 1994. From that date to December 31
,1995, Richard W. Arms, Jr., as President of the Arms Companies Division of
Lakeview, was primarily responsible for Investors Research Fund portfolio
management, subject to oversight supervision by Robert P. Moseson, President of
Lakeview. In managing the Investors Research Fund portfolio Lakeview has applied
the Arms Equivolume investment strategy, a stock selection strategy that uses
technical indicators. Since November 1992, Mr. Arms was assisted in applying
this strategy on behalf of Lakeview clients, including Investors Research Fund,
by Fredric J. French. On December 31, 1995, Richard W. Arms, Jr., resigned as
President of the Arms Companies Division of, and as an employee of Lakeview, and
on January 1, 1996, Fredric J. French was promoted from Vice President and
Senior Portfolio Strategist for the Arms Companies to the position of President
of that division. Thus, beginning January 1, 1996, Fredric J. French and Robert
P. Moseson jointly assume responsibility for Investors Research Fund's portfolio
management.
Fredric J. French has more than six years of experience in applying the Arms
Equivolume investment strategy, primarily as an immediate assistant to Richard
W. Arms, Jr., the developer of the strategy. Mr. French has served in positions
of increasing responsibility of the Arms Companies Division of Lakeview since
November, 1992. Since that time, he has been part of the management team setting
investment guidelines and objectives for Lakeview's investment management
accounts and for the day-to-day application of the Arms Equivolume investment
strategy. In this regard, he has also been responsible for stock selection and
trading for investment management accounts. In October, 1995, Mr. French
conceived and developed the dividend screening addition to the Arms Equivolume
charting method of stock selection. Lakeview believes that the dividend
screening addition was an improvement that significantly enhanced the Fund's
performance since its implementation. Prior to joining Lakeview, Mr. French
served as a sales agent and field sales manager for Encyclopedia Britannica
(March 1991 to November 1992) and as an insurance agent with The Prudential
Insurance Company of America (January 1990 to March 1991). For approximately
four years prior to 1996, Mr. French was employed in part, by the Arms
Equivolume Corporation where he served as sales manager and assisted Richard
Arms in stock selection for investments based on Arms Equivolume and in the
application of Arms Equivolume investment strategies. Mr. French was also
instrumental in the design and marketing of Equivolume software. Mr. French
holds a Bachelor of Arts in business administration degree from Chadron State
University (Nebraska).
- 16 -
<PAGE>
Robert P. Moseson, President of Lakeview, is also the founder and President of
Performance Analytics, Inc., a national retirement plan consulting firm and
Spectrum Adviser Corporation, an investment advisory firm. Lakeview is an
NASD-licensed broker/dealer firm and an SEC registered investment adviser. Prior
to co-founding Performance Analytics, Inc., Mr. Moseson served in positions of
increasing responsibility with Merrill Lynch, Pierce, Fenner & Smith, initially
as an account executive (1969-1972) and later as Vice President and head of
Merrill Lynch Midwest region for performance evaluation (1972-1985). Performance
Analytics, Inc., is an investment consulting firm specializing in tracking and
evaluating the investment performance of fund managers. Mr. Moseson has
developed and implemented computer-based programs for style tilting and asset
allocation that are operated and licensed through Spectrum Advisory Corporation.
Mr. Moseson is considered to be a leading national authority on style tilting
and asset allocation, which are strategies to enhance fund returns and control
risk. Accordingly, Mr. Moseson had extensive experience in formulating
investment objectives and policies, developing investment action plans for
institutional funds, measuring investment performance and selecting courses of
action to maximize investment return. Mr. Moseson holds a Bachelor of Science
degree in business from Roosevelt University (Chicago, Illinois).
The advisory contract provides in substance that the adviser will continuously
provide an investment program for the Fund's assets; will, subject to the
general control of the Board of Directors, develop and implement portfolio
investment decisions, including placement of portfolio brokerage orders on a
discretionary basis; and will furnish to the Fund the services of its directors,
officers, and employees in the supervision, control and conduct of the
investment activities of the Fund.
The Fund bears the operating expenses as set forth on page 2. The Fund pays the
adviser a quarterly fee equal to 0.125% of the value of the Fund's average net
assets. On an annual basis, this will amount to one-half (1/2) of one percent
(1%) of the value of the Fund's average net assets. In 1995, the adviser's fee
as a percentage of the Fund's average net assets was 0.50%. The ratio of
operating expenses to average net assets was 1.60% in 1995.
The contract also provides that, in the event operating expenses of the Fund (as
audited and including the adviser's fee, but not including taxes, brokerage,
12b-1 fees, capitalized expenditures and extraordinary expenses) exceed the
limits applicable to the Fund under the laws or regulations of any state in
which Fund shares are qualified for sale, the adviser will immediately
compensate the Fund for such excess. At the present time, the effective limits
of expenses allowable are 2.5% of the first $30,000,000 of average net assets;
2.0% of the next $70,000,000 of net assets; and 1.5% of the remaining net assets
for any fiscal year.
The managment fees paid by the Fund to Lakeview Securities Corporations in 1995
was $171,087. In fiscal 1994 they received $141,952.The management fees paid by
the Fund to its previous adviser, Investors Research Company, in the year 1993
was $266,827. In 1994 they received $56,691 (for the first quarter of fiscal
1994). The investment adviser receives no brokerage commissions or any other
compensation from the Fund.
PERSONAL INVESTING BY FUND PERSONNEL:
Investors Research Fund has a strict Code of Ethics which prohibits all of its
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of the Fund's planned portfolio
transactions. Lakeview Securities also has a Code of Ethics which is intended to
achieve that same goal. The objective of the Code of Ethics of both the Fund and
its adviser is that their operations be carried out for the exclusive benefit of
the Fund's shareholders. Both organizations maintain careful monitoring of
compliance with their Code of Ethics.
- 17 -
<PAGE>
THE FUND DOES NOT UTILIZE DERIVATIVES:
Investors Research Fund may not either purchase or sell those instruments
commonly known as derivatives. Broadly defined, derivatives are contracts that
derive their value from the value of some underlying asset (such as currencies,
equities or commodities), some indicator (such as interest rates), or some index
(such as the Standard & Poor's 500 Stock Index). It is the Fund's belief that
the risks of such contracts are not consistent with the capital appreciation
objectives of Investors Research Fund.
PORTFOLIO BROKERAGE:
Neither the Fund nor any of its officers is affiliated with any broker-dealer.
None of the directors is affiliated with a broker-dealer except for Robert P.
Moseson, who is affiliated with Lakeview Securities Corporation, a licensed
broker-dealer. However, the Fund's investment advisory agreement specifically
prohibits the placement of the Fund's portfolio brokerage through Lakeview
Securities Corporation, which eliminates such a source of potential conflicts of
interest. The principal underwriter is not affiliated with either the Fund or
the investment adviser.
The authority for placing the Fund's portfolio brokerage has been delegated to
the Fund's investment adviser, Lakeview Securities Corporation. Mr. French, as
portfolio manager, is principally responsible for selecting the broker-dealer to
execute portfolio orders. The Fund is informed that neither Mr. French nor
Lakeview Securities has any agreement or commitment of any kind to place
portfolio transactions through any particular broker-dealer.
Orders for portfolio transactions may be placed by the adviser with
broker-dealers who have sold shares of the Fund, but the fact that a
broker-dealer has sold shares of the Fund is not the sole factor in the
selection of such broker-dealer. The adviser will not, however, give weight to
this factor if this would result in the Fund not obtaining the most favorable
prices and executions reasonably obtainable. Further, there will be no
particular ratio of brokerage business to Fund sales.
The Fund itself checks executions of portfolio orders with the spread quoted in
the financial press to ascertain that executions are within the range quoted for
the day of execution.
The Fund has authorized the adviser to give consideration to the receipt of
research services from broker-dealers in its placing of portfolio brokerage
transactions. However, the adviser has informed the Fund that it does not expect
to exercise that authority on more than a nominal basis. No persons acting on
behalf of Lakeview Securities or the Fund are authorized to pay a broker a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction in recognition of the value of brokerage or
research services provided by the broker. The primary basis for selecting
brokers is to seek brokers to effect transactions where prompt execution of
orders at the most favorable prices can be secured.
Figures pertaining to the Fund's brokerage for the last three fiscal years are
presented in the following table:
<TABLE>
<CAPTION>
Annual Portfolio
Turnover Brokerage Commissions Paid Brokerage Paid to
Ratio to Total Brokerage by the Fund to Broker-Dealers not Affiliated
Total Assets Commissions Paid the Underwriters* with Adviser or Underwriter for
Sales Services Other
<S> <C> <C> <C> <C> <C> <C>
1993 109.92% $289,422 $168,461 $120,961 -nil- -nil-
1994 234.77% $210,457 $82,392 $128,065 -nil- -nil-
1995 248.44% $284,333 $80,465 $203,868 -nil- -nil-
<FN>
* The Underwriter is also a registered broker-dealer with a securities retail
brokerage operation and its offices have in the past been the largest source of
Fund sales.
</FN>
</TABLE>
- 18 -
<PAGE>
MANAGEMENT'S DISCUSSION and ANALYSIS of INVESTMENT PERFORMANCE
Investors Research Fund, Inc. has been a continuous, but cautious, participant
in this unusual market during our fiscal year of October 1, 1994 through
September 30, 1995 and on through the end of calendar 1995. Using the historical
index standards of the Dow Jones Industrial average and the S & P 500, the
market, starting in January, 1995, has had a rare and steep rise. That market
period could be characterized as permeated with unbridled speculation. To have
the market turn out as it did last year, several good things had to happen.
Inflation had to be under control, interest rates had to go down, and employment
had to go up. Shortfalls in any of these scenarios would undoubtedly have
seriously changed the outcome of the market move. The problem for our adviser
was to carry out its investing responsibilities while not gambling with the
shareholder assets.
Our adviser believed, we feel correctly, that speculating that all of those
factors would come together and that there would not be a market correction was
not appropriate. Any disappointment with the fundamentals would cause a market
correction of some magnitude. The fact that all did fortuitously come together
left the Fund behind the market averages throughout a substantial portion of
1995.
At present, the price/dividend yield stands at its lowest point in S & P
history. As of October 31, 1995, it was 41 times dividend and the market
(12/8/95) has gone up 500 points on the Dow from that level. Historically, when
that ratio has gotten significantly out of line, a decline correction occurs,
varying from a minimum 25% to a maximum of 89%, with 49% the average. We believe
that we must always evaluate the risk involved against the return over the long
term for a prudent investment policy. Since one of our declared objectives is
preservation of capital, we have been concerned about the occurrence of a sudden
and very substantial retreat occurring at almost any time since about last April
1995.
Now at the end of 1995, we find the high quality conservative stocks we own are
benefitting from increased market interest and price, as others step away from
the technology stocks. Quality is returning to its own. The market yield for
dividends is 2.3% while the Fund has a 3.9% dividend yield. The price of the
quality stocks we hold is therefore rising. Our actual return (not considering
any sales load) from January 1, 1995 through the fiscal year of September 30,
1995 was 7.7%, but it stood at 16.58% for the 1995 calendar year. Earnings
disappointments during the last quarter of calendar 1995 have started investors
returning to the quality types of stocks the Fund owns.
Investors Research Fund management and its adviser favor a conservative approach
which preserves capital and aims for an orderly increase in value over time. As
indicated, our concentration is on well known stocks which increase in value
with low risk over time. We look for the issues which have, among other factors,
lower price/earnings ratios and which have temporarily come down in price
because of what our adviser believes are transitory factors. They have less
volatility than more risk laden issues. We believe the Fund to be well
positioned for the next market change. The real test of investment performance
should be over a market cycle of three to five or six years in order to smooth
out the short term gyrations of the market.
As always it is to be noted that past performance is not necessarily predictive
of future performance.
Computation of Net Asset Value and Maximum
Offering Price of the Company's Shares
On the Basis of the Financial Condition of the Company at September 30, 1995
Value of net assets............................................$ 32,013,130
Number of shares outstanding................................... 7,806,337
Net asset value and repurchase price per share.................$ 4.10
Underwriting commission per share included in offering price*..$ .25
Offering Price per share (100/94.25 of $4.10)..................$ 4.35
*(5 3/4% of offering price, reduced on sale of $25,000 or more. See sales
charges page 20).
- 19 -
<PAGE>
NET ASSET VALUE:
The net asset value per share is determined by dividing (1) the total value of
the assets of the Fund (securities, cash and assets of every kind, but not
including any amount for good-will or going-concern value) less the amount of
all debts, obligations and liabilities of the Fund, by (2) the total number of
shares of the Fund outstanding.
In determining the total value of the assets of the Fund, securities are valued
once daily as of the close of the exchange on which they are primarily traded,
as set forth on page 14 under Redemption of Shares. In the event there is no
sale on this date, the value of the security is fixed by the Board of Directors,
on the basis of the last known transaction for such security.
The value of securities which are not listed or traded on any recognized stock
exchange, but for which market quotations are readily available, is determined
by the Board of Directors on the basis of the latest bid price quotations
available. The value of securities which are not listed or traded on any
recognized stock exchange, and for which market quotations are not readily
available, and the value of any other assets of the Fund, are fair value as
determined in good faith by the Board of Directors.
HOW TO BUY SHARES:
The Fund's shares may be purchased at the public offering price through
broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with Diversified Securities Inc., the
Underwriter.
Purchases are made at the net asset value to be determined plus applicable sales
charge. The public offering price (net asset value plus sales charge) is
computed once daily on each day that the New York Stock Exchange is open, as of
the close of trading on the Exchange New York City time. At the date of this
prospectus, the close of trading is 4:00 p.m., but this time may be changed. The
offering price so determined becomes effective at the New York Stock Exchange
closing time. Orders for shares of the Fund received by dealers prior to the New
York Stock Exchange closing time are confirmed at the offering price next to be
determined on that day, provided the order is received by the Underwriter prior
to the NYSE's close of business. (It is the responsibility of the dealers to
transmit such orders so that they will be received by the underwriter prior to
such close of business.) Orders received by dealers subsequent to the New York
Stock Exchange closing time will be confirmed at the closing time on the next
day the New York Stock Exchange is open. The New York Stock Exchange is closed
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
- 20 -
<PAGE>
SALES CHARGES:
Sales charges on purchases of less than $25,000 amount to 5.75% of the amount
the buyer invests; 6.10% of the amount received by the Fund.
Lower sales charges are applicable to larger transactions as indicated in the
following table:
Sales
Sales Charge as
Charges as Percentage
Percentage of the
of the Net Offering
Amount Price (The
Received Amount
Amount of by the the Buyer
Purchase Fund Invests)
Less than $25,000................... 6.10% 5.75%
$25,000 to less than $50,000........ 5.82% 5.50%
$50,000 to less than $100,000....... 4.99% 4.75%
$100,000 to less than $250,000...... 3.90% 3.75%
$250,000 to less than $500,000...... 2.56% 2.50%
$500,000 to less than $1,000,000.... 2.04% 2.00%
$1,000,000 and more................. 0.00% 0.00%
(A selling dealer is ordinarily allowed approximately 85% of the sales charge on
sales of less than $1,000,000.)
The above scale is applicable to a purchase made at one time by an individual,
or an individual, his spouse and children under the age of 21, or a trustee or
other fiduciary of a single trust estate or single fiduciary account (including
a pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code).
The above reduced sales commissions scale is also applicable to the cumulative
amount of purchases made by any one of the persons enumerated above on an
"accumulated purchases" basis. For example, if a shareholder has purchased and
still owns shares with a value at cost or current offering price (whichever is
higher) of $25,000 and subsequently purchases $5,000 additional, the charge
applicable to the $5,000 purchase would be 5.50%.
TO TAKE ADVANTAGE OF THIS PRIVILEGE, THE DEALER MUST NOTIFY THE PRINCIPAL
UNDERWRITER WHEN THE ORDER IS PLACED.
Shares are sold at net asset value and without sales commission to the directors
(including retired directors with long service), officers of the Fund, its
Investment Adviser and Principal Underwriter and broker-dealers who maintain
selling agreements with the Underwriter, or the bona fide employees or sales
representatives of any of the foregoing who have acted as such for not less than
90 days, and to their family members or to any trust, pension, profit sharing or
other benefit plan for such persons, upon written assurance that the shares are
being purchased for investment purposes and will not be resold except through
redemption or repurchase by or on behalf of the Fund.
The Board of Directors has recently approved a new program under which members
of qualified organizations are able to invest at net asset value on the basis of
broker cooperation. The arrangement applies when the following requirements are
met: (1) the individual is a member of an organization which has at least 200
members, (2) that organization has sponsored Investors Research Fund, Inc. as an
investment vehicle for its members, and (3) the selling broker has agreed to
waive any commission on the transactions of members of that organization
investing in the Fund through that broker. Diversified Securities, Inc., the
Fund's underwriter, has agreed to waive its usual underwriting retention for
investors meeting the above requirements.
The aggregate dollar amount of underwriting commissions derived by all retailers
from sales of the Fund's securities during 1993, 1994, and 1995 were $27,477,
$40,075, and $ 19,603. The underwriter receives a portion of the sales charges.
The underwriter, Diversified Securities, Inc., retained $5,695, $5,124 and
$5,222 in the past three fiscal years. These latter figures represent the
underwriter's share of sales charges on all sales of Fund shares.
- 21 -
<PAGE>
INTENDED QUANTITY INVESTMENT STATEMENT OF INTENTION:
If it is anticipated that $25,000 or more of Fund shares will be purchases
within a 13 month period it is advantageous to sign a Statement of Intention so
that shares first purchased may be obtained at the same reduced sales charge as
though the quantity were invested in one lump sum. For this purpose, such a
Statement may be signed at any time within 90 days of a purchase, and a 90 day
back dating period will be used in order to include the earlier purchase also at
the reduced sales charge. The Statement authorizes the Transfer Agent to hold in
escrow sufficient shares which can be redeemed to make up any difference in
sales charge on the amount actually invested within the 13 month period.
Execution of a Statement is not binding and does not obligate the shareholder to
purchase, or the Fund to sell, the full amount indicated in the Statement, and
should the total amount actually purchased during the 13 month period be more or
less than that indicated on the Statement of Intention, any required price
adjustment will be made. The Statement of Intention Procedure applies to
purchases of $25,000 or more. Required application forms are available from the
Principal Underwriter or your investment dealer, or on page 28 of this
Prospectus, and should be read carefully.
INVESTMENT ACCUMULATION PLAN:
Open Accounts for Accumulating Shares
When an investor makes his initial investment (no minimum) in shares of the Fund
through his investment dealer, an account will be opened for him on the books of
the Fund by DST Systems, Inc. the Fund's Transfer and Shareholder Record Keeping
Agent. A shareowner may make additional investments (no minimum) in shares of
the Fund at any time through his investment dealer or by sending a check to DST
Systems, Inc. for investment in full and fractional shares at the public
offering price next determined. There is no charge for stock certificates, but
they will not be issued unless DST Systems receives a written request from the
shareowner or the dealer.
Income dividends and capital gains distributions, if any, will be automatically
credited by DST Systems to the shareowner's account in full and fractional
shares of the Fund at net asset value on the date of payment without sales
charge, except to the extent the shareowner elects in writing to the contrary. A
shareowner may at any time give a written direction to DST Systems that all
income dividends and/or capital gains distributions are to be paid to him in
cash. A shareowner may terminate his account at will. An application form for
such an account appears on page 28 of this prospectus.
PRE-AUTHORIZED CHECK PLAN:
Investment Plan
Investors desiring to make monthly investments are given the option to utilize a
pre-authorized check plan whereby DST Systems, Inc., as agent for the
Distributor, is empowered to draft the investor's bank account monthly in the
amount of $25.00 or more as specified by the investor. The proceeds of the draft
will be invested in shares of the Fund at the offering price on the 5th or 20th
day of the month as specified by the investor, or the next succeeding business
day should the date of the draft fall on a day when the New York Exchange is not
open. Forms for this purpose are available from your Dealer or by writing the
Fund Underwriter.
CHECK-A-MONTH PAYMENT PLAN:
Withdrawal Plan
Under this Plan, you can advise DST Systems how many dollars you wish to receive
each month or each quarter, provided your shares are worth at least $5,000 at
the time the plan is initiated. However, there can be no withdrawal in excess of
current account balance.
At the net asset value effective on the 15th day of each month (or effective on
the closest business day) Fund shares will be sold to make up the amount of each
month's payment (since all dividends and distributions are automatically
reinvested at net asset value). These sales may deplete the shareholder's
investment, especially in declining markets, and may create an income tax
liability or credit, depending on whether the sale price is higher or lower than
the shareholder's cost basis. This arrangement does not, of course, provide a
guaranteed annuity.
Ordinarily, it will be disadvantageous to be making withdrawals under a Plan
like this while buying shares in this or any other investment company, because
you will be paying unnecessary sales charges. Accordingly, if you start a
Withdrawal Plan, your Accumulation Plan open account, if one is in effect, will
be terminated.
- 22 -
<PAGE>
HANDLING INVESTING AND REDEMPTION TRANSACTIONS THROUGH YOUR BANK OR
SAVINGS INSTITUTION;
A. Shareholders may arrange for automatic investing whereby the Transfer Agent
will be authorized to initiate a debit to your bank account in a specific amount
(minimum $50) to be used to purchase shares of the Fund. Scheduled automatic
investments may be made between the third and twenty-eighth day of a month.
After each automatic investment, you will receive a transaction confirmation and
the debit should be reflected on the shareholder's next bank statement. The plan
may be terminated by the shareholder at any time, and the Fund also may modify
or terminate the plan at any time. If, however, the shareholder terminates an
automatic investment plan leaving an account balance of less than $1,000, the
Fund may close that account. If the applicant desires to utilize this investment
option, that election should be made on the application included in this
prospectus.
B. If a shareholder who has elected the check-a-month payment plan or who
requests a redemption of part or all of his or her shares so requests, payment
of the redemption amount may be made through the Automated Clearing House
("ACH") direct to the shareholder's bank or savings institution if the
shareholder has selected that option in the application and has named a
commercial bank or savings institution with a routing number to which the
Transfer Agent can send the redemption proceeds. Once the ACH redemption
privilege has been initiated, the shareholder or someone acting on his or her
behalf may make such redemption request by calling 1-800-616-4414. He or she may
also use the ACH by mailing a signed request that includes the name of the Fund,
the account number and the amount to be transferred to:
Investors Research Fund, inc.
P.O. Box 419958
Kansas City, MO 64141
CERTIFICATE SHAREHOLDERS REINVESTMENT PRIVILEGES:
Shareholders who may not wish to participate in the Investment Accumulation Plan
or Check-a-Month Payment Plan, and who have elected to receive dividends and
distributions in cash regularly, may still enjoy the privilege of electing to
reinvest dividends and distributions at net asset value without sales commission
by so electing within 15 days of the date of payment, and returning their
dividend to the Transfer Agent for reinvestment. Such reinvestments will be made
at the closing net asset value on the day the dividend or distribution is
received by DST Systems.
RETIREMENT PLAN FOR THE SELF-EMPLOYED:
For those self-employed individuals who wish to purchase shares of the Fund in
conjunction with the Self-Employed Individuals Tax Retirement Act of 1962,
(Keogh Act), there is available through the Principal Underwriter an Agreement
and Plan. The Plan has been accepted by the Federal Internal Revenue Service for
adoption as a master plan by a self-employed individual. Investors Fiduciary
Trust Company of Kansas City, Missouri acts as custodian of the assets
represented by the shares in each Keogh Account. The Custodian will charge $12
per year to the Keogh participants for this service, and will file such
information as may be required by the Internal Revenue Service or other
agencies.
DST Systems,Inc., a data processing company which provides services to all
shareholders of the Fund, will act as accounting and reporting agent for the
Keogh Plan sponsored by the Fund. It will provide the participants with regular
accountings of their investments, and with a cumulative statement at least
annually of their plan assets.
The Agreement provides that normal fees as Accounting and Reporting Agent or
out-of-pocket expenses (as Accounting and Reporting Agent) are not included in
the above charges.
For further details, including the right to appoint a successor custodian, see
the Agreement and Plan Application available through your investment dealer.
- 23 -
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT:
An employed person may establish an I.R.A. plan regardless of his participation
in any other retirement program, and there is available through the Principal
Underwriter an individual retirement account (I.R.A.) established under the
Employee Retirement Income Security Act of 1974.
The IRA sponsored by Investors Research Fund, Inc. (the Fund) is substantially
identical to the model IRA approved by the Internal Revenue Service. Investors
Fiduciary Trust Company of Kansas City, Missouri acts as Custodian of the assets
represented by the shares in each IRA custodial account. The Custodian will
charge $12 per year to IRA participants for this service, and will file such
information as may be required by the Internal Revenue Service or other
agencies.
DST Systems, Inc., a data processing company which provides services to all
shareholders of the Fund, will act as accounting and reporting agent for the IRA
plan sponsored by the Fund. It will provide the participants with regular
accountings of their investments, and with a cumulative statement at least
annually of their plan assets.
On the initial investment in an Individual Retirement Account, the funds are
invested on the date of receipt by DST Systems. However, in compliance with
Internal Revenue Service rules each individual has the right to revoke the
investment in seven days by notifying DST Systems by mail or telegram, and all
funds will be returned to the investor.
403 (b) RETIREMENT ACCOUNT:
The Fund offers a Plan and Custody Agreement for those employees who qualify
under section 403 (b) of the Internal Revenue Code and who wish to purchase
shares of the Fund in conjunction with a tax-deferred compensation arrangement.
Consult your dealer or the Principal Underwriter of the Fund.
RETIREMENT PLANS: General
All payments for Keogh Plans and IRAs must be mailed directly to DST Systems,
and should not be placed through your investment dealer's normal order entering
process. Make checks payable to Investors Research Fund, Inc.
As soon as practicable following each purchase for a Participant's account, DST
Systems will furnish the Participant with a statement indicating (a) dollars
invested and price per share, (b) the number of full and fractional shares just
purchased, (c) total full and fractional shares held under the Plan, and (d) a
history for the year-to-date of all transactions for the Participant's account.
The Internal Revenue Code has several important restrictions concerning
contributions to and withdrawals from Keogh Plans and IRAs. Therefore,
consultation with a competent legal or financial adviser with respect to plan
requirements and tax aspects is recommended.
REDEMPTION OF SHARES:
The net asset value is determined once daily as of the close of the New York
Stock Exchange on each day on which said Exchange is open for trading.
Redemptions are confirmed at the net asset value next to be determined, unless
redemption at a specified future date is requested. The Board of Directors
reserves the right to make interim determinations, of net asset value.
On behalf of the Fund, the transfer agent, DST Systems, Inc., will redeem shares
from stockholders of record at the per share net asset value next to be
determined after receipt of a properly executed request from a shareholder,
unless, as noted above, redemption at a future date is requested. The Fund's
transfer agent is willing to accept notices of redemption to be effected on a
specified business day in the future, not to exceed fifteen (15) calendar days
from the date of the notice. For example, notice can be given to redeem a
particular number of shares on a specified business day or a sufficient number
of shares to provide a stipulated dollar amount on the last business day of a
specified period (e.g., a specified year, month, week, or quarter) or any other
business day. The share value at which redemption will be made will be the net
asset value determined for the day specified for redemption.
- 24 -
<PAGE>
Please take note, however, that market conditions can change during the period
specified and neither the Fund nor DST Systems, Inc. assumes any responsibility
for taking action itself to deal with any such interim market action.
Nevertheless, in view of such possibility, DST Systems, Inc. will accept written
instructions canceling a specific redemption request transmitted by FAX
transmission and received a sufficient time prior to execution to allow
cancellation. The DST Systems, Inc. FAX number for such notices is (816)
435-7123.
For a properly executed request all parties (or trustees) in whose name the
shares are held should sign, and any redemption of either book shares or
certificates exceeding $50,000 in value should be accompanied by a stock power
or letter with the signatures guaranteed. Shareholders' signatures may be
guaranteed by municipal and government securities dealers and brokers, national
and registered securities exchanges and associations, savings associations, and
most credit unions as well as banks, trust companies and securities brokers. The
Fund's transfer agent, DST Systems, Inc., determines the acceptability of
specific guarantor institutions and the form of signature guarantee presented.
Be sure to identify your account number.
Requests for redemption should be sent to the transfer agent's office at the
address listed on the face of this prospectus. It is suggested that all
redemption requests by mail be sent Certified with return receipt. Normally
payment for shares redeemed will be made by check by the Fund, mailed within
seven days after receipt of the certificates or the written redemption request.
The Fund may delay forwarding a redemption check for recently purchased shares
while it determines whether the purchase payment will be honored. Such delay may
take up to 15 days or more. Redemption of shares or payment may be suspended at
times (a) when the New York Stock Exchange is closed other than customary
week-end and holiday closings, (b) when trading on said Exchange is restricted,
(c) when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits, provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in (b)
or (c) exist. The redemption price will be 100% of the net asset value, but the
Fund reserves the right to fix an across the board redemption fee in an amount
not to exceed 1% of the net asset value. The Fund does not presently intend to
charge a redemption fee.
Shares will normally be redeemed for cash, although the Corporation retains the
right to redeem its shares in kind under unusual circumstances, such as an
unusually large redemption, in order to protect the interests of the remaining
shareholders, by the delivery of securities selected from its assets, at its
discretion. The Corporation has, however, elected to be governed by Rule 18f-1
under the Investment Company Act of 1940 pursuant to which the corporation is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Corporation during any 90 day period for any one
shareholder. Should redemptions by any shareholder exceed such limitations, the
Corporation will have the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind the redeeming shareholder might incur brokerage
costs in converting the assets to cash. The method of valuing securities used to
make redemptions in kind will be the same as the method of valuing portfolio
securities described under Net Asset Value, page 10, and such valuation will be
made as of the same time the redemption price is determined.
A shareholder may also submit his endorsed certificate through a dealer, but any
dealer through whom the redemption is made may impose a service charge. It is
the dealer's responsibility to transmit orders promptly.
- 25 -
<PAGE>
REINVESTMENT of REDEMPTION PROCEEDS:
A shareholder who has had shares redeemed and has not previously exercised this
reinstatement privilege may, within 9 months after the date of the redemption,
reinstate any portion or all of the proceeds of such redemption in shares of the
Fund at net asset value next determined after a reinstatement request. This
reinvestment request must be accompanied by the full amount of the proceeds to
be reinvested, and sent to the Transfer Agent.
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTION and TAXES:
Ordinary Investment Income. The Fund has complied with Sub-Chapter M of the
Internal Revenue Code in every year and intends to comply with provisions of the
Federal Internal Revenue Code, and to distribute annually on or about the last
business day of December substantially all of its net ordinary investment
income, if any. This policy will relieve the Fund of income tax liability on
such income under said Code. The Fund also intends to meet the distribution
requirements imposed by the Code to avoid the imposition of the 4% excise tax.
The distribution will be made in additional shares of the Fund unless the
shareholder has notified the transfer agent, DST Systems, that he prefers to
receive cash.
Capital Gains. If net gains are realized from the sale of assets during any
year, the Directors will decide whether or not to distribute them. If a
distribution is made, it will be made in additional shares of the Fund unless
the shareholder has notified the transfer agent, DST Systems, that he prefers
cash, and will be made but once annually on or about the last business day of
December. If these gains are not distributed, the Fund will pay the Federal
Income Tax assessed thereon, if any, and advise each shareholder of the amount
of the tax credit to which he will then be personally entitled.
Approximately 4% of the net asset value of the shares at September 30, 1995
represents net unrealized appreciation. Net gain on sale of securities when
realized and distributed, whether paid in cash or additional shares, is taxable.
If the net asset value of shares were reduced below a shareholder's cost by
distribution of gain realized on sale of securities, such distribution would be
a return of investment though taxable as stated above.
To the extent that a regulated investment company distributes the excess of its
net gain over its net loss, such gain is not taxable to the company but is
taxable to the shareholder, irrespective of how long the shareholder may have
held his shares.
Special Note. When declared, all ordinary income and capital gain distributions
immediately reduce the net asset value of the shares by a like amount. Therefore
when shares are purchased just before the declaration date, the distribution
received by that shareholder constitutes a direct return of his capital even
though subject to taxation.
PLAN of DISTRIBUTION UNDER RULE 12b-1:
On March 30, 1993, the Fund adopted a plan of distribution pursuant to the
S.E.C.'s Rule 12b-1. The plan became effective April 1, 1993. During Fiscal
1995, the Fund expended $56,614 pursuant to this plan. The plan authorizes the
Fund to make certain payments to broker-dealers who have engaged in the
marketing and distribution of the Fund's shares and who are available to provide
services to the Fund's shareholders. The payments are made quarterly and are
based on the value of shares held by Fund shareholders for whom the registered
representative is broker of record. Currently, all of the payments represent
compensation to underwriters, dealers and sales personnel for services to
shareholders of the Fund. No director or other interested person of the Fund has
any direct or indirect financial interest in the operation of the plan or its
related agreements.
The Fund believes that the existence of the Plan has enhanced the service level
to Fund shareholders.
Illustration of an Assumed Investment of $10,000
in the Investors Research Fund
[GRAPHIC OMITTED]
The graph compares the results of a $10,000 original investment in the Investors
Research Fund in two different investment scenarios over the life of the fund.
The first being with capital gains income distribution and dividends reinvested
and the second being with capital gains income distributions and dividends
received in cash
- 26 -
<PAGE>
TERMS AND CONDITIONS OF STATEMENT OF INTENTION
Subject to conditions specified below each purchase will be made at the public
offering price applicable to a single transaction of the dollar amount indicated
on the application as described in the then effective Prospectus. I understand
that this reduction in the distribution charge and offering price does not apply
to investments directly into an Investment Accumulation Plan nor will such
investments apply toward the completion of the "Statement."
I understand that after having purchased the amount indicated above, I may
continue purchases for the balance of the period at the public offering price
applicable to such amount. I also understand that I may, at any time during the
period, revise upward my stated intention and that such a revision shall, for
all subsequent purchases, be treated as a new Statement of Intention (including
escrow of additional shares) except as to the period of this statement, which
shall remain unchanged. There will be no retroactive reduction of the
distribution charge already paid on purchases made prior to such revision.
I make no commitment to purchase shares, but I agree that if purchases are made
within thirteen (13) months from this date do not aggregate the amount specified
on the application I will pay the increased amount of distribution charge
prescribed in the terms of escrow set forth below. It is understood that 5% of
the dollar amount checked on the reverse side will be held in escrow in the form
of shares (computed to the nearest full share) registered in my name. These
shares will be held by the Escrow Agent and will be subject to the terms of
escrow referred to above.
I further understand that the privilege of purchasing shares at a reduced
distribution charge over a thirteen month period may be withdrawn as to future
purchases upon information that the shares are being resold or transferred by me
within the thirteen month period.
To assure that I will benefit from the reduced public offering price on future
purchases, my dealer must refer to this statement of intention in placing each
future order by me for shares of the Fund specified above while this statement
is in effect.
TERMS OF ESCROW
1. Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified in the Statement of Intention shall be held in escrow by
the Escrow Agent, DST Systems, Inc. in the form of shares (computed to the
nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the name of the purchaser. For instance, if
the minimum amount specified under this Statement is $25,000 and the public
offering price applicable to transactions of $25,000 is $10 a share, 125 shares
($1,250 worth) would be held in escrow. All dividends and any capital gains
distributions on the escrowed shares will be paid directly to the purchaser or
to his order.
2. If the purchaser completes the total minimum investment specified under this
Statement within the thirteen month period, the escrowed shares will be
delivered to the purchaser or to his order promptly upon completion.
3. If the intended investment is not completed, the purchaser will remit to DST
Systems, Inc. an amount equal to the excess of the distribution charge
applicable to a single purchase in the aggregate amount actually paid by him
over the distribution charge actually included in such aggregate amount. If the
purchaser does not within 20 days after written request by Diversified
Securities Inc. or his dealer pay such difference in distribution charge, the
Escrow Agent, upon instructions from Diversified Securities, Inc. will cause to
be redeemed an appropriate number of the escrowed shares in order to realize
such difference. If the proceeds from such a redemption are inadequate for such
purpose, the purchaser shall be liable to DST Systems, Inc. for the difference.
4. The purchaser hereby irrevocably constitutes and appoints the Escrow Agent
his attorney with full power of substitution in the premises to surrender for
redemption any or all escrowed shares on the books of the Fund.
5. Full shares remaining after the redemption referred to in Item 3, together
with any excess cash proceeds of the shares so redeemed, will be delivered to
the purchaser or to his order by the Escrow Agent.
REQUIREMENT THAT PURCHASE COMPLY WITH RULE 22d-1
Rule 22d-1 under the Investment Company Act of 1940, supervised by the
Securities and Exchange Commission, provides that reduced rates on large
transactions are limited to purchases made by the following: An individual, or
an individual, his spouse, and their children under 21 purchasing securities for
his (their) own account; and a trustee or other fiduciary purchasing securities
for a single trust estate or single fiduciary account (including a pension,
profit sharing, or other employee benefit trust created pursuant to a Plan
qualified under Section 401 of the Internal Revenue Code). Such rates are not
allowable to a group of individuals whose funds are combined, directly or
indirectly, for the purchase of securities or to a trustee, agent, custodian or
their representative of such a group.
- 27 -
<PAGE>
Sponsor: DIVERSIFIED SECURITIES, INC. Transfer Agent: DST Systems, Inc.
P.O. Box 357 P.O. Box 419958
3701 Long Beach Blvd. Kansas City, Missouri 64141
Long Beach, California 90801
INVESTORS RESEARCH FUND, INC.
================================================================================
TYPE OF ACCOUNT (Check one only): BASIS FOR OPENING MY
I. [] INVESTMENT ACCUMULATION PLAN ACCOUNT (Check as
Appropriate):
Income Dividends are to be [] Reinvested [] Paid in [] I enclose a check
Capital Gains Distributions cash in the amount of
are to be [] Reinvested [] Paid in $______________
[] Hold shares on deposit OR cash [] I attach
[] Issue certificate and Certificates
deliver to [] Dealer OR [] Investor for__________shares
[] Wire Order
(see attached)
II. []CHECK-A-MONTH PAYMENT PLAN (All payments are processed at the net asset
value effective on the 21st day of the month (Minimum investment is $5,000).
Type of Plan: [] Monthly or [] Quarterly Send check in amount of $ (not less
than $50) Make check payable to: [] Registered Owner(s) as shown below Or []
Other Payee (see attached)
- --------------------------------------------------------------------------------
III.REGISTRATION INFORMATION: REGISTRATION ADDRESS:
Owner(s)____________________________ Street or
____________________________________ P.O. Box________________________
In the case of two or more owners, City ___________________________
the account will be registered State __________ Zip ___________
"Join Tenants" unless otherwise specified.
Soc. Sec. Number ___________________ Citizenship: [] U.S. [] Other________
If you fail to supply the Fund with your correct Social Security Number or Tax
Identification Number you will be subject to a $50 penalty. If you falsify
information on this form or make any other false statement resulting in no
backup withholding on an account which is subject to backup withholding, you may
be subject to a $500 penalty and to certain criminal penalties, including fines
and imprisonment.
(See IRS Certification Information on reverse)
- --------------------------------------------------------------------------------
IV. Authorization for Automated Clearing House Transfer
Investments and/or Redemptions
[]A. Investments - I (we) hereby authorize the Fund's Transfer Agent to have the
amount shown below transferred automatically from my (our) account as
indicated and invested in my (our) Investors Research Fund account. I can
indicate any day between the 3rd and 28th of the month.
[] Monthly, transfer $______________ on the ______ day of the month.
[] Quarterly, transfer $______________ on the _______ day of January,
April, July and October.
[]B. Redemption - I (we) hereby elect to use the Automated Clearing House
transfer facilities in the event I (we) should redeem any of my (our)
shares.
___________________________________ ______________________________
Name of Bank or Savings Institution Account Number at that Bank or
Savings Institution
Type of account: [] Checking [] Savings
YOU MUST ATTACH A VOIDED CHECK OR ENCODED DEPOSIT SLIP. YOUR REQUEST CANNOT BE
PROCESSED WITHOUT IT.
- --------------------------------------------------------------------------------
V. STATEMENT OF INTENTION. Although I am not obligated to do so, it is my
intention to purchase shares of INVESTORS RESEARCH FUND, INC. over a period of
thirteen months in accordance with the provisions provided on page 13 of the
Fund's prospectus. The aggregate amount of such purchase(s) to be at least equal
to the amount indicated below:
[] $25,000 [] $50,000 [] $100,000 [] $250,000 [] $500,000 [] $1,000,000
Accepted by Diversified Securities, Inc.
By ______________________Escrow Shares ____________ Expiration Date ____________
- --------------------------------------------------------------------------------
VI. TO BE EXECUTED BY DEALER: The undersigned desires to act as a dealer for
this account and hereby enters into the dealer
agreement on the reverse side of this application.
Unregistered shares are being held by the Distributor for this plan:
___________ _____________ __________ Dealer's Name and Address
Invoice No. No. of Shares Trade Date (Main Office Only)
_________________________
______________________________________ | |
Representative's Last Name and Number | |
______________________________________ | |
Dealer Branch in Which Plan Originated _________________________
______________________________________
Authorized Signature of Dealer (see over)
- --------------------------------------------------------------------------------
- 28 -
<PAGE>
DEALER AGREEMENT
Under these plans, the dealer signing the application acts as principal in all
purchases of Fund shares and appoints the Transfer Agent as its agent to execute
the purchases, confirm each purchase for the investor, and transmit to the
investor each new prospectus of the Fund. The Transfer Agent remits monthly to
the dealer the amount of its commissions. The dealer hereby guarantees the
genuineness of the signature(s) on the application and represents that he is a
duly licensed dealer and may lawfully sell Fund shares in the state designated
as the Investor's mailing address, and that he has entered into a Selling Group
Agreement with Diversified Securities Inc. with respect to the sale of Fund
shares. The dealer signature on the reverse side of this application signifies
acceptance of the concession terms, a signature guarantee, and acceptance of
responsibility for obtaining additional sales charges if specified purchases are
not completed.
IRS CERTIFICATION INFORMATION
As required by law, the Fund is to withhold Federal Income tax equal to 20% from
income dividends, capital gains distributions and redemption payments if you do
not provide the Fund with your correct social security or other taxpayer
identification number. In addition, the Fund is required to withhold from income
dividends and capital gains distributions, but not redemption payments, if you
do not certify to the Fund that you are not subject to backup withholding due to
notification by the Internal Revenue Service of under reported interest or
income from dividends, including those which would otherwise be reinvested in
additional shares of the Fund.
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
- --------------------------------------------------------------------------------
[] New Account Part II:
A. [] I have [] I have NOT
Name been notified by the IRS that
_________________________ I am subject to Backup
Please Print Withholding as a result of a
failure to report dividend or
Address interest income.
_____________________________
_____________________________________ B. [] The IRS has notified me that
_____________________________________ I am no longer subject to
_____________________________________ Backup Withholding.
- --------------------------------------------------------------------------------
Part I: Part III:
A. Social Security Number or Tax I.D.
Number
NON-RESIDENT ALIEN
__ __ __ __ __ __ __ __ __ Under penalties of perjury, I certify
that I am neither a citizen nor a
resident of the United States.
B. I do not have a TIN, but I have
applied for or intend to apply for
one. I understand that if I do not _____________________________________
provide this number within 60 days, Signature (Non-Resident Alien)
the required 20% withholding will
apply.
- --------------------------------------------------------------------------------
Under Penalties of perjury, I certify If Further information is needed.
that the information on this form is consult your tax adviser.
true, correct and complete
_____________________________________ _____________________________________
Signature Date Signature Date
_____________________________________ _____________________________________
Signature Date Signature Date
- 29 -
<PAGE>
PERFORMANCE INFORMATION:
From time to time, Investors Research Fund may state its total return in
advertisements and investor communications. Total return is the change in value
of an investment in the Fund over a given period, assuming reinvestment of any
dividends and capital gains, thus reflecting actual performance over the stated
period. Total return may be stated for any relevant period as specified in the
advertisement or communication. Any statements of total return, or other
performance data on the Fund, will normally be accompanied by information on the
Fund's average annual compounded rate of return over the most recent four
calendar quarters and the period from the Fund's inception of operations. The
Fund may also advertise aggregate and average total return information over
different periods of time.
The Fund's average annual compounded rate of return is determined by reference
to a hypothetical $1,000 investment in the Fund. The value of the $1,000
investment is then ascertained at the end of the stated period (one year, five
years, ten years, and the life of the fund) as if the shareholder had redeemed
his or her investment at that time. Thus, the calculation takes into
consideration the maximum sales charge, all distributions, and whatever capital
appreciation and depreciation occurred during the particular period. Taxes are
not deducted. Finally, by use of a mathematical formula, the final increase or
decrease is given on the basis of an average annual return which, compounded
annually, would have produced an amount equaling the redemtion value at the end
of the period stated. Aggregate total return is calculated in a similar manner
except that the results are not stated on an annualized basis.
The result is that each such calculation assumes that the maximum sales charge
was deducted from the initial $1,000 investment at the time it was made and that
all dividends and distributions were reinvested at net asset value on the
reinvestment dates during the particular period stated. It is to be noted that
averaging the total return over a period creates a hypothetical rate of return
that, if achieved annually, would have produced the same total return with
performance constant over the entire period. Averaging has the affect of
smoothing out year to year variations; actual year by year results almost always
differ from each other to some extent, but the ending total return is the same
in both presentations.
The performance of the Fund may be compared to that of various indexes of
investment performance published by third parties (including, for example, and
not limited to, The Dow Jones Industrial Average. The S&P 500, and the NASDAQ
Composite Index). Also, the Fund's standard performance may be compared to the
Fund's performance calculated as if no sales charges were deducted.
From time to time, evaluations of the Fund's performance by independent sources
may also be used in advertisements and in information furnished to present or
prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current or average total return
for any period should not be considered as a representation of what an
investment may earn or what an investor's total return may be in any future
period.
OTHER SERVICES:
United Missouri Bank, 928 Grand Avenue, Kansas City, Missouri 94141, is the
Fund's custodian, and as such is responsible for safekeeping of securities in
the Fund.
Timpson Garcia, 1610 Harrison Street, Oakland, CA 94612, is the Fund's
independent accountant and annually audits the financial statements of the Fund.
For a more complete description of the duties performed by the independent
accountant, see page 26 of this document.
SHAREHOLDER'S INQUIRIES:
In the event a shareholder should have any question concerning his or her
individual records or matters of shareholder accounting, he or she should direct
the inquiry in writing to DST Systems, Inc., P.O. Box 419958, Kansas City, MO
64141, (800) 616-4414 or (816) 435-1089. In the event a shareholder should
desire information relating to general operations of the Fund, he or she should
write to Investors Research Fund, Inc., 3916 State Street, Suite 3C, Santa
Barbara, CA 93105, or (800) IRFUND1 or (805) 569-3253.
- 30 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
with Dividends and Capital Gains Distributions Reinvested in
Additional Shares and Calculated on the Basis of the Current Sales Commission
The table below covers a period from March 3, 1959 to Sept. 30, 1995 the life of
the Fund. While this period, on the whole, was one of generally rising common
stock prices, it also included some interim periods of substantial market
decline. The results shown should not be considered as a representation of the
dividend income or capital gains or loss which may be realized from an
investment made in the Fund today.
<TABLE>
<CAPTION>
Cost Net Asset Value of Shares Accumulated
Total Cost
Year Annual Cumulative Including Initially Capital Subtotal Investment Total
Ended Dividends Dividends Invested Gains Of Value
12/31 Invested Invested Dividends Distribution Dividends
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1959-65 $ 810 $ 810 $ 10,810 $ 13,873 $ 5,125 $ 18,998 $ 1,058 $ 20,056
1966-70 $ 1,424 $ 2,234 $ 12,234 $ 11,628 $ 12,344 $ 23,972 $ 2,196 $ 26,168
1971-75 $ 2,699 $ 4,933 $ 14,933 $ 12,268 $ 18,436 $ 30,704 $ 5,225 $ 35,929
1976-80 $ 4,670 $ 9,603 $ 19,603 $ 23,614 $ 59,198 $ 82,812 $ 17,036 $ 99,848
1981 $ 1,624 $ 11,227 $ 21,227 $ 13,254 $ 58,111 $ 71,365 $ 11,196 $ 82,561
1982 $ 5,265 $ 16,492 $ 26,492 $ 18,671 $ 81,860 $100,531 $ 21,334 $121,865
1983 $ 0 $ 16,492 $ 26,492 $ 20,092 $111,063 $131,155 $ 22,958 $154,113
1984 $ 6,188 $ 22,680 $ 32,680 $ 17,633 $106,658 $124,291 $ 26,496 $150,787
1985 $ 3,614 $ 26,294 $ 36,294 $ 19,324 $127,301 $146,625 $ 32,621 $179,246
1986 $ 1,069 $ 27,363 $ 37,363 $ 19,862 $174,676 $194,538 $ 34,561 $229,098
1987 $ 2,659 $ 30,022 $ 40,022 $ 18,978 $198,019 $216,997 $ 35,901 $252,898
1988 $ 8,601 $ 38,623 $ 48,623 $ 18,094 $188,799 $206,893 $ 42,949 $249,842
1989 $ 4,827 $ 43,450 $ 53,450 $ 21,667 $226,078 $247,745 $ 56,189 $303,934
1990 $ 13,634 $ 57,084 $ 67,084 $ 18,018 $220,011 $238,029 $ 60,453 $298,482
1991 $ 4,137 $ 61,221 $ 71,221 $ 25,125 $310,784 $335,909 $ 88,768 $424,677
1992 $ 4,805 $ 66,026 $ 76,026 $ 18,479 $294,064 $312,543 $ 70,066 $382,609
1993 $ 4,375 $ 70,401 $ 80,401 $ 17,902 $317,716 $335,618 $ 72,295 $407,913
1994 $ 41,929 $112,330 $122,330 $ 14,368 $279,267 $293,635 $100,154 $393,789
9-30-95 $ 3,896 $116,226 $126,226 $ 15,751 $306,148 $321,899 $113,675 $435,574
<FN>
The total cost figure represents the initial cost of $10,000 plus the cumulative
amount of income dividends reinvested, but a sales commission of 5.75% is
included only on the initial $10,000 investment as all shareholders enjoy the
privilege of reinvesting dividends and distributions without sales charge. The
dollar amounts of capital gains distributions accepted in shares were: 1959 nil;
1960 $208; 1961 nil; 1962 $85; 1963 nil; 1964 $1,126; 1965 $2,358; 1966 $697;
1967 $2,566; 1968 $2,291; 1969 $4,582; 1970 nil; 1971 nil; 1972 $6,359; 1973
nil; 1974 nil; 1975 nil; 1976 nil; 1977 nil; 1978 $4,417; 1979 $7,020; 1980
$4,699; 1981 $25,175; 1982 nil; 1983 $23,281; 1984 $9,113; 1985 $10,687; 1986
$46,198; 1987 $29,252; 1988 nil; 1989 nil; 1990 $32,354; 1991 $3,756; 1992
$65,668; 1993 $32,447; 1994 $24,095. Total $338,434.
No adjustment has been made for any income taxes payable by shareholders on
capital gains distributions and dividends reinvested in shares.
In this illustration the dollars invested over the life of the Fund yielded a
total return of +4,256%, or an average annual compound total return of +10.89%
per year.
</FN>
</TABLE>
- 31 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SUMMARY OF REGULAR INVESTING OVER THE PAST 36 1/2 YEARS $100 PER MONTH
(The Life of the Fund)
[GRAPHIC OMITTED]
Illustration of An Assumed Continuous Investment Program in terms of investments
of $100 per month with Dividends and Capital Gains Distributions accepted in
shares. Covers the period from March 3, 1959 to Sept. 30, 1995 - the life of the
Fund. While this period, on the whole, was one of generally rising common stock
prices, it also included some interim periods of substantial market decline.
The results shown should not be considered as a representation of the dividend
income or profit or loss which may be realized from an investment made in the
Fund today. Such systematic investment plans cannot assure a profit or protect
against depreciation in declining markets. No adjustment has been made for any
income taxes payable by shareholders on capital gains income distributions
accepted in shares.
Investors Research Fund, Inc.
Summary of Regular Investing Over the Past 36 1/2 Years (The Life of the Fund)
Monthly Investments of $100
Total Investment since March 3, 1959............................... $ 43,900
Income Dividends for Period Invested............................. 145,834
Total Investment Cost Including Invested Dividends............... $ 189,734
Value of Investment on September 30, 1995*......................... $ 562,086
* Includes value of shares accepted as capital gains distributions. The total
dollar amounts of the distributions (at the time shares were acquired) were
$414,039.
<TABLE>
<CAPTION>
COST CUMULATIVE NET ASSET VALUE OF SHARES
Total Cost As From
Year Cumulative Annual Cumulative Including Through Capital Sub Investment Total
Ended Monthly Dividends Dividends Invested Monthly + Gain = Total + of = Value
12/31 Investments Invested Invested Dividends Investments Distributions Dividends
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1959-65 $ 8,200 $ 363 $ 363 $ 8,563 $ 10,181 $ 2,968 $ 13,149 $ 466 $ 13,615
1966-70 $ 14,200 $ 1,204 $ 1,567 $ 15,767 $ 13,222 $ 9,171 $ 22,393 $ 1,503 $ 23,896
1971-75 $ 20,200 $ 2,805 $ 4,372 $ 24,572 $ 19,365 $ 14,978 $ 34,343 $ 4,615 $ 38,958
1976-80 $ 26,200 $ 5,486 $ 9,858 $ 36,058 $ 46,346 $ 56,913 $103,259 $ 17,049 $120,308
1981 $ 27,400 $ 1,978 $ 11,836 $ 39,236 $ 26,746 $ 62,252 $ 88,998 $ 11,559 $100,557
1982 $ 28,600 $ 6,482 $ 18,318 $ 46,918 $ 39,217 $ 87,694 $126,911 $ 23,131 $150,042
1983 $ 29,800 $ 0 $ 18,318 $ 48,118 $ 43,213 $122,829 $166,042 $ 24,892 $190,934
1984 $ 31,000 $ 7,716 $ 26,034 $ 57,034 $ 38,998 $119,251 $158,249 $ 29,760 $188,009
1985 $ 32,200 $ 4,531 $ 30,565 $ 62,765 $ 43,886 $143,746 $187,632 $ 37,108 $224,740
1986 $ 33,400 $ 1,346 $ 31,911 $ 65,311 $ 46,060 $202,929 $248,989 $ 39,440 $288,429
1987 $ 34,600 $ 3,359 $ 35,270 $ 69,870 $ 44,948 $233,206 $278,154 $ 41,321 $319,475
1988 $ 35,800 $ 10,905 $ 46,175 $ 81,975 $ 43,982 $222,348 $266,330 $ 50,452 $316,782
1989 $ 37,000 $ 6,140 $ 52,315 $ 89,315 $ 53,892 $266,251 $320,143 $ 66,470 $386,613
1990 $ 38,200 $ 17,396 $ 69,711 $107,911 $ 45,803 $262,250 $308,053 $ 72,789 $380,842
1991 $ 39,400 $ 5,292 $ 75,003 $114,403 $ 65,294 $370,799 $436,093 $107,219 $543,312
1992 $ 40,600 $ 6,162 $ 81,165 $121,765 $ 48,984 $356,700 $405,684 $ 84,986 $490,670
1993 $ 41,800 $ 5,624 $ 86,789 $128,589 $ 48,563 $387,766 $436,329 $ 88,009 $524,338
1994 $ 43,000 $ 54,019 $140,808 $183,808 $ 39,934 $342,488 $382,422 $124,914 $507,336
9/30/95 $ 43,900 $ 5,026 $145,834 $189,734 $ 44,687 $375,455 $420,142 $141,944 $562,086
<FN>
* The total cost figure represents the cumulative total of monthly investments
of $100 plus the cumulative amount of income dividends invested, but includes a
sales charge of 5.75% (subject to discount under right of accumulation) only on
shares purchased through monthly investments. No adjustment has been made for
any income taxes payable by shareholders. The dollar amounts of capital gain
distributions accepted in shares were: 1959 nil; 1960 $43; 1961 nil; 1962 $27;
1963 nil; 1964 $642; 1965 $1,461; 1966 $486; 1967 $1,915; 1968 $1,805; 1969
$3,770; 1970 nil; 1971 nil; 1972 $6,122; 1973 nil; 1974 nil; 1975 nil; 1976 nil;
1977 nil; 1978 $5,053; 1979 $8,196; 1980 $5,564; 1981 $30,132; 1982 nil; 1983
$28,344; 1984 $11,166; 1985 $13,168; 1986 $57,156; 1987 $36,313; 1988 nil; 1989
nil; 1990 $40,568; 1991 $4,722; 1992 $84,441; 1993 $41,819;1994 $31,126. Total
$414,039.
</FN>
</TABLE>
- 32 -
<PAGE>
Comparison of the Investors Research Fund to Standard & Poor's 500 Stock Index
[GRAPHIC OMITTED]
The average annual compound rate of Total Return for the 1, 5, and 10 year
periods ended September 30, 1995 was 1.5%, +7.5%, and +9.7% respectively.
Total Return quotations reflect the deduction of the maximum initial sales
charge, deduction of proportional shares of Fund expenses, and assume that all
dividends and distributions are reinvested when paid.
Past performance is not predictive of future performance.
- 33 -
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors
Investors Research Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Investors Research Fund, Inc., including the securities in the Fund, as of
September 30, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the selected per share data and ratios for each of the
three years in the period then ended. These financial statements and per share
data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
selected per share data and ratios based on our audits. The selected per share
data and ratios for each of the two years ended September 30, 1992, and 1991,
were audited by other auditors whose report dated October 13, 1992, expressed an
unqualified opinion on the per share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Investors Research Fund, Inc. as of September 30, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the selected per share data
and ratios for each of the three years in the period then ended, in conformity
with generally accepted accounting principles.
TIMPSON GARCIA
Oakland, California
October 17, 1995
- 34 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
A S S E T S
Investments in securities, at market
(cost $30,745,627) (Note 1) $ 32,034,958
Cash 186,331
Receivables
Investment securities sold $ 431,011
Interest from U.S. Treasury Bills 3,657
Dividends from common stocks 38,171 472,839
------------
Other assets 33,096
------------
$ 32,727,224
L I A B I L I T I E S
Investment securities purchased $ 614,720
Capital stock redeemed 4,600
Investment advisory fees (Note 2) 39,462
Other expenses 55,312 714,094
------------ ------------
Net assets at September 30, 1995 $ 32,013,130
============
Net assets value per share on 7,806,337
shares outstanding (Note 3) $4.101
======
Maximum offering price per share
(100/94.25 of $4.101) $4.351
======
See Notes to Financial Statements.
- 35 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SECURITIES IN THE FUND
September 30, 1995
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
AEROSPACE/DEFENSE (1.68%)
5,500 General Dynamics $ 301,813
5,000 Rockwell International 236,250
AIR TRANSPORT (.99%)
13,000 Airborne Freight 318,500
AUTOMOTIVE/TRUCKING (2.05%)
14,000 General Motors 656,250
BANKS/THRIFTS (9.06%)
15,000 Ahmanson (HF) & Co. 380,625
25,000 Banc One Corp 912,500
5,000 Bankers Trust NY 351,250
14,000 Great Western Financial 332,500
12,000 Mellon Bank Corp 537,000
5,000 Morgan (J.P.) 386,875
BEVERAGES (3.87%)
5,000 Anheuser-Busch Cos 311,875
6,800 Coca-Cola Enterprises 469,200
9,000 PepsiCo, Inc. 459,000
BUILDING MATERIALS (1.05%)
6,000 Fluor Corp 336,000
CHEMICAL (3.31%)
8,000 Dow Chemical 596,000
15,000 Morton International 465,000
COMPUTER/PERIPHERAL (1.47%)
10,000 Cray Research * 221,250
3,000 Hewlett-Packard 250,125
COMPUTER SOFTWARE (1.00%)
16,000 Cheyenne Software * 320,000
DRUGS (4.94%)
30,000 ALZA Corp * 690,000
20,000 Upjohn Co. 892,500
ELECTRICAL EQUIPMENT (3.45%)
10,000 Honeywell, Inc 428,750
45,000 Westinghouse Electric 675,000
ELECTRICAL UTILITIES (5.53%)
20,000 Detroit Edison 645,000
12,500 New England El System 462,500
10,000 Pacific Gas & Electric 300,000
15,000 Potomac Electric Power 363,750
FOOD PROCESSING (2.98%)
10,000 ConAgra Inc 396,250
10,000 General Mills 557,500
FOOD WHOLESALE (1.84%)
20,000 Supervalu Inc 587,500
INSURANCE (2.67%)
13,500 American General 504,563
18,000 USF&G Corp 348,750
MACHINERY (1.51%)
3,500 Caterpillar, Inc 199,062
8,000 Foster Wheeler 283,000
MEDICAL SERVICES (1.82%)
12,000 Columbia/HCA Hlthcare 583,500
- 36 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
MEDICAL SUPPLIES (4.03%)
8,000 Abbott Laboratories $ 341,000
5,000 Bausch & Lomb 206,875
10,000 Johnson & Johnson 741,250
METALS (1.32%)
10,000 Homestake Mining 170,000
4,000 Phelps Dodge 251,000
NATURAL GAS (2.01%)
8,000 Consolidated Natl. Gas 323,000
10,000 Questar Corp 320,000
OILFIELD SERVICES (5.41%)
40,000 Baker Hughes, Inc 815,000
22,000 Halliburton Co 918,500
PAPER (1.57%)
11,000 Weyerhaeuser Co 501,875
PETROLEUM (3.88%)
6,000 Atlantic Richfield 644,250
6,000 Mobil Corp 597,750
PRECISION INSTRUMENTS (1.11%)
10,000 Perkin-Elmer 356,250
RAILROAD (2.10%)
8,000 CSX Corp 673,000
RECREATION (2.76%)
5,000 Disney (Walt) Co 286,875
15,000 Time Warner 596,250
RESTAURANT (.96%)
8,000 McDonald's Corp 306,000
RETAIL SPECIALTY (2.53%)
30,000 Toys R Us * 810,000
RETAIL STORES (5.07%)
15,000 Dillard Dept. Stores 'A' 478,125
12,000 May Dept. Stores 525,000
25,000 Wal-Mart Stores 618,750
SECURITIES BROKERAGE (2.08%)
25,000 Edwards (AG) Inc 665,625
SEMICONDUCTORS (2.46%)
7,600 Motorola, Inc 580,450
7,500 National Semiconductor * 207,187
TELECOMMUNICATIONS (8.52%)
7,500 AT & T Corp 493,125
8,000 Bell Atlantic Corp 491,000
25,000 Comsat Corp 565,625
10,000 NYNEX Corp 477,500
20,000 Sprint Corp 700,000
TOBACCO (1.45%)
11,000 American Brands 464,750
UNCLASSIFIED (1.28%)
6,000 Textron, Inc 409,500
- 37 -
<PAGE>
Total common stock (97.76%)
(cost $30,005,819) $ 31,295,150
$750,000 U.S. TREASURY BILLS (2.31%)
Due November 30, 1995 (amortized cost) 739,808
Total (100.07%) $ 32,034,958
Subtract: excess of payables over cash,
receivables and other assets (.07%) 21,828
Net assets (100%) $ 32,013,130
* Non-income producing
See Notes to Financial Statements.
- 38 -
<PAGE>
INVESTORS RESEARCH, FUND, INC.
STATEMENT OF OPERATIONS
Year Ended September 30, 1995
Investment income:
Dividends $ 932,082
Interest 138,111
Other (Note 4) 1,234
-----------
Total investment income $ 1,071,427
Expenses:
Investment advisory fee (Note 2) $ 171,087
Legal, accounting and auditing 92,159
Transfer agent fee 54,606
12b-1 distribution fee 56,614
Custodian fee $ 30,155
Less credits earned (Note 5) 1,436 28,719
Salaries - officer ---------- 18,000
Salaries - other 29,850
Insurance 27,958
Taxes 8,896
Notices to investors 18,199
Directors' fees 10,250
Registration fees 21,330
Miscellaneous 1,689
Line of credit commitment fee (Note 10) 9,227
------------
Total expenses 548,584
------------
Net investment income $ 522,843
Realized and unrealized gain (loss) on investments:
Net realized (loss) $ (136,509)
Net increase in unrealized appreciation of
investments during the year (Note 6) 2,123,911
------------
Net gain on investments 1,987,402
------------
Net increase in net assets resulting from operations $ 2,510,245
============
See Notes to Financial Statements.
- 39 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended September 30, 1995 and 1994
1995 1994
---- ----
(DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 522,843 $ 560,034
Net realized gain (loss) on investments (136,509) 5,908,942
Net change in unrealized appreciation
of investments 2,123,911 7,323,020)
------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 2,510,245 $ (854,044)
------------ ------------
Distributions paid to shareholders:
From net investment income $ (3,952,096) $ (481,749)
From net realized gain on investments (2,099,817) (3,525,191)
------------ ------------
Total distributions to shareholders $ (6,051,913) $ (4,006,940)
------------ ------------
Fund share transactions:
Proceeds from sale of Fund shares $ 922,757 $ 1,824,414
Proceeds from reinvestment of distributions
from net investment income and net realized
gain on investments 5,418,536 3,470,942
Cost of shares redeemed from shareholders (7,256,192) (12,393,396)
------------ ------------
Net (decrease) in net assets due to
Fund shares transactions $ (914,899) $ (7,098,040)
------------ ------------
Total (decrease) in net assets $ (4,456,567) $(11,959,024)
NET ASSETS:
Beginning of year 36,469,697 48,428,721
------------ ------------
End of year $ 32,013,130 $ 36,469,697
============ ============
NET ASSETS CONSIST OF:
Fund shares at par $ 7,806,337 $ 7,893,510
Paid in capital 22,532,049 23,276,071
Undistributed net investment income 522,843 423,703
Undistributed net realized gain (loss)
on sale of investment securities (137,430) 5,710,991
Unrealized appreciation (depreciation)
of investment securities 1,289,331 (834,578)
------------ ------------
$ 32,013,130 $ 36,469,697
============ ============
See Notes to Financial Statements.
- 40 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
General:
Investors Research Fund is registered under the Investment Act of 1940, as
amended, as a diversified, open-end management investment company. The
Fund is incorporated in the State of Delaware.
Security valuations:
A security listed or traded on an exchange is valued at its last sales
price on the exchange where the security is principally traded. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date. Short-term obligations (U.S.
Treasury Bills) are valued at amortized cost which approximates market
value.
Income taxes:
The Fund intends to comply with the requirements of the Internal Revenue
Code necessary to qualify as a regulated investment company and, as such,
will not be subject to federal income taxes on otherwise taxable income
(including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded
in the financial statements.
Security transactions and investment income:
Security transactions are accounted for on the trade date basis. Realized
gains or losses on sales are computed on the basis of specific
identification of the securities sold. Interest income is recorded as
earned from settlement date and is recorded on the accrual basis. Dividend
income is recorded on the ex- dividend date.
Distributions to shareholders:
Dividends to shareholders are recorded on the ex-divided date.
Undistributed net investment income and net realized gains from security
transactions are distributed to shareholders in the succeeding fiscal
year.
Concentration of credit risk:
All of the cash of the Fund are held in one institution and at times
reflect a total balance greater than the FDIC's $100,000 maximum insurable
at one institution.
Note 2. Affiliated Party Transactions - Investment Advisory Fee
The Fund has entered into an investment advisory agreement with Lakeview
Securities Corporation (Adviser). Under the terms of the investment
advisory agreement, the Fund pays an advisory fee to the Adviser at the
annual rate of one-half of one percent (0.5%) of the Fund's average daily
net assets, payable quarterly. This agreement requires the Adviser to
reduce its fees or, if necessary, make payments to the Fund to the extent
required to satisfy any expense limitations imposed by the securities laws
or regulations thereunder of any state in which the Fund's shares are
qualified for sale. There were no excess expenses absorbed by the Adviser
during the year.
Messrs. Robert P. Moseson and Richard W. Arms, Jr., directors of the Fund,
are President and a Director of Lakeview Securities Corporation and
President of the Arms Companies Division of Lakeview Securities
Corporation, respectively.
The Fund does not directly compensate directors affiliated with the
Adviser.
- 41 -
<PAGE>
Note 3. Capital Stock (Fund Shares)
At September 30, 1995, there were 20,000,000 shares of $1.00 par value
capital stock authorized. Transactions in Fund shares for the years ended
September 30, 1995 and 1994 were as follows:
1995 1994
---- ----
Shares sold 229,192 392,236
Shares issued to shareholders in reinvestment
of net investment income and net realized gains 1,448,735 751,449
Shares redeemed (1,765,100) (2,606,563)
---------- ----------
Net (decrease) ( 87,173) (1,462,878)
Balance:
Beginning of year 7,893,510 9,356,388
--------- ----------
End of year 7,806,337 7,893,510
========== ==========
Note 4. Other Income
Other income represents income from a settlement of a class action lawsuit
against a company whose security was previously held by the Fund.
Note 5. Custodian Fees
The Fund changed custodians to UMB Bank, N.A. (UMB), effective August 18,
1995. Under the fee schedule with UMB the Fund earns credits, based on
custody cash balances, to be applied to custodian fees. Any earnings
credits that are not applied in full to the UMB charges expires at the end
of each calendar year.
Total custodian fees from August 18, 1995 $ 1,436
=======
Credits applied $ 1,436
=======
Note 6. Appreciation (Depreciation) of Investments
At September 30, 1995, the net unrealized appreciation for stocks was as
follows:
Aggregate gross unrealized appreciation
for all investments in which there is an
excess of value over tax cost $1,568,431
Aggregate gross unrealized (depreciation)
for all investments in which there is an
excess of tax cost over value ( 279,100)
----------
Net unrealized appreciation - stocks $1,289,331
=========
The cost basis used above is the same as that used for financial statement
purposes.
Note 7. Underwriting Agreement
The Fund has entered into a distribution agreement with Diversified
Securities, Inc. (DSI), wherein DSI serves as the principal underwriter of
the Fund. A sales charge of 1.0% to 5.75% based on the amounts purchased
is withheld by the transfer agent. No sales charge is assessed on
purchases of $1,000,000 or more and on purchases by employees and
directors of the Fund, investment adviser, and underwriter. The transfer
agent disburses the sales charges withheld in the following manner: (1) to
the sales broker and (2) to DSI as the Fund's underwriter. Sales charges
withheld by the transfer agent amounted to $19,603. Of the total amount
withheld $5,222 and $4,632 were paid to DSI for underwriting fees and
brokerage fees, respectively. The sales charges are not an expense of the
Fund and hence are not reflected in the accompanying statement of
operations.
- 42 -
<PAGE>
Note 8. Distribution of Income
Net investment income and realized gains from investment transactions
distributed during the year to the investors' accounts for each unit
outstanding throughout the year were:
Net investment income $0.516
=====
Net realized gain on investments $0.276
=====
The distributions were paid on December 31, 1994 and August 10, 1995 to
shareholders of record on December 28, 1994 and July 5, 1995,
respectively. These distributions represent net investment income and net
realized gains for the year ended December 31, 1994.
Note 9. Purchases and Sales of Securities
Purchases and sales of securities (other than United States Government
Obligations) from unaffiliated issuers aggregated $79,463,610 and
$77,031,856, respectively. Purchases and sales, including redemptions, of
U.S. Treasury Bills totaled $32,540,801 and $43,882,228, respectively.
Note 10.Line of Credit
The Fund had an unsecured $10,000,000 line of credit with Bank of America.
This line of credit was discontinued by the Fund on September 18, 1995.
The line of credit was not used during the period October 1, 1994 through
September 18, 1995.
- 43 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year Ended September 30,
<S> <C> <C> <C> <C> <C>
Per Share Data 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(for one share outstanding throughout each year) (1) (2) (2)
Net asset value, beginning of year $ 4.62 $ 5.18 $ 5.74 $ 5.65 $ 5.31
------- ------- ------- ------ ------
Income from investment operations:
Net investment income $ 0.07 $ 0.06 $ 0.05 $ 0.05 $ 0.11
Net realized and unrealized gains
(losses) on securities 0.25 (0.15) 0.43 0.17 1.10
------- ------- ------- ------ ------
Total from investment
operations $ 0.32 $ (0.09) $ 0.48 $ 0.22 $ 1.21
------- ------- ------- ------ ------
Less distribution to shareholders:
Dividends from net investment income $ (0.50) $ (0.05) $ (0.07) $ (0.07) $ (0.23)
Distributions from capital gains (0.34) (0.42) (0.97) (0.06) (0.64)
------- ------- ------- ------ ------
Total distributions $ (0.84) $ (0.47) $ (1.04) $ (0.13) $ (0.87)
------- ------- ------- ------ ------
Net asset value, end of year $ 4.10 $ 4.62 $ 5.18 $ 5.74 $ 5.65
======= ======= ======= ====== ======
Total return (3) 7.7% (1.8)% 9.6% 3.5% 26.2%
======= ======= ======= ====== ======
Ratios and Supplemental Data
Net assets, end of year (in millions) $ 32 $ 36 $ 48 $ 61 $ 65
Ratios to average net assets:
Expenses 1.60% 1.47% 1.05% 0.91% 0.90%
Net investment income 1.52% 1.39% 1.12% 0.99% 2.00%
Portfolio turnover rate (4) 248.44% 234.77% 109.92% 67.31% 46.86%
<FN>
(1) Fund changed investment adviser on January 1, 1994.
(2) The information for the years, 1991 and 1992, reclassified for comparative
purposes with the addition of "total return" and "net assets, end of year"
was audited by other auditors whose reports expressed unqualified opinions
on both years.
(3) Sales loads are not reflected in total return.
(4) Portfolio turnover rates for the years 1991 through 1993 have been restated
to exclude U.S. Treasury Bills.
</FN>
</TABLE>
- 44 -
<PAGE>
Distributor / Underwriter
DIVERSIFIED SECURITIES, INC. PROSPECTUS 1996
P.O. Box 357 (3701 Long Beach Blvd.) Application & Statement of Additional
Long Beach, CA 90801 - 90807 Information
Shareholder/Dealer Services
(800) 732-1733 or (310) 595-7711
INVESTORS RESEARCH FUND, INC.
3916 State Street, Suite 3C
Santa Barbara, California 93105
(800) IRFUND1
(805) 569-3253
INVESTMENT ADVISER
LAKEVIEW SECURITIES CORP. January 30, 1996
333 W. Wacker Drive, Suite 1010
Chicago, Illinois 60606
CUSTODIAN
United Missouri Bank
928 Grand Avenue
Kansas City, MO 64141
AUDITORS
TIMPSON GARCIA
Certified Public Accountants
21610 Harrison Street
Oakland, California 94612
COUNSEL
HUGH J. HAFERKAMP, ESQ. INVESTORS
222 E. Carrillo, Suite 207 RESEARCH
Santa Barbara, California 93101 FUND
INCORPORATED
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419958
Kansas City, Missouri 64141
(800) 616-4414
(816) 435-1089
Please Read and Retain This Prospectus
For Future Reference
- 45 -
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
OTHER INFORMATION
- 46 -
<PAGE>
PART C
Item 24 Financial Statements and Exhibits (See Appendix)
A. Index to Financial Statements
(1) Statements and Schedules Included in Prospectus and
Statement of Additional Information - Parts A and B
1. Statement of Assets and Liabilities as of
September 30, 1995 (page 35).
2. Statement of Operations - including Realized and
Unrealized Capital Gains or (Losses)on Investments
for the Fiscal Year Ended September 30, 1995 (page 39).
3. Statement of Changes in Net Assets for the Two Fiscal
Years Ended September 30, 1994 and 1995 (page 40).
4. Notes to Financial Statements (pages 41 - 43).
5. Securities in the Fund - Schedule of Investments
in Securities of Unaffiliated Issuers (page 36).
6. Selected Per Share Data and Ratios (page 44).
(2) Statements Included in the Registration Statement -
Part C - but Omitted From the Prospectus
1. Statement of Operations for the Fiscal Years
Ended September 30, 1994 and 1995 (page 53).
2. Realized and Unrealized Gains on Investments (page 53).
B. Exhibits:
(1) The charter presently in effect is the same as that originally filed
except that Article IV has been amended to authorize up to 20,000,000
shares and a new Article XVI has been added to modify director's
liability pursuant to Section 102(b)(7) of the Delaware General
Corporation Law. The charter and the referenced amendments are being
filed concurrently as EX-99.B1 (page 57).
(2) The bylaws presently in effect are the same as those originally filed
except that Article III, Section 1 was amended in February, 1988 to
authorize the Board of Directors to fix the location of the annual
meeting and Article III, Section 2 was amended concurrently to change
the date of the annual meeting to the last Tuesday in March. See also
Item 27 below re an Amendment to Article IV of the bylaws. The bylaws
and the referenced amendments are being filed concurrently as EX-99.B2
(page 65).
(3) Not applicable.
(4) The forms of securities presently used are the same as those
previously filed.
(5) A new investment advisory contract has been made with Lakeview
Securities Corporation. The investment advisory contract is being
filed concurrently as EX-99.B5 (page 75).
(6) The underwriting contract between the Fund and Diversified Securities,
Inc. is the same as that previously filed. The Fund is not a party to
any other underwriting agreements. That underwriting contract is being
filed concurrently as EX-99.B6 (page 80).
(7) Not applicable.
(8) The Fund's custodial agreement is now with the United Missouri Bank,
Kansas City, Missouri. A copy of the new custodial agreement is being
filed concurrently as EX-99.B8 (page 87).
(9) Not applicable.
(10) Counsel's opinion and consent filed herewith as EX-99.B10 (page 103).
(11) Not applicable.
- 47 -
<PAGE>
(12) For the Statement of Operations for the last two fiscal years, see
page 53.
(13) Not applicable.
(14) The model plans currently in use are plans which have been restated,
and amended in connection therewith, to comply with the various legal
requirements imposed by federal legislation in the past several years.
Current copies of the Fund's Master Self-Employed Retirement Plan, its
Section 403(b) Plan, and its Retirement Plan Custodial Services
Agreement are set forth in EX-99.B14 (page 104). Custodial fees are
now $12 per annum per account.
(15) The Fund adopted a plan pursuant to rule 12b-1 during 1993. Copies of
the effective documents are set forth in EX-99.B15 (page 150).
(16) See Part C Appendix at page 52.
(17) Submitted herewith as EX-27 (page 56).
(18) Not Applicable.
Item 25 Persons Controlled By or Under Common Control With Registrant
A. Persons controlled by Investors Research Fund, Inc.: None
B. Persons under common control with the Fund: None
Item 26 Number of Holders of Securities
On September 30, 1995, the Fund had 2,369 holders of its securities.
Item 27 Indemnification
A. The Fund was incorporated under the laws of the State of Delaware.
Therefore, Section 145 of the Delaware Corporation law would be
applicable with respect to indemnification of the officers, directors,
employees and agents of the Fund.
B. On July 13, 1982, the Fund amended its bylaws to provide for
indemnification of certain officers, directors and other parties with
respect to certain types of liabilities, claims and expenses. The
amendment to Article IV is set forth as part of EX-99.B2 (page __)
This bylaw will be implemented in accordance with the requirements of
the Securities and Exchange Commission release Number IC-11330,
September 2, 1980.
C. The Fund has purchased a policy of directors and officers liability
insurance in accordance with the authorization set forth in
subparagraph (e) of Article IV, Section 16 of the bylaws.
Item 28 Business and Other Connections of Investment Adviser
A. Lakeview Securities Corporation has been engaged in essentially the
same activities during the last two fiscal years. In addition to
serving as a registered investment adviser, Lakeview Securities acts
as a licensed broker-dealer. In that capacity, it acts primarily as an
introducing broker for clients of its affiliated corporation,
Performance Analytics, Inc., as well as other companies.
Robert P. Moseson and Leslie I. Golembo, President and Chief Executive
Officer, respectively, and the two directors, of Lakeview Securities,
also hold the same positions in Performance Analytics, Inc., which is
an investment consulting firm which specializes in providing
investment advice, investment manager evaluation services, and
management consulting services to a broad range of institutional
investors. The principal business address of Performance Analytics,
Inc. is: 333 West Wacker Drive, Suite 1010 Chicago, Illinois 60610.
Item 29 Principal Underwriters
A. The Fund's principal underwriter, Diversified Securities, Inc., does
not act as principal underwriter, depositor or investment adviser to
any other investment company.
- 48 -
<PAGE>
Positions
and
B. Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
Robert J. Conway President None
3701 Long Beach Blvd.
Long Beach, CA 90801
Joseph W. Conway Executive None
3701 Long Beach Blvd. Vice President
Long Beach, CA 90801
Joseph W. Stok Vice President and None
3701 Long Beach Blvd. Secretary
Long Beach, CA 90801
C. During 1995, Diversified Securities, Inc. received $5,222 in net
underwriting commissions in connection with the sale of the Fund's
shares and $80,465 in brokerage commissions in connection with the
Fund's portfolio transactions.
Item 30 Location of Accounts and Records
Records required by 17 C.F.R. Chap. 230.31a-1(b)
A. Current Operating Accounts and Records of the Fund.
(1) At Investors Research Fund Headquarters, 3916 State Street, Suite
C, Santa Barbara, CA 93105
(a) Records required by subparagraphs (4), (5),(6),(9),(10) and
(11)
(2) At Bartlett, Pringle & Wolf, Certified Public Accountants, 1123
Chapala Street, Santa Barbara, CA 93101
(a) Records required by subparagraphs (1) and (2) except those
maintained by the Bank of America and DST Systems, Inc. (see
infra)
(3) (A) From September 18, 1995 through the present: At United
Missouri Bank, 928 Grand Avenue, Kansas City, MO 64141.
(a) Records required by subparagraph (1) relating to
receipts and deliveries of portfolio securities.
(b) Records required by subparagraph (2) relating to
portfolio securities in transfer and in physical
possession.
(c) Records required by subparagraph (2) relating to each
broker-dealer, bank or other person effecting portfolio
transactions.
(B) From October 1, 1994 to September 18, 1995: At Bank of
America, 299 Euclid Avenue, 5th Floor, Pasadena, CA 91101.
(a) Records required by subparagraph (1) relating to
receipts and deliveries of portfolio securities.
(b) Records required by subparagraph (2) relating to
portfolio securities in transfer and in physical
possession.
(c) Records required by subparagraph (2) relating to each
broker-dealer, bank or other person effecting portfolio
transactions.
(4) At DST Systems, Inc., 1004 Baltimore Avenue, Kansas City, MO
64105
(a) Records required by subparagraph (1) relating to
receipts and deliveries of Fund shares.
(b) Records required by subparagraph (2) relating to Fund
shares in transfer and in physical possession.
(c) Records required by subparagraph (2) relating to
accounts for each shareholder of the Fund.
- 49 -
<PAGE>
B. Records of the Fund retained on a Temporary basis.
(1) All records are retained at their current records location for
two years.
C. Records of the Fund retained on a Permanent basis.
(1) At Investors Research Fund Headquarters, 3916 State Street, Suite
3C, Santa Barbara, CA 93105
(a) All records requiring permanent retention except those
listed below.
(2) At Data Retrieval Services, 7201 East 64th Court, Kansas City, MO
64133.
(a) All records which are maintained on a current basis by DST
Systems, Inc. are stored at this location permanently.
(3) At Bank of America, Records Storage Center-South, Orange 4049,
5200 East La Palma, Anaheim, CA 92807
(a) Records required by subparagraph (12) relating to receipts
and deliveries of portfolio securities.
(b) Records required by subparagraph (2) relating to portfolio
securities in transfer and in physical possession.
(c) Records required by subparagraph (2) relating to each
broker-dealer, bank or other person effecting portfolio
transactions.
Item 31 Management Services
A. The only pertinent management-related service contract not discussed
in Parts A or B issued by the Fund is that with the accounting firm of
Bartlett, Pringle & Wolf, 1123 Chapala Street, Santa Barbara,
California 93101. The Fund has a written agreement terminable upon
reasonable notice engaging that firm to provide operational accounting
services to the Fund. The Fund paid Bartlett, Pringle & Wolf $27,035
during 1995 and $34,507 during 1994. The Fund paid to its previous
accountants Guntermann, Thompson & Lanza, Accountants, Inc. $23,911
during 1993.
Item 32 Undertakings
Not applicable.
- 50 -
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
APPENDIX
FINANCIAL STATEMENTS AND EXHIBITS
INVESTORS RESEARCH FUND, INC.
- 51 -
<PAGE>
Average Annual Total Return
Current Year Ending
30-Sep-95
I (Investment) $1,000.00
L (Load) 5.75%
P (Gross investment including maximum sales load) $942.50
<TABLE>
<CAPTION>
Prior Year 5 Years Prior 10 Years Prior Life of the Fund
Ending Ending Ending
30-Sep-94 30-Sep-90 30-Sep-85 31-Mar-59
<S> <C> <C> <C> <C>
ERV (Ending redeemable value of investment (P) $1,015.13 $1,434.66 $2,524.57 $43,557.44
after "N" years, all dividends
and distributions reinvested)
N (Number of years) 1 5 10 36.5
T (Average annual Total Return) 1.512 7.485 9.703 10.8934%
</TABLE>
- 52 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF OPERATIONS
Years Ended September 30, 1995 and 1994
1995 1994
---- ----
Investment income:
Dividends $ 932,082 $ 542,969
Interest 138,111 593,466
Other 1,234 18,473
---------- -----------
Total investment income $ 1,071,427 $ 1,154,908
--------- ---------
Expenses:
Investment advisory fee $ 171,087 $ 198,643
Legal, accounting and auditing 92,159 116,541
Transfer agent's fee 54,606 73,375
12b-1 distribution fees 56,614 48,520
Custodian's fee 30,155 36,601
Less: credits earned ( 1,436) -0-
Salaries officer 18,000 34,474
Salaries other 29,850
Insurance 27,958 27,188
Taxes 8,896 17,255
Notices to investors 18,199 16,645
Directors' fees 10,250 10,810
Registration fees 21,330 8,905
Miscellaneous 1,689 5,917
Line of credit commitment fee 9,227 -0-
----------- ----------
Total expenses $ 548,584 $ 594,874
---------- ----------
Net investment income $ 522,843 $ 560,034
---------- ----------
Realized and unrealized gain (loss) on investments:
Net realized gain $ ( 136,509) $ 5,908,942
Net increase in unrealized appreciation
(depreciation) of investments
during the year 2,123,911 (7,323,020)
--------- ----------
Net gain (loss) on investments $ 1,987,402 $ (1,414,078)
--------- ----------
Net increase (decrease) in net assets
assets resulting from operations $ 2,510,245 $ ( 854,044)
========= ===========
- 53 -
<PAGE>
REPORT AND CONSENT OF
INDEPENDENT AUDITORS
To the Board of Directors
and Shareholders of
Investors Research Fund, Inc.
With reference to the Registration Statement (Form N-1A) of Investors Research
Fund, Inc., filed under the Securities Act of 1933 as amended, we hereby consent
to the use of our report dated October 17, 1995, appearing in the prospectus
which is a part of such Registration Statement. We further consent to the use of
the opinion in the following paragraph.
The audit referred to in the aforementioned report include an audit of the
financial statements of Investors Research Fund, Inc., for the year ended
September 30, 1995, as listed in the accompanying index of this Registration
Statement. The statements of operations for the year ended September 30, 1994
were audited by us and we expressed on unqualified opinion on them in our report
dated October 27, 1994.
TIMPSON GARCIA
December 18, 1995
Oakland, California
- 54 -
<PAGE>
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Signature
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to rule 485(a) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 65 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Barbara and State of California on the 23 rd
day of January, 1996.
INVESTORS RESEARCH FUND, INC.
By: /S/
Dr. Francis S. Johnson
President
- 55 -
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> US Dollars $
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> $30,745,627
<INVESTMENTS-AT-VALUE> $32,034,958
<RECEIVABLES> $472,839
<ASSETS-OTHER> $219,427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> $32,727,224
<PAYABLE-FOR-SECURITIES> $614,720
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> $99,374
<TOTAL-LIABILITIES> $714,094
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> $30,861,229
<SHARES-COMMON-STOCK> 7,806,337
<SHARES-COMMON-PRIOR> 7,893,510
<ACCUMULATED-NII-CURRENT> $522,843
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> $(136,509)
<OVERDISTRIBUTION-GAINS> $(921)
<ACCUM-APPREC-OR-DEPREC> $1,289,331
<NET-ASSETS> $32,013,130
<DIVIDEND-INCOME> $932,082
<INTEREST-INCOME> $138,111
<OTHER-INCOME> $1,234
<EXPENSES-NET> $548,584
<NET-INVESTMENT-INCOME> $522,843
<REALIZED-GAINS-CURRENT> $(136,509)
<APPREC-INCREASE-CURRENT> $2,123,911
<NET-CHANGE-FROM-OPS> $2,510,245
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> $3,952,096
<DISTRIBUTIONS-OF-GAINS> $2,099,817
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 229,192
<NUMBER-OF-SHARES-REDEEMED> 1,765,100
<SHARES-REINVESTED> 1,448,735
<NET-CHANGE-IN-ASSETS> $(4,456,567)
<ACCUMULATED-NII-PRIOR> $423,703
<ACCUMULATED-GAINS-PRIOR> $5,710,991
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> $171,087
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> $550,020
<AVERAGE-NET-ASSETS> $34,324,633
<PER-SHARE-NAV-BEGIN> 4.62
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.25
<PER-SHARE-DIVIDEND> 0.50
<PER-SHARE-DISTRIBUTIONS> 0.34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.10
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
CERTIFICATE OF INCORPORATION
OF
INVESTORS RESEARCH FUND, INC.
ARTICLE 1.
The name of the Corporation is Investors Research Fund, Inc., (hereinafter
called "the Corporation").
ARTICLE II.
The principal office of the Corporation in the State of Delaware is to be
located at No. 100 West Tenth Street, in the City of Wilmington, County of New
Castle. The name and address of its resident agent is the Corporation Trust
Company, No. 100 West Tenth Street, Wilmington, Delaware.
ARTICLE III.
The nature of the business of the Corporation and the objects or purposes
proposed to be transacted are as follows, to wit:
(a) To engage in the business of a mutual investment company,
including but without limitation, the holding, investing, reinvesting,
or otherwise placing the funds of the Corporation in stocks, shares,
purchase or subscription warrants, or other rights, bonds, debentures,
debenture stocks, notes, evidences of indebtedness or interest or
ownership, mortgages, guarantees, acceptances, or other commercial
paper, treasury stock, certificate of interest or participation in any
profit sharing agreement, collateral trust certificate,
pre-organization certificate or subscription, transferable share,
investment contract, voting trust certificate, certificate of deposit
for a security or in general any interest or instrument commonly known
as a security, or any certificate of interest or participation in any
temporary or interim certificate for, or receipt for, any of the
foregoing, and any securities, negotiable or non-negotiable, secured
or unsecured and however described, which are issued or created or
guaranteed by any person, firm, corporation, or association, public or
private, or by the United States government, its agencies or
instrumentalities, by any Territories, States, Counties, Cities,
Towns, Districts, or other political subdivisions, or by any foreign
countries (all of the foregoing being hereinafter called
"securities");
(b) To acquire, through purchase, exchange, or otherwise, hold,
dispose of, transfer, reissue, or cancel shares of the Corporation in
any manner and to the extent now or hereafter permitted by the laws of
Delaware and by this Certificate of Incorporation;
(c) To borrow money to the extent permitted by the By-Laws.
(d) To possess and exercise all rights, powers, and privileges
with reference to such business or incident to ownership, use and
enjoyment of such funds or any of such securities, including, but
without limitation, the right, power, and privilege, to own, vote,
hold, purchase, sell, negotiate, assign, exchange, transfer, mortgage,
pledge, foreclose, or otherwise deal with, dispose of, use, exercise,
or enjoy any rights, title, interest, powers, or privileges under or
with reference to any of such securities, and to invest or utilize the
proceeds, interest, dividends, or other returns therefrom in each
manner as is consistent with the purposes, business, or objects of the
Corporation;
(e) Insofar as the same may be convenient or necessary in
connection with or incidental to the accomplishment of any of the
purposes or the attainment of any of the objects hereinabove
enumerated, to purchase, or otherwise acquire, own, hold, operate,
exchange, assign, transfer, pledge, mortgage, or otherwise dispose of,
real and personal property of every class and description, wherever
located;
- 57 -
<PAGE>
(f) To have one or more offices to carry on all or any of its
operations, and, subject to the provisions of this Certificate of
Incorporation, to do any and all things necessary, suitable,
convenient, or proper for, or in connection with, or incidental to,
the accomplishment of any of the purposes or the attainment of any of
the objects herein enumerated, or designed directly or indirectly to
promote the interests of the Corporation, or to enhance or protect the
value of any of its assets, and to do any and all things and exercise
any and all powers which it may now or hereafter be lawful for the
Corporation to do or to exercise under the laws of the State of
Delaware that may now or hereafter be applicable to the Corporation;
and
(g) To conduct its business so far as permitted by law in all
states, territories, dependencies and colonies of the United States,
its insular possessions, and in the District of Columbia and in
foreign countries.
The objects and purposes specified in the foregoing clauses of this Article
III, except where otherwise expressed, shall be in no way limited or restricted
by reference to or inference from the terms of any other clause of this or any
other article of this Certificate of Incorporation and shall be regarded as
independent objects and purposes and shall be construed as powers as well as
objects and purposes. Except as aforesaid, the Corporation shall be authorized
to exercise and enjoy all powers, rights and privileges granted by Title 8 of
the Delaware Code of 1953, as amended, to corporations of this character, and
all the powers conferred upon such corporations by the laws of the State of
Delaware, so far as not in conflict therewith, or which may be conferred by all
acts heretofore or hereafter amendatory of said Act, or said laws, and the
enumeration of certain powers, as herein specified, is not intended as exclusive
of or as a waiver of any of the powers, rights or privileges granted or
conferred by said Act or the laws of said State now or hereafter in force.
The objects and purposes set forth in clause (a) of this Article III are
hereby declared to be the principal or predominant objects and purposes of the
Corporation, and nothing herein contained shall be construed as authorizing the
Corporation to exercise or enjoy any of its other rights, privileges, powers,
objects, or purposes except as incidental or ancillary to those enumerated in
said clause (a).
ARTICLE IV.
The total number of shares of stock which the Corporation shall have
authority to issue is Five Hundred Thousand (500,000). All shares shall be of
one class and of the par value of One Dollar ($1.00) per share.
The minimum amount of capital with which the Corporation shall commence
business is One Hundred Thousand Dollars ($100,000.00.
ARTICLE V.
The holders of the shares of capital stock of the Corporation shall be
entitled at any time upon written request and surrender of the certificates for
any or all such shares, to cause such shares to be redeemed by the Corporation
at the redemption price and upon the conditions hereinafter set forth; provided,
always, that under applicable law of the State of Delaware funds shall be
legally available to the Corporation for the purpose of effecting such
redemption. (As used in this Article V the terms "redeemed" and "redemption"
shall be deemed to mean "purchase", and the right of shareholders granted herein
to cause their shares to be redeemed shall be satisfied by the purchase of their
shares by the Corporation.)
(a) The term "redemption price" as used herein shall mean and refer to
an amount equal to the net asset value per share (as hereinafter defined)
of such shares as of the close of business on the redemption date (as
hereinafter defined) as of which any such shares are redeemed, less a
redemption fee to be fixed by the Board of Directors of the Corporation in
an amount not to exceed one per cent (1%) of such net asset value per
share.
The term "redemption date" (with respect to any particular share) as
used herein shall mean and refer to the date of actual delivery to and
receipt by the Corporation of the written request required by paragraph (c)
of this Article V and the certificate or certificates representing shares
to be redeemed unless such delivery be made on a day on which the New York
Stock Exchange is closed. In such event the redemption date shall be the
next succeeding day on which the New York Stock Exchange is open for
trading.
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(b) Payment of the redemption price at the option of the Corporation
may be made in cash or in securities, or partly in cash and partly in
securities. In case such payment or some part thereof shall be made in
securities, the holder of shares to be redeemed shall be entitled to
delivery, as far as reasonably practicable, of a proportionate interest
(determined as hereinafter provided) in the securities in which the funds
of the Corporation are invested of a value equivalent to the portion of the
redemption price of such shares which is not paid in cash. The value of the
securities shall be determined on the redemption date as provided in this
Article V and any determination by or pursuant to the direction of the
Board of Directors of the Corporation in respect thereof shall be binding
pursuant to the provisions of this Article V. In order to avoid delivering
securities in unreasonably small denominations or amounts, the Corporation
may adjust any interest in securities so to be paid to any such holder of
shares of the Corporation to somewhat more or less than such shareholders
arithmetical proportion of such securities and may adjust any fractional
differences in cash, and any such adjustment made by the Corporation in
good faith shall be binding upon such holder and upon all other holders of
shares of the Corporation, past, present or future. Delivery of the
securities included in any payment in kind shall be made as promptly as
necessary transfers on the books of the several corporations whose
securities are to be delivered may be made.
(c) Before the Corporation shall be required to redeem, or cause to be
redeemed, such shares, the holder thereof shall file with the Corporation
or its designated agents, a written request for redemption in the form and
in a manner acceptable to the Corporation. A holder of shares shall
surrender the certificate, or certificates, representing the shares to be
redeemed, in form for transfer to the Corporation or its designated agent,
with such proof of the authenticity of the signature as may reasonably be
required by the Corporation, together with a sum equal to the transfer tax,
if any, payable with respect to such redemption.
(d) In each case of such redemption, payment of the redemption price
shall be made within five days after the redemption date except (1) for any
period (A) during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or (B) during which trading on the
New York Stock Exchange is restricted, (2) for any period during which an
emergency exists as a result of which (A) disposal by the corporation of
securities owned by it is not reasonably practical (B) it is not reasonably
practical for the corporation thoroughly to determine the price of its net
assets, or (3) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of security holders of
the Corporation. The Corporation may make payment of such redemption price
by causing its designated agent to deposit with a custodian an amount, in
cash or in securities, or partly in cash and partly in securities, equal to
such redemption price, and the Corporation shall thereupon be relieved and
discharged from all responsibility to the holder of shares to be redeemed
and neither the Corporation nor such agent shall be liable for any interest
to such holder upon any cash included in the redemption price nor in any
other manner with respect to such cash or any such securities or any other
part of such payment so held by such agent, except, in the case of such
agent, to make payment of the redemption price in accordance with the
provisions hereof.
(e) The right of the former holder of shares delivered for redemption
in accordance with the provisions of this Article to receive dividends
thereon (other than his right, if any, to unpaid dividends declared payable
to shareholders of record on a date prior to the redemption date) and all
other rights of such former holder with respect to such shares except his
right to receive, in cash or in kind, or partly in cash and partly in kind,
the redemption price of such shares from the Corporation or its designated
agent as provided herein, shall forthwith cease and terminate from and
after the redemption date for such shares. In the event that less than all
of the shares represented by any certificate surrendered for such
redemption are to be redeemed, new certificates shall be issued
representing the unredeemed shares.
(f) The net asset value per share of any shares of the capital stock
of the Corporation (exclusive of treasury stock), as of the close of
business on any business day, shall be determined by or pursuant to the
direction of the Board of Directors, by dividing (i) the total value of the
assets of the Corporation (the value thereof to be determined as
hereinafter provided) at the close of business on such business day less
the amount determined by or pursuant to the direction of the Board of
Directors of all debts, obligations, and liabilities of the Corporation
(which debts, obligations and liabilities shall include, without limitation
of the generality of the foregoing, any or all debts, obligations,
liabilities, or claims, of any and every kind and nature, fixed, accrued,
unmatured or contingent, including liability for taxes, for management
services, for declared but unpaid dividends and any reserves or charges for
any or all thereof, whether for taxes, expenses, contingencies, or
otherwise), at the close of business on such business day, but excluding
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the Corporation's liability upon its capital and surplus, by (ii) the total
number of shares of the capital stock of the Corporation outstanding at the
close of such business day. For the purpose of computing the number of
outstanding shares of the Corporation, treasury shares shall be excluded
and shares which have been delivered to the Corporation for redemption
shall be included and treated as outstanding until immediately after the
redemption date, and thereafter shall be treated as not being outstanding.
Shares subscribed for shall be deemed to be outstanding as of the time of
the acceptance of any subscription and the entry thereof on the books of
the Corporation, and the net price thereof, less commissions, if any, shall
be deemed to be an asset of the Corporation.
(g) For the purpose of this Certificate of Incorporation the total
value of the assets of the Corporation as of the close of business on any
business day shall be the "market value" of all securities, excluding
securities of the Corporation, plus cash and receivables and all other
tangible assets owned by the Corporation, determined as follows:
(i) The "market value" as of the close of business on such
business day of securities listed or dealt in on a recognized Stock
Exchange shall be determined by taking the latest sale price on such
business day, or, lacking any sales on that day, a price not higher
than the latest asked price and not lower than the latest bid price on
that day, ascertained by any method which may be selected by or under
the direction of the Board of Directors. In the absence of sales and
of bid and asked quotations on that day, the "market value" shall be
determined by any method which may be selected and deemed proper by or
under the direction of the Board of Directors, giving due
consideration to the latest available quotation and the action of the
market in comparable securities.
(ii) The "market value" as of the close of business on such
business day of other securities as to which market quotations are
readily available shall be determined by taking a price not higher
than the latest asked price and not lower than the latest bid price at
the close of business on such business day by any method which may be
selected by or under the direction of the Board of Directors. In the
absence of bid and asked quotations on the day as of which the price
is being determined, the market value shall be determined by any
method which may be selected and deemed proper by or under the
direction of the Board of Directors.
(iii) The "market value" of securities for which market
quotations are not readily available and any other assets of the
Corporation shall be determined by any method which may be selected
and deemed fair and proper by or under the direction of the Board of
Directors.
(iv) Dividends declared but not yet received, or rights in
respect of securities which are quoted ex-dividend or ex-rights, shall
be included at the value thereof as determined by or under the
direction of the Board of Directors as accrued income on the day the
particular securities are first quoted ex-dividend or ex-rights.
(h) Any determination made in good faith and, so far as accounting
matters are involved, in accordance with accepted accounting practice by or
pursuant to the direction of the Board of Directors, as to the amount of
the assets, debts, obligations or liabilities of the Corporation, as to the
amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating such reserves or charges, as to the
use, alteration or cancellation of any reserves or charges (whether or not
any debt, obligation or liability for which such reserves or charges shall
have been created shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged), as to the price or closing
bid or asked price of any security owned or held by the Corporation, as to
the market value of any security or fair value of any other asset of the
corporation, as to the number of shares of the Corporation outstanding, as
to the estimated expense to the Corporation in connection with purchases of
its shares, as to the ability to liquidate securities in orderly fashion,
as to the extent to which it is practicable to deliver a cross-section of
the portfolio of the Corporation in payment for any such shares, as to the
method of payment for any such shares repurchased, or as to any other
matters relating to the issue, sale, purchase and/or other acquisition or
disposition of securities or shares of the Corporation, shall be final and
conclusive, and shall be binding upon the Corporation, and all holders of
its shares, past, present and future, and shares of the Corporation are
issued and sold on the condition and understanding, evidenced by acceptance
of certificates for such shares, that any and all such determinations shall
be binding as aforesaid.
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(i) All reserves and all funds for accounts remaining as reserves or
reserved funds for accounts after the date as of which any shares of the
Corporation are redeemed, if and when the Board of Directors in its
discretion shall determine that the retention of any such reserves or
reserved funds or accounts shall no longer be necessary or advisable, shall
be paid or transferred into the general funds or asset accounts of the
Corporation, and there shall not be any liability of the Corporation or any
of the holders of its shares, past, present, or future, to the former
holders of shares of the Corporation which have been redeemed.
(j) Any asset which the Corporation may enter on its books after the
date as of which any shares of the Corporation are redeemed which in good
faith have not theretofore been carried on the books of the Corporation as
an asset shall be so entered without any liability in respect thereof by
the Corporation or any of the holders of its shares, past, present, or
future, to the former holders of shares of the Corporation which have been
redeemed.
(k) The Board of Directors, in its discretion, may make such
regulations, not inconsistent with the provisions of this Article, which it
shall deem reasonable and necessary to carry out the provisions of this
Article.
ARTICLE VI.
The name and places of residence of each of the incorporators are as
follows:
L. A. Schoonmaker Wilmington, Delaware
W. T. Cunningham Wilmington, Delaware
A. D. Atwell Wilmington, Delaware
ARTICLE VII.
The Corporation is to have perpetual existence.
ARTICLE VIII.
The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
ARTICLE IX.
The number of directors of the Corporation shall be such as from time to
time shall be fixed by the By-Laws, but in no case shall the number be less than
three (3). Directors need not be stockholders.
ARTICLE X.
In addition to its general powers, and in furtherance and not in limitation
of the powers conferred by statute, the Board of Directors is expressly
authorized:
(a) To issue the shares of capital stock of the Corporation at such
times and in such manner and on such terms and conditions and for such
lawful consideration as it may deem advisable.
(b) To make, alter, amend or repeal the By-Laws of the Corporation,
including By-Laws fixing or changing the number of directors, subject,
however, to any restrictions contained in the ByLaws and to the power
vested in and reserved to the stockholders having general voting power to
review, modify and rescind any such action by the affirmative vote or
written consent to the holders of a majority of the outstanding shares of
stock having general voting power, which said power is hereby vested in and
reserved to such stockholders.
(c) To prescribe and regulate, from time to time, the procedure to be
followed in and all details concerning the books of account, and financial
statements, and issue, purchase, sale, transfer or redemption of the shares
of the Corporation or Securities and the determination of the value of any
asset or of the liquidating or redemption value of the shares of the
Corporation; subject always to the provisions of this Certificate of
Incorporation.
(d) To determine whether any, and, if any, what part, of the surplus
of the Corporation or of the net profits arising from its business shall be
declared in dividends and paid to shareholders, and to direct and determine
the use and disposition of any of such surplus or net profits.
(e) To determine to the extent permitted by law at what times and
places and under what conditions and regulations the accounts and books of
the Corporation or any of them shall be open to inspection by shareholders.
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(f) To create a trust for custodianship with a bank or trust company
organized and existing under laws of a State of the United States, or the
United States, and deposit all securities owned by the Corporation and cash
represented by the sale of securities owned or issued by it with such
trustee or custodian.
The Corporation may in its By-Laws confer powers upon its directors in
addition to the foregoing and in addition to the powers and authority expressly
conferred upon them by statute, but in no case inconsistent with the
constitution or laws of the United State of America or of the State of Delaware.
ARTICLE XI.
At all elections of directors, each shareholder entitled to vote shall be
entitled to as many votes as shall equal the number of his shares multiplied by
the number of directors to be elected, and he may cast all of such votes for a
single director, or he may distribute them among the number to be voted for, or
for two or more of them as he may see fit, and thus exercise the right of
cumulative voting, as authorized and regulated by the statutes of the State of
Delaware.
ARTICLE XII.
The Board of Directors is expressly authorized by resolution or resolutions
passed by a majority of the whole Board, to designate one or more committees,
each committee to consist of two (2) or more of the Directors of the
Corporation, which to the extent provided in said resolution or resolutions or
in the By-Laws of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation and may have power to authorize the seal of the Corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be stated in the By-Laws of the Corporation or as
may be determined from time to time by resolution adopted by the Board of
Directors.
ARTICLE XIII.
No holder of stock of any class whatsoever, whether now or hereafter
authorized, shall be entitled, as such, as a matter of right, to subscribe for
or purchase any part of any new or additional issue of stock of any class
whatsoever, whether now or hereafter authorized, or whether issued for cash,
property or services.
ARTICLE XIV.
Both shareholders and directors shall have power, if the By-Laws so
provide, to hold their meetings and to have one or more offices within or
without the State of Delaware and to keep the books of the Corporation (subject
to the provisions of applicable statutes), outside of the State of Delaware at
such places as may from time to time be designated by the Board of Directors.
ARTICLE XV.
The validity and effect of any contract, agreement, assignment,
transaction, act or thing entered into, performed, or done by the Corporation
shall in no way be impaired or affected by the fact that a director, officer,
agent, or employee of the Corporation (or any firm, syndicate, group, trust,
association or corporation of which any officer or director is a stockholder,
member, director, officer, employee or agent, or in which any officer or
director has any financial interest) is interested therein as an individual or
is in any other position of conflicting interest. The execution of an agreement
for management service to be furnished to the Corporation with respect to
investments and with respect to underwriting and other activities involved with
investment in, and distribution of, securities, and for management of the
business activities of the Corporation, to such extent as its Board of Directors
shall from time to time require, is hereby authorized and approved regardless of
the fact that the other party to the agreement may be a corporation or other
organization, some or all of whose directors, officers, agents and employees may
be directors, officers, employees or agents of the Corporation.
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ARTICLE XVI.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned hereby associate to establish a corporation for the
transaction of the business and the promotion of the objects and purposes and
subject to the provisions hereinabove set forth under the provisions of Title 8
of the Delaware Code of 1953, and for that purpose make and file this
Certificate of Incorporation as required by law and hereunto set our hands and
seals.
----------/S/------------------
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DATED: December 26, 1958
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE
OF INCORPORATION OF INVESTORS RESEARCH FUND, INC.
INVESTORS RESEARCH FUND, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That Article IV of the Certificate of Incorporation of Investors
Research Fund, Inc. has been amended so that it now reads as follows:
"IV. The total number of shares which the corporation shall have
authority to issue is Twenty Million (20,000,000) shares. All shares shall
be of one class and of the par value of One Dollar ($1.00) per share. The
aggregate par value of said shares shall be Twenty Million Dollars
($20,000,000.00)."
SECOND: That the amendment of the Certificate of Incorporation of INVESTORS
RESEARCH FUND, INC. set forth in FIRST above was duly adopted in accordance with
the provisions of Section 242(b) of the General Corporation Law of the State of
Delaware on January 15, 1985.
IN WITNESS WHEREOF, said INVESTORS RESEARCH FUND, INC. has caused this
certificate to be signed by JOHN R. NOBLE, its President, and Francis S.
Johnson, its Secretayr, this 14th day of November, 1985.
INVESTORS RESEARCH FUND, INC.
By_________/S/_______________
John R. Noble, President
(CORPORATE SEAL)
ATTEST: By__________/S/_______________
Francis S. Johnson, Secretary
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CERTIFICATE OF AMENDMENT OF THE CERTIFICATE
OF INCORPORATION OF INVESTORS RESEARCH FUND, INC.
INVESTORS RESEARCH FUND, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
First: That the Certificate of Incorporation of Investors Research Fund,
Inc. has been amended to set forth the following provision as Article XVI
thereof:
"XVI. No person who, after the effective date of this provision,
shall serve as a director of this corporation shall be personally
liable to this corporation or to any of its shareholders for monetary
damages on the basis of having breached his fiduciary duty while
serving as a director, provided, however, that this provision shall
not eliminate the liability of a director (1) for any breach by the
director of his duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3)
under Section 174 of the Delaware General Corporation Law, or (4) for
any transaction from which the director derived an improper personal
benefit.
"If the Delaware Corporation Law is amended after the effective
date of this provision to further limit or eliminate liability of the
corporation's directors for breach of fiduciary duty, then a director
of this corporation shall not be liable for any such breach to the
fullest extent permitted by the Delaware Corporation Law as so amended
from time to time.
"This provision shall be construed so as to be consistent with
section 17(h) of the Investment Company Act of 1940."
SECOND: That the existing Article XVI of the said Certificate of
Incorporation was amended so as to re-number it as ARTICLE XVII of the said
Certificate of Incorporation.
THIRD: That the amendments of the Certificate of Incorporation of INVESTORS
RESEARCH FUND, INC. set forth in FIRST and SECOND above were duly adopted in
accordance with the provisions of Section 242(b) of the General Corporation Laws
of the State of Delaware on January 15, 1985.
IN WITNESS WHEREOF, said INVESTORS RESEARCH FUND, INC. has caused this
certificate to be signed by JOHN R. NOBLE, its President, and FRANCIS S.
JOHNSON, its Secretary, this 15th day of November, 1988.
INVESTORS RESEARCH FUND, INC.
By__________/S/________________
John R. Noble, President
ATTEST: By______________/S/________________
Francis S. Johnson, Secretary
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B Y - L A W S
OF
INVESTORS RESEARCH FUND, INC.
ARTICLE I
OFFICES
Section 1. The principal office of the Corporation in the State of Delaware
is hereby fixed and located at No. 100 West Tenth Street in the City of
Wilmington, County of Newcastle. The name and address of its resident agent is
The Corporation Trust Company, No. 100 West Tenth Street, Wilmington, Delaware.
Section 2. California Office. An office of the Corporation is hereby fixed
and located at the City of Santa Barbara, State of California. The Board of
Directors is hereby granted full power and authority to change, from time to
time, said office from one location to another.
Section 3. Other Offices. Branch or subordinate offices may at any time be
established by the Board of Directors at any place, or places where the
Corporation is qualified to do business.
ARTICLE II
SEAL
The corporate seal shall be in circular form and shall have inscribed
thereon the name of the Corporation, the year of its incorporation and the words
"Corporate Seal Delaware".
ARTICLE III
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All annual meetings of shareholders shall be
held at the office of the Corporation, in the City of Santa Barbara, State of
California, and all other meetings of shareholders shall be held either at the
said office or at any other place within or without the State of Delaware which
may be designated either by the Board of Directors pursuant to authority
hereinafter granted to said Board, or by the written consent of all shareholders
entitled to vote thereat, given either before or after the meeting and filed
with the Secretary of the Corporation.
Section 2. Annual Meetings. The annual meetings of shareholders shall be
held at 10:30 o'clock in the morning on the last Tuesday in March in each year
provided, however, that should said day fall upon a legal holiday, then any such
annual meeting of shareholders shall be held at the same time and place on the
next day thereafter ensuing which is not a legal holiday. At such meetings
directors for the ensuing year shall be elected, reports of the affairs of the
Corporation shall be considered, and any other business may be transacted which
is within the powers of the shareholders.
Written or printed notice of each annual meeting shall be given to each
shareholder entitled to vote thereat, either personally or by mail or other
means of written communication, charges prepaid, addressed to such shareholder
at his address appearing on the books of the Corporation or given by him to the
Corporation for the purpose of notice. If a shareholder gives no address, notice
shall be deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) days before each annual meeting, unless a longer period is required by law,
and shall specify the place, other matters, if any, as may be expressly required
by statute.
Section 3. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes whatsoever, may be called at any time by the President or by
the Board of Directors, or by one or more shareholders holding not less than
one-fifth of the voting power of the Corporation. Except in special cases where
other express provision is made by statute, notice of such special meetings
shall be given in the same manner as for annual meetings of shareholders.
Notices of any special meeting shall specify in addition to the place, day and
hour of such meeting, the general nature of the business to be transacted. No
business other than that specified in the notice of meeting shall be transacted
at any special meeting.
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Section 4. Adjourned Meetings and Notice Thereof. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary to
give any notice of an adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
Section 5. Voting. Except where the transfer books of the Corporation shall
have been closed or a date shall have been fixed as a record date for the
determination of shareholders entitled to vote at any meeting of shareholders,
as hereinafter provided in Section 1 of Article VI, no share of stock shall be
voted on at any election for directors which has been transferred on the books
of the Corporation within twenty (20) days next preceding such election of
directors, unless now or hereafter otherwise permitted or required by law. All
voting may be viva voce or by ballot, except that all elections of directors
must be by ballot and, upon the demand of any shareholder before the voting
begins the vote upon any questions before a meeting of shareholders shall be by
ballot. Every shareholder entitled to vote at any election of directors shall
have the right to cumulate his votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of votes
to which his shares are entitled, or to distribute his votes on the same
principle among as many candidates as he shall think fit. The candidates
receiving the highest number of votes up to the number of directors to be
elected shall be elected. Except as otherwise provided in these By-Laws, in the
Certificate of Incorporation, or under the laws of the State of Delaware, all
elections shall be had and all questions decided at any meeting of shareholders
by a majority vote of shares present.
Section 6. Quorum. The presence in person or by proxy of persons entitled
to vote a majority of the outstanding voting shares at any meeting shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding withdrawal of enough shareholders to
leave less than a quorum.
Section 7. Waiver of Notice. The transactions of any meeting of
shareholders, either annual or special, however called and noticed, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to notice, signs a written waiver
of notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 8. Action without Meeting. Whenever the vote of shareholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by Chapter 1 of Title 8 of the Delaware Code of 1953, as
amended, the meeting and vote of shareholders may be dispensed with, if all of
the shareholders, who would have been entitled to vote upon the action if such
meeting were held, shall consent in writing to such corporate action being
taken; except that in the case of a sale, lease, or exchange of all of the
corporate property and assets, the written consent of the holders of only a
majority of the voting stock issued and outstanding shall be required.
Section 9. Proxies. Every person entitled to vote or execute consents shall
have the right to do so either in person or by one or more agents authorized by
a written proxy executed by such person or his duly authorized agent and filed
with the Secretary of the Corporation; provided that no such proxy shall be
valid after the expiration of three (3) years from the date of its execution,
unless the person executing it specifies therein the length of time for which
such proxy is to continue in force, which in no case shall exceed seven (7)
years from the date of its execution.
ARTICLE IV
DIRECTORS
Section 1. Powers. Subject to limitation of the Certificate of
Incorporation, of the By-Laws, and of Title 8 of the Delaware Code of 1953, as
amended, as to action which shall be authorized or approved by the shareholders,
and subject to the duties of directors as prescribed by the By-Laws, all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be controlled by, the Board of
Directors. Without Prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the Board of Directors shall
have the following powers, to wit:
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First: To select and remove all the other officers, agents and
employees of the Corporation, prescribe such powers and duties for them as may
not be inconsistent with law, with the Certificate of Incorporation of the
By-Laws, fix their compensation, and require from them security for faithful
service.
Second: To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the Certificate of Incorporation or the By-Laws, as they may
deem best.
Third: To designate any place within or without the State of Delaware
for the holding of any shareholders' meeting or meetings except annual meetings
as provided in Article III, Section 1, hereof; to adopt, make and use a
corporate seal in accordance with Article II hereof; to prescribe the forms of
certificates of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgement they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law.
Fourth: To borrow money and incur indebtedness for the purposes of the
Corporation.
Fifth: To appoint an executive committee and to delegate to such
committee any of the powers and authority of the Board in the management of the
business and affairs of the Corporation, except the power to declare dividends
and to adopt, amend or repeal By-Laws. The executive committee shall be composed
of two or more directors.
Sixth: To provide and maintain a bond issued by a reputable fidelity
insurance company, authorized to do business in the place where the bond is
issued, against larceny and embezzlement, covering each officer and employee of
the Corporation, who may singly, or jointly with others, have access to
securities or funds of the Corporation either directly or through authority to
draw upon such funds or to direct generally the disposition of such securities.
Such bond may be in the form of an individual bond covering each such person or
a schedule or blanket bond covering all such persons and shall be in such
reasonable amount as a majority of the Board of Directors who are not officers
and employees of the Corporation shall determine with due consideration to the
value of the aggregate assets of the Corporation to which such officers or
employees may have access. No such bond shall be issued for a period in excess
of six (6) years.
Section 2. Number and Qualification of Directors. The authorized number of
directors of the Corporation shall be thirteen (13), until changed by amendment
of the Certificate of Incorporation or by amendment of these By-Laws; provided
that in no case shall the number of directors be less than three (3).
Section 3. Election and Term of Office. The directors shall be elected at
each annual meeting of shareholders, but if any such meeting is not held, or the
directors are not elected thereat, the director may be elected at any special
meeting of shareholders held for that purpose. All directors shall hold office
until their respective successors are elected.
Section 4. Vacancies. Vacancies in the Board of Directors (other than a
vacancy existing because shareholders failed to elect the full authorized number
of directors to be voted for at any annual or special meeting of the
shareholders) may be filled by majority of the remaining directors, though less
than a quorum, provided, however, that immediately after filling any such
vacancy at least two-thirds of the directors then holding office shall have been
elected to such office by the shareholders of the Corporation at an annual or
special meeting of shareholders. Each director so elected by a majority of the
remaining directors shall hold office until his successor is elected at an
annual or a special meeting of the shareholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at any
annual or special meeting of shareholders at which any director or directors are
elected to elect the full authorized number of directors to be voted for at that
meeting. If the Board of Directors accepts the resignation of a director
tendered to take effect at a future time, the Board or the shareholders shall
have power to elect a successor to take office when the resignation is to become
effective. The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors.
Section 5. Removal. At any special meeting of the shareholders duly called,
as provided in these By-Laws, all of the directors may, by a vote of a majority
of all the outstanding shares entitled to vote, be removed from office with or
without cause, or any director or directors may be removed from office for
cause, and the successor or successors of the director or directors so removed
may be elected at such meeting.
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Section 6. Place of Meeting. Regular meetings of the Board of Directors
shall be held at any place within or without the State of Delaware which has
been designated from time to time by resolution of the Board or by written
consent of all members of the Board. In the absence of such designation, regular
meetings shall be held at the office of the Corporation in the City of Santa
Barbara, State of California. Special meetings of the Board of Directors may be
held either at a place so designated or at such office.
Section 7. Organization Meeting. Immediately following each annual meeting
of shareholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, election of officers, and the transaction of other
business. Notice of such meeting is hereby dispensed with.
Section 8. Other Regular Meetings. Other regular meetings of the Board of
Directors shall be held without call on the second Tuesday of each month at 3:30
o'clock in the afternoon, provided, however, should said day fall upon a legal
holiday, then said meeting shall be held at the same time on the next day
thereafter ensuing which is not a legal holiday. Notice of all such regular
meetings of the Board of Directors is hereby dispensed with.
Section 9. Special Meetings. Special meetings of the Board of Directors for
any purposes shall be called at any time by the President or, if he is absent or
unable or refuses to act, by a vice president or by any two directors.
Written notice of the time and place of special meetings shall be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to him at his office as it
is shown upon the records of the Corporation, or if it is not so shown on such
records or is not readily ascertainable, at the place in which the meetings of
the directors are regularly held. In case such notice is mailed or telegraphed,
it shall be deposited in the United States mail or delivered to the telegraph
company for transmission in the City of Santa Barbara, State of California, at
least forty-eight (48) hours prior to the time of the holding of the meeting. In
case such notice is delivered as above provided, it shall be so delivered at
least twenty-four (24) hours prior to the time of the holding of the meeting.
Such mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such director.
Section 10. Notice of Adjournment. Notice of the time and place of holding
an adjourned meeting need not be given to absent directors if the time and place
be fixed at the meeting adjourned.
Section 11. Waiver of Notice. The transactions of any meeting of the Board
of Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum be
present, and if, either before or after the meeting, each of the directors
entitled to notice signs a written waiver thereof. All such waivers shall be
filed with the corporate records or made a part of the minutes of the meeting.
Section 12. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
committee.
Section 13. Quorum. A majority of the authorized number of directors shall
be necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as an act of the Board of Directors, unless a greater
number be required by law or by the Certificate of Incorporation.
Section 14. Adjournment. A Quorum of the directors may adjourn any meeting
of the Board of Directors to meet again at a stated day and hour; provided,
however, that in the absence of a quorum, a majority of the directors present at
any such meeting, either regular or special, may adjourn from time to time until
the time fixed for the next regular meeting of the Board.
Section 15. Fees and Compensation. Directors shall not receive any stated
salary for their services as directors, but, by resolution of the Board of
Directors, a fixed fee, with or without expenses of attendance, may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any directors from serving the corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving compensation therefor.
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Section 16. Indemnification of Directors and Officers. Each director and
officer (and his heirs, executors, and administrators) may be indemnified by the
Corporation against reasonable costs and expenses incurred by him in connection
with any action, suit or proceeding to which he may be made a party by reason of
his being or having been a director or officer of the Corporation, except in
relation to any actions, suits or proceedings, in which he has been adjudged
liable because of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. In the absence of
an adjudication which expressly absolves the director or officer of liability to
the Corporation or its stockholders for willful misfeasance, bad faith, gross
negligence and reckless disregard of the duties involved in the conduct of his
office, or in the event of a settlement, each director and officer (and his
heirs, executors and administrators) may be indemnified by the Corporation
against payments made, including reasonable costs and expenses, provided that
such indemnity shall be conditioned upon the prior determination by a resolution
of two-thirds of those members of the Board of Directors of the Corporation who
are not involved in the action, suit or proceeding that the director or officer
has no liability by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office, and
provided further that if a majority of the members of the Board of Directors of
the Corporation are involved in the action, suit or proceeding, such
determination shall have been made by a written opinion of independent counsel.
Amounts paid in settlement shall not exceed costs, fees and expenses which would
have reasonably been incurred if the action, suit or proceeding had been
litigated to a conclusion. Such a determination by the Board of Directors, or by
independent counsel, and the payments of amounts by the Corporation on the basis
thereof shall not prevent a stockholder from challenging such indemnification by
appropriate legal proceedings on the grounds that the person indemnified was
liable to the Corporation or its security holders by reasons of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The foregoing rights and indemnification
shall not be exclusive of any other rights to which the officers and directors
may be entitled according to law.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a President,
a Vice-President, a Secretary, and a Treasurer. The Corporation may also have,
at the discretion of the Board of Directors, one or more additional
vice-presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article. One person may hold two or more
offices, except those of President and Secretary.
Section 2. Election. The officers of the Corporation except such officers
as may be appointed in accordance with the provisions of Section 3 or Section 5
of this Article shall be elected annually by the Board of Directors, and each
shall hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. Subordinate Officer, Etc. The Board of Directors may appoint
such other officers as the business of the Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. Removal and Resignation. Any officer may be removed, either with
or without cause, by a majority of the Board of Directors at the time in office,
at any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board of Directors, by an officer upon whom such power of removal
may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the President, or to the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to such office.
Section 6. Voting Shares in other Corporations. The Corporation may vote
any and all shares held by it in any other corporation or corporations by such
officer, agent or proxy as the Board of Directors may appoint, or, in default of
such appointment by its President or by a director vice-president.
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Section 7. President. The President shall be the chief executive officer of
the Corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of
the Corporation. He shall preside at all meetings of the shareholders and at all
meetings of the Board of Directors. He shall, when authorized by the Board of
Directors, execute all contracts in behalf of the Corporation, and shall affix
the seal to any instrument requiring it and when so affixed, the seal shall be
attested by the signature of the Secretary or an assistant secretary. He shall
be ex officio a member of all the standing committees, including the executive
committee, if any, shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 8. Vice-President. In the absence or disability of the President,
the vice-presidents in order of their rank as fixed by the Board of Directors,
or if not ranked, the vice-president designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the President. The
vice-presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Board of
Directors or the By-Laws.
Section 9. Secretary. The Secretary shall keep, or cause to be kept, a book
of minutes at the principal office of the Corporation or such other place as the
Board of Directors may order, of all meetings of directors and shareholders,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at
Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the Corporation's transfer agent, a stock ledger, or a
duplicate stock ledger showing the names of the shareholders and their
addresses, the number of shares held by each, the number and date of
certificates issued for the same, and the number and date of redemption of every
certificate surrendered for redemption.
The Secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the By-Laws.
Section 10. Treasurer. The Treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
The Treasurer shall deposit all moneys, securities and other valuables in
the name and to the credit of the Corporation with such depositaries or
custodians as may be designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and directors, whenever they request it, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or the By-Laws. Section 11. Duties
of Officers may be Delegated. In the case of the absence or disability of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors, by majority vote, may delegate for
the time being the powers or duties or any of them of such officer to any other
officer or to any director or to any other person.
ARTICLE VI
Section 1. Closing of Transfer Books. The Board of Directors shall have
power to close the stock transfer books of the Corporation for a period not
exceeding thirty (30) days preceding the date of any meeting of shareholders or
the date for the payment of any dividend or the date for the allotment of
rights; provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
thirty (30) days preceding the date of any meeting of shareholders or the date
for the payment of any dividend, or the date for the allotment of rights, as a
record date for the determination of the shareholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment of rights, and in such case only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to notice of, and to vote at, such meeting, or to receive payment of
such dividend, or to receive such allotment of rights, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
such record date fixed as aforesaid.
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Section 2. Transfers of Stock. The shares of stock shall be transferable on
the books of the Corporation by the person named in the stock Certificate or by
attorney lawfully constituted in writing, upon surrender of the certificate. The
Board of Directors shall have power and authority to make all such rules and
regulations as it shall deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation. The Board
of Directors may appoint and remove transfer agents and registrars of transfer,
and may require all stock certificates to bear the signatures of any such
transfer agent and/or any such registrar of transfers.
Section 3. Certificates of Stock. A certificate or certificates for shares
of the capital stock of the Corporation shall be issued to each shareholder when
any such shares are fully paid up, and shall be numbered and entered in the
corporate books as they are issued. All such certificates shall exhibit the
holder's name and certify the number of shares owned by him and represented by
such certificate, and be signed by the President or a vice-president and the
Secretary or an assistant secretary, or be authenticated by facsimiles of the
signatures of the President and Secretary, or by a facsimile of the signature of
the President and the written signature of the Secretary or an assistant
secretary, and shall be impressed with the corporate seal, or a facsimile
thereof. Every certificate authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk, and be registered by an
incorporated bank or trust company, either domestic or foreign, as registrar of
transfer, before issuance.
Section 4. Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 5. Inspection of Corporate Records. The stock ledger or duplicate
stock ledger, the books of account, and minutes of proceedings of the
shareholders and the Board of Directors and of executive committees of directors
shall be open to inspection upon the written demand of any shareholder or the
holder of a voting trust certificate, at any reasonable time, and for a purpose
reasonably related to his interests as a shareholder, or as the holder of such
voting trust certificate, and shall be exhibited at any time when required by
the demand at any shareholders' meeting of ten per cent (10%) of the shares
represented at the meeting. Such inspection may be made in person or by an agent
or attorney, and shall include the right to make extracts. Demand of inspection
other than at a shareholders' meeting shall be made in writing upon the
President, Secretary, or an assistant secretary of the Corporation.
Section 6. Stock Ledge. The Secretary of the Corporation shall prepare, at
least ten days before every election of directors, a complete list of the
shareholders entitled to vote in said election, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
and the name of each shareholder. Such list shall be open to the examination of
any shareholder during ordinary business hours, for a period of at least ten
days prior to the election, at the place where the election is to be held. Such
list shall be open to examination during the whole time of the meeting at which
the election shall take place.
Section 7. Fiscal Year. The fiscal year of the Corporation shall be such as
may hereafter be determined by the Board of Directors.
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ARTICLE VII
The Corporation shall not:
1. Engage in short sales, margin purchases, puts, calls, straddles,
or spreads;
2. Engage in underwriting or act as distributor of securities issued
by others;
3. Invest in commodities, commodity contacts or real estate;
4. Purchase securities of another issuer (except government
securities as defined in the Investment Company Act of 1940, as
amended) if immediately after and as a result of such purchase
either, (a) more than five per cent (5%) of the assets of the
Corporation would consist of securities of such issuer, (b) more
than ten per cent (10%) of the outstanding voting securities of
any one issuer would be owned by the Corporation, or (c) more
than ten per cent (10%) of the outstanding securities of any
class of any one issuer would be owned by the Corporation;
5. Borrow money in an amount exceeding twenty-five per cent (25%) of
the market value of its total net assets;
6. Lend money or securities, provided, however, that the making of
time or demand deposits with banks and the purchase of bonds,
debentures or other securities of another issuer or any
government or governmental agency at original issue or otherwise
shall not be deemed to be a loan of money;
7. Invest in the securities of another investment company, as
defined in the Investment Company Act of 1940, as amended;
8. Invest in companies for the purpose of exercising control or
management;
9. Purchase or otherwise acquire any securities from or through, or
sell or otherwise dispose of any securities to or through an
officer or director of the Corporation, directly or indirectly,
This restriction shall not apply to shares of the Corporation or
to purchases or sales on a securities exchange in connection with
which only the regular exchange commissions are charged and
imposed.
The foregoing restrictions shall not apply to the acquisition by the
Corporation of any security or property in full or partial satisfaction of any
claim or demand, or as a distribution on any security owned by the Corporation,
or on the exercise of any right distributed on any security owned by the
Corporation, or as a result of merger, consolidation or acquisition of
substantially all of the assets of any other corporation; provided, however,
that if any security or property so acquired would not be permitted as an
investment by this Corporation it shall be converted into a permitted investment
as soon as is reasonably practicable.
ARTICLE VIII
These By-Laws may be altered, amended, or repealed by the affirmative vote
of a majority of the holders of shares issued and outstanding, by the written
consent of such shareholders, at any regular or special meeting of the
shareholders if notice of the proposed alteration, amendment, or repeal be
contained in the notice of the meeting, or by the affirmative vote of a majority
of the Board of Directors at any regular or special meeting; providing, however,
that the directors shall not have the power to amend Section 2 of Article IV of
these By-Laws so as to decrease the number of directors or to alter, amend or
repeal any of the provisions of Article VII of these By-Laws.
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Article IV, ss. - As amended 7/13/82
Bylaws Providing for Indemnification of Certain officers,
Directors and Other Parties for Investors Research
(a) The corporation shall indemnify to the fullest extent permitted by law
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
However, the corporation shall not indemnify any person for any liability
to the corporation or to its security holders, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office.
(b) Any indemnification shall, unless ordered by a court, be made only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is permitted by law under the
circumstances. Such determination shall be made (1) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion. [or, (3) if a quorum of disinterested
directors so directs or if such a quorum cannot be obtained, then by the
shareholders.]
(c) expenses incurred by a person described in (a) above in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon request
in writing and receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation as
authorized in (a). The determination as to whether or not the corporation shall
pay such expenses in advance of the final disposition of the matter and as to
the sufficiency of the undertaking offered by such party shall be determined in
the same manner as provided in (b) above. A determination to be made pursuant to
(b) or (c) shall be made at the next meeting of the board of directors [or the
shareholders, as appropriate], provided the written request is received by the
corporation at least 15 days prior to the date of such meeting.
No advance may be made hereunder unless at least one of the following
requirements has been fulfilled as a condition to the advance: (1) the
indemnitee shall provide a security for his undertaking, (2) the corporation
shall be insured against losses arising by reason of any lawful advances, or (3)
a majority of a quorum of the disinterested, non-party directors, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(d) the indemnification provided above shall continue as to a person who
has ceased to be a director, officer, employee or agent of the corporation and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(e) The corporation shall have power to purchase and maintain insurance:
(1) To indemnify the corporation for any obligation which it incurs as
a result of the indemnification of directors and officers under the provisions
of this article, and
(2) To indemnify directors and officers in instances in which they may
be indemnified by the corporation under the provisions of this article, and
(3) To indemnify directors and officers in instances in which they may
not otherwise be indemnified by the corporation under the provisions of this
article. No insurance may provide for any payment, other than cost of defense,
to or on behalf of any director or officer:
(1) if a judgement or other final adjudication adverse to the
insured director or officer establishes that his acts of active and deliberate
dishonesty were material to the cause ofaction so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled, or
(2) in relation to any risk the insurance of which is prohibited
under the insurance law of Delaware.
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(f) for purposes of this bylaw, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, had been authorized to
indemnify its directors, officers and employees or agents so that any person who
is or was a director, officer, employee or agent of such constituent corporation
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under the
provision of this bylaw with respect to the resulting or surviving corporation
as he or she would have with respect to the constituent corporation if its
separate existence had continued.
(g) for purposes of this bylaw, references to "other enterprises" shall
include employee benefit plans and the indemnification provided hereby shall
include any excise taxes assessed on a person with respect to an employee
benefit plan, and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves service by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries.
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INVESTMENT ADVISORY AGREEMENT
Lakeview Securities Corporation
333 West Wacker Drive
Suite 1010
Chicago, IL 60610
Ladies and Gentlemen:
Investors Research Fund, Inc. (the "Fund") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"). The Fund is engaged in the business of investing
and reinvesting its assets in securities of the type, and in accordance with the
limitations specified in the Prospectus, Application and Statement of Additional
Information dated January 30, 1993, which is a part of its effective
Registration Statement filed with the U.S. Securities and Exchange Commission,
all in such manner and to such extent as may from time-to-time be authorized by
the board of directors of the Fund. The Fund hereby retains you as investment
adviser for the consideration and upon the terms and conditions hereafter set
forth:
1. The Fund employs you to manage the investment and reinvestment of its
assets and, without limiting the generality of the foregoing, to supervise the
investment affairs of the Fund, to make reviews of its investments, and to
recommend and effect investment changes whenever such changes appear to be
desirable. In addition, you are to perform all statistical, research and
analysis services necessary to the performance of your duties as investment
adviser. Such services shall be rendered directly to the Fund.
2. It is understood that you will from time-to-time employ or associate
with yourself such persons as you believe to be particularly fitted to assist
you in the execution of your duties hereunder, the cost of performance of such
duties to be borne and paid by you. You will provide adequate and suitable
office space for the performance of your duties hereunder. You will provide to
the Fund in writing, promptly following request, such information regarding
itself and the Fund's investments as shall be necessary for the preparation of
periodic reports to the Fund's stockholders and such other documents and papers
as may be required to comply with applicable laws and the rules, regulations and
other requirements of the Securities and Exchange Commission or other federal,
state or local governmental agencies. You agree to permit inspection by officers
and directors of the Fund, upon reasonable notice and at reasonable times, of
all records, books, correspondence, stockholder lists, and other papers and
documents maintained or prepared by you in connection with the Fund's business
and affairs. Furthermore, you agree to maintain, preserve and make available all
such records in accordance and compliance with Section 31 of the Act, Section
204 of the Investment Advisers Act of 1940 (as amended) and all governmental
regulations and requirements, as applicable to you in your capacity as
investment adviser to the Fund.
3. You will make decisions with respect to all purchases and sales of
securities for or on account of the Fund. To carry out such decisions, you are
hereby authorized, as the Fund's agent and attorney-in-fact, for the Fund's
account, at the Fund's investment risk, and in the Fund's name, to place orders
for the investment and reinvestment of its assets. In all purchases, sales and
other transactions in securities for the Fund, you are authorized to exercise
full discretion and act for the Fund in the same manner and with the same force
and effect as the officers and directors might or could do with respect to such
purchases, sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions. In this regard, however, it is understood that you
will not be making purchases and sales of securities on behalf of the Fund in
your capacity as a broker-dealer. Notwithstanding the foregoing, all procedures
for making changes in the Fund's portfolio of securities, including procedures
for the placing and confirmation of orders with brokers and dealers, shall at
all times be and remain under the direction and control of the Fund's board of
directors and officers. You will, however, maintain such records and perform
such duties in connection with the Fund's portfolio of securities as may be
reasonably requested by the Fund, and as may be required by applicable
governmental laws and regulations.
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4. The Fund shall provide you with all information under its control which
may be reasonably required for the performance of your duties hereunder, and to
advise you promptly of any changes in the Fund's policies which may affect any
of your obligations hereunder. Except as otherwise specifically provided
hereinabove, you shall have no obligation to provide supervisory or
administrative services in connection with the general business and affairs of
the Fund, it being expressly agreed and understood that the Fund shall employ
other persons to maintain its own books and records, prepare and file with the
Securities and Exchange Commission and applicable governmental and
quasi-governmental authorities periodic reports and amendments to the Fund's
Registration Statement, prepare notices of stockholders' meetings, declarations
of dividends and other communications from the Fund to its stockholders, and to
operate and conduct the general business and administrative affairs of the Fund.
If, however, you or your affiliates shall render any such services at the
request of the officers or directors of the Fund, the Fund will pay to you or
such of your affiliates the fully burdened cost of such personnel for rendering
such services to the Fund at such rates as shall from time-to-time be agreed
upon between you and the Fund.
5. You will report to the board of directors of the Fund at each regularly
scheduled meeting thereof all changes in the Fund's portfolio since the prior
report, and will furnish to the Fund from time-to-time such information as you
may believe appropriate concerning the Fund's portfolio, whether concerning the
individual companies whose securities are included in the Fund's portfolio, the
industries in which they are engaged, or the conditions prevailing in the
economy generally. You will also furnish to the Fund such statistical and
analytical information with respect to securities in its portfolio as you may
believe appropriate or as the board of directors may reasonably request. In
making purchases and sales of securities, you will bear in mind the policies set
from time-to-time by the board of directors of the Fund as well as the
limitations imposed in the Fund's Registration Statement, the Act, and the
Internal Revenue Codes of 1986, as amended, in respect of regulated investment
companies.
6. All expenses and charges incident to the operation of the Fund,
including, but not limited to, (a) payment of the fees payable to you under
Paragraph 7, (b) custody, transfer and dividend disbursing expenses, (c)
directors' fees and officers' compensation, (d) legal and auditing expenses, (e)
clerical, accounting and other office costs of the Fund, (f) the cost of
personnel providing services to the Fund, as provided in Paragraph 4, (g) costs
of printing the Fund's prospectus and reports to the stockholders, (h) costs of
maintenance of the Fund's corporate existence and qualifications to do business,
(i) interest and bank charges, taxes, brokerage fees and commissions, (j) costs
of stationery and supplies, (k) expenses and fees relating to registration and
filing with the Securities and Exchange Commission and state regulatory
authorities, and (1) such promotional expenses as may be contemplated by an
effective plan pursuant to Rule 12b-1 under the Act, providing, however, that
payment by the Fund of such promotional expenses shall be in an amount, and in
accordance with the procedures, set forth in such plan, and excepting those
expenses to be paid by you as an incidence of the investment advisory services
to be performed by you hereunder, shall be borne and paid by the Fund either
directly or by way of reimbursement to you for any such expenses you have
advanced pursuant to agreement with the Fund.
7. In consideration of the services to be rendered by you, the Fund agrees
to pay to you a quarterly fee equal to 0.125% of the net assets of the Fund
calculated as an average of the net assets of the Fund as of the close of each
month of the Fund's fiscal year; said fee not to exceed 0.5% annually of the
average net assets of the Fund calculated as at the close of each month of the
Fund's fiscal year. The value of the Fund's assets shall be determined in
accordance with Section 2 (a) (41) of the Act as of the last business day of
each month by three (3) directors of the Fund who are not affiliated persons of
you.
It is recognized that you are permitted no direct control over most of the
operating expenses of the Fund. However, anything herein to the contrary
withstanding, it is agreed that you shall be responsible for the portion of the
net expenses of the Fund (except taxes, brokerage, distribution service fees
paid in accordance with an effective plan pursuant to Rule 12b-1 under the act,
expenditures which are capitalized in accordance with generally accepted
accounting principles, and extraordinary expenses, all to the extent permitted
by applicable state law and regulation) incurred by the Fund during each of its
fiscal years or portions thereof that this Agreement is in effect which, as to
the Fund in any such year, exceeds the limits applicable to the Fund under the
laws or regulations of any state in which Fund shares are qualified for sale
(reduce pro rata for any portion of less than a year).
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8. We shall expect of you, and you will give us the benefit of your best
judgement and effort in rendering services to the Fund, and the Fund agrees as
an inducement to your undertaking these services that neither you, nor your
officers, directors, shareholders, employees or agents, or any affiliates of the
foregoing shall be liable for any mistake of judgement, or opinion relating to
portfolio and investment matters of the Fund, except for lack of good faith,
provided that nothing herein shall be deemed to protect or purport to protect,
you against any liability to the Fund or its stockholders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
in the performance of your obligations and duties hereunder, or by reason of
your reckless disregard of your obligations and duties hereunder.
9. The Fund hereby continuously represents that (a) the shares of the Fund
have been and will continue to be offered and sold in compliance with all
applicable federal and state securities laws including, without limitation, the
Act, the Securities Act of 1933, as amended and the Securities Exchange Act of
1934, as amended, (b) the Fund is, and at all times during the term of this
Agreement will be, an open-end diversified management investment company duly
registered and in good standing under all applicable federal and state laws,
including, without limitation, the Act, (c) the Registration Statement and
prospectus pursuant to which the shares of the Fund have been and will be
offered and sold will not contain any untrue statement of materials facts or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading, provided, however, that this clause
(d) shall not apply to statements in or omissions from such Registration
Statement or prospectus made in reliance upon and in conformity with information
furnished to the Fund in writing by you which is incorporated accurately into
such Registration Statement or prospectus, and (e) this Agreement has been
approved by the board of directors of the Fund, including a majority of the
directors who are not interest persons thereof. The Fund agrees to indemnify,
defend and hold you, and your officers, directors, shareholders, and employees,
and their respective affiliates, harmless from and against any and all loss,
cost, damage, liability and expense (including, without limitation, reasonable
attorneys' fees and costs) which you or any of them may suffer, sustain or incur
as a result of the Fund's breach of the foregoing.
10. You are to have no authority to make, and agree not to make, any
representation on behalf of the Fund. You will not give advice or make
recommendations concerning the Fund to any of your other clients except in your
capacity as investment counsel for such other clients and not on behalf of the
Fund. All powers of control over the Fund's investments shall at all times be
and remain in the Fund's directors and officers.
11. This Agreement shall become effective as of the date of approval of
this Agreement by the vote of a majority of the outstanding voting securities of
the Fund or upon termination of the current advisory agreement, whichever is
later, and shall continue in effect until the first anniversary of such date,
and thereafter for successive twelve-month periods (computed from each
anniversary date), provided that such continuance is specifically approved at
least annually by the board of directors of the Fund or by vote of a majority of
the outstanding voting securities (as defined in Section 2(a) (42) of the Act)
of the Fund, and, in either case, by a majority of the board of directors who
are not parties to this Agreement or interested persons (as defined in Section
2(a) (19) of the Act) of any such party (other than as an officer or director of
the Fund); provided, further, however, that if the continuation of the Agreement
is not approved, you may continue to render to the Fund the services described
herein in a manner and to the extent permitted by the Act and the rules and
regulations thereunder. This Agreement may be terminated, without the payment of
any penalty, by a vote of a majority of the outstanding voting securities (as
defined in the Act) of the Fund, or by a vote of a majority of the board of
directors on sixty (60) days' written notice to you, or by you on sixty (60)
days' written notice to the Fund. The Fund hereby agrees to promptly call a
meeting of the stockholders of the Fund to consider and vote upon the approval
of this Agreement; and to prepare and prosecute any amendments to the
Registration Statement necessitated by this Agreement. If, within 90 days after
the date hereof, this Agreement shall not have been approved by the holders of a
majority of the shares of the Fund, you will be entitled to terminate this
Agreement upon notice to the Fund and will be entitled to any Fees earned by you
as provided in Paragraph 7.
12. The Fund represents that the investment advisory contract with its past
adviser has been terminated, without payment of any penalty, by the board of
directors of the Fund effective within sixty (60) days of notice of termination.
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<PAGE>
13. This Agreement may not be transferred, assigned, sold, or in any manner
hypothecated or pledged by you, and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale hypothecation or a pledge by
you. The terms, "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed to them by governing law and interpretations
thereof contained in rules or regulations promulgated by the Securities and
Exchange Commission thereunder. You may assign this Agreement in a transaction
in which you rely bona fide upon Rule 2a-6 under the Act upon notice to the
Fund.
14. In the event this Agreement is terminated for any reason and no
subsequent agreement is entered into between you and the Fund, all fees and all
other monies due to you hereunder shall be prorated as of the effective date of
termination and paid within five (5) business days thereafter. Upon such
termination or within a reasonable time thereafter, you shall surrender to the
Fund, all books, records, correspondence, stockholders' lists and other papers
and documents pertaining to the Fund which are in your possession or control.
The Fund hereby agrees that during the term of the Agreement and for a period of
one (1) year following the termination of this Agreement that it will not
employ, solicit for employment, or engage or solicit for engagement, directly or
indirectly, any person employed by you or any of your affiliates at any time
within one (1) year preceding the proposed date of employment or engagement (or
any firm with whom such a person is an associated person) without your express
written consent.
15. Except to the extent necessary to enable you to perform your
obligations hereunder, nothing herein shall be deemed to limit or restrict your
right, or the right of any of your officers, directors, shareholders, or
employees, or any affiliates thereof, to engage in any other business or to
devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, firm, individual, trust or association.
16. It is recognized that the competence and general reputation of Richard
W. Arms, Jr., within the securities field are matters of substantial inducement
to the Fund in entering into this agreement. Therefore, in the event of any
proposed or accomplished termination or other significant change in Mr. Arms'
employment arrangement by or with you, you will promptly notify the Fund of such
prospective or accomplished changes. If possible, such notification will be
given to us no later than ten (10) days prior to the effective date of the
proposed changed.
17. The Fund acknowledges and agrees that you may obtain from
broker-dealers approved by the board of directors of the Fund, supplemental
research, market and statistical information for use with respect to the Fund.
The term "research, market and statistical information" includes, without
limitation, advice as to the value of securities, the advisability of investing,
purchasing and selling securities, and the availability of securities or
purchasers or sellers of securities, and furnishing analyses and reports
concerning issues, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts. The Fund understands that such
information will be in addition to and not in lieu of the services required to
be performed by you under this Agreement and that your expenses will not
necessarily be reduced as a result of the receipt of such information. The Fund
also acknowledges that such information may be useful to you and your affiliates
in providing services to clients other than the Fund, and that not all such
information will at all times be used by you in connection with the Fund.
Finally, the Fund acknowledges that information provided to you and your
affiliates by brokers and dealers through whom other clients of yours effect
securities transactions may be useful to you in providing services to the Fund.
Accordingly, the Fund understands that investment decisions for the Fund may
not, at all times, be made independently from those of other accounts managed by
you and your affiliates. In furtherance of the foregoing, the Fund agrees that,
when the same securities are purchased for or sold by the Fund and any such
other accounts you shall allocate such purchases and sales in a manner deemed by
you to be fair and equitable to all of the accounts, including the Fund and,
subject to your obtaining the best price and execution for your clients (which
shall not necessarily mean the lowest commission available), brokers and dealers
providing research, market and statistical information may be engaged to effect
transactions on behalf of the Fund.
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<PAGE>
18. All notices and communications to be made hereunder shall be in writing
and shall be delivered to the Fund or to you, as the case may be, by U.S.
certified mail, return receipt requested, postage prepaid, by commercial courier
or by personal delivery, in each case to the address set forth in this Agreement
or to such other person or address as shall be identified by written notice as
provided herein. Any notice or communication sent by mail as aforesaid shall be
deemed delivered three (3) business days after deposit in the U.S. Mail; any
notice sent personally or by commercial courier shall be deemed delivered upon
confirmation of receipt at such address.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of California. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
If the foregoing is satisfactory to you, please indicate your acceptance by
signing below.
Very truly yours,
INVESTORS RESEARCH FUND, INC.
By:________/S/________________
Title: President
Accepted this 27 day of December, 1993
LAKEVIEW SECURITIES CORPORATION
By:________/S/_________________
Title: President
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DISTRIBUTION AGREEMENT
This Distribution Agreement, dated this 31st day of March, 1974, between
INVESTORS RESEARCH FUND, INC., a Delaware corporation (hereinafter called the
"Fund"), and DIVERSIFIED SECURITIES, INC., a California corporation (hereinafter
called the "Distributor"), is made with reference to the following facts:
The Fund is an investment company registered under the Investment Company
Act of 1940.
The Distributor is a registered broker-dealer.
The parties hereto agree as follows:
1. The Distributor shall be the exclusive agent of the Fund to offer
for sale Shares of the Fund, commencing on the effective date of this Agreement,
as hereinafter set forth, and continuing so long thereafter as this Agreement
shall be in effect. Distributor shall have the sole responsibility for the
offering for sale of Shares through dealers, but such sales shall be consummated
directly between the Fund and the Dealer's customers in the manner requested of
the Fund by the Dealer through the Distributor. The Distributor will not
purchase Shares from the Fund for resale and will not repurchase Shares. The
Distributor will take requests for redemption and repurchases from Dealers and
submit such requests to the Fund for execution. The Fund shall not offer Shares
for sale for its own account or for the account of others, or authorize others
than Distributor to offer or sell Shares for the Fund's account so long as this
Agreement shall remain in effect except as follows:
(a) The Fund may at any time issue Shares as a stock dividend
payable in cash or stock at the option of the shareholder.
(b) The Fund may at any time issue or grant to holders of its
outstanding Shares rights to purchase Shares at no less than the net
asset value of outstanding Shares, and may issue Shares upon exercise
of such rights, provided, however, that all such rights are granted
equally to all shareholders. (c) The Fund may at any time issue Shares
to any other corporation, association, trust, partnership or
individual, or its, their, or his security holders in connection with
a plan of merger, consolidation, or reorganization to which the Fund
is a party or in connection with the acquisition of all or
substantially all the property and assets of such other corporation,
association, trust, partnership or individual. (d) The Fund may at any
time sell its Shares at net asset value and without sales commission
to its directors, officers or partners of the Fund, its Investment
Adviser and Distributor or the bona fide, full-time employees or sales
representatives of any of the foregoing who have acted as such for not
less than ninety (90) days or to any trust, pension, profit-sharing or
other benefit plan for such person, upon written assurance that the
Shares are being purchase for investment purposes will not be resold
except through redemption or repurchase by or on behalf of the Fund.
The exception contained in this subparagraph (d) shall be effective
only during the period or periods that it is described in the Fund's
current Prospectus.
2. Distributor shall devote its best efforts to effect the sale of
Shares of the Fund and to such other activities as are contemplated by this
Agreement. It shall use its best efforts to effect such sales in those States in
which the Shares may be eligible or qualified for sale.
3. The Fund shall retain the right to direct the execution of orders
for its portfolio transactions with such brokers and eligible dealers as the
Fund in its sole and exclusive discretion shall from time to time determine.
Distributor agrees to mail to each of the Fund's directors within ten (10) days
after the end of each calendar month a written report tabulating the following
for such month: the total sales of the Shares of the Fund; the ten (10) brokers
or eligible dealers who sold the greatest number of such shares for said month,
giving both the number of shares and the dollar volume thereof for each such
broker or eligible dealer, and such other pertinent information as may be agreed
upon from time to time between the Fund and Distributor.
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<PAGE>
4. The Fund agrees that it will make available for offering and sale
through Distributor its unissued Shares registered with the Securities and
Exchange Commission at the public offering price per Share based on asset value
as determined in the manner set forth in the then current Prospectus. The Fund
will make available proper certificates for Shares ordered by the Distributor
for delivery against payment in Los Angeles, California Clearing House funds.
The Fund may, however, withhold Shares from sale temporarily or permanently, at
any time if, in the opinion of counsel for the Fund, such offering or sale would
be contrary to law, or its Board of Directors determine that such offering or
sale is inadvisable in the interests of the Fund. The Fund will give prompt
notice to Distributor of any determination to withhold its Shares from sale, and
will indemnify Distributor against any loss suffered by Distributor as the
result of a good-faith acceptance by Distributor of an order for sale of Shares
of the Fund in accordance with Paragraph 8 hereof, and prior to receipt by
Distributor of such notice.
5. The Shares offered and sold through Distributor for the Fund's
account under this Agreement shall be offered and sold only at the then current
public offering price, provided that Distributor may employ the services of
subagents, or may offer Shares for sale for the Fund's account to other dealers,
and may allow such other dealers such commissions and may extend such
concessions or discounts as are set forth in the then current Registration
Statement and Prospectus filed with the Securities and Exchange Commission.
Dealers may, in the discretion of Distributor, be given exclusive or other sales
rights in State or other areas. No commission shall be allowed and no discounts
or concessions shall be extended by Distributor, however, unless Distributor
shall obtain a written agreement from each Dealer, running to Distributor and
the Fund to the effect that Dealer is a member of the National Association of
Securities Dealers, and will comply with the provisions of Section 26 of Article
III of the Rules of Fair Practice of that Association, and will not offer for
sale or sell Shares of the Fund at less than the public offering price set forth
in the then current Registration Statement and Prospectus.
6. The public offering price of Shares shall at all times be the
public offering price then in effect based on net asset value in the manner set
forth in the then current Registration Statement and the Prospectus included
therein filed by the Fund with the Securities and Exchange Commission to
register the Shares so offered. Until further notice from Fund to Distributor,
the public offering price will be determined by the Board of Directors of the
Fund, at the time and in the manner set forth in the Prospectus.
7. Distributor shall not, without the consent of the Fund, offer for
sale any Shares of the Fund other than Shares made available by the Fund under
this Agreement.
8. All orders for the purchase of Shares offered by the Distributor
for the account of the Fund shall be accepted at the time received by
Distributor, and at the offering price then in effect unless rejected by
Distributor or by the Fund. Distributor may not receive such orders subject to
acceptance or otherwise delay their execution. The Fund shall be promptly
advised of all such orders received, and shall make available proper
certificates for the Shares ordered for delivery against payment of the purchase
price. Certificates shall be delivered by the Fund only against receipt of the
purchase price, in Los Angeles, California Clearing House funds, subject to
deduction for the commissions of Distributor and Dealer as provided in Paragraph
9 of this Agreement. The provisions of this Paragraph 8 shall not operate to
impair the right of the Fund to withhold Shares from sale under the provisions
of Paragraph 4 of this Agreement, and Distributor or the Fund may reject any
order, provided that the Fund will indemnify Distributor against any loss
suffered by Distributor as the result of any order accepted in good faith by
Distributor which is rejected by the Fund, unless Distributor shall have
received, prior to acceptance of such order, notice from the Fund that such
order will be rejected, or that the Fund has determined to withhold Shares from
sale.
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<PAGE>
9. As compensation for its services as selling agent under this
Agreement, Distributor and the Dealer shall receive a commission in an amount
equal to 8.5% of the public offering price referred to in Paragraph 6 of this
Agreement in single transactions involving less than $10,000.00, reduced in
single transactions involving more than $10,000.00 as follows:
Sales Commis- Distributor's Dealer's Share
sion as Per- Share of of Sales Com-
Amount of centage of Sales Commission mission as Per-
Single Offering as Percentage of centage of
Transaction Price Offering Price Offering Price
Less than $10,000 8.5% 1.5% 7%
$10,000 or more
but less than
$25,000 7.75% 1.5% 5.4%
$25,000 or more
but less than
$50,000 6.9% 1.5% 5.4%
$50,000 or more
but less than
$100,000 4.8% 1.05% 3.75%
$100,000 or more
but less than
$250,000 3.5% 0.75% 2.75%
$250,000 or more
but less than
$500,000 2.6% 0.60% 2.0%
$500,000 or more
but less than
$1,000,000 2.0% 0.50% 1.5%
$1,000,000 or more
but less than
$5,000,000 1.5% 0.375% 1.125%
$5,000,000 and over 1.0% 0.25% 0.75%
A single transaction for the purpose of this Agreement shall be as defined in
the then current Registration Statement and Prospectus filed with the Securities
and Exchange Commission.
10. The Fund agrees to use its best efforts to qualify and maintain
the qualification of an appropriate number of its Shares for sale under the laws
regulating the sale of securities in such States as shall be mutually agreed
upon by the Distributor and the Fund. Any such qualification may be terminated
or withdrawn by the Fund at any time in its discretion.
11. The Fund agrees to furnish Distributor a proper form of Prospectus
for use in offering the Shares under this Agreement, with such revisions thereof
and additions thereto as may be necessary from time to time during the period of
this Agreement in order that such form of Prospectus may be suitable and lawful
for use in connection with an offering of Shares in interstate commerce, and in
States in which Shares are qualified for offering.
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<PAGE>
12. Insofar as they are used in connection with the sale and
distribution of the Shares, Distributor shall pay all costs and expenses
incurred in the preparation, printing and distribution of material required or
used in the sale, promotion, underwriting and distribution of the Shares,
including but not limited to all costs of printing and distribution only of
prospectuses, reports to shareholders and other similar material used in
connection with sales. Distributor shall also pay all other expenses in
connection with the offering for sale of Share to be made by it under this
Agreement, including the fees and expenses of its counsel and expenses of
obtaining proper licenses and authorizations to act as a dealer or salesman of
securities in the State of California and other States in which it may elect to
make such offerings as a dealer or salesman. The cost of carrying plan accounts
for the Fund's shareholders will be borne by the Fund; the cost of initiating
new share accounts, including the cost of initiating new investments in existing
accounts, will be borne by the Distributor. Distributor also agrees to pay the
service charge of the Fund's Custodian for each withdrawal check drawn in
connection with the Check-a-Month Payment Plan sponsored by the Fund.
Distributor agrees to pay for all costs and expenses incurred in the
preparation, printing, distribution and where necessary, filing with appropriate
Federal and State agencies, of all sales and advertising material and all
printed forms and data required or actually used in connection with the sale and
distribution of the Shares, whether contracts, order blanks, confirmation forms
or otherwise, but Distributor will not be responsible for expenses or costs in
connection with the qualification or registration of the Shares. Distributor
will not be liable or responsible for the preparation and distribution of proxy
statements.
13. Distributor agrees to submit to appropriate Federal and State
agencies, including the National Association of Securities Dealers, all sales
materials and forms prior to their use which are to be used in the sale,
promotion, underwriting and distribution of Shares, in compliance with such
rules as such agencies, including the National Association of Securities
Dealers, shall promulgate, and shall be solely responsible for any such material
prepared by Distributor which may be found not to be in compliance. Distributor
will inform the Fund what material is being used, and will send copies of all
such material to the Fund for its files.
14. Distributor agrees to render daily to the Fund (c/o Mr. Anthony
Guntermann, 308 East Carrillo Street, Santa Barbara, California) and to the
Fund's custodian the following: (1) statement of total number of Fund Shares
sold, giving gross sales amount, dealer discount, net amount due, Distributor
discount, and net to Fund; and (2) total number of Fund Shares redeemed and the
dollar amount thereof, and to cause the daily publication of the Fund's bid and
asked prices in the normal news media.
15. The Fund agrees and warrants that all registration statements from
time to time filed by it with the Securities and Exchange Commission will
contain all statements which are required to be stated therein, that all
Prospectuses will contain all statements required to be contained therein, and
will conform with the requirements of the Securities Act of 1933 as amended, and
the Investment Company Act of 1940 as amended, and the rules and regulations
thereunder; that no part of any registration statement or of any application for
qualification of said Shares under State securities laws will include, at the
time when it or they become effective, any untrue statement of a material fact,
or omit to state a material fact required to be stated thereunder, or necessary
to make the statements therein not misleading, and that no Prospectus will
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statement therein not misleading. Distributor
agrees that it will not in offering Shares for sale use any Prospectus or
advertising or sales material not approved in writing by the Fund, or make any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in the light of the circumstances under which
they are made, not misleading. The agreements and warranties of the Fund
contained in this Paragraph 15 are made for the benefit of and shall extend in
favor of each Dealer to whom sales are made through the Distributor, but only
upon the condition that such Dealer will not, in the offering of Shares for
sale, use any Prospectus or advertising or sales material not approved in
writing by the Fund and/or make any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading.
16. The Fund will immediately advise Distributor, confirming such
advice in writing, in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of any Registration
Statement or Prospectus, or the initiation of any proceedings for that purpose.
The Fund further agrees that if during the term of this Agreement the Securities
and Exchange Commission issues any such stop order it will make every reasonable
effort to obtain a lifting of such order at the earliest possible moment.
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<PAGE>
17. This Agreement shall continue in effect until midnight, March 31,
1975, and from year to year thereafter, but only so long as such continuance is
specifically approved at least annually in accordance with the provisions of
Section 15 of the Investment Company Act of 1940, as amended. Notwithstanding
the foregoing, this Agreement may be sooner terminated without payment of
penalty as follows:
(a) Upon either party giving to the other
party at least sixty (60) days' written notice of an intent to terminate;
(b) Upon the giving of at least five (5) days'
written notice by either party to the other party, fixing an earlier termination
date, upon the happening of any of the following events:
(i) The issuance by the Securities and
Exchange Commission of a stop order suspending the effectiveness of any
Registration Statement covering the Shares to be offered for the account of the
Fund.
(ii) The institution of court proceedings
by the Securities and Exchange Commission or any other authority empowered to
regulate the sale of securities to prevent the offering or sale of Shares to be
offered by Distributor for the account of the Fund under this Agreement.
(iii) The institution by the National
Association of Securities Dealers of disciplinary proceedings against
Distributor or proceedings to suspend or cancel the membership of Distributor in
that organization.
18. The books and records of Distributor insofar as they related to
sales of the Fund's Shares shall be open to inspection during business hours by
the officers and authorized representatives of the Fund, and the books and
records of the Fund relating to the determination of the offering price of
Shares shall be open to inspection during business hours by the officers and
authorized representatives of Distributor.
19. This Agreement shall not be assignable by either party hereto, and
in the event of assignment shall automatically be terminated forthwith. Transfer
of voting control of Distributor shall constitute an assignment for purposes of
this Paragraph 19.
20. In the event that any provision of this Agreement is now or in the
future in violation of the Investment Act of 1940, as now or a mended and in
effect, or any present or future rule or regulation at any time placed in effect
thereunder by the Securities and Exchange Commission or a registered securities
association or other authority empowered to make rules or regulations under said
Act, and such violation or prospective violation is brought to the attention of
the parties hereto and is not thereafter immediately eliminated by amendment of
this Agreement, this Agreement may be terminated forthwith by either party by
written notice to the other. The opinion of counsel for either party to this
Agreement as to the existence of such violation or prospective violation shall
be conclusive and binding on both parties for the purpose of termination under
this Paragraph 20.
21. The Fund agrees to indemnify and hold harmless the Distributor,
and each of the persons, if any, who control the Distributor (within the meaning
of Section 15 of the Securities act of 1933), any officer or director of the
Distributor, against liability, joint or several, to any person acquiring any of
the Shares which may be based upon Section 11 or 12 of said Act, or any other
statue, or the common law, or otherwise, by reason of the Fund's failure to
comply with its agreements under Paragraph 15 hereof, or by reason of the
furnishing by the Fund for inclusion in any Registration Statement, Prospectus,
or Amendment thereof, or any application for qualification of securities under
any other State law of any information containing a misstatement of a material
fact or which omits to state a material fact necessary in order to make the
information furnished not misleading. Such indemnity shall include expenses
(including counsel fees and the cost of any investigation and preparation for
any litigation) whether or not resulting in any liability, provided, however,
(a) that in no case shall the Fund be liable unless the party claiming indemnity
under the provisions of this Paragraph 21 shall have notified the Fund in
writing thereof within ten (10) days after summons or other legal process has
been served on the party against whom claim is made or such party's duly
designated agent for service of process; and (b) that liability of the Fund
shall not extend to any misstatement or omission in such Registration Statement,
Prospectus, or Securities Application which is the result of or based upon
information supplied to the Fund by the Distributor.
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<PAGE>
The Fund may at its option assume the defense of any suit brought to
enforce any such liability, but such defense shall be conducted by counsel of
good standing chosen by the Fund and satisfactory to the Distributor. If the
Fund elects to assume the defense of any such suit and retains counsel
satisfactory to the Distributor, the Distributor shall bear the fees and
expenses of any additional counsel retained by it; but in case the Fund does not
elect to assume the defense of any such suit, or if counsel retained by the Fund
is not satisfactory to the Distributor, the Fund will reimburse the Distributor
or the person or persons named as defendant in any such suit, for the fees and
expenses of any counsel retained by them.
The indemnification agreement contained in this Paragraph 21, and the
representations and warranties of the Fund in this Agreement shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Distributor or any person in control of the Distributor, and
shall survive the delivery of any Shares hereunder. The Fund agrees promptly to
notify the Distributor of the commencement of any litigation or proceedings
against it, or any of its officers and directors in connection with the issue or
sale of any of the Shares covered by any applicable Registration Statement.
22. The Distributor agrees to indemnify and hold harmless the Fund,
and each of the persons, if any, who control the Fund (within the meaning of
Section 15 of the Securities Act of 1933), and any officer or director of the
Fund, against liability, joint and several, to any person acquiring any of the
Shares which may be based upon Section 11 or 12 of said Act, or any other
statute, or the common law, or otherwise, by reason of Distributor's failure to
comply with its agreements under Paragraph 15 hereof, or by reason of the
furnishing by Distributor for inclusion in any Registration Statement,
Prospectus, or Amendment thereof or any application for qualification of
securities under any State law of any information containing a misstatement of a
material fact or which omits to state a material fact necessary in order to make
the information furnished not misleading. Such indemnity shall include expenses
(including counsel fees and the costs of any investigation and preparation for
any litigation) whether or not resulting in any liability, provided, however,
(a) that in no case shall Distributor be liable unless the party claiming
indemnity under the provisions of this Paragraph 22 shall have notified
Distributor in writing thereof within ten (10) days after summons or other legal
process shall have been served on the party against whom claim is made or such
party's duly designated agent for service of process; and (b) that liability of
the Distributor shall not extend to any misstatement or omission in such
Registration Statement, Prospectus or Securities Application which is the result
of or based upon information supplied by the Fund.
Distributor may at its option assume the defense of any suit brought
to enforce any such liability but such defense shall be conducted by counsel of
good standing chosen by Distributor and satisfactory to the Fund. If Distributor
elects to assume the defense of any such suit and retains counsel satisfactory
to the Fund the Fund shall bear the fees and expenses of any additional counsel
retained by it, but in case the Distributor does not elect to assume the defense
of any such suit, or if counsel retained by the Distributor is not satisfactory
to the Fund, Distributor will reimburse the Fund or the person or persons named
as defendant in any such suit, for the fees and expenses of any counsel retained
by them.
The indemnification agreement contained in this Paragraph 22, and the
representations and warranties of Distributor in this Agreement, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Fund or by any person in control of the Fund, and shall
survive the delivery of any Shares hereunder. Distributor agrees properly to
notify the Fund of the commencement of any litigation or proceedings against it,
or any of its officers and directors, in connection with the issue or sale of
any of the Shares covered by any application Registration Statement.
23. The Fund agrees to disclose this Agreement to the Securities and
Exchange Commission upon its execution, and approval by the Board of Directors
of the Fund.
24. Notwithstanding anything to the contrary herein contained, no
provision of this Agreement protects or purports to protect Distributor against
any liability to the Fund or its security holders to which Distributor would
otherwise be subject by reason of wilful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
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<PAGE>
25. Any and all notices required hereunder by or from either party
shall be in writing and shall be served by registered mail, postage prepaid.
Notices to the Fund shall be sent to 924 Laguna Street, Santa Barbara,
California 93101, and to Distributor at P. O. Box 357, Long Beach, California
90801. Either party may change the foregoing addresses by the service on the
other party of a written notice specifying the new address or addresses to which
notices are to be sent.
26. Distributor agrees not to act as principal underwriter of another
fund.
27. This Agreement shall be executed in two counterparts, each of
which shall be an original.
The parties hereto have caused this Agreement to be executed in their
corporate names by their duly authorized officers, and their corporate seals to
be affixed as of the day and year hereinbefore set forth.
INVESTORS RESEARCH FUND, INC. DIVERSIFIED SECURITIES INC.
By_________/S/______________ By____________/S/____________
John R. Noble Robert J. Conway
By_________/S/______________ By____________/S/____________
Francis S. Johnson Robert A. Wildenberg
- 86 -
CUSTODY AGREEMENT
Dated: August 11,1995
Between
UMB BANK, N.A.
and
INVESTORS RESEARCH FUND, INC.
This agreement made as of this 11th day of August, 1995, between Investors
Research Fund, Inc. with its principal place of business located at 3916 State
Street, Suite 3C, Santa Barbara, California 93105, (hereinafter "Fund"), and UMB
Bank, n.a., a national banking association with its principal place of business
located at Kansas City, Missouri (hereinafter "Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, the Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by the Fund which Assets are to
be held in such accounts as the Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
The Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to the Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the meanings
so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
scrip, warrants, interim certificates and all negotiable or nonnegotiable paper
commonly known as Securities and other instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by the
Custodian for the benefit of the Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a written request
(including, without limitation, facsimile transmission), direction, instruction
or certification signed or initialed by or on behalf of the Fund by an
Authorized Person; (ii) a telephonic or other oral communication from a person
the Custodian reasonably believes to be an Authorized Person; or (iii) a
communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) on behalf of the
Fund. Instructions in the form of oral communications shall be confirmed by the
Fund by in writing in the manner set forth in clause (i) above, but the lack of
such confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral Instructions prior to the Custodian's receipt of such
confirmation. The Fund authorizes the Custodian to record any and all telephonic
or other oral Instructions communicated to the Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the President or any Vice President of
the Fund or any other person designated by the President of the Fund in writing,
which countersignature or confirmation shall be included on the same instrument
containing the Instructions or on a separate instrument relating thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and the Fund.
(c)(4) Where appropriate, Instructions and Special Instructions shall be
continuing instructions.
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<PAGE>
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
The Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund as in
effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional information.
The Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, the Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of the Fund who will have continuing
authority to certify to the Custodian: (a) the names, titles, signatures and
scope of authority of all persons authorized to give Instructions or any other
notice, request, direction, instruction, certificate or instrument on behalf of
the Fund, and (b) the names, titles and signatures of those persons authorized
to countersign or confirm Special Instructions on behalf of the Fund (in both
cases collectively, the "Authorized Persons" and individually, an "Authorized
Person"). Such Resolutions and certificates may be accepted and relied upon by
the Custodian as conclusive evidence of the facts set forth therein and shall be
considered to be in full force and effect until delivery to the Custodian of a
similar Resolution or certificate to the contrary. Upon delivery of a
certificate which deletes or does not include the name(s) of a person previously
authorized to give Instructions or to countersign or confirm Special
Instructions, such persons shall no longer be considered an Authorized Person
authorized to give Instructions or to countersign or confirm Special
Instructions. Unless the certificate specifically requires that the approval of
anyone else will first have been obtained, the Custodian will be under no
obligation to inquire into the right of the person giving such Instructions or
Special Instructions to do so. Notwithstanding any of the foregoing, no
Instructions or Special Instructions received by the Custodian from the Fund
will be deemed to authorize or permit any director, trustee, officer, employee,
or agent of the Fund to withdraw any of the Assets of the Fund upon the mere
receipt of such authorization, Special Instructions or Instructions from such
director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of the Fund which are delivered
to it from time to time. The Custodian shall not be responsible for any property
of the Fund held or received by the Fund and not delivered to the Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of the Fund either:
(i) by physical possession of the share certificates or other instruments
representing such Securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of sub-paragraph (3) below.
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<PAGE>
(2) The Custodian may hold registrable portfolio Securities which have been
delivered to it in physical form, by registering the same in the name of the
Fund or its nominee, or in the name of the Custodian or its nominee, for whose
actions the Fund and Custodian, respectively, shall be fully responsible. Upon
the receipt of Instructions, the Custodian shall hold such Securities in street
certificate form, so called, with or without any indication of fiduciary
capacity. However, unless it receives Instructions to the contrary, the
Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the Fund or only assets held by the
Custodian as a fiduciary, provided that the records of the Custodian shall
indicate at all times the Fund or other customer for which such Securities are
held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities owned by
the Fund in, and the Fund hereby approves use of: (a) The Depository Trust
Company; (b) The Participants Trust Company; and (c) any book-entry system as
provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by the Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through one or
more agents or Subcustodians which are also qualified to act as custodians for
investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities in a
Securities System, provided that such Securities are represented in an account
("Account") of the Custodian in the Securities System that includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for the benefit of
customers.
(iii) The books and records of the Custodian shall at all times identify
those Securities belonging to the Fund which are maintained in a Securities
System.
(iv) The Custodian shall pay for Securities purchased for the account of
the Fund only upon (a) receipt of advice from the Securities System that such
Securities have been transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall transfer Securities sold for the account of the
Fund only upon (a) receipt of advice from the Securities System that payment for
such Securities has been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from the Securities System
relating to transfers of Securities for the account of the Fund shall be
maintained for the Fund by the Custodian. The Custodian shall deliver to the
Fund on the next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the account of the
Fund. Such transaction reports shall be delivered to the Fund or any agent
designated by the Fund pursuant to Instructions, by computer or in such other
manner as the Fund and Custodian may agree.
(v) The Custodian shall, if requested by the Fund pursuant to Instructions,
provide the Fund with reports obtained by the Custodian or any Subcustodian with
respect to a Securities System's accounting system, internal accounting control
and procedures for safeguarding Securities deposited in the Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System on behalf of the Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of the Fund maintained with such Securities System.
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<PAGE>
(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with the Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for the Fund for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will deposit any such Securities in
accordance with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange Securities
held by it in temporary form for Securities in definitive form, to surrender
Securities for transfer into a name or nominee name as permitted in Section
4(b)(2), to effect an exchange of shares in a stock split or when the par value
of the stock is changed, to sell any fractional shares, and, upon receiving
payment therefor, to surrender bonds or other Securities held by it at maturity
or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the Custodian
shall, with respect to a purchase of Securities, pay for such Securities out of
monies held for the Fund's account for which the purchase was made, but only
insofar as monies are available therein for such purpose, and receive the
portfolio Securities so purchased. Unless the Custodian has received Special
Instructions to the contrary, such payment will be made only upon receipt of
Securities by the Custodian, a clearing corporation of a national Securities
exchange of which the Custodian is a member, or a Securities System in
accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, upon receipt of Instructions: (i) in connection with a repurchase
agreement, the Custodian may release funds to a Securities System prior to the
receipt of advice from the Securities System that the Securities underlying such
repurchase agreement have been transferred by book-entry into the Account
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the Securities
System may make payment of such funds to the other party to the repurchase
agreement only upon transfer by book-entry of the Securities underlying the
repurchase agreement into such Account; (ii) in the case of Interest Bearing
Deposits, currency deposits, and other deposits, foreign exchange transactions,
futures contracts or options, pursuant to Sections 4(g), 4(h), 4(l), and 4(m)
hereof, the Custodian may make payment therefor before receipt of an advice of
transaction; and (iii) in the case of Securities as to which payment for the
Security and receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument representing
the Security expected to take place in different locations or through separate
parties, such as commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar Securities, the Custodian may make payment for
such Securities prior to delivery thereof in accordance with such generally
accepted trade practice or the terms of the instrument representing such
Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of the Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian will,
with respect to a sale, deliver or cause to be delivered the Securities thus
designated as sold to the broker or other person specified in the Instructions
relating to such sale. Unless the Custodian has received Special Instructions to
the contrary, such delivery shall be made only upon receipt of payment therefor
in the form of: (a) cash, certified check, bank cashier's check, bank credit, or
bank wire transfer; (b) credit to the account of the Custodian with a clearing
corporation of a national Securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities System,
in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, Securities held in physical form may be delivered and paid for in
accordance with "street delivery custom" to a broker or its clearing agent,
against delivery to the Custodian of a receipt for such Securities, provided
that the Custodian shall have taken reasonable steps to ensure prompt collection
of the payment for, or return of, such Securities by the broker or its clearing
agent, and provided further that the Custodian shall not be responsible for the
selection of or the failure or inability to perform of such broker or its
clearing agent or for any related loss arising from delivery or custody of such
Securities prior to receiving payment therefor.
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<PAGE>
(2) Other Assets Sold. Upon receipt of Instructions and except as otherwise
provided herein, the Custodian shall receive payment for and deliver other
Assets for the account of the Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an option or
sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by the Fund; (b) if the transaction involves the sale of a covered
call option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of the Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions. (2) Upon receipt of Instructions relating to the sale of a
naked option (including stock index and commodity options), the Custodian, the
Fund and the broker-dealer shall enter into an agreement to comply with the
rules of the OCC or of any registered national securities exchange or similar
organizations(s). Pursuant to that agreement and the Fund's Instructions, the
Custodian shall: (a) receive and retain confirmations or other documents, if
any, evidencing the writing of the option; (b) deposit and maintain in a
segregated account, Securities (either physically or by book-entry in a
Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The Fund and the broker-dealer shall be responsible for
determining the quality and quantity of assets held in any segregated account
established in compliance with applicable margin maintenance requirements and
the performance of other terms of any option contract.
(h) Futures Contracts.
N/A
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and maintain on
its books a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred Assets of the Fund, including
Securities maintained by the Custodian in a Securities System pursuant to
Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
purpose of compliance by the Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
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<PAGE>
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the Fund of such action in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing.
The Fund agrees that if it gives an Instruction for the performance of an
act on the last permissible date of a period established by any optional offer
or on the last permissible date for the performance of such act, the Fund shall
hold the Bank harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of the Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of the Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as the Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. Dollars
or other currencies, as the Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to the Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
N/A
(n) Pledges or Loans of Securities.
(1) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the Fund to the borrower thereof
only upon receipt of the collateral for such borrowing. The Custodian shall have
no responsibility or liability for any loss arising from the delivery of
Securities prior to the receipt of collateral. Upon receipt of Instructions and
the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends, rights, and
other items of like nature and, upon receipt of Instructions, take action with
respect to the same as directed in such Instructions.
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(p) Routine Dealings.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of the Fund except as may be otherwise provided in this Agreement
or directed from time to time by Instructions from the Fund. The Custodian may
also make payments to itself or others from the Assets for disbursements and
out-of-pocket expenses incidental to handling Securities or other similar items
relating to its duties under this Agreement, provided that all such payments
shall be accounted for to the Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to the Fund with
respect to portfolio Securities and other Assets; (b) promptly credit to the
account of the Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collection; and (d) promptly execute ownership and other
certificates and affidavits for all federal, state, local and foreign tax
purposes in connection with receipt of income or other payments with respect to
portfolio Securities and other Assets, or in connection with the transfer of
such Securities or other Assets; provided, however, that with respect to
portfolio Securities registered in so-called street name, or physical Securities
with variable interest rates, the Custodian shall use its best efforts to
collect amounts due and payable to the Fund. The Custodian shall notify the Fund
in writing by facsimile transmission or in such other manner as the Fund and
Custodian may agree in writing if any amount payable with respect to portfolio
Securities or other Assets is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and payable
with respect to portfolio Securities or other Assets that are in default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account or
accounts on the books of the Custodian; provided that such bank account(s) shall
be in the name of the Custodian or a nominee thereof, for the account of the
Fund, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.
(s) Dividends, Distributions and Redemptions.
To enable the Fund to pay dividends or other distributions to shareholders
of the Fund and to make payment to shareholders who have requested repurchase or
redemption of their shares of the Fund (collectively, the "Shares"), the
Custodian shall release cash or Securities insofar as available. In the case of
cash, the Custodian shall, upon the receipt of Instructions, transfer such funds
by check or wire transfer to any account at any bank or trust company designated
by the Fund in such Instructions. In the case of Securities, the Custodian
shall, upon the receipt of Special Instructions, make such transfer to any
entity or account designated by the Fund in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received for
shares issued or sold from time to time by the Fund, and shall credit such funds
to the account of the Fund. The Custodian shall notify the Fund of Custodian's
receipt of cash in payment for shares issued by the Fund by facsimile
transmission or in such other manner as the Fund and the Custodian shall agree.
Upon receipt of Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for shares as may be set forth in such
Instructions and at a time agreed upon between the Custodian and the Fund; and
(b) make federal funds available to the Fund as of specified times agreed upon
from time to time by the Fund and the Custodian, in the amount of checks
received in payment for shares which are deposited to the accounts of the Fund.
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(u) Proxies and Notices; Compliance with the Shareholders Communication Act
of 1985.
The Custodian shall deliver or cause to be delivered to the Fund all forms
of proxies, all notices of meetings, and any other notices or announcements
affecting or relating to Securities owned by the Fund that are received by the
Custodian, any Subcustodian, or any nominee of either of them, and, upon receipt
of Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of the Fund to an issuer which
requests such information pursuant to the Shareholder Communications Act of 1985
for the specific purpose of direct communications between such issuer and the
Fund unless the Fund directs the Custodian otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities under
this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be open
for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the Fund during normal business hours of the
Custodian.
The Custodian shall provide accountings relating to its activities under
this Agreement as shall be agreed upon by the Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as the Fund may request to
obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of the Fund's periodic reports
to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of the Fund, the Custodian shall deliver to the Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be paid,
all bills, statements, or other obligations of the Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Special
Subcustodians, or Interim Subcustodians (as each are hereinafter defined) to act
on behalf of the Fund. A Domestic Subcustodian, in accordance with the
provisions of this Agreement, may also appoint a Special Subcustodian, or
Interim Subcustodian to act on behalf of the Fund. For purposes of this
Agreement, all Domestic Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act or any trust company or other entity,
any of which meet the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act for the Custodian on
behalf of the Fund as a subcustodian for purposes of holding Assets of the Fund
and performing other functions of the Custodian within the United States (a
"Domestic Subcustodian"). The Fund shall approve in writing the appointment of
the proposed Domestic Subcustodian; and the Custodian's appointment of any such
Domestic Subcustodian shall not be effective without such prior written approval
of the Fund. Each such duly approved Domestic Subcustodian shall be listed on
Appendix A attached hereto, as it may be amended, from time to time.
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(b) Foreign Subcustodians.
N/A
(c) Interim Subcustodians.
N/A
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf of the
Fund, appoint one or more banks, trust companies or other entities designated in
such Special Instructions to act for the Custodian on behalf of the Fund as a
subcustodian for purposes of: (i) effecting third-party repurchase transactions
with banks, brokers, dealers or other entities through the use of a common
custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
the Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the Fund in Special Instructions. The Custodian shall not
amend any subcustodian agreement entered into with a Special Subcustodian, or
waive any rights under such agreement, except upon prior approval pursuant to
Special Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to the
Fund, terminate any Subcustodian of the Fund in accordance with the termination
provisions under the applicable subcustodian agreement, and upon the receipt of
Special Instructions, the Custodian will terminate any Subcustodian in
accordance with the termination provisions under the applicable subcustodian
agreement.
(f) Certification Regarding Foreign Subcustodians.
N/A
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to the Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by the Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, Securities System, Securities Depository or
Clearing Agency utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a "Person") is
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of: (a) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or of
any foreign country, or political subdivision thereof or of any court of
competent jurisdiction (and neither the Custodian nor any other Person shall be
obligated to take any action contrary thereto); or (b) any event beyond the
control of the Custodian or other Person such as armed conflict, riots, strikes,
lockouts, labor disputes, equipment or transmission failures, natural disasters,
or failure of the mails, transportation, communications or power supply; or (ii)
for any loss, damage, cost or expense resulting from "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
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(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by the Fund,
insofar as such loss, damage or expense arises from the performance of the
Custodian or any Domestic Subcustodian in reasonable reliance upon records that
were maintained for the Fund by entities other than the Custodian or any
Domestic Subcustodian prior to the Custodian's employment hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled to receive
advice of counsel of its own choosing on all matters.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of the
Fund and upon statements of the Fund's accountants and other persons believed by
it in good faith to be expert in matters upon which they are consulted, and
neither the Custodian nor any Domestic Subcustodian shall be liable for any
actions taken or omitted, in good faith, pursuant to such advice or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected and
indemnified in acting as a custodian hereunder upon any Resolutions of the Board
of Directors or Trustees, Instructions, Special Instructions, advice, notice,
request, consent, certificate, instrument or paper reasonably appearing to it to
be genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from the Fund hereunder a certificate
signed by any officer of the Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions hereof, neither the
Custodian nor any Domestic Subcustodian shall be under any duty or obligation to
inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for the
Fund, the legality of the purchase thereof or evidence of ownership required to
be received by the Fund, or the propriety of the decision to purchase or amount
paid therefor;
(ii) the legality of the sale of any Securities by or for the Fund, or the
propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings or
similar actions with respect to the Fund's Assets; and may, until notified to
the contrary, presume that all Instructions or Special Instructions received by
it are not in conflict with or in any way contrary to any provisions of the
Fund's Declaration of Trust, Partnership Agreement, Articles of Incorporation or
By-Laws or votes or proceedings of the shareholders, trustees, partners or
directors of the Fund, or the Fund's currently effective Registration Statement
on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
N/A
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
Securities Depositories and Clearing Agencies.
The Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.
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(d) Defaults or Insolvencies of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense suffered
or incurred by the Fund resulting from or occasioned by the actions, omissions,
neglects, defaults or insolvency of any broker, bank, trust company or any other
person with whom the Custodian may deal (other than any of such entities acting
as a Subcustodian, Securities System or Securities Depository and Clearing
Agency, for whose actions the liability of the Custodian is set out elsewhere in
this Agreement) unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
The Fund agrees to reimburse the Custodian for all out-of-pocket expenses
incurred by the Custodian in connection with this Agreement, but excluding
salaries and overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, the Fund agrees to
indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If the Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition to
the obligations provided in Sections 6 and 7, the Custodian agrees to indemnify
and hold harmless the Fund from all losses, damages and expenses suffered or
incurred by the Fund caused by the negligence or willful misfeasance of the
Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of the Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of the Fund, the Custodian
may, in its discretion without further Instructions, provide an advance
("Advance") to the Fund in an amount sufficient to allow the completion of the
transaction by reason of which such payment or transfer of funds is to be made.
In addition, in the event the Custodian is directed by Instructions to make any
payment or transfer of funds on behalf of the Fund as to which it is
subsequently determined that the Fund has overdrawn its cash account with the
Custodian as of the close of business on the date of such payment or transfer,
said overdraft shall constitute an Advance. Any Advance shall be payable by the
Fund on demand by Custodian, unless otherwise agreed by the Fund and the
Custodian, and shall accrue interest from the date of the Advance to the date of
payment by the Fund to the Custodian at a rate agreed upon in writing from time
to time by the Custodian and the Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund, and not, by reason of such Advance, deemed to be a transaction
undertaken by the Custodian for its own account and risk. The Custodian and the
Fund acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance with the
settlement terms of such transactions or to meet emergency expenses not
reasonably foreseeable by the Fund. The Custodian shall promptly notify the Fund
of any Advance. Such notification shall be sent by facsimile transmission or in
such other manner as the Fund and the Custodian may agree.
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10. SECURITY FOR OBLIGATIONS TO CUSTODIAN.
If the Custodian or any Subcustodian, Securities System, or Securities
Depository or Clearing Agency acting either directly or indirectly under
agreement with the Custodian, or any nominee of any of the foregoing, shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement (collectively
"Liability"), except such as may arise from its or its nominee's breach of the
relevant standard of care set forth in this Agreement, or if the Custodian, or
any such Subcustodian, Securities System, or Securities Depository or Clearing
Fund, then in such event property of the Fund equal in value to not more than
110% of such Advance and accrued interest thereon or the anticipated amount of
such Liability shall be held as security for such Liability or for such Advance
and the interest thereon.
The Fund shall reimburse the Custodian promptly for any Liability and shall
pay any Advances on demand after notice from the Custodian to the Fund of the
existence of the Advance. If, after notification, Fund shall fail to promptly
pay such Advance or interest when due or shall fail to reimburse the Custodian
promptly in respect of a Liability, the Custodian or any such Subcustodian,
Securities System, or Securities Depository or Clearing Agency shall be entitled
to utilize available cash or dispose of the Fund's Assets to the extent, and
only to the extent, necessary to obtain repayment or reimbursement.
11. COMPENSATION.
The Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and the Fund from time to time. Such compensation,
together with all amounts for which the Custodian is to be reimbursed in
accordance with Section 7(e), shall be billed to the Fund and paid in cash to
the Custodian.
12. POWERS OF ATTORNEY.
Upon request, the Fund shall deliver to the Custodian such proxies, powers
of attorney or other instruments as may be reasonable and necessary or desirable
in connection with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement.
13. TERMINATION AND ASSIGNMENT.
The Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the Fund
shall pay to the Custodian such fees as may be due the Custodian hereunder as
well as its reimbursable disbursements, costs and expenses paid or incurred.
Upon termination of this Agreement, the Custodian shall deliver, at the
terminating party's expense, all Assets held by it hereunder to the Fund or as
otherwise designated by the Fund by Special Instructions. Upon such delivery,
the Custodian shall have no further obligations or liabilities under this
Agreement except as to the final resolution of matters relating to activity
occurring prior to the effective date of termination.
This Agreement may not be assigned by the Custodian or the Fund without the
respective consent of the other, duly authorized by a resolution by its Board of
Directors or Trustees.
14. NOTICES.
Notices, requests, instructions and other writings delivered to the Fund at
3916 State Street, Suite 3C, Santa Barbara, CA 93105, postage prepaid, or to
such other address as the Fund may have designated to the Custodian in writing,
shall be deemed to have been properly delivered or given to the Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration Department of the Custodian at its office at 928 Grand
Avenue, Kansas City, Missouri, or mailed postage prepaid, to the Custodian's
Securities Administration Department, Post Office Box 226, Kansas City, Missouri
64141, or to such other addresses as the Custodian may have designated to the
Fund in writing, shall be deemed to have been properly delivered or given to the
Custodian hereunder; provided, however, that procedures for the delivery of
Instructions and Special Instructions shall be governed by Section 2(c) hereof.
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15. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or waived, in
any manner except in writing, properly executed by both parties hereto;
provided, however, Appendix A may be amended from time to time as Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated according to the
terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of execution hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liability 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(c)
Subcustodian 5
1940 Act 4(v)
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(h) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their duly respective authorized officers.
INVESTORS RESEARCH FUND, INC.
ATTEST:
/S/
By: /S/
Name: Francis S. Johnson
Title: President
Date: 8/16/95
UMB BANK, N.A.
ATTEST:
/S/
By: /S/
Name: Ralph R. Santaro
Title: Vice President
Date: 8/17/95
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APPENDIX A
DOMESTIC SUBCUSTODIANS:
United Missouri Bank Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS AND CLEARING AGENCIES
Euroclear
Investors Research Fund, Inc. UMB Bank, n.a.
By: /S/ By: /S/
Name: Francis S. Johnson Name: Ralph R. Santaro
Title: President Title: Vice President
Date: 8/16/95 Date: 8/17/95
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UMB Bank, n.a.
Schedule of Fees
Investors Research Fund, Inc.
Net Asset Value Charges
A fee to be computed as of month end and payable on the last day of each
month of the portfolios' fiscal year, at the annual rate of:
1.00 basis point on the combined net assets up to $250,000,000;
.75 basis point on the next $250,000,000 of combined net assets;
.50 basis points on the combined net assets in excess of $500,000,000;
subject to a $500.00 per month minimum per portfolio.
Portfolio Transaction Fees
DTC* $5.00
PTC* 12.00
Fed Book Entry* 8.00
Physical* 20.00
Third Party (Bank Book Entry)* 15.00
Principal & Interest Payments 5.00
Options/Futures 25.00
Corporate Actions/Calls/Reorgs 25.00
UMB Repurchase Agreements 5.00
Checks Issued 10.00
*A transaction includes buys, sells, maturities, or free security
movements.
Out-of-Pocket Expenses
Including, but not limited to, security transfer fees, certificate
fees, FDIC insurance premiums, shipping/courier fees or charges, and
remote system access charges.
Earnings Credits
Earnings credits will be computed on all collected custody balances
using 75% of the UMB daily Fed Funds rate. Overdrafts will be computed
using the Fed Funds rate plus 1.5% (150 basis points) on each day an
overdraft occurs. Positive and/or negative credits will be monitored
daily and the net positive or negative credit amount(s) will be
included in the monthly fee statement. Any earnings credits that are
not applied in full to the UMB invoice will expire at the end of each
calendar year.
The fees stated in this schedule shall remain in effect for a period of two
years. Fees for services not contemplated by this schedule shall be negotiated
on a case-by-case basis.
INVESTORS FUNDS, INC. UMB BANK, N.A.
By:_______/S/_____________ BY:__________/S/__________________
Name: Francis S. Johnson Name: Ralph R. Santoro
Title: President Title: Vice President
Date: 8/16/95 Date: 8/17/95
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CAVALLETTO, WEBSTER, MULLEN & McCAUGHEY
112 East Victoria St., Box 779
Santa Barbara, California
Woodland 6-1501
May 14, 1959
Invcestors Research Fund, Inc.
922 Laguna Street
Santa Barbara, California
Gentlemen:
We have examined the Registration Statement to be filed by you on Form
S-5 with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended for the purpose of registering an additional 215,940 shares
of your Common Stock, par value $1.00 per share (hereinafter call the "Stock").
We have also examined the procedings heretofore taken by you in connection with
the authorization, issue and sale of the Stock, including copies of resolutions
heretofore adopted by your Board of Directors.
It is our opinion that, subject to issuance by the Commis sioner of
Corporations of the State of Califronia of an appropriate permit authorizing the
issuance and sales of the Stock by you, the Stock, when sold and issued pursuant
to said proceedings so taken and in the manner contemplated in said Registration
Statement, will be legally issued, fully paid and nonassessable Common Stock of
your corporation.
We consent to the use of this opinion as an exhibit to said
Registration Statement.
Respectfully Submitted,
/S/
CAVALLETTO, WEBSTER, MULLEN
&McCAUGHEY
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INVESTORS RESEARCH FUND, INC.
MASTER SELF-EMPLOYED RETIREMENT PLAN ADOPTION AGREEMENT
Basic Plan Document No. 01
(As amended and restated for years beginning after December 31, 1986)
The employer named below hereby:
A. [ ] Establishes, effective ________________ (the "Effective Date"), a
profit-sharing plan and trust to be known as
_____________________________________________Plan (the "Plan") in the form
of the Investors Research Fund, Inc. Master Self-Employed Retirement Plan
(as amended and restated effective for Plan Years beginning after December
31, 1986):
-OR-
B. [ ] Amends, restates and continues, effective __________________________
(the "Effective Date"). originally established on _____________________1991
(the "Original Plan"), in the form of the Investors Research Fund,Inc.
Master Self-Employed Retirement Plan (as amended and restated effective for
Plan Years beginning after December 31, 1986).
The Employer and each Participant named herein, acknowledge receipt of a
current prospectus of Investors Research Fund, Inc., in addition to a copy
of the Plan.
Capitalized terms in this Adoption Agreement are defined in the Plan. The
Plan and this Adoption Agreement shall be read and construed together.
1. The Employer
(a) Name of Adopting Employer: ______________________________________
Nature of business: ____________________________________________
The Adopting Employer is [ ] a sole proprietor, or [ ] a
partnership.
Business address: __________________________________________
Adopting Employer's federal tax ID no. _____________________
Fiscal year end (if not December 31) ____________________________
(b) List each other employer that must be aggregated with the
Adopting Employer under Code sections 414(b), (c), (m) or (o).
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(Note: The Plan must cover all employees of the Adopting Employer and any
other related employer under Code sections 414(b), (c), (m), or (o), that
have met the eligibility requirements specified in Item 2. below.
FOR ALL PURPOSES OF THE PLAN, ALL EMPLOYEES OF THE ADOPTING EMPLOYER AND
ANY OTHER
RELATED EMPLOYER SHALL BE TREATED AS EMPLOYED BY THE ADOPTING EMPLOYER.)
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<PAGE>
2. Eligibility Requirements
Each Employee will be eligible to participate in this Plan in
accordance with Article III of the Plan, except the following:
(a) [ ] Employees who have not completed _____Year(s) of Service.
(The required number of Years of Service must be a whole number.
No more than 1 year of Service may be required; except that if
Item 10(a) (full and immediate vesting) is elected, the required
number of Years of Service may be no more than 2.)
(b) [ ] Employees who have not attained age_____(not greater than age
21).
(c) [ ] Employees included in a unit of employees covered by
collective bargaining agreement between the Employer and employee
representatives, if retirement benefits were the subject of good
faith bargaining and if 2 percent or less of the employees of the
Employer who are covered pursuant to that agreement are
professionals as defined in Section 1.410(b)-9(g) of the proposed
regulations. For this purpose, the term "employee
representatives" does not include any organization more than half
of whose members are employees who are owners, officers, or
executives of the Employer.
(d) [ ] Employees who are nonresident aliens (within the meaning of
section 7701(b)(1)(B) and who receive no earned income (within
the meaning of section 911(d)(2) from the Employer which
constitutes income from sources within the United States (within
the meaning of section 861(a)(3)).
(e) [ ] Employees who terminate employment during the Plan Year with
not more than 500 Hours of Service and who are not Employees on
the last day of the Plan Year.
3. Compensation
Compensation will mean all of each Participant's Section 415
safe-harbor compensation (as that term is defined in Section 4.5(b) of
the Plan).
(a) Which is actually paid to the Participant during
[ ] the Plan Year.
[ ] the calendar year ending with or within the Plan Year.
(b) Compensation
[ ] shall include
[ ] shall not include
Employer contributions made pursuant to a salary reduction agreement
which are not includable in the gross income of the Employee under
Sections 125.402(a)(8), 402(h) or 403(b) of the Code.
4. IF THE EMPLOYER MAINTAINS OR HAS EVER MAINTAINED ANOTHER QUALIFIED
PLAN IN WHICH ANY PARTICIPANT IN THIS PLAN IS (OR WAS) A PARTICIPANT
OR COULD POSSIBLY BECOME A PARTICIPANT, THE EMPLOYER MUST COMPLETE
THIS SECTION 4. THE EMPLOYER MUST ALSO COMPLETE THIS SECTION IF IT
MAINTAINS A WELFARE BENEFIT FUND, AS DEFINED IN SECTION 419(e) OF THE
CODE, OR AN INDIVIDUAL MEDICAL ACCOUNT, AS DEFINED IN SECTION
415(1)(2) OF THE CODE, UNDER WHICH AMOUNTS ARE TREATED AS ANNUAL
ADDITIONS WITH RESPECT TO ANY PARTICIPANT IN THIS PLAN.
(a) [ ] If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan, the provisions of Section 4.4(b) of the Plan
will apply.
(b) [ ] If the Participant is, or has ever been, a Participant in a
defined benefit plan maintained by the Employer.
============================================================
============================================================
5. The term "Plan Year" shall mean:
The 12-consecutive month period which ends on each ____________, and
each anniversary thereof.
(Note: You may not elect a Plan Year which ends in a day other than
the last day of a calendar month.)
6. Employee contributions are prohibited for Plan Years beginning after
the Plan Year in which this Plan, as amended, is adopted by the
Employer. Special rules apply with respect to Employer contributions
made during Plan Years which began after December 31, 1986. See
Section 4.6 of the Plan.
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<PAGE>
7. (a) [ ] The limitation year is the 12-consecutive month period which
ends on each ___________.
(b) [ ] The limitation year is the Plan Year.
8. For each Participant, "Normal Retirement Age" shall be:
(a) [ ] Age ____(not to exceed 65).
(b) The later of age _____(not to exceed 65) or the _____(not to
exceed 5th) anniversary of the "participation commencement date."
The "participation commencement date" is the first day of the
first Plan Year in which the Participant commenced participation
in the Plan.
9. The Employer's annual contribution, subject to the limitations of
Section 4.4 of the Plan, shall be:
(a) [ ] An amount determined by resolution of the Employer.
(b) [ ] _____percent (not to exceed 15) of the total Compensation of
all Participants for the Plan Year in question.
(c) [ ] Contributions on behalf of disabled Participants:
The Employer_____will_____will not make contributions on behalf of
disabled Participants on the basis of the Compensation each such
Participant would have received for the Plan Year in question if the
Participant had been paid at the rate of Compensation paid immediately
before becoming permanently and totally disabled. Such imputed
Compensation for the disabled Participant may be taken into account
only if the Participant is not a Highly Compensated Employee and
contributions made on behalf of such Participant are nonforfeitable
when made.
10. Vesting Schedule
A participant's Account shall become vested, i.e. nonforfeitable upon
his or her termination of employment for reasons other than death,
disability or attainment of Normal Retirement Age (in 7.1 of the
Plan):
(a) [ ] Participants' Accounts will be immediately and fully vested.
(b) [ ] The nonforfeitable interest of each Participant in her or her
Account (to the extent attributable to Employer contributions)
shall be determined on the following basis: [ ] 100 percent
vesting after_____(not to exceed 3, except that if the required
number of Years of Service under 2(a) is 2, then the number of
Years of Service for 100 percent vesting cannot exceed (2) Years
of Service.
or,
[ ] _____percent (not less than 20) vesting after 2 years of
service; [ ] _____percent (not less than 40) vesting after 3
years of service; [ ] _____percent (not less than 60) vesting
after 4 years of service; [ ] _____percent (not less than 80)
vesting after 5 years of service; [ ] 100 percent vesting after 6
years of service.
(c) All of an Employee's Years of Service with the Employer shall be
counted for purposes of determining her or her nonforfeitable
percentage in the Employee's Account (to the extent derived from
Employer contributions) except that the following Years of
Service shall be disregarded:
[ ] Years of Service before the Employer adopted this Plan or a
predecessor plan:
[ ] Years of Service before the Employee attained age 18.
11. Integration with Social Security
This Plan may not provide for permitted disparity if the Employer
maintains any other plan that disparity and benefits to any of the
same participants.
(a) [ ] (Optional) Allocation of Employer contributions and
forfeitures, if any, shall be integrated with benefits under the
Social Security Act (see Section 4.3 of the Plan).
(b) [ ] The integration level is equal to:
[ ] Taxable wage base
[ ] $________(a dollar amount less than the taxable wage base)
[ ] _____percent of taxable wage base (not to exceed 100 percent)
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<PAGE>
12. Present Value. Top-Heavy Ratio
(a) [ ] For purposes of determining the top-heavy ratio, the present
value of accrued benefits under a defined benefit pension plan
shall be discounted for mortality and interest based on the
following:
Interest rate:____percent
Mortality Table:_______________
(b) [ ] Not Applicable. Employer has never maintained one or more
defined benefits plans.
13. Simplified Definition of Highly Compensated Employee
[ ] The simplified definition of Highly Compensated Employee in
Section 2.10(g) of the Plan for Employers that maintain significant
business activities (and employ employees) in at least two
significantly separate geographic areas will apply.
14. Appointment of Custodian and Accounting and Reporting Agent
(a) The Employer appoints Investors Fiduciary Trust Company, or its
successor, as Custodian under the Plan.
(b) The Employer appoints DST Systems, Inc. to serve as Accounting
and Reporting Agent, in accordance with the Agreement, which is
incorporated by reference, effective upon acceptance by DST
Systems. DST Systems will furnish accounting and reporting
services.
(c) The fee schedules for the Custodian and the Accounting and
Reporting Agent are attached hereto as Schedule "C", and are
incorporated herein. Fees may be changed upon notice to the
Employer.
15. Adoption of the Plan.
Adopted this ______day of ______________________, 19___.
---------------------------------------------------------
(Signature of Employer if Sole Proprietor)
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(Signature of Partner if Partnership)
16. RELIANCE ON OPINION LETTER
An Employer who has maintained or who later adopts any plan (including
a welfare benefit fund as defined in Section 419(e) of the Code, which
provides post-retirement medical benefits allocated to separate
accounts for key employees, as defined in section 419A(d)(3) of the
Code or an individual medical account, as defined in section 415(I)(2)
of the Code) in addition to this Plan may not rely on the opinion
letter issued by the National Office of the Internal Revenue Service
that this Plan is qualified under Section 401 of the Internal Revenue
Code. If the Employer who adopts or maintains multiple plans wishes to
obtain reliance that his or her plan(s) are qualified, application for
a determination letter should be made to the appropriate Key District
Director of Internal Revenue.
This Adoption Agreement may be used only with the Basic Plan Document
No. O1.
Failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan. Investors Research Fund, Inc., the
Sponsoring Organization, will inform the Employer of any amendments
made to the Plan or of the discontinuance or abandonment of the plan.
The name, address and telephone number of the Sponsoring Organization's
authorized representative is:
Hugh J. Haferkamp, Esq.
1335 State Street
Santa Barbara, California 93101
(805) 963-0538
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<PAGE>
17. Custodian and Accounting and Reporting Agent Acceptance DST Systems,
Inc. will act as Accounting and Reporting Agent, and Investors
Fiduciary Trust Co. (IFTC) will act as Custodian of your Plan.
Acceptance by Investors Fiduciary Trust Company of its appointment as
Custodian and the establishment of the Custodian Account shall be
effective upon its receipt of the Employer's initial contribution. The
receipt of your confirmation statement from DST Systems, Inc. will
serve as your confirmation of its acceptance. You will not receive an
executed copy of this Adoption Agreement. The Custodian's fees may be
deducted from each Participant's account.
18. Payment and Mailing Instructions
Mail the following to:
DST Systems, Inc.,
Post Office Box 958,
Kansas City, Missouri 64141:
(a) Account application along with completed and signed Adoption
Agreement; and (b) Initial contribution check made payable to
Investors Research Fund, Inc.
FOR DEALER ONLY (Please type or print):
-----------------------------------------------
Dealer's Name
By:____________________________________________
Authorized Signature of Dealer
-----------------------------------------------
Representative's Name
-----------------------------------------------
Branch Office
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<PAGE>
SCHEDULE A
The following information must be completed by each Participant under the Plan:
The named Participant hereby designates the person(s) named below as his or
her Beneficiary to receive any benefits from his or her Account which may
become due at or after his or her death according to the terms and
conditions of the Plan. If more than one person is named, any payments will
be paid in equal shares to each of the designated persons, survivor or
survivors as shall then be living, or if none, pursuant to the terms of the
Plan.
Each Participant reserves the right to change or revoke the beneficiary
designation without notice to any Beneficiary, except that his or her
spouse's consent shall be required if the spouse is eliminated as primary
Beneficiary.
A. Name of Participant____________________________________________________
Address________________________________________________________________
City_______________________________State______Zip Code_________________
B. Social Security Number_________________________________________________
C. Date of Birth (Month) __________________(Day)____________(Year)________
D. Primary Beneficiary (Relationship)______________(Date of Birth)________
Address________________________________________________________________
City______________________________State______Zip Code__________________
E. Contingent Beneficiary (Relationship)___________(Date of Birth)________
Address________________________________________________________________
City_______________________________State______Zip Code_________________
F. Signature of Participant_______________________________________________
G. Signature of Participant's Spouse, if not Primary
Beneficiary*__________________________________________________________
*Spousal consent must be witnessed by a Plan representative or Notary
Public.
--------------------------- ------------------------------
Name of Plan Representative Signature
(Please print)
--------------------------- ------------------------------
Relationship to Plan Date
Subscribed and sworn to before me on __________________________________
[SEAL]
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<PAGE>
INVESTORS RESEARCH FUND, INC.
MASTER SELF-EMPLOYED RETIREMENT PLAN
Basic Plan Document No. 01
(As Amended and Restated for Plan Years Beginning After December 31, 1986)
ARTICLE 1. INTRODUCTION
The Employer has adopted the Investors Research Fund, Inc. Self-Employed
Retirement Plan (the "Plan"), as of the date specified in the Adoption
Agreement. The Plan is intended to qualify as a profit-sharing plan under
Section 401(a), et seq. of the Code. The Plan shall be for the exclusive benefit
of the Participants and their Beneficiaries.
The Employer shall have the sole authority and control respecting manage
ment and administration of the Plan. The Employer shall be the "named fiduciary"
under the Plan for purposes of Title I of ERISA.
The Plan is a master profit-sharing plan and is made available by Investors
Research Fund, Inc. (the "Sponsoring Organization") for adoption by employers.
The Custodial Account is established as part of the Plan for the joint use of
all adopting employers.
The Plan consists of two separate documents, the basic Plan document and
the Adoption Agreement.
ARTICLE 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings specified
below, unless a different meaning is clearly required by the context:
2.1. Account
"Account" shall mean each separate account maintained for a Participant
under the Plan, collectively or singly, as the context requires. Accounts shall
be credited with contributions, credited or debited with investment gains or
losses and charged for distributions as provided elsewhere in the Plan. The Plan
Administrator may create special types of Accounts for administrative reasons,
even though the Accounts are not expressly authorized by the Plan.
2.2. Beneficiary
"Beneficiary" shall mean the person or entity entitled to receive a
Participant's Account on his or her death. The surviving spouse of the
Participant, or if there is no surviving spouse, the Participant's estate, shall
be his or her Beneficiary unless the Participant designates another person or
entity as Beneficiary and his or her spouse consents to the designation.
2.3. Break in Service
"Break in Service" shall mean a Plan Year during which an Employee does not
complete more than 500 Hours of Service with the Employer. See Sections 3.2 and
7.5 for special rules concerning crediting an Employee's pre- and post-Break in
Service employment for purposes of determining the Employee's eligibility to
participate and vested percentage under the Plan.
2.4. Code
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
2.5. Compensation
(a) "Compensation" shall mean all of each Participant's "Section 415
safe-harbor compensation" (as that term is defined in Section 4.5(b) of the
Plan). Compensation shall include only that Compensation which is actually
paid to the Participant during the determination period. Except as provided
elsewhere in this Plan, the applicable period shall be the period elected
by the Employer in the Adoption Agreement. If the Employer makes no
election, the applicable period shall be the Plan Year. For self-employed
individuals, Compensation shall mean Earned Income.
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<PAGE>
(b) The Compensation of each Participant taken into account for
determining all benefits provided under the Plan for any determination
period shall not exceed Two Hundred Thousand Dollars ($200,000), as
adjusted at the same time and in the same manner as under Section 415(d) of
the Code, except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year and
the first adjustment to the $200,000 limitation is effected on January 1,
1990. If the period for determining compensation used in calculating an
employee's allocation for a determination period is a short plan year (i.e.
shorter than 12 months), the annual compensation limit is an amount equal
to the otherwise applicable annual compensation limit multiplied by the
fraction, the numerator of which is the number of months in the short plan
year, and the denominator of which is 12. In determining the Compensation
of a Participant for purposes of this limitation, the rules of Section
414(q)(6) of the Code shall apply, except in applying such rules, the term
"family" shall include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age nineteen (19)
before the close of the Plan Year. If, as a result of the application of
such rules, the adjusted Two Hundred Thousand Dollars ($200,000) limitation
is exceeded, then (except for purposes of determining the portion of
compensation up to the integration level if the Plan provides for permitted
disparity), the limitation shall be prorated among the affected individuals
in proportion to each such individual's Compensation as determined under
this section prior to the application of this limitation.
(c) Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and
which is not includable in the gross income of the Employee under sections
125, 402(a)(8), 402(h) or 403(b) of the Code.
(d) If Compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for the
current determination period, the Compensation for such prior year is
subject to the applicable annual compensation limit in effect for that
prior year. For this purpose, for years beginning before January 1, 1990,
the applicable annual compensation limit is $200,000.
2.6. Custodial Account
"Custodial Account" shall mean the account established under Section 401(f)
of the Code pursuant to a separate written agreement between the Sponsoring
Organization and the Custodian.
2.7. Custodian
"Custodian" shall mean Investors Fiduciary Trust Company ("IFTC") or its
successors.
2.8. Disability
"Disability" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months. The
permanence and degree of such impairment shall be supported by medical evidence.
If elected by the Employer in the Adoption Agreement, nonforfeitable
contributions will be made to the Plan on behalf of each disabled Participant
who is not a Highly Compensated Employee.
2.9. Earned Income
"Earned Income" shall mean the net earnings from self-employment in the
trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in gross income
and the deductions allocable to such items. Net earnings are reduced by
contributions by the Employer to a qualified plan to the extent deductible under
Section 404 of the Code. Net earnings shall be determined with regard to the
deduction allowed to the taxpayer by Section 164(f) of the Code for taxable
years beginning after December 31, 1989.
2.10. Employee
"Employee" shall mean any employee, Owner-Employee, or partner of the
Employer maintaining the Plan or of any other employer required to be aggregated
with such Employer under Sections 414(b), (c), (m) or (o) of the Code. To the
extent required by Code Sections 414(n) and 414(o), Leased Employees shall be
deemed to be an Employee.
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<PAGE>
2.11. Employer
(a) Adopting Employer: The sole proprietorship or partnership as the
case may be, which is indicated on the Adoption Agreement, and any
successor entity which continues the Plan.
(b) Non-Adopting Employers: Companies that have not adopted the Plan
but which are required to be aggregated with the Adopting Employer under
section 414(b), (c), (m) or (o) of the Code.
(c) All Employees of adopting and non-adopting Employers shall be
treated as employed by a single company for all Plan purposes, including
Service crediting.
(d) In contexts in which actions are required or permitted to be taken
or notice is to be given, the Employer shall mean the Adopting Employer or
any successor company.
2.12. Highly Compensated Employee
"Highly Compensated Employee" shall include Highly Compensated Active
Employees and Highly Compensated Former Employees.
(a) A Highly Compensated Active Employee includes any Employee who
performs service for the Employer during the determination year and who,
during the look-back year: (I) received Compensation from the Employer in
excess of Seventy- five Thousand Dollars ($75,000) (as adjusted pursuant to
Section 415(d) of the Code); (ii) received Compensation from the Employer
in excess of Fifty Thousand Dollars ($50,000) (as adjusted pursuant to
Section 415(d) of the Code) and was a member of the top-paid group for such
year; or, (iii) was an officer of the Employer and received compensation
during such year that is greater than fifty percent (50%) of the dollar
limitation in effect under Section 415(b)(1)(A) of the Code. The term
Highly Compensated Employee also includes: (I) Employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the Employee is one of the
one hundred (100) employees who received the most Compensation from the
Employer during the determination year; and (ii) employees who are five
percent (5%) owners at any time during the look-back year or determination
year.
(b) If no officer has satisfied the Compensation requirement of (iii),
above, during either a determination year or look-back year, the highest
paid officer for such year shall be treated as a Highly Compensated
Employee.
(c) For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the twelve-month period immediately preceding
the determination year.
(d) A Highly Compensated Former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a Highly Compensated Active Employee for either
the separation year or any determination year ending on or after the
Employee's fifty-fifth (55th) birthday.
(e) If an Employee is, during a determination year or look-back year,
a family member of either a five percent (5%) owner who is an Active or
Former Employee or a Highly Compensated Employee who is one of the ten (10)
most highly compensated employees ranked on the basis of Compensation paid
by the Employer during such year, then the family member and the five (5)
percent owner or top-ten Highly Compensated Employee shall be aggregated.
In such case, the family member and 5 percent owner or top-ten Highly
Compensated Employee shall be treated as a single Employee receiving
Compensation and Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the family member and five
percent (5%) owner or top-ten Highly Compensated Employee. For purposes of
this section, family member includes the spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of such
lineal ascendants or descendants.
(f) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group, the top one hundred (100) employees, the number of
employees treated as officers and the Compensation that is considered, will
be made in accordance with Section 414(q) of the Code and the regulations
thereunder.
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<PAGE>
(g) If elected by the Employer in the Adoption Agreement, the
preceding paragraph will be modified by substituting $50,000 for $75,000 in
(a)(I) and by disregarding (a)(ii). This simplified definition of Highly
Compensated Employee will apply only to Employers that maintain significant
business activities (and employ employees) in at least two significantly
separate geographic areas.
2.13. Hour of Service
"Hour of Service" shall mean:
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall be
credited to the Employee for the computation period in which the duties are
performed; and
(b) Each hour for which an Employee is paid or entitled to payment, by
the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No more
than five hundred one (501) Hours of Service shall be credited under this
paragraph for any single continuous period (whether or not such period
occurs in a single computation period). Hours under this paragraph shall be
calculated and credited pursuant to Section 2530.200b-2 of the Department
of Labor Regulations, which are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph (b), as
the case may be, and under this paragraph (c). These hours shall be
credited to the Employee for the computation period or periods to which the
award or agreement pertains rather than the computation period in which the
award, agreement or payment is made.
(d) Hours of Service shall be credited for employment with other
members of an affiliated service group (under Section 414(m) of the Code),
a controlled group of corporations (under Section 414(b) of the Code), or a
group of trades or businesses under common control (under Section 414(c) of
the Code), of which the adopting Employer is a member, and any other entity
required to be aggregated with the Employer pursuant to Section 414(o) of
the Code and the regulations thereunder.
(e) Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Section 414(n) of
the Code, or Section 414(o) and the regulations thereunder.
(f) Solely for purposes of determining whether a Break in Service, as
defined in Section 2.3, for participation and vesting purposes has occurred
in a computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be determined,
eight (8) Hours of Service per day of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the individual, (2) by reason of
a birth of a child of the individual (3) by reason of the placement of a
child with the individual in connection with the adoption of such child by
such individual, or (4) for purposes of caring for such child for a period
beginning immediately following such birth or placement. The Hours of
Service, credited under this paragraph shall be credited in the computation
period in which the absence begins if the crediting is necessary to prevent
a Break in Service in that period, or in all other cases, in the following
computation period.
2.14. Leased Employee
Leased Employee shall mean any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year, and such services are of a type historically performed by
Employees in the business field of the Employer.
(a) Contributions or benefits provided a Leased Employee by the
leasing organization which are attributable to services performed for the
Employer shall be treated as provided by the Employer.
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(b) A Leased Employee shall not be considered an employee of the
recipient if: (1) such employee is covered by a money purchase pension plan
providing: (A) a nonintegrated employer contribution rate of at least ten
(10) percent of compensation, as defined in Section 415(c)(3) of the Code,
but including amounts contributed by the employer pursuant to a salary
reduction agreement which are excludable from the employee's gross income
under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of
the Code, (B) immediate participation, and (C) full and immediate vesting,
and (2) Leased Employees do not constitute more than twenty percent (20%)
of the recipient's non highly compensated work force.
2.15. Normal Retirement Age
"Normal Retirement Age" shall mean the age selected in the Adoption
Agreement. If the Employer enforces a mandatory retirement age, the Normal
Retirement Age is the lesser of that mandatory age or the age specified in the
Adoption Agreement.
2.16. Owner-Employee
"Owner-Employee" shall mean an individual who is (a) a sole proprietor, or
(b) a partner who owns more than ten (10) percent of either the capital interest
or profits interest of the partnership.
2.17 Participant
"Participant" shall mean each Employee who has met the eligibility require
ments as specified in the Adoption Agreement, and who has become a participant
of the Plan in accordance with Article 3 of this Plan.
2.18. Plan Administrator
"Plan Administrator" shall mean the Employer.
2.19. Plan Year
The "Plan Year" is the twelve (12)-consecutive month period designated by
the Employer in the Adoption Agreement.
2.20. Self-Employed Individual
"Self-Employed Individual" shall mean an individual who has Earned Income
for the Plan Year in question from the trade or business with respect to which
the Plan is established; the term shall also include an individual who would
have had Earned Income but for the fact that the trade or business had no net
profits for such year.
2.21. Year of Service
"Year of Service" shall mean a twelve (12)-consecutive month period
(computation period) during which the Employee completes at least one thousand
(1,000) Hours of Service. See Sections 3.2 and 7.5 which set forth special rules
for determining Years of Service for purposes of eligibility and vesting,
respectively.
ARTICLE 3. ELIGIBILITY REQUIREMENTS
3.1. Participation
Every Employee who has met the eligibility requirements as stated in the
Adoption Agreement on or before the Effective Date of this Plan shall become a
Participant as of the Effective Date, and every other Employee shall become a
Participant as of the first day of the calendar month next following the
calendar month in which he or she meets the eligibility requirements as stated
in the Adoption Agreement.
3.2. Eligibility Computation Periods
(a) For purposes of determining Years of Service and Breaks in Service
for purposes of eligibility, the initial eligibility computation period is
the twelve (12)- consecutive month period beginning on the date the
Employee first performs an Hour of Service for the Employer (employment
commencement date). The succeeding twelve (12)-consecutive month periods
commence with the first Plan Year which commences prior to the first
anniversary of the Employee's employment commence ment date regardless of
whether the Employee is entitled to be credited with 1,000 Hours of Service
during the initial eligibility computation period. An employee who is
credited with 1,000 hours of service in both the initial eligibility
computation period and the first Plan Year which commences prior to the
first anniversary of the Employee's initial eligibility computation period
will be credited with two Years of Service for purposes of eligibility to
participate.
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(b) Years of Service and Breaks in Service will be measured on the
same eligibility computation period.
(c) All Years of Service with the Employer are counted toward
eligibility except the following:
(1) If an Employee has a one (1)-year Break in Service before
satisfying the Plan's requirement for eligibility, service before such
break will not be taken into account. (The above provision is only
permitted if the Plan provides one hundred percent (100%) vesting
after an Employee completes two (2) Years of Service.)
(2) In the case of a Participant who does not have any
nonforfeitable right to his or her Account balance derived from
Employer contributions, Years of Service before a period of
consecutive one (1) year Breaks in Service will not be taken into
account in computing eligibility service if the number of consecutive
one (1)-year Breaks in Service in such period equals or exceeds the
greater of five (5) of the aggregate number of Years of Service. Such
aggregate number of Years of Service will not include any Years of
Service disregarded under the preceding sentence by reason of prior
Breaks in Service.
(3) If a Participant's Years of Service are disregarded pursuant
to the preceding paragraph, such Participant will be treated as a new
Employee for eligibility purposes. If a Participant's Years of Service
may not be disregarded pursuant to the preceding paragraph, such
Participant shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment. (d) In
the event a Participant is no longer a member of an eligible class of
employees and becomes ineligible to participate but has not incurred a
Break in Service, such Employee will participate immediately upon
returning to an eligible class of employees. If such Participant
incurs a Break in Service, eligibility will be determined under the
Break in Service rules of the Plan. In the event an Employee who is
not a member of an eligible class of employees becomes a member of an
eligible class, such Employee will participate immediately if such
Employee has satisfied the minimum age and service requirements and
would have otherwise previously become a Participant.
3.3. Special Rule for Owner-Employees
(a) If this Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or
businesses, the Plan and the plan established with respect to such
other trades or businesses must, when looked at as a single plan,
satisfy Section 401(a) and (d) of the Code with respect to the
Employees of this and all such other trades or businesses.
(b) If this Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or
businesses, the employees of each such other trade or business must be
included in a plan which satisfies Section 401(a) and (d) of the Code
and which provides contributions and benefits not less favorable than
provided for such Owner-Employees under this Plan.
(c) If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which he does not control
and such individual controls a trade or business, then the
contributions or benefits of the Employees under the plan of the trade
or business which he does control must be as favorable as those
provided for him under the most favorable plan of the trade or
business which he does not control.
(d) For purposes of the preceding paragraphs, an Owner-Employee,
or two or more Owner-Employees, shall be considered to control a trade
or business if such Owner-Employee, or such two or more
Owner-Employees together:
(1) own the entire interest in an unincorporated trade or
business, or
(2) in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits
interest in such partnership. For purposes of the preceding
sentence, an Owner-Employee, or two or more Owner-Employees shall
be treated as owning any interest in a partnership which is
owned, directly or indirectly, by a partnership which such
Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding
sentence.
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ARTICLE 4. EMPLOYER CONTRIBUTIONS
4.1. Employer Contributions
The Employer intends to make recurring and substantial contributions to the
Plan. The amount of the Employer's contributions to the Plan shall be
discretionary, to be determined by the Employer. Employer contributions are not
limited to the Employer's current or accumulated profits.
4.2. Allocation of Employer Contributions and Forfeitures
Employer contributions and forfeitures, if any, will be allocated to each
Participant who either completes 500 hours of service during the Plan Year or
who is employed on the last day of the Plan Year in the ratio that such
Participant's Compensation bears to the Compensation of all Participants. (See
Section 4.3 for special allocation rules where the Employer has elected in the
Adoption Agreement to properly integrate Plan benefits with Social Security.)
4.3. Permitted Disparity
This plan may not provide for permitted disparity if the employer maintains
any other plan that provides for permitted disparity and benefits any of the
same participants.
(a) Employer contributions for the Plan Year plus any forfeitures will
be allocated to Participants' Accounts as follows:
STEP ONE: Contributions and forfeitures will be allocated to each
Participant's Account in the ratio that each Participant's total
Compensation bears to all Participants' total Compensation, but not in
excess of three percent (3%) of each Participant's Compensation.
STEP TWO: Any contributions and forfeitures remaining after the
allocation in Step One will be allocated to each Participant's Account
in the ratio that each Participant's Compensation for the Plan Year in
excess of the "integration level" bears to the excess Compensation of
all Participants, but not in excess of three percent (3%).
STEP THREE: Any contributions and forfeitures remaining after the
allocation in Step Two will be allocated to each Participant's Account
in the ratio that the sum of each Participant's total Compensation and
Compensation in excess of the integration level bears to the sum of
all Participants' total Compensation and Compensation in excess of the
integration level, but not in excess of the "profit sharing maximum
disparity rate."
STEP FOUR: Any remaining Employer contributions or forfeitures
will be allocated to each Participant's Account in the ratio that each
Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
(b) The "integration level" shall be equal to the taxable wage base or
such lesser amount elected by the Employer in the Adoption Agreement. The
taxable wage base is the contribution and benefit base in effect under
section 230 of the Social Security Act at the beginning of the Plan Year.
(c) Compensation shall mean compensation as defined in section 2.5 of
the Plan.
(d) The "maximum profit-sharing disparity rate" is equal to the lesser
of:
(1) two and seven-tenths percent (2.7%), or
(2) the applicable percentage determined in accordance with the
table below:
If the Integration Level
the applicable
is more than but not more than percentage is
$0 X* 2.7%
X* of TWB 80% of TWB 1.3%
80% of TWB Y** 2.4%
*X = the greater of $10,000 or 20% of the TWB
**Y = any amount more than 80% of the TWB but less than 100% of the TWB
(If the integration level used is equal to the taxable wage base, the applicable
percentage is 2.7%.)
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4.4. Limitations on Allocations
(a) If the Participant does not participate in, and has never
Participated in another qualified plan or a welfare benefit fund as defined
in Section 419(e) of the Code maintained by the Employer, or an individual
medical account as defined in Section 415(1)(2) of the Code, maintained by
the Employer, which provides an "annual addition" as defined in Section
4.5, below, the amount of annual additions which may be credited to the
Participant's Account for any limitation year will not exceed the lesser of
the maximum permissible amount or any other limitation contained in this
Plan. If the Employer contribution that would otherwise be contributed or
allocated to the Participant's Account would cause the annual additions for
the limitation year to exceed the maximum permissible amount, the amount
contributed or allocated will be reduced as follows so that the annual
additions for the limitation year will equal the maximum permissible
amount:
(1) Prior to determining the Participant's actual Compensation
for the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the limitation year,
uniformly determined for all Participants similarly situated.
(2) As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for each Participant
for the limitation year in question shall be determined on the basis
of the Participant's Compensation for such year.
(3) If pursuant to subparagraph (2), above, or as a result of the
allocation of forfeitures, if any, there is an excess amount, the
excess amount shall be disposed of as follows:
(A) any nondeductible voluntary employee contributions, to
the extent they would reduce the excess amount, shall be returned
to the Participant;
(B) if after the application of subparagraph (A), an excess
amount still exists, and the Participant is covered by the Plan
at the end of the limitation year in question, the excess amount
in the Participant's Account shall be used to reduce Employer
contributions (including any allocation of forfeitures) for such
Participant in the next limitation year, and each succeeding
limitation year if necessary;
(C) if after the application of subparagraph (A), an excess
amount still exists, and the Participant is not covered by the
Plan at the end of the limitation year in question, the excess
amount shall be held unallocated in a suspense account and shall
be applied to reduce future Employer contributions (including
allocation of any forfeitures) for all remaining Participants in
the next limitation year, and each succeeding limitation year if
necessary;
(D) if a suspense account is in existence at any time
pursuant to this Section 4.3, it shall not participate in any
allocation of the Plan's investment gains and losses. If a
suspense account is in existence at any time during a particular
limitation year, all amounts in the suspense account must be
allocated and reallocated to participants' accounts before any
employer or any employee contributions may be made to the plan
for that limitation year. Excess amounts may not be distributed
to participants or former participants.
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(b) This subparagraph (b) shall apply if, in addition to this Plan,
the Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, or a welfare benefit
fund as defined in Section 419(e) of the Code maintained by the Employer,
or an individual medical account as defined in Section 415(1)(2) of the
Code, maintained by the Employer, which provides an annual addition as
defined in Section 4.5, below, during any limitation year. The annual
additions which may be credited to a Participant's Account under this Plan
for any such limitation year shall not exceed the maximum permissible
amount reduced by the annual additions credited to a Participant's Account
under such other plans and welfare benefit funds for the same limitation
year. If the annual additions with respect to the Participant under such
other defined contribution plans and welfare benefit funds are less than
the maximum permissible amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account under
this Plan would cause the annual additions for the limitation year to
exceed this limitation, then the amount contributed or allocated shall be
reduced as follows so that the annual additions under all such plans and
funds for the limitation year in question shall equal the maximum
permissible amount. If the annual additions with respect to the Participant
under such other defined contribution plans and welfare benefit funds in
the aggregate are equal to or greater than the maximum permissible amount,
no amount shall be contributed or allocated to the Participant's Account
under this Plan for such limitation year:
(1) Prior to determining the Participant's actual Compensation
for the limitation year, the Employer may determine the maximum
permissible amount for a Participant in the manner described in
Section 4.4(a)(1).
(2) As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the limitation
year shall be determined on the basis of the Participant's actual
Compensation for the limitation year.
(3) If a Participant's annual additions under this Plan and such
other plans would result in an excess amount for a limitation year,
the excess amount shall be deemed to consist of the annual additions
last allocated, except that annual additions attributable to a welfare
benefit fund or individual medical account shall be deemed to have
been allocated first regardless of the actual allocation date.
(4) If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date
of another plan, the excess amount attributed to this Plan will be the
product of:
(A) the total excess amount allocated as of such date, times
(B) the ratio of (i) the annual additions allocated to the
Participant for the limitation year as of such date under this
Plan, to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under this
and all the other qualified master or prototype defined
contribution plans.
(5) Any excess amount attributed to this Plan will be disposed of
in the manner described in subparagraph (a)(3), above.
(c) If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a master or
prototype plan, annual additions which may be credited to the Participant's
Account under this Plan for any limitation year shall be limited in
accordance with subsection (b) as though the other plan were a master or
prototype plan.
(d) If the Employer maintains, or at anytime has maintained, a
qualified defined benefit plan covering any Participant in this Plan, the
"annual additions" which may be credited to the Participant's Account under
this Plan for any limitation year shall be limited, so that the sum of the
Participant's defined benefit plan fraction and defined contribution
fraction shall not exceed 1.0 in any limitation year.
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4.5. Definitions
Terms used in this Article shall have the following meaning:
(a) Annual Additions
The sum of the following amounts credited to a Participant's Account
for the limitation year in question:
(1) Employer contributions;
(2) Employee contributions;
(3) forfeitures; and
(4) amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(1)(2) of the Code, which is
part of a pension or annuity plan maintained by the Employer, are
treated as annual additions to a defined contribution plan. Also,
amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable
to post-retirement medical benefits allocated to the separate account
of a key employee, as defined in Section 419A(d)(3) of the Code, under
a welfare benefit fund, as defined in Section 419(e) of the Code,
maintained by the Employer, are treated as annual additions to a
defined contribution plan. For this purpose, any excess amount applied
under Sections 4.3(a)(3) or (b)(5) in the limitation year to reduce
Employer contributions will be considered an annual addition for such
limitation year.
(b) Compensation
A Participant's wages, salaries, and fees for professional services
and other amounts received (without regard to whether or not an amount is
paid in cash) for personal services actually rendered in the course of
employment with the Employer maintaining the plan (including, but not
limited to, commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits, and reimburse ments or other expense allowances
under a nonaccountable plan (as described in 1.62-(c)), and excluding the
following:
(1) Employer contributions to a plan of deferred compensation
which are not includable in the Employee's gross income for the
taxable year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions are
deductible by the Employee, or any distributions from a plan of
deferred compensation;
(2) amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(3) amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(4) other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Section 403(b) of the Internal Revenue Code (whether or
not the contributions are actually excludable from the gross income of
the Employee). For any self-employed individual, compensation will
mean Earned Income. For purposes of applying the limitations of this
Article, compensation for a limitation year is the compensation
actually paid or made available in gross income during such limitation
year. Notwithstanding the preceding sentence, compensation for a
Participant who is permanently and totally disabled (as defined in
Section 22(e)(3) of the Internal Revenue Code) shall mean the
Compensation such Participant would have received for the limitation
year if the Participant had been paid at the rate of Compensation paid
immediately before becoming permanently and totally disabled; such
imputed compensation for the disabled Participant may be taken into
account only if the Participant is not a Highly Compensated Employee,
and contributions made on behalf of such Participant are
nonforfeitable when made.
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(c) Defined Benefit Fraction
A fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether or
not terminated) maintained by the Employer, and the denominator of which is
the lesser of one hundred twenty-five percent (125%) of the dollar
limitation determined for the limitation year in question under Sections
415(b) and (d) of the Code or one hundred forty percent (140%) of the
highest average compensation, including any adjustments under Section
415(b) of the Code. Not withstanding, if the Participant was a participant
as of the first day of the first limitation year beginning after December
31, 1986, in one or more defined benefit plans maintained by the Employer
which were in existence on May 6, 1986, the denominator of this fraction
will not be less than one hundred twenty-five percent (125%) of the sum of
the annual benefits under such plans which the Participant had accrued as
of the close of the last limitation year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the Plan after May
5, 1986. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Section 415
for all limitation years beginning before January l, 1987.
(d) Defined Contribution Dollar Limitation
Thirty Thousand Dollars ($30,000) or if greater, one-fourth of the
defined benefit dollar limitation set forth in Section 415(b)(1) of the
Code as in effect for the limitation year in question.
(e) Defined Contribution Fraction
A fraction, the numerator of which is the sum of the annual additions
to the Participant's account under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the current and
all prior limitation years (including the annual additions attributable to
the Participant's nondeductible employee contributions to all defined
benefit plans, whether or not terminated, maintained by the Employer, and
the annual additions attributable to all welfare benefit funds, as defined
in Section 419(e) of the Code, and individual medical accounts, as defined
in Section 415(1)(2) of the Code, maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for the
current and all prior limitation years of service with the Employer
(regardless of whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any limitation year is the
lesser of one hundred twenty-five percent (125%) of the dollar limitation
determined under Sections 415(b) and (d) of the Code in effect under
Section 415(c)(1)(A) of the Code, or thirty-five percent (35%) of the
Participant's Compensation for such year. Notwithstanding, if the Employee
was a Participant as of the end of the first day of the first limitation
year beginning after December 31, 1986, in one or more defined contribution
plans maintained by the Employer which were in existence on May 6, 1986,
the numerator of this fraction will be adjusted if the sum of this fraction
and the defined benefit fraction would otherwise exceed 1.0 under the terms
of this Plan. Under the adjustment, an amount equal to the product of (A)
the excess of the sum of the fractions over 1.0 times (B) the denominator
of this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last limitation year beginning before January
l, 1987, and disregarding any changes in the terms and conditions of the
Plan made after May 6, 1986, but using the Section 415 limitation
applicable to the first limitation year beginning on or after January 1,
1987. The annual addition for any limitation year beginning before January
1, 1987, shall not be recomputed to treat all Employee contributions as
annual additions.
(f) Employer
For purposes of this Article, Employer shall mean the Employer that
adopts this Plan, and all members of a controlled group of corporations (as
defined in Section 414(b) of the Code as modified by Section 415(h)), all
commonly controlled trades or businesses (as defined in Section 414(c) as
modified by Section 415(h)) or affiliated service groups (as defined in
Section 414(m)), of which the adopting Employer is a part, and any other
entity required to be aggregated with the Employer pursuant to regulations
under Section 414(o) of the Code.
(g) Excess Amount
The excess of the Participant's annual additions for the limitation
year over the maximum permissible amount.
(h) Highest Average Compensation
The average Compensation for the three (3) consecutive Years of
Service with the Employer that produces the highest average. A Year of
Service with the Employer for purposes of this subsection (h) is the Plan
Year.
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(I) Master or Prototype Plan
A plan the form of which is the subject of a favorable opinion letter
from the Internal Revenue Service.
(j) Maximum Permissible Amount
The maximum annual addition that may be contributed or allocated to a
Participant's Account under the Plan for any limitation year shall not
exceed the lesser of:
(1) the defined contribution dollar limitation, or
(2) twenty-five percent (25%) of the Participant's Compensation
for the limitation year. The compensation limitation referred to in
(2) shall not apply to any contribution for medical benefits (within
the meaning of Section 401(h) or Section 419(A)(f)(2) of the Code)
which is otherwise treated as an annual addition under Section
415(1)(1) or 419(A)(d)(2) of the Code. If a short limitation year is
created because of an amendment changing the limitation year to a
different 12 consecutive month period, the maximum permissible amount
will not exceed the defined contribution dollar limitation multiplied
by the following fraction: Number of months in the short limitation
year 12
(k) Projected Annual Benefit
The annual retirement benefit (adjusted to an actuarially equivalent
straight life annuity if such benefit is expressed in a form other than a
straight life annuity or qualified joint and survivor annuity) to which the
Participant would be entitled under the terms of the Plan assuming:
(1) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later), and
(2) the Participant's Compensation for the current limitation
year and all other relevant factors used to determine benefits under
the Plan will remain constant for all future limitation years.
(l) Limitation Year
The limitation year shall be the calendar year, or the 12 consecutive
month period elected by the Employer in section 7 of the Adoption
Agreement. All qualified plans maintained by the Employer must use the same
limitation year. If the limitation year is amended to a different 12
consecutive month period, the new limitation year must begin on a date
within the limitation year in which the amendment is made.
4.6. Voluntary Contributions By Participants
(a) This Plan will not accept nondeductible Employee contributions and
Employer matching contributions for Plan Years beginning after the Plan
Year in which this Plan, as amended, is adopted by the Employer. Employee
contributions for Plan Years beginning after December 31, 1986, if any,
together with any matching contributions as defined in Section 401(m) of
the Code, will be limited so as to meet the nondiscrimination test of Code
Section 401(m).
(b) The account balance derived from nondeductible Employee
contributions is the Employee's total account balance multiplied by a
fraction, the numerator of which is the total amount of nondeductible
Employee contributions less withdrawals and the denominator of which is the
sum of the numerator and the total contributions made by the Employer on
behalf of the Employee less withdrawals. For this purpose, contributions
include contributed amounts used to provide ancillary benefits and
withdrawals include only amounts distributed to the Employee and do not
reflect the cost of any death benefits.
(c) The Plan Administrator will not accept deductible Employee
contributions which are made for a taxable year beginning after December
31, 1986. Contributions made prior to that date will be maintained in a
separate Account which will be nonforfeitable at all times. The Account
shall share in the gains and losses of the Plan. No part of the deductible
Employer contribution account may be used to purchase life insurance.
Subject to Section 6.1, Joint and Survivor Annuity require ments (if
applicable), the Participant may withdraw any part of his or her Employee
contributions by making a written application to the Plan Administrator.
4.7. Limitations Based on Age Not Permitted
Allocation of Employer contributions or forfeitures shall not be
discontinued or decreased because of the Participant's attainment of any age.
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ARTICLE 5. DISTRIBUTION REQUIREMENTS
Except as otherwise provided in Article 6, Joint and Survivor Annuity
Requirements, the requirements of this Article shall apply to any distribution
of a Participant's Account. Unless otherwise specified, the provisions of this
Article 5 apply to calendar years beginning after December 31, 1984. All
distributions required under this Article shall be determined and made in
accordance with the proposed regulations under Section 401(a)(9), including the
minimum distribution incidental benefit requirement of Section 1.401(a)(9).2 of
the proposed regulations.
5.1. Required Beginning Date
The entire interest of a Participant must be distributed or begin to be
distributed no later than the Participant's required beginning date.
(a) General Rule
The required beginning date of a Participant is the first day of April
of the calendar year following the calendar year in which the Participant
attains age seventy and one-half (70 ).
(b) Transitional Rules
The required beginning date of a Participant who attained age seventy
and one-half (70) before January 1, 1988, shall be determined in accordance
with (1) or (2) below.
(1) Non-Five-percent Owners The required beginning date of a
Participant who is not a five- percent owner is the first day of April
of the calendar year following the calendar year in which the later of
retirement or attainment of age seventy and one-half (70 ) occurs.
(2) Five-percent Owners
The required beginning date of a Participant who is a five-
percent owner during any year beginning after December 31, 1979, is
the first day of April following the later of:
(i) the calendar year in which the Participant attains age
seventy and one-half (70 ), or
(ii) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a five
percent owner, or the calendar year in which the Participant
retires. The required beginning date of a Participant who is not
a five-percent owner who attains age seventy and one-half (70)
during 1988 and who has not retired as of January l, 1989, is
April 1, 1990.
(c) Five-percent Owner
A Participant is treated as a five-percent owner for purposes of this
section if such Participant is a five-percent owner as defined in Section
416(I) of the Code (determined in accordance with Section 416 but without
regard to whether the Plan is top-heavy) at any time during the Plan Year
ending with or within the calendar year in which such owner attains age
sixty six and one-half (66 ) or any subsequent Plan Year.
(d) Continued Distributions
Once distributions have begun to a five-percent owner under this
section, they must continue to be distributed, even if the Participant
ceases to be a five-percent owner in a subsequent year.
5.2. Limits on Distribution Periods
As of the first distribution calendar year, distributions, if not made in a
single sum, may only be made over one of the following periods (or a combination
thereof):
(a) the life of the Participant,
(b) the life of the Participant and a designated Beneficiary,
(c) a period certain not extending beyond the life expectancy of the
Participant, or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
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5.3. Minimum Amounts to be Distributed
If the Participant's interest is to be distributed in other than a single
sum, the following minimum distribution rules shall apply on or after the
required beginning date:
(a) If a Participant's benefit is to be distributed over (1) a period
not extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the Participant's
designated Beneficiary or (2) a period not extending beyond the life
expectancy of the designated Beneficiary, the amount required to be
distributed for each calendar year, beginning with distributions for the
first distribution calendar year, must at least equal the quotient obtained
by dividing the Participant's benefit by the applicable life expectancy.
(b) For calendar years beginning before January l, 1989, if the
Participant's spouse is not the designated Beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the
life expectancy of the Participant.
(c) For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for the first
distribution calendar year shall not be less than the quotient obtained by
dividing the Participant's benefit by the lesser of (1) the applicable life
expectancy or (2) if the Participant's spouse is not the designated
Beneficiary, the applicable divisor determined from the table set forth in
Q&A-4 of Section 1.401(a)(9).2 of the proposed regulations. Distributions
after the death of the Participant shall be distributed using the
applicable life expectancy in Section 4.1(a) above as the relevant divisor
without regard to Proposed Regulations Section 1.401(a)(9).2.
(d) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's
required beginning date. The minimum distribution for other calendar years,
including the minimum distribution for the distribution calendar year in
which the Employee's required beginning date occurs, must be made on or
before December 31 of that distribution calendar year.
(e) If the Participant's benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder shall
be made in accordance with the requirements of Section 401(a)(9) of the
Code and the proposed regulations thereunder.
5.4. Commencement of Benefits
(a) Subject to Section 7.3 (Restrictions on Immediate Distributions),
a Participant shall be entitled to receive his or her Account, to the
extent it is vested, following his or her termination of employment as an
Employee. A Participant may elect, subject to the joint and survivor
annuity requirements of Section 6.1, to receive distribution of his or her
Account in an optional form of benefit as described in Section 5.8.
Distribution of the Participant's Account shall normally be made or
commence not later than 60 days following the end of the Plan Year in which
the Participant terminates employment.
(b) Unless the Participant elects otherwise, distribution of benefits
will begin no later than the sixtieth (60th) day after the latest of the
close of the Plan Year in which:
(1) the Participant attains age sixty-five (65) (or Normal
Retirement Age, if earlier);
(2) occurs the tenth (lOth) anniversary of the year in which the
Participant commenced participation in the Plan; or
(3) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and spouse
to consent to a distribution while a benefit is immediately
distributable, within the meaning of section 7.3 of the Plan, shall be
deemed to be an election to defer commencement of payment of any
benefit sufficient to satisfy this section.
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5.5. Death Distribution Provisions
(a) If the Participant dies after distribution of his or her interest
has commenced, the remaining portion of such interest shall continue to be
distributed at least as rapidly as under the method of distribution being
used prior to the Participant's death.
(b) If the Participant dies before distribution of his or her interest
begins, distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that an
election is made to receive distributions in accordance with (1) or (2)
below.
(1) If any portion of the participant's interest is payable to a
designated Beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the
designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Participant died.
(2) If the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in accordance
with (1) above shall not be earlier than the later of (A) December 31
of the calendar year immediately following the calendar year in which
the Participant died and (B) December 31 of the calendar year in which
the Participant would have attained age seventy and one-half (70 ).
(3) If the Participant has not made an election pursuant to this
subparagraph (b) by the time of his or her death, the Participant's
designated Beneficiary must elect the method of distribution no later
than the earlier of (A) December 31 of the calendar year in which
distributions would be required to begin under this section, or (B)
December 31 of the calendar year which contains the fifth anniversary
of the date of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does not
elect a method of distribution, distribution of the Participant's
entire interest must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
(c) For purposes of subparagraph (b) above, if the surviving spouse
dies after the Participant, but before payments to such spouse begin, the
provisions of subparagraph (b), with the exception of subitem (2) therein,
shall be applied as if the surviving spouse were the Participant.
(d) For purposes of this Section 5.5, any amount paid to a child of
the Participant will be treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving spouse when the child
reaches the age of majority.
(e) For the purposes of this section 5.5, distribution of a
Participant's interest is considered to begin on the Participant's required
beginning date (or, if subparagraph (c) above is applicable, the date
distribution is required to begin to the surviving spouse pursuant to
subparagraph (b) above). If distribution in the form of an annuity
irrevocably commences to the Participant before the required beginning
date, the date distribution is considered to begin is the date distribution
actually commences.
5.6. Definitions
(a) Applicable Life Expectancy
The life expectancy (or joint and last survivor expectancy)
calculated using the attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated Beneficiary's)
birthday in the applicable calendar year reduced by one for each
calendar year which has elapsed since the date life expectancy was
first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
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(b) Designated Beneficiary
The individual who is designated as the Beneficiary under the
Plan in accordance with Section 2.2, above, and Section 401(a)(9) and
the proposed regulations thereunder.
(c) Distribution Calendar Year
A calendar year for which a minimum distribution is required. For
distributions beginning before the Participant's death, the first
distribution calendar year is the calendar year immediately preceding
the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the
first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 5.5 above.
(d) Life Expectancy
Life expectancy and joint and last survivor expectancy are
computed by use of the expected return multiples in Tables V and VI of
Section 1.72.9 of the income tax regulations. Unless otherwise elected
by the Participant (or spouse, in the case of distributions described
in Section 5.5(b) above) by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such election
shall be irrevocable as to the Participant (or spouse) and shall apply
to all subsequent years. The life expectancy of a nonspouse
Beneficiary may not be recalculated.
(e) Participant's Benefit
(1) The account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar
year (valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the account balance as
of dates in the valuation calendar year after the valuation date
and decreased by distributions made in the valuation calendar
year after the valuation date.
(2) Exception for second distribution calendar year. For
purposes of paragraph (1) above, if any portion of the minimum
distribution for the first distribution calendar year is made in
the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in
the second distribution calendar year shall be treated as if it
had been made in the immediately preceding distribution calendar
year.
5.7. Transitional Rule
(a) Notwithstanding the other requirements of this Article and subject
to the requirements of Article 6, Joint and Survivor Annuity Requirements,
distribution on behalf of any Employee, including a Five-percent owner, may
be made in accordance with all of the following requirements (regardless of
when such distribution commences):
(1) The distribution by the Plan is one which would not have
disqualified such Plan under Section 401(a)(9) of the Internal Revenue
Code as in effect prior to amendment by the Deficit Reduction Act of
1984.
(2) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the Plan is
being distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
(3) Such designation was in writing, was signed by the Employee
or the Beneficiary, and was made before January 1. 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employer or the
Beneficiary specifies the time at which distribution will commence,
the period over which distributions will be made, and in the case of
any distribution upon the Employee's death, the Beneficiaries of the
Employee listed in order of priority.
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(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be made
upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the Beneficiary, to
whom such distribution is being made, will be presumed to have designated
the method of distribution under which the distribution is being made if
the method of distribution was specified in writing and the distribution
satisfies the requirements in subsections 5.7(a)(1) and (5).
(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of Section 401(a)(9) of the Code and the proposed
regulations thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must distribute by the end of
the calendar year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to
satisfy Section 401(a)(9) of the Code and the proposed regulations
thereunder, but for the Section 242(b)(2) election. For calendar years
beginning after December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements in Section 1.401(a)(9).2 of
the proposed regulations. Any changes in the designation will be considered
to be a revocation of the designation. However, the mere substitution or
addition of another Beneficiary (one not named in the designation) under
the designation will not be considered to be a revocation of the
designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation,
directly or indirectly (for example, by altering the relevant measuring
life). In the case in which an amount is transferred or rolled over from
one plan to another plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
5.8. Optional Form of Benefit
Subject to the joint and survivor annuity rules of Article 6, a Participant
may elect to receive payment of his or her benefit in one lump sum or in annual
or more frequent installments over a period permissible under Section 5.2.
above.
ARTICLE 6. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
The provisions of this Article shall apply to any Participant who is
credited with at least one Hour of Service with the Employer on or after August
23, 1984, and such other Participants as provided in Section 6.6.
6.1. Qualified Joint and Survivor Annuity
Unless an optional form of benefit under Section 5.8 is selected pursuant
to a qualified election within the ninety (90)-day period ending on the annuity
starting date, a married Participant's vested Account balance will be paid in
the form of a qualified joint and survivor annuity and an unmarried
Participant's vested Account Balance will be paid in the form of a life annuity.
The Participant may elect to have such annuity distributed upon attainment of
the earliest retirement age under the Plan.
6.2. Qualified Preretirement Survivor Annuity
Unless an optional form of benefit has been selected within the election
period pursuant to a qualified election, if a Participant dies before the
annuity starting date, then the Participant's vested Account balance shall be
applied toward the purchase of an annuity for the life of his or her surviving
spouse. The surviving spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
6.3. Definitions
(a) Election Period
The period which begins on the first day of the Plan Year in which the
Participant attains age thirty-five (35) and ends on the date of the
Participant's death. If a Participant separates from service prior to the
first day of the Plan Year in which age thirty-five (35) is attained, with
respect to the Account balance as of the date of separation, the election
period shall begin on the date of separation.
(1) A Participant who will not yet attain age thirty-five (35) as
of the end of any current Plan Year may make a special qualified
election to waive the qualified preretirement survivor annuity for the
period beginning on the date of such election and ending on the first
day of the Plan Year in which the Participant will attain age
thirty-five (35). Such election shall not be valid unless the
Participant receives a written explanation of the qualified
preretirement survivor annuity in such terms as are comparable to the
explanation required under Section 6.4.
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(2) Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in which
the Participant attains age thirty-five (35). Any new waiver on or
after such date shall be subject to the full requirements of this
Article.
(b) Earliest Retirement Age
The earliest date on which, under the Plan, the Participant could
elect to receive retirement benefits.
(c) Qualified Election
A waiver of a qualified joint and survivor annuity or a qualified
preretirement survivor annuity. Any waiver of a qualified joint and
survivor annuity or a qualified preretirement survivor annuity shall not be
effective unless. (1) the Participant's spouse consents in writing to the
election, (2) the election designates a specific Beneficiary, including any
class of beneficiaries or any contingent beneficia ries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal consent); (3)
the spouse's consent acknowledges the effect of the election; and (4) the
spouse's consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the qualified joint and survivor
annuity shall not be effective unless the election designates a form of
benefit payment which may not be changed without spousal consent (or the
spouse expressly permits designations by the Participant without any
further spousal consent).
(1) If it is established to the satisfaction of a Plan
representative that there is no spouse or that the spouse cannot be
located, a waiver will be deemed a qualified election.
(2) Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained) shall
be effective only with respect to such spouse. A consent that permits
designations by the Participant without any requirement of further
consent by such spouse must acknowledge that the spouse has the right
to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the spouse voluntarily elects to
relinquish either or both of such rights.
(3) A revocation of a prior waiver may be made by a Participant
without the consent of the spouse at any time before the commencement
of benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the
Participant has received notice as provided in Section 6.4 below.
(d) Qualified Joint and Survivor Annuity
An immediate annuity for the life of the Participant with a survivor
annuity for the life of the spouse which is not less than fifty percent
(50%) and not more than one hundred percent (100%) of the amount of the
annuity which is payable during the joint lives of the Participant and the
spouse and which is the amount of benefit which can be purchased with the
Participant's vested Account balance. The percentage of the survivor
annuity under the Plan shall be fifty percent (50%).
(e) Spouse (Surviving Spouse)
The spouse or surviving spouse of the Participant, provided that a
former spouse will be treated as the spouse or surviving spouse to the
extent provided under a qualified domestic relations order as described in
Section 414(p) of the Code.
(f) Annuity Starting Date
The first day of the first period for which an amount is paid as an
annuity or any other form.
(g) Vested Account Balance
The aggregate value of the Participant's vested Account balances
derived from Employer and Employee contributions (including rollovers),
whether vested before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life. The provisions of this
Article shall apply to a Participant who is vested in amounts attributable
to Employer contributions, Employee contributions (or both) at the time of
death or distribution.
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6.4. Notice Requirements
(a) In the case of a qualified joint and survivor annuity as described
in Section 6.1 of this Article, the Plan Administrator shall no less than
thirty (30) days and no more than ninety (90) days prior to the annuity
starting date provide each Participant a written explanation of: (1) the
terms and conditions of a qualified joint and survivor annuity; (2) the
Participant's right to make and the effect of an election to waive the
qualified joint and survivor annuity form of benefit; (3) the rights of a
Participant's spouse, and (4) the right to make, and the effect of, a
revocation of a previous election to waive the qualified joint and survivor
annuity.
(b) In the case of a qualified preretirement survivor annuity as
described in Section 6.2 of this Article, the Plan Administrator shall
provide each Participant within the applicable period for each Participant,
a written explanation of the qualified preretirement survivor annuity in
such terms and in such manner as would be comparable to the explanation for
meeting the requirements of paragraph (a) applicable to a qualified joint
and survivor annuity.
(1) The applicable period for a Participant is whichever of the
following periods ends last:
(A) the period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Participant
attains age thirty-five (35);
(B) a reasonable period ending after the individual becomes
a Participant;
(C) a reasonable period ending after paragraph (c) ceases to
apply to the Participant;
(D) a reasonable period ending after this Article first
applies to the Participant. Notwithstanding the foregoing, notice
must be provided within a reasonable period ending after
separation from service in the case of a Participant who
separates from service before attaining age thirty-five (35).
(2) For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events described in (B),
(C) and (D) is the end of the two (2)-year period beginning one (1)
year prior to the date the applicable event occurs, and ending one (1)
year after that date. In the case of a Participant who separates from
service before the Plan Year in which age thirty-five (35) is
attained, notice shall be provided within the two (2)-year period
beginning one (1) year prior to separation and ending one (1) year
after separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
Participant shall be redetermined. (c) Notwithstanding the other
require ments of this Section 6.4, the respective notices prescribed
by this section need not be given to a Participant if (1) the Plan
"fully subsidizes" the costs of a qualified joint and survivor annuity
or qualified preretirement survivor annuity, and (2) the Plan does not
allow the Participant to waive the qualified joint and survivor
annuity or qualified preretirement survivor annuity and does not allow
a married Participant to designate a non-spouse Beneficiary. For
purposes of this paragraph (c), a Plan fully subsidizes the costs of a
benefit if no increase in cost or decrease in benefits to the
Participant may result from the Participant's failure to elect another
benefit.
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6.5. Safe Harbor Rules
(a) This section applies if the following conditions are satisfied:
(1) the Participant does not elect payments in the form of a life annuity;
and (2) on the death of the Participant, the Participant's vested Account
balance will be paid to the Participant's surviving spouse, but if there is
no surviving spouse, or if the surviving spouse has already consented in a
manner conforming to a qualified election, then to the Participant's
designated Beneficiary. The surviving spouse may elect to have distribution
of the vested Account balance commence within the ninety (90) day period
following the date of the Participant's death. The Account balance shall be
adjusted for gains or losses occurring after the Participant's death in
accordance with the provisions of the Plan governing the adjustment of
Account balances for other types of distributions. This Section 6.5 shall
not be operative with respect to the Participant if the Plan is a direct or
indirect transferee of a defined benefit plan, money purchase pension plan,
a target benefit plan, stock bonus, or profit-sharing plan which is subject
to the survivor annuity requirements of Section 401(a)(11) and Section 417
of the Code. If this section 6.5 is operative, then except to the extent
otherwise provided in section 6.6, the other provisions of this Article
shall be inoperative.
(b) The Participant may waive the spousal death benefit described in
this section at any time provided that no such waiver shall be effective
unless it satisfies the conditions of section 6.3(c) (other than the
notification requirement referred to therein) that would apply to the
Participant's waiver of the qualified preretirement survivor annuity.
6.6. Transitional Rules
(a) Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the previous
sections of this Article must be given the opportunity to elect to have the
prior sections of this Article apply if such Participant is credited with
at least one (1) Hour of Service under this Plan or a predecessor plan in a
Plan Year beginning on or after January 1, 1976, and such Participant had
at least ten (10) years of vesting service when he or she separated from
service.
(b) Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one Hour of Service under this Plan or a
predecessor plan on or after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on or after January 1,
1976, must be given the opportunity to have his or her benefits paid in
accordance with subsection (d) of this Article.
(c) The respective opportunities to elect (as described in paragraphs
(a) and (b), above) must be afforded to the appropriate Participants during
the period commencing on August 23, 1984, and ending on the date benefits
would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to paragraph (b) of this
Section and any Participant who does not elect under paragraph (a) or who
meets the requirements of paragraph (a) except that such Participant does
not have at least ten (10) years of vesting service when he or she
separates from service, shall have his or her benefits distributed in
accordance with all of the following requirements if benefits would have
been payable in the form of a life annuity:
(1) Automatic joint and survivor annuity. If benefits in the form
of a life annuity become payable to a married Participant who:
(A) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(B) dies on or after Normal Retirement Age while still
working for the Employer, or
(C) begins to receive payments on or after the qualified
early retirement age; or
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(D) separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and after
satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits; then such benefits will be received under
this Plan in the form of a qualified joint and survivor annuity,
unless the Participant has elected otherwise during the election
period. The election period must begin at least six (6) months
before the Participant attains qualified early retirement age and
end not more than ninety (90) days before the commencement of
benefits. Any election hereunder will be in writing and may be
changed by the Participant at any time.
(2) Election of early survivor annuity. A Participant who is
employed after attaining the qualified early retirement age will be
given the opportunity to elect, during the election period, to have a
survivor annuity payable on death. If the Participant elects the
survivor annuity, payments under such annuity must not be less than
the payments which would have been made to the spouse under the
qualified joint and survivor annuity if the Participant had retired on
the day before his or her death. Any election under this provision
will be in writing and may be changed by the Participant at any time.
The election period begins on the later of (A) the ninetieth (90th)
day before the Participant attains the qualified early retirement age,
or (B) the date on which Participant begins, and ends on the date the
Participant terminates employment.
(3) For purposes of this paragraph (d):
(A) Qualified early retirement age is the lesser of:
(i) the earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits,
(ii) the first day of the one hundred twentieth (120th)
month beginning before the Participant reaches Normal
Retirement Age, or
(iii) the date the Participant begins participation.
(B) Qualified joint and survivor annuity is an annuity for
the life of the Participant with a survivor annuity for the life
of the spouse as described in Section 6.1 of this Article.
6.7. Nontransferability of Annuities
Any annuity contract distributed herefrom must be nontransferable.
6.8. Conflicts with Annuity Contracts
The terms of any annuity contract purchased and distributed by the Plan to
a Participant or spouse shall comply with the requirements of this Plan.
ARTICLE 7. VESTING
7.1. Vesting Rules
(a) A Participant who terminates employment with the Employer for
reasons other than retirement, death or disability shall be entitled to
receive a vested interest in the value of his or her Participant Account
attributable to contributions by the Employer in accordance with the
vesting schedule elected by the Employer on the Adoption Agreement.
(b) Notwithstanding the vesting schedule elected by the Employer on
the Adoption Agreement, a Participant's right to his or her Account shall
be nonforfeitable upon the Employee's death, disability or attainment of
Normal Retirement Age, and shall also become nonforfeitable in the event of
the Employer's complete discontinuance of contributions under this Plan. In
the event of the termination or partial termination of the Plan, the
Account balance of each affected Participant shall become nonforfeitable.
7.2. Vesting on Distribution Before Break in Service
(a) If an Employee terminates service, and the value of the Employee's
vested Account balance derived from Employer and Employee contributions is
not greater than Three Thousand Five Hundred Dollars ($3,500), the Employee
will receive a distribution of the value of the entire vested portion of
such Account balance and the nonvested portion will be treated as a
forfeiture. For purposes of this section, if the value of an Employee's
vested Account balance is zero, the Employee shall be deemed to have
received a distribution of such vested Account balance. A Partici pant's
vested Account balance shall not include accumulated deductible Employee
contributions within the meaning of Section 72(o)(5)(B) of the Code for
Plan Years beginning prior to January l, 1989.
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(b) If an Employee terminates service, and elects, in accordance with
Section 7.3, to receive the value of the Employee's vested Account balance,
the nonvested portion will be treated as a forfeiture. If the Employee
elects to have distributed less than the entire vested portion of the
Account balance derived from Employer contributions, the part of the
nonvested portion that will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of which is the
amount of the distribution attributable to Employer contributions and the
denominator of which is the total value of the vested Employer-derived
Account balance.
(c) If an Employee receives a distribution pursuant to this section
and the Employee resumes employment covered under this Plan, the Employee's
Employer-derived Account balance will be restored to the amount on the date
of distribution if the Employee repays to the Plan the full amount of the
distribution attributable to Employer contributions before the earlier of
five (5) years after the first date on which the Participant is
subsequently reemployed by the Employer, or the date the Participant incurs
five (5) consecutive one (1)-year Breaks in Service following the date of
distribution. If an Employee is deemed to receive a distribution pursuant
to this section, and the Employee resumes employment covered under this
Plan before the date the Participant incurs five (5) consecutive one
(1)-year Breaks in Service, upon the reemployment of such Employee, the
Employer, derived Account balance of the Employee will be restored to the
amount on the date of such deemed distribution.
7.3. Restrictions on Immediate Distributions
(a) If the value of a Participant's vested Account balance derived
from Employer and Employee contributions exceeds (or at the time of any
prior distribution exceeded) Three Thousand Five Hundred Dollars ($3,500),
and the Account balance is immediately distributable, the Participant and
the Participant's spouse (or where either the Participant or the spouse has
died, the survivor) must consent to any distribution of such Account
balance. The consent of the Participant and the Participant's spouse shall
be obtained in writing within the ninety (90)-day period ending on the
"annuity starting date." The annuity starting date is the first day of the
first period for which an amount is paid as an annuity or any other form.
The Plan Administrator shall notify the Participant and the Participant's
spouse of the right to defer any distribution until the Participant's
Account balance is no longer immediately distributable. Such notification
shall include a general description of the material features, and an
explanation of the relative values of the optional forms of benefit
available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3), and shall be provided no less than
thirty (30) days and no more than ninety (90) days prior to the annuity
starting date.
(b) Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified joint and
survivor annuity while the Account balance is immediately distributable.
(Furthermore, if payment in the form of a qualified joint and survivor
annuity is not required with respect to the Participant, only the
Participant need consent to the distribution of an Account balance that is
immediately distributable.) Neither the consent of the Participant nor the
Participant's spouse shall be required to the extent that a distribution is
required to satisfy Section 401(a)(9) or Section 415 of the Code. In
addition, upon termination of this Plan, if the Plan does not offer an
annuity option (purchased from a commercial provider) and if the Employer
or any entity within the same controlled group as the Employer does not
maintain another defined contribution plan (other than an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code), the
Participant's account balance will, without the Partici pant's consent, be
distributed to the Participant. However, if any entity within the same
controlled group as the Employer maintains another defined contribution
plan (other than an employee stock ownership plan as defined in section
4975(e)(7) of the Code) then the Participant's account balance will be
transferred, without the Participant's consent, to the other Plan if the
Participant does not consent to an immediate distribution.
(c) An Account balance is immediately distributable if any part of the
Account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains or would have attained if not
deceased) the later of Normal Retirement Age or age sixty-two (62).
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(d) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after December 31, 1988, the Participant's vested
Account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Section 72(o)(5)(B)
of the Code.
7.4. Years of Service for Vesting Purposes
For purposes of computing an Employee's nonforfeitable right to his or her
Account balance derived from Employer contributions, Years of Service and Breaks
in Service shall be measured by Plan Years.
7.5. Vesting Break in Service Rules
(a) In the case of a Participant who has incurred a one (1) year Break
in Service, Years of Service before such break will not be taken into
account until the Participant has completed a Year of Service after such
Break in Service.
(b) In the case of a Participant who has five (5) or more consecutive
one (1) year Breaks in Service, the Participant's pre-break service will
count in vesting of the Employer-derived Account only if either:
(1) such Participant has any nonforfeitable interest in the
Account attributable to Employer contributions at the time of his or
her separation from service, or
(2) upon returning to service, the number of consecutive one (1)
year Breaks in Service is less than the number of Years of Service.
(c) In the case of a participant who has five (5) or more consecutive
one (1) year Breaks in Service, all service after such Breaks in Service
will be disregarded for the purpose of vesting the Employer-derived Account
that accrued before such Breaks in Service.
(d) Separate accounts will be maintained for the Participant's
pre-break and post-break Employer-derived Account balance. Both Accounts
will share in the earnings and losses of the Custodial Account.
7.6. Amendment of Vesting Schedule
(a) If the Plan's vesting schedule is amended, or the Plan is amended
in any way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage, or if the Plan is deemed amended
by an automatic change to or from a top-heavy vesting schedule, each
Participant with at least three (3) Years of Service (determined in
accordance with Section 7.4. above) with the Employer may elect, within a
reasonable period after the adoption of the amendment or change, to have
his or her nonforfeitable percentage computed under the Plan without regard
to such amendment or change. For participants who do not have at least one
(1) Hour of Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "Five (5) Years of
Service" for "Three (3) Years of Service."
(b) The period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and shall end
on the latest of:
(1) sixty (60) days after the amendment is adopted;
(2) sixty (60) days after the amendment becomes effective; or
(3) sixty (60) days after the Participant is issued written
notice of the amendment by the Employer or Plan Administrator.
7.7. Amendments Affecting Accrued Benefits
No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's Account may be reduced to the extent
permitted under Section 412(c)(8) of the Code. For purposes of this paragraph, a
Plan amendment which has the effect of decreasing a Participant's Account or
eliminating an optional form of benefit with respect to benefits attributable to
service before the amendment shall be treated as reducing an accrued benefit.
Furthermore, if the vesting schedule of a Plan is amended, in the case of an
Employee who is a Participant as of the later of the date such amendment is
adopted or the date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Employee's right to his Employer-derived
accrued benefit will not be less than this percentage computed under the Plan
without regard to such amendment.
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7.8. Reinstatement of Benefit
If a benefit is forfeited because the Participant or beneficiary cannot be
found, such benefit will be reinstated if a claim is made by the Participant or
beneficiary.
ARTICLE 8. MODIFICATIONS FOR TOP-HEAVY PLANS
8.1. Application of Article
If the Plan is or becomes top-heavy in any Plan Year beginning after
December 31, 1983, the provisions of this Article 8 will supersede any
conflicting provisions in the Plan or Adoption Agreement.
8.2. Definitions
(a) Key Employee
Any Employee or former Employee (and the beneficiaries of such
Employee) who at any time during the determination period was:
(1) an officer of the Employer having an annual compensation
greater than fifty percent (50%) of the dollar limitation under
Section 415(b)(1)(A) of the Code,
(2) an owner (or considered an owner under Section 318 of the
Code) of one of the ten (10) largest interests in the Employer if such
individual's compensation exceeds one hundred percent (100%) of the
dollar limitation under Section 415(c)(1)(A) of the Code,
(3) a five percent (5%) owner of the Employer, or
(4) a one percent (1%) owner of the Employer having an annual
compensation from the Employer of more than One Hundred Fifty Thousand
Dollars ($150,000). Annual compensation means compensation as defined
in Section 415(c)(3) of the Code, but including amounts contributed by
the Employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under Section 125, Section
402(a)(8), Section 402(h) or Section 403(b) of the Code. The
determination period is the Plan Year containing the determination
date and the four (4) preceding Plan Years. The determination of who
is a key employee will be made in accordance with Section 416(I)(1) of
the Code and the regulations thereunder.
(b) Top-Heavy Plan
For any Plan year beginning after December 31, 1983, this Plan is
top-heavy if any of the following conditions exists:
(1) if the top-heavy ratio for this Plan exceeds sixty percent
(60%) and this Plan is not part of any required aggregation group or
permissive aggrega tion group of plans.
(2) if this Plan is a part of a required aggregation group of
plans but not part of a permissive aggregation group and the top-heavy
ratio for the group of plans exceeds sixty percent (60%).
(3) If this Plan is a part of a required aggregation group and
part of a permissive aggregation group of plans and the top heavy
ratio for the permissive aggregation group exceeds sixty percent
(60%).
(c) Top-Heavy Ratio
(1) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and the
Employer has never maintained any defined benefit plan which during
the five (5) year period ending on the determination date(s) has or
has had accrued benefits, the top-heavy ratio for this Plan alone or
for the required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of the Account balances of
all key employees as of the determination date(s) (including any part
of any Account balance distributed in the five (5) year period ending
on the determination date(s)), and the denominator of which is the sum
of all Account balances (including any part of any account balance
distributed in the five (5) year period ending on the determination
date(s)), both computed in accordance with Section 416 of the Code and
the regulations thereunder. Both the numerator and denominator of the
top-heavy ratio are increased to reflect any contribution not actually
made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the
regulations hereunder.
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(2) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and the
Employer maintains or has maintained one or more defined benefit plans
which during the five (5) year period ending on the determination
date(s) has or has had any accrued benefits, the top-heavy ratio for
any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of Account balances under
the aggregated defined contribution plan or plans for all key
employees, determined in accordance with (1) above, and the present
value of accrued benefits under the aggregated defined benefit plan or
plans for all key employers as of the determina tion date(s), and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all participants,
determined in accordance with (1) above, and the present value of
accrued benefits under the defined benefit plan or plans for all
participants as of the determination date(s), all determined in
accordance with Section 416 of the Code and the regulations
thereunder. The accrued benefits under a defined benefit plan in both
the numerator and denominator of the top-heavy ratio are increased for
any distribution of an accrued benefit made in the five (5) year
period ending on the determination date.
(3) For purposes of (1) and (2) above, the value of Account
balances and the present value of accrued benefits will be determined
as of the most recent valuation date that falls within or ends with
the twelve (12)-month period ending on the determination date, except
as provided in Section 416 of the Code and the regulations thereunder
for the first and second plan years of a defined benefit plan. The
account balances and accrued benefits of a Participant (A) who is not
a key employee but who was a key employee, or (B) who has been
credited with at least one (1) Hour of Service with any Employer
maintaining the Plan at any time during the five (5)-year period
ending on the determination date will be disregarded. The calculation
of the top-heavy ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in
accordance with Section 416 of the Code and the regulations
thereunder. Deductible Employee contributions will not be taken into
account for purposes of computing the top-heavy ratio. When
aggregating plans the value of account balances and accrued benefits
will be calculated with reference to the determination dates that fall
within the same calendar year. The accrued benefit of a Participant
other than a key employee shall be determined under (A) the method, if
any, that uniformly applies for accrual purposes under all defined
benefit plans maintained by the Employer, or (B) if there is no such
method, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule of Section
411(b)(1)(C) of the Code.
(d) Permissive Aggregation Group
The required aggregation group of plans plus any other plan or plans
of the Employer which, when considered as a group with the required
aggregation group, would continue to satisfy the requirements of sections
401(a)(4) and 410 of the Code.
(e) Required Aggregation Group
(1) Each qualified plan of the Employer in which at least one key
employee participates or participated at any time during the
determination period (regardless of whether the Plan has terminated),
and
(2) any other qualified plan of the Employer which enables a plan
described in (1) to meet the requirements of Sections 401(a)(4) or 410
of the Code.
(f) Determination Date
For any Plan Year subsequent to the first Plan Year, the last day of
the preceding Plan Year. For the first Plan Year of the Plan, the last day
of that year.
(g) Valuation Date
The date elected by the Employer in Section 7 of the Adoption
Agreement as of which account balances or accrued benefits are valued for
purposes of calculating the top-heavy ratio.
(h) Present Value
Present value shall be based only on the interest and mortality rates
specified in the Adoption Agreement.
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8.3. Minimum Allocation
(a) Except as otherwise provided in subsection (c) and (d) below, the
Employer contributions and forfeitures allocated on behalf of any
Participant who is not a key employee shall not be less than the lesser of
three percent (3%) of such Participant's Compensation or in the case where
the Employer has no defined benefit plan which designates this Plan to
satisfy Section 401 of the Code, the largest percentage of Employer
contributions and forfeitures, as a percentage of the first Two Hundred
Thousand Dollars ($200,000) of the key employee's Compensation, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contribution. This minimum
allocation shall be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the year because of
(1) the Participant's failure to complete one thousand (1,000)
Hours of Service (or any equivalent provided in the Plan), or
(2) the Participant's failure to make mandatory Employee
contributions to the Plan, or
(3) Compensation less than a stated amount.
(b) For purposes of computing the minimum allocation, Compensation
will mean compensation as defined in Section 2.5 of the Plan.
(c) The provision in (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or plans of the
Employer and the minimum allocation or benefit requirement applicable to
top-heavy plans will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under Code Section 416(b)) may not be forfeited under
Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
8.4. Minimum Vesting Schedule
For any Plan Year in which this Plan is top-heavy, one of the minimum
vesting schedules as elected by the Employer on the Adoption Agreement will
automatically apply to the Plan. The minimum vesting schedule applies to all
benefits within the meaning of Section 411(a)(7) of the Code except those
attributable to Employee contributions, including benefits accrued before the
effective date of Section 416 and benefits accrued before the Plan becomes
top-heavy. Further, no decrease in a Participant's nonforfeitable percentage may
occur in the event the Plan's status as top-heavy changes for any Plan Year.
However, this section does not apply to the Participant Account balances of any
Employee who does not have an Hour of Service after the Plan has initially
become top-heavy and such Employee's Participant Account balance attributable to
Employer contributions and forfeitures will be determined without regard to this
section.
ARTICLE 9. AMENDMENT AND TERMINATION
9.1. Amendment by Sponsoring Organization
The Sponsoring Organization may amend any part of the Plan.
9.2. Amendment by Adopting Employer
(a) The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Section 415 or Section 416 of the Code
because of the required aggregation of multiple plans, and (3) add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for any
other reason, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this master plan
and will be considered to have an individually designed plan.
(b) The Plan shall terminate upon the death of the Employer if the
Employer is a sole proprietorship, or upon notice of the termination of the
partnership if the Employer is a partnership, unless in either case
provision is made by a successor to the business of the Employer for the
continuation of this Plan and the attached Agreement.
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9.3. Termination of Plan
(a) Upon the termination of the Plan, the attached Agreement and Plan,
shall remain in full force and effect for whatever period is necessary to
complete the distribution of all assets in each Participant Account. Such
distributions shall be made as soon as administratively feasible and in
such manner as specified under the provisions of Article 6. Upon the
completion of such distribution, the Sponsoring Organization, and Custodian
shall be relieved from all further liability with respect to all amounts so
paid.
(b) In the event of the termination or partial termination of the
Plan, the Account balance of each affected Participant will be
nonforfeitable.
(c) In the event of a complete discontinuance of contributions under
the Plan, the Account balance of each affected Participant will be
nonforfeitable.
9.4. Plan Merger
In the event of a merger or consolidation with, or transfer of assets to
any other Plan, each Participant will receive a benefit immediately after such
merger, etc. (if the Plan then terminated) which is at least equal to the
benefit the Participant was entitled to immediately before such merger, etc. (if
the Plan had terminated).
ARTICLE 10. MISCELLANEOUS
10.1. Limitation on Rights of Employees
Neither the establishment of the Plan and the Plan Account nor any
modification thereof, nor the creation of any fund or account, nor the payment
of any benefits, shall be construed as giving to any Participant or other person
any legal or equitable right against the Employer, the Custodian, the Sponsoring
Organization or the Accounting and Reporting Agent, except as herein provided,
and in no event shall the terms of employment of any Employee or Participant be
modified or in any way be affected hereby.
10.2. Exclusive Benefit
(a) The corpus or income of the Custodial Account may not be diverted
to or used for other than the exclusive benefit of the Participants or
their beneficiaries.
(b) Any contribution made by the Employer because of a mistake of fact
must be returned to the Employer within one (1) year of the contribution,
upon the written request of the Employer.
(c) In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Internal Revenue Code,
any contribution made incident to that initial qualification by the
Employer must be returned to the Employer within one (1) year after the
date the initial qualification is denied, but only if the application for
the qualification is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan is adopted, or
such later date as the Secretary of the Treasury may prescribe.
10.3. Taxes
Any income taxes or other taxes of any kind whatsoever that may be levied
or assessed upon or in respect to the assets of the Plan, or the income arising
therefrom, any transfer taxes incurred in connection with the investment and
reinvestment of such assets, and all other administrative expenses incurred by
the Accounting and Reporting Agent or the Custodian in the performance of their
duties (including fees for legal services rendered to the Accounting and
Reporting Agent or Custodian and administrative fees) shall be charged and paid
as provided in the attached Adoption Agreement.
10.4. Source of Benefit Payments
It is a condition of this Plan, and each Employee by participating herein
expressly agrees, that he shall look solely to the mutual fund shares in the
Custodial Account for the payment of any benefit to which he is entitled under
the Plan.
10.5. Failure of Qualification
If the Plan of a participating Employer fails to attain or retain its
qualified status, such plan will no longer participate in this master plan and
will be considered an individually designed plan. The funds of such plan will be
removed from the Custodial Account as soon as administratively feasible.
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10.6. Related Companies
If the Employer is a member of an affiliated service group (as defined in
Section 414(m) of the Code), all Employees of the affiliated service group will
be treated as employed by a single Employer. If the Employer maintains the Plan
of a predecessor employer, service with such employer will be treated as service
for the Employer.
10.7. Loans to Participants
Loans to Participants are not permitted under this Plan.
10.8. Anti-alienation
No benefit or interest available hereunder will be subject to assignment or
alienation, either voluntarily or involuntarily. The preceding sentence shall
also apply to the creation, assignment, or recognition of a right to any benefit
payable with respect to a participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations order, as
defined in Section 414(p) of the Code, or any domestic relations order entered
before January 1, 1985.
10.9. Governing Law
This Plan and the attached Agreement shall be construed, administered, and
enforced in accordance with the Code and ERISA. State law shall be applicable
only to the extent it is not preempted by ERISA. To the extent that state law is
applicable, the laws of the State of California shall apply.
IN WITNESS WHEREOF, this Plan has been amended and restated by INVESTORS
RESEARCH FUND, INC., as of January 1, 1987.
Sponsoring Organization
INVESTORS RESEARCH FUND, INC.
By ______________________________________
Title ________________________________
Dated ________________________________
INVESTORS RESEARCH FUND, INC.
MASTER SELF-EMPLOYED RETIREMENT PLAN
Basic Plan Document No. 01
(As Amended and Restated for Plan Years Beginning After December 31, 1986)
This Plan was prepared by
John R. Nelson
MULLEN & HENZELL
112 East Victoria Street
Santa Barbara, California 93101
(805) 966-1501
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AMENDMENTS
December 1994
Pursuant to section 9.2 of the Investors Research Fund, Inc. Master
Self-Employment Retirement Plan, Basic Plan Document No. 01 (As amended and
Restated for Plan Years Beginning After December 31, 1986), Investors Research
Fund, Inc. Hereby amends the said plan as follows:
AMENDMENT I. Article 2, Section 2.5 is hereby amended to add the following
provision:
(e) In addition to the other applicable limitations set forth in the
plan, and notwithstanding any other provisions of the plan to the
contrary, for plan years beginning on or after January 1, 1994, the
annual compensation for each employee taken into account under the
plan shall not exceed the OBRA '93 annual compensation limit. The OBRA
'93 annual compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in accordance with
section 401(a)(17)(B) of the Internal Revenue Code. The cost of living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination
period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall
mean the OBRA '93 annual compensation limit set forth in this
provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current
plan year, the compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination
periods beginning before the first day of the first plan year
beginning on or after January 1, 1994 the OBRA '93 annual compensation
limit is $150,000.
AMENDMENT II. Article 6, Section 6.4 is hereby amended to add the following
provision:
Section 6.4 (a)(1) If a distribution is one in which sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such
distribution may come less than 30 days after the notice required
under section 1.411 (a) - 11 (c) of the Income Tax Regulations is
given, provided that:
(1) the plan administrator clearly informs the participants that
the participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
portion), and
(2) the participant, after receiving the notice, affirmatively
elects a distribution.
AMENDMENT III, A new Article is hereby added to the plan document to read as
follows:
Article 11. DIRECT ROLLOVERS
Section 11.1. This article applies to distribution made on or after
January 1, 1993. Notwithstanding any provision of the plan to the
contrary that would otherwise limit a distributee's election under
this Article, distributee may elect, at the time and in the manner
prescribed by the plan administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
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Section 11.2. DEFINITIONS
Section 11.2.1. Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancy) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
Section 11.2.2. Eligible retirement plan: An eligible retirement plan
is an individual retirement account described in section 408(b) of the
Code, an annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that accepts
the distribu tee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
Section 11.2.3. Distributee: A distributee includes an employee or
former employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
Section 11.2.4. Direct rollover: A direct rollover is a payment by the
plan to the eligible retirement plan specified by the distributee.
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INVESTORS RESEARCH FUND SECTION 403(b)(7) RETIREMENT PLAN
AND CUSTODIAL ACCOUNT AGREEMENT
ARTICLE I
DEFINITIONS
1.1 Account: The custodial account established and maintained under this
Agreement on behalf of the Employee pursuant to Section 403(b)(7) of the Code.
1.2 Account Holder: The Employee, or, after the death of the Employee, the
Beneficiary of the Employee, or executor or administrator of the estate of the
Employee entitled to direct investment of assets held in the Account.
1.3 Agreement: The Investors Research Fund Section 403(b)(7) Retirement
Plan and Custodial Account Agreement as set forth herein.
1.4 Application: The Application for the Investors Research Fund Section
403(b)(7) Retirement Plan and Custodial Account executed by the Employee and the
Custodian providing for the establishment of the Account in accordance with the
terms and conditions of this Agreement.
1.5 Beneficiary: The person or persons designated in accordance with the
provisions of Article 5.6 to receive any undistributed amounts credited to the
Account upon the death of the Employee.
1.6 Code: The Internal Revenue Code of 1986, as amended, and including any
regulations or rulings issued thereunder.
1.7 Company: Investors Research Fund, in which contributions to the Account
shall be invested.
1.8 Custodian: Investors Fiduciary Trust Company or any successor thereto
appointed in accordance with the provisions of Article 8, provided that such
successor is either a bank or another person who satisfies the requirements of
Section 401(f)(2) of the Code.
1.9 Disability: A determination that the Employee is unable to engage in
any substantial gainful activity by reason of a medically determinable physical
or mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration.
1.10 Employee: The individual who has executed the Application and who is
employed by the Employer on a full or part-time basis or who is a former or
retired employee of the Employer.
1.11 Employer: The employer that is:
(a) described in Section 501(c)(3) of the Code and exempt from tax
under Section 501(a) of the Code; or
(b) a State, a political subdivision of a State, or an agency or
instrumentality thereof, but only with respect to employees who perform or
have performed services for an educational organization described in
Section 170(b)(1)(A)(ii) of the Code;
and, except with respect to an Account to which no contributions other than
rollovers or transfers are made, the Employer that has executed the Application.
1.12 ERISA: The Employee Retirement Income Security Act of 1974, as
amended, including any regulations issued thereunder.
1.13 Financial Hardship: A determination that the Employee has an immediate
and heavy financial need requiring a distribution from the Account. Any
determination of the existence of a qualifying financial hardship on the part of
the Employee and the amount required to be distributed to meet the need created
by the hardship shall be made in accordance with the rules and regulations under
Section 403(b)(7) of the Code.
1.14 Fund(s): One or more of the regulated investment companies offered by
Investors Research Fund, a Delaware corporation, as available investments under
this Agreement.
1.15 Salary Reduction Agreement: The Salary Reduction Agreement described
in Article 3.2.
1.16 Salary Reduction Contribution: The amount contributed by the Employer
to the Account in accordance with a Salary Reduction Agreement.
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ARTICLE II
ESTABLISHMENT OF ACCOUNT
2.1 Purpose. This Agreement is intended to provide for the establishment
and administration of an Account to receive contributions by the Employer on
behalf of the Employee in accordance with Section 403(b)(7) of the Code or to
receive rollover contributions or transfers from another 403(b) annuity contract
or custodial account.
2.2 Establishment of Account. The Custodian shall establish and maintain
the Account for the benefit of the Employee according to the terms and
conditions of this Agreement. The name, address and social security number of
the Employee and Beneficiary are set forth on the Application, and it shall be
the obligation of the Account Holder to notify the Custodian of any changes
thereto. The Application and, if applicable, the Salary Reduction Agreement, are
incorporated herein by reference. The Account will become effective upon
acceptance by or on behalf of the Custodian, as evidenced by written
confirmation to the Employee.
ARTICLE III
CONTRIBUTIONS
3.1 Contributions. The Employer shall make Salary Reduction Contributions
to the Account on behalf of the Employee in accordance with the Salary Reduction
Agreement between the Employer and the Employee as described in Article 3.2,
subject to the limitations of Articles 3.4, 3.5, and 3.6.
3.2 Salary Reduction Agreement. The Salary Reduction Agreement shall be a
legally binding agreement between the Employer and the Employee whereby the
Employee irrevocably agrees to take a reduction in salary or to forego an
increase in salary with respect to amounts earned after the agreement's
effective date, and whereby the Employer agrees to contribute the amount of
salary reduced or foregone by the Employee to the Account. The Employer and
Employee shall not enter into more than one such Salary Reduction Agreement in
any one taxable year of the Employee. The Salary Reduction Agreement may be
terminated at any time by the Employee with respect to amounts not yet earned by
the Employee.
3.3 Limitations in General. The Employee shall compute and determine the
maximum amount that may be contributed on behalf of the Employee in accordance
with the Employee's exclusion allowance, as defined in Section 403(b)(2) of the
Code, and in accordance with the applicable limitations under Section 415(c) of
the Code. Neither the Custodian nor the Company shall have any liability or
responsibility with respect to such computations or determinations, or for any
tax imposed on any excess contributions that exceed the limitations or exclusion
allowance.
3.4 Contribution Limitations.
(a) No amount shall be contributed on behalf of the Employee for
any limitation year in excess of the applicable limitations of Section
415(c) of the Code. In the absence of a special election by the
Employee under Section 415(c)(4) of the Code, the amount contributed
shall not exceed the lesser of:
(i) $30,000 (or, if greater, one-fourth the defined benefit
plan dollar limitation in effect under Section 415(b)(1) of the
Code for the limitation year); or
(ii) 25 percent of the Employee's compen sation (within the
meaning of Section 415(c)(3) of the Code) for the limitation
year.
(b) The term "limitation year" shall mean the calendar year,
unless the Employee elects to change the limitation year to another
twelve-month period by attaching a statement to his or her federal
income tax return in accordance with the regulations under Section 415
of the Code. If the Employee is in control (within the meaning of Code
Section 414(b) or (c), as modified by Code Section 415(h)) of the
Employer, the limitation year shall be the same as the limitation year
of the Employer under Section 415 of the Code. (c) If the Employer or
any affiliated employer as described in Section 415(h) of the Code
makes contributions on behalf of the Employee to any other custodial
account or annuity contract described in Section 403(b) of the Code,
then the contributions to such annuity contract shall be combined with
the contributions to the Account for purposes of the limitations of
subsection (a). If the Employee is covered by a qualified plan
sponsored by an entity controlled by the Employee, then contributions
to such a plan shall also be included for the purposes of the
limitations of subsection (a).
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3.5 Exclusion from Gross Income. For federal tax purposes, the Employee may
exclude from gross income for any taxable year the Employer contributions that
are made to the Account to the extent such contributions do not exceed the
Employee's exclusion allowance under Section 403(b)(2) of the Code for the
taxable year.
3.6 Excess Contributions. Any excess contributions (as defined in Section
4973(c) of the Code) that are made to the Account shall be subject to the six
percent excise tax of Section 4973(a) of the Code. Neither the Custodian nor the
Company shall have any duty or responsibility for determining whether any
contributions to the Account are excludable from the Employee's gross income, or
for assuring that any contributions to the Account do not constitute excess
contributions for purposes of Code Section 4973. The disposition of excess
contributions will be made in accordance with instructions from the Employer, if
the Employee has not separated from service, or otherwise, from the Employee.
The Employer or Employee providing such instructions is responsible for
determining that they are consistent with applicable law.
3.7 Limitation on Salary Reduction Contributions.
(a) Employer contributions that are made to the Account pursuant
to a Salary Reduction Agreement shall not exceed the amount of $9,500,
or such greater amounts as may be permitted with respect to the
Employee for the taxable year under Section 402(g)(5) of the Code,
reduced by the aggregate amounts contributed in any calendar year at
the election of the Employee to any qualified cash and deferred
arrangement described in Section 401(k) of the Code, any simplified
employee pension described in Section 408(k)(6) of the Code, and any
eligible deferred compensation plan described in Section 457 of the
Code.
(b) Notwithstanding any provision of this Agreement to the
contrary, if the Employee determines that an amount contributed during
a taxable year to the Account exceeds the limitation set forth in
subsection (a), and no later than March 1 of the following taxable
year notifies the Custodian in writing of the excess amount the
Employee has determined, then the Custodian shall distribute such
excess amount, plus any income or minus any losses allocable thereto,
to the Employee no later than the following April 15. The Employee
shall have the sole responsibility for timely determining any excess
deferrals to the Account and notifying the Custodian in accordance
with these procedures.
(c) Neither the Custodian nor the Company shall have any duty or
responsibility for determining whether any contributions to the
Account constitute excess deferrals as described in Section
402(g)(2)(A) of the Code, or for assuring that any excess deferrals
are timely distributed in accordance with the procedures of Section
402(g)(2)(A) of the Code.
3.8 Rollover Contributions and Transfers.
(a) The Employee shall be permitted to make a rollover
contribution to the Account of an amount received by the Employee that
is attributable to participation in another annuity contract or
custodial account described in Section 403(b) of the Code, provided
such rollover contribution complies with all requirements of Section
403(b)(8) or Section 408(d)(3)(A)(iii) of the Code, whichever is
applicable.
(b) The Custodian may accept a direct transfer of assets to the
Account on behalf of the Employee from another annuity contract or
custodial account described in Section 403(b) of the Code to the
extent permitted by the Code and the regulations and rulings thereun
der. The Employee shall not request or initiate a transfer from a
contract or account containing distribution restrictions that are more
restrictive than those provided in Article V. The Employee shall not
request or initiate a transfer from a contract or account covered by
ERISA, unless the transferee Account is part of an employee benefit
plan which provides distribution restrictions which meet the require
ments of Section 205 of ERISA and the regulations thereunder with
respect to any amount transferred.
(c) Neither the Custodian nor the Company shall have any duty or
responsibility for determining whether any rollover contribu tion or
transfer of assets by or on behalf of the Employee pursuant to this
Article 3.8 is a proper rollover contribution or transfer of assets
under the Code, or for the tax treatment to the Employee of any
transfer or rollover.
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(d) To the extent permitted under applicable law, the Account
Holder reserves the right to transfer or rollover any or all of the
assets of the Account to such other form of annuity contract or
custodial account described in Section 403(b) of the Code or to such
Individual Retirement Account (IRA) or other plan established pursuant
to Section 408 of the Code as the Employee may determine, upon written
instructions to the Custodian, in a form acceptable to the Custodian;
provided, however that the Custodian shall have no responsibility for
the tax treatment to the Account Holder of any such transfer or
rollover.
(e) The Custodian shall not be liable for losses arising from the
acts, omissions, or delays or other inaction of any party transfer
ring assets to the Account or receiving assets transferred from the
Account pursuant to this Article.
3.9 Manner of Making Contributions. All contributions to the Account shall
be paid directly to the Custodian. Contributions may be made by check or bank
wire. Contributions shall be preceded or accompanied by written instructions
directing the investment of the amount contributed on behalf of the Employee in
accordance with Article 4.1.
ARTICLE IV
INVESTMENTS
4.1 Investment of Account. All contributions to the Account and all assets
in the Account shall be invested in the Fund(s) in accordance with instructions
given to the Custodian by the Account Holder in a manner acceptable to the
Custodian. By giving such instructions, the Account Holder will be deemed to
have acknowledged receipt of the then current prospectus of any Fund in which
the Account Holder instructs the Custodian to invest such contributions or
assets. If the Custodian receives any contribution to the Account that is not
accompanied by acceptable instructions directing its investment, the Custodian
may hold or return all or a part of the contribution uninvested without
liability for loss of income or appreciation pending receipt of acceptable
instructions.
4.2 Investment Advice. The Account Holder agrees that neither the Custodian
nor the Company undertake to provide any advice with respect to the investment
of the Account, and that the responsibility of the Custodian to invest in shares
of a particular Fund pursuant to the directions of the Account Holder does not
constitute an endorsement by the Custodian of that Fund. Neither the Custodian
nor the Company shall be liable for any loss that results from the exercise of
control over the Account by the Account Holder.
4.3 Account Earnings. All dividends, capital gains distributions and other
earnings received by the Custodian on any shares held in the Account shall be
automatically reinvested in additional shares.
4.4 Investment Exchanges. The Account Holder may direct the Custodian to
redeem any or all shares of any Fund that are held in the Account and to
reinvest the proceeds in any other Fund available under this Agreement. By
giving such directions, the Account Holder will be deemed to have acknowledged
receipt of the then current prospectus of any Fund in which the Account Holder
instructs the Custodian to reinvest such proceeds. Any such exchange transaction
shall conform with the provisions of the current prospectus for the applicable
Fund. 4.5 Record Ownership; Voting of Shares. All shares of the Company acquired
by the Custodian pursuant to this Agreement shall be registered in the name of
the Custodian or its nominee. The Custodian shall mail or transmit to the
Account Holder's address of record all notices, prospectuses, financial
statements, proxies and proxy soliciting materials relating to the shares held
in the Account. The Custodian shall not vote any such shares except in
accordance with written instructions received from the Account Holder, provided
however, that the Custodian may, in the absence of instructions, vote "present"
for the sole purpose of allowing such shares to be counted for establishment of
a quorum at a shareholder's meeting.
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ARTICLE V
DISTRIBUTION OF ASSETS OF ACCOUNT
5.1 Request for Distribution. The Custodian shall distribute the assets of
the Account to the Employee upon receipt by the Custodian of a written request
for distribution submitted by the Employee, in a form acceptable to the
Custodian, subject to the limitations of Article 5.2.
5.2 Limitations on Distributions. Except as may otherwise be provided in
Article 3.6, the assets of the Account shall not be distributed to the Employee
before the Employee attains age 59-1/2 unless the Employee has:
(a) separated from the service of the Employer,
(b) incurred a Disability, or
(c) encountered Financial Hardship.
Any distribution that is made to the Employee for reason of Financial Hardship
shall not exceed the amount of Employer contributions made to the Account
pursuant to a salary reduction agreement with the Employee, excluding earnings
thereon.
5.3 Method of Distribution. Subject to the limitations of this Article 5,
the Employee may elect to have distribution of the assets of the Account made in
one or a combination of the following ways:
(a) lump-sum payment; or
(b) monthly, quarterly or annual installment payments over a
period certain not to exceed the life expectancy of the Employee or
the joint and last survivor life expectancy of the Employee and his or
her Beneficiary in a manner that satisfies the minimum distribution
requirements of Article 5.4.
If no election of the method of distribution is made by the Employee within 30
days of receipt by the Custodian of the written request for distribution
referred to in Article 5.1, the Custodian shall make such distribution to the
Employee in a lump-sum payment of cash.
5.4 Minimum Distribution Requirements Prior to Death of Employee.
(a) Commencement of Distributions. Notwithstanding any provision
of this Agreement to the contrary, distribution of the Account shall
commence no later than the "Required Beginning Date". For any Employee
who attained age 70-1/2 prior to January 1, 1988, the Required
Beginning Date is the April 1 following the calendar year in which the
Employee attains age 70-1/2 or terminates employment, whichever is the
later. For any employee who attained age 70-1/2 in 1988 and had not
retired by January 1, 1989, the Required Beginning Date is April 1,
1990. For any other Employee who attained age 70 and 1/2 after
December 31, 1987, the Required Beginning Date is the April 1
following the calendar year in which the Employee attains age 70-1/2
regardless of whether the Employee has then retired.
(b) Minimum Amounts to be Distributed. The minimum amount
distributed to the Employee for each taxable year, beginning no later
than the Required Beginning Date under subsection (a) above, must
equal or exceed the minimum distribution required under Sections
401(a)(9) and 403(b)(10) of the Code and must meet the incidental
death benefit requirement of these Sections.
5.5 Distribution Upon Death of Employee. In the event the Employee dies
prior to the complete distribution of the assets of the Account, all assets
remaining in the Account shall be distributed to the Employee's Beneficiary in a
lump-sum payment or in monthly, quarterly or annual installment payments over a
specified period as selected in writing by the Beneficiary in accordance with
the following rules:
(a) Where Distribution Had Already Commenced. If distribution to
the Employee had already commenced and the Employee died after the
Employee's Required Beginning Date, the assets of the Account shall be
distributed to the Beneficiary at least as rapidly as under the method
of distribution in effect prior to the Employee's death.
(b) Five-Year Rule. If the Employee died before the Employee's
Required Beginning Date, the assets of the Account shall be
distributed to the Beneficiary by December 31 of the calendar year
which contains the fifth anniversary of the death of the Employee.
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(c) Exception for Distributions Over Life Expectancy.
Notwithstanding subsection (b) above, the assets of the Account may be
distributed to the Beneficiary in installment payments over a period
certain not exceeding the Beneficiary's life expectancy, provided such
distribution commences by December 31 of the calendar year immediately
following the year of the Employee's death or, if the Beneficiary is
the surviving spouse of the Employee, by December 31 of the later of
(1) the calendar year immediately following the calendar year in which
the Employee died or (2) the calendar year in which the Employee would
have attained age 70- 1/2.
Notwithstanding any provision of this Agreement to the contrary, to the extent
permitted under regulation, ruling procedures or notice of the Internal Revenue
Service, the minimum distribution calculated in accordance with Code sections
403(b)(10) and 401(a)(9) may be taken from any 403(b) annuity or account of the
Employee. If the Beneficiary dies while receiving payments from the Account, all
remaining assets in the Account shall be distributed as soon as practicable to
the estate of the Beneficiary.
5.6 Designation of Beneficiary. The Employee may from time to time
designate any person, persons or entity as the Beneficiary who shall receive any
undistributed assets held in the Account at the time of the Employee's death.
Any Beneficiary designation by the Employee shall be made on a form prescribed
by the Custodian, and shall be effective only when filed with the Custodian
during the lifetime of the Employee. If the Employee fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary designated by
the Employee predeceases the Employee, the assets of the Account shall be
distributed upon the death of the Employee in the following order of priority:
first to the employee's surviving spouse, if any, and second, to the estate of
the Employee. Notwithstanding the foregoing, if this Agreement constitutes part
of an "employee benefit plan" under ERISA, then the Beneficiary of a married
Employee must be the spouse of the Employee, unless the spouse of the Employee
consents in writing to designation of a different Beneficiary and such consent
acknowledges the effect of the designation, specifies the nonspouse Beneficiary
designated, and is witnessed by a notary public. Furthermore, such a designation
of a nonspouse Beneficiary may be changed only if the spouse of the Employee
provides a new consent that meets all requirements of the preceding sentence.
5.7 Distributions Pursuant to Qualified Domestic Relations Orders. In the
case of an Account that is part of an "employee pension benefit plan" (as
defined in ERISA), nothing in this Agreement shall prohibit distribution to any
person in accordance with the terms of a "qualified domestic relations order" as
defined in Section 206(d) of ERISA.
5.8 Direct Rollovers. This Article 5.8 applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of this Agreement to the
contrary that would otherwise limit a distributee's election under this section,
a distributee may elect, at the time and in the manner prescribed by the
Custodian and fund transfer agent, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. For the purpose of this section, the following
definitions apply:
(a) Eligible rollover distribution: An eligible rollover is any
distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution is required to
comply with the minimum distribution and incidental death benefit
requirements of section 401(a)(9) and 403(b)(10) of the Code; and the
portion of any distribution that is not includible in gross income. An
eligible rollover distribution also does not include any other amounts
that may be excluded under regulations, procedures, notices, or
rulings interpret ing the term eligible rollover distribution under
sections 401(a)(31), 402, or 403(b) of the Code.
(b) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code,
an individual retirement annuity described in section 408(b) of the
Code, or another 403(b) annuity, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement
annuity.
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(c) Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations order,
as defined in section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
(d) Direct rollover: A direct rollover is a payment by the plan
to the eligible retirement plan specified by the distributee.
(e) The Custodian and fund transfer agent may prescribe
reasonable procedures for the election of direct rollovers under this
section, including, but not limited to, requirements that the
distributee provide the Custodian with adequate information,
including, but not limited to: the name of the eligible retirement
plan to which the rollover is to be made; a representation that the
recipient plan is an individual retirement plan or a 403(b) annuity,
as appropriate; acknowledgement from the recipient plan that it will
accept the direct rollover; and any other information necessary to
make the direct rollover.
ARTICLE VI
RESPONSIBILITIES AND DUTIES OF CUSTODIAN
6.1 Asset Retention. The Custodian shall hold all contributions to the
Account which are received by it subject to the terms and conditions of this
Agreement and for the purposes set forth herein. The Custodian shall be
responsible only for such assets as shall actually be received by it.
6.2 Records and Reports. The Custodian shall file such reports with the
Internal Revenue Service as may be required to be filed by the Custodian (not
including such reports as may be required to be filed by the Employer) under
Treasury Regulations. The Custodian, the Employer, Employee and Beneficiary
shall furnish to one another such information relevant to the Account as may be
required in connection with such reports. Unless the Employee (or Beneficiary,
where applicable) sends the Custodian written objection to a report within 60
days after its receipt, the Employee (or Beneficiary, where applicable) shall be
deemed to have approved such report, and in such case the Custodian shall be
forever released and discharged from all liability and accountability to anyone
with respect to all matters and things included therein. The Custodian may seek
a judicial settlement of its accounts. In any such proceeding, the only
necessary party thereto in addition to the Custodian shall be the Employee.
6.3 Limitations on Responsibilities and Duties.
(a) The Custodian shall not be responsible in any way for the
collection of contributions provided for under this Agreement, the
selection of the investments for the Account, the purpose or propriety
of any distribution made pursuant to Article 5 hereof, or any other
action taken at the direction of the Employee (or Beneficiary or
Employer, where applicable). The Custodian shall not be obliged to
take any action whatsoever with respect to the Account except upon
receipt of directions in a form acceptable to the Custodian from the
Employee (or Beneficiary or Employer, where applicable). The Custodian
shall be under no obligation to determine the accuracy or propriety of
any such directions and shall be fully protected in acting in
accordance therewith.
(b) The Custodian is an agent appointed by the Account Holder to
perform solely the duties assigned to it under the Agree ment, it
being acknowledged that certain of such duties may be performed by the
Custodian in any event pursuant to one or more other contractual
arrangements or relationships. The Custodian shall not be deemed to be
a fiduciary under ERISA for any reason, including but not limited to
the Custodian's ability:
(1) to receive contributions pursuant to the provisions of
the Agreement;
(2) to hold, invest and reinvest the contributions in Fund
shares;
(3) to register any property held by the Custodian in its
own name, or in nominee or bearer form that will pass delivery;
and
(4) to make distributions from the Account in cash or in
Fund shares pursuant to the provisions of the Agreement.
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(c) The Employer shall be solely responsible for assuring
compliance at all times with the nondiscrimination requirements of
Code section 403(b)(12) and the Custodian shall not be responsible in
any way for such compliance.
(d) It is hereby agreed that, subject to the provisions of
applicable law, no person other than the Account Holder may institute
or maintain any action or proceeding against the Custodian.
6.4 Indemnification of Custodian. The Account Holder and the successors of
the Account Holder, including any executor or administrator of the Account
Holder, shall, to the fullest extent permitted by law, at all times fully
indemnify and save harmless the Custodian, its successors and assigns from any
and all claims, actions, or liabilities arising from investments or
distributions made or actions taken at the direction of the Account Holder, and
from any and all other liability whatsoever (including without limitation all
reasonable expenses incurred in defending against or settlement of such claims,
actions or liabilities) which may arise in connection with this Agreement or the
Account, except liability arising from the gross negligence or willful
misconduct of the Custodian.
6.5 Liability of Custodian. The Custodian's liability under this Agreement
and matters which it contemplates shall be limited to matters arising from the
Custodian's gross negligence or willful misconduct. The Custodian shall be
entitled to rely conclusively upon, and shall be fully protected in any action
or nonaction taken in reliance upon, any written notices or other communications
or instruments believed by the Custodian to be genuine and to have been properly
executed. The Custodian shall not under any circumstances be responsible for the
timing, purpose, or propriety of any contribution or of any distribution made
hereunder, nor shall the Custodian incur any liability or responsibility for any
tax imposed on account of any such contribution or distribution. The Custodian
shall not be obligated or expected to commence or defend any legal action or
proceeding in connection with this Agreement unless agreed upon by the Custodian
and Account Holder, and unless fully indemnified for so doing to the
satisfaction of the Custodian.
ARTICLE VII
FEES AND EXPENSES OF THE CUSTODIAN
7.1 Compensation of Custodian. In consideration for its services hereunder,
the Custodian shall be entitled to receive the applicable fees specified in the
Application. The Custodian may substitute a revised fee schedule from time to
time upon 30 days' written notice to the Account Holder. The Custodian shall be
entitled to such reasonable additional fees as it may from time to time
determine for services required of it and not clearly identified on the fee
schedule. The Custodian's ability to earn income on amounts held in non-interest
bearing accounts has been taken into consideration in establishing the
Custodian's fees. The Custodian shall be entitled to retain any such income as a
part of its agreed compensation hereunder, and such income shall not be or
become a part of the Fund.
7.2 Charges Upon the Account. Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon or in respect of the Account
(including any transfer taxes incurred in connection with the investment and
reinvestment of Account assets), expenses, fees and administrative costs
incurred by the Custodian in the performance of its duties (including fees for
legal services rendered to the Custodian), and the Custodian's compensation as
determined under Article 7.1 shall constitute a charge upon the assets of the
Account. At the Custodian's option, such fees, taxes or expenses shall be paid
from the Account or by the Account Holder. The Custodian may redeem fund shares
and use the proceeds of redemption to pay such fees, taxes or expenses.
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ARTICLE VIII
RESIGNATION OR REMOVAL OF CUSTODIAN
8.1 Resignation or Removal. The Custodian may resign at any time by written
notice to the Account Holder which shall be effective 30 days after delivery
thereof. The Company shall appoint a successor Custodian who shall accept such
appointment in a writing provided to the Custodian and Account Holder within
such 30-day period. The Custodian may be removed by the Company at any time upon
30 days written notice to the Custodian, provided that the Company designates a
successor Custodian that accepts such appointment by a writing provided to the
Account Holder and the Custodian within such 30-day period. Upon such
resignation or removal, the Custodian shall transfer and deliver all assets of
the Account and all records relative thereto to the successor Custodian
appointed by the Company, provided such successor Custodian has in writing
accepted this Agreement as it is or may be then amended. Notwithstanding the
foregoing, the Custodian is authorized to reserve such sum of money as it may
deem advisable for payment of all of its fees, compensation, costs and expenses,
or for payment of any other liability constituting a charge on or against the
assets of the Account or on or against the Custodian, and where necessary may
liquidate shares in the Account for such payments. Any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor Custodian.
8.2 Liability for Successor's Acts. Upon its resignation or removal, the
Custodian shall not be liable for the acts or omissions of any successor
Custodian. Upon the transfer of assets of the Account to a successor Custodian,
the resigning or removed Custodian shall be relieved of all further liability
with respect to this Agreement, the Account and the assets thereof.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 Amendment of Agreement.
(a) The Account Holder, Employer, and Custodian hereby delegate
to the Company the power to amend this Agreement, including any
retroactive amendment necessary for the purpose of conforming the
Agreement to the requirements of the Code. The Company shall deliver
written notice of any such amendment to the Account Holder, Custodian
and any Employer who is party to this Agreement.
(b) No amendment to this Agreement shall cause or permit:
(i) any part of the assets of the Account to be used for, or
diverted to, purposes other than for the exclusive benefit of the
Employee or Beneficiary, except with regard to payment of the
expenses of the Custodian and the Company as authorized by the
provisions of this Agreement and except to the extent required by
law;
(ii) the Employee to be deprived of any accrued benefits
under this Agreement unless such amendment is required for the
purpose of con forming the Agreement to the requirements of any
law, government regulation or ruling; or
(iii) the imposition of any additional duties or obligations
on the Custodian without its consent.
9.2 Termination of Agreement. This Agreement shall terminate when all
assets in the Account have been distributed or otherwise transferred out of the
Account. Upon completion of such distribution, the Custodian shall be released
from all further liability with respect to all amounts so paid to the extent
permitted by applicable law.
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ARTICLE X
MISCELLANEOUS
10.1 Retirement Plan Provisions Shall Control. In the event contributions
are being made to the Account pursuant to any retirement plan or program
sponsored by the Employer, to the extent any provisions of this Agreement are
inconsistent with such retirement plan or program, the provisions of the
Employer's retirement plan or program shall control, provided:
(a) such provisions are not contrary to the rules and regulations
under Section 403(b)(7) of the Code; and
(b) such provisions do not impose any additional responsi bilities or
duties on the Custodian without its prior consent. The Employer shall be
responsible for delivering the most recent copy of any such retirement plan
or program to the Custodian.
10.2 ERISA Requirements. If this Agreement is determined to constitute part
of an "employee benefit plan" established or maintained by the Employer subject
to Title I of ERISA, then the Employer shall be solely responsible for assuring
such employee benefit plan complies at all times with the requirements of Title
I of ERISA.
10.3 Exclusive Benefit. The assets of the Account shall not be used for, or
diverted to, purposes other than for the exclusive benefit of the Employee or
his or her Beneficiary. The assets of the Account shall not be subject to the
claims of the creditors of the Employer.
10.4 Nonforfeitability and Nontransferability. The interest of the Employee
in the balance of the Account shall at all times be nonforfeitable and
nontransferable. All rights under this Agreement are enforceable solely by the
Employee or his or her Beneficiary, or any duly authorized representative of the
Employee or Beneficiary.
10.5 Nonalienation. The assets of the Account shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, except with regard to payment of expenses of the
Custodian as authorized by the provisions of the Agreement and except to the
extent required by law.
10.6 Notices. Any notice, accounting, or other communication which the
Custodian may give to the Employer or the Account Holder shall be deemed given
when mailed to the Employee at the latest address which has been furnished to
the Custodian. Any notice or other communication which the Employer or Account
Holder may give to the Custodian shall not become effective until actual receipt
of said notice by the Custodian.
10.7 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of Missouri, to the extent not preempted by Federal
law. No provision of this Agreement shall be construed to conflict with any
provision of an Internal Revenue Service regulation, ruling, release, or other
order which affects, or could affect, the terms of this Agreement or its
compliance with the requirements of Section 403(b)(7) of the Code.
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ADOPTION OF DISTRIBUTION PLAN
WHEREAS, Investors Research Fund, Inc. (the Fund) is registered as an
open-end diversified management investment company under the Investment Company
Act of 1940 (the 1940 Act); and
WHEREAS, the Fund desires to finance distribution of its shares in
accordance with this Plan of Distribution pursuant to Rule 12b-1 under the Act;
and
WHEREAS, the Board of Directors of the Fund has determined to adopt this
Distribution Plan in accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan will benefit the
Fund and its Shareholders; and,
WHEREAS, this Plan has been approved by a vote of the Board of Directors of
the Fund, including a majority of those directors who are not interested persons
of the Fund, as defined in the Act, and who have no direct or indirect financial
interest in the operation of this Plan (hereafter the 'disinterested
Directors"), cast in person at a meeting called for the purpose of voting on
this Plan.
NOW THEREFORE, the Fund hereby adopts the Plan on the following terms and
conditions:
1.(a) The Fund will make payments to broker-dealers who have engaged in the
marketing and distribution of the Fund's shares and who agree to provide certain
services of value to the Fund's Shareholders.
(b) Payments made our of or charged against the assets of the Fund are
subject, in total, to a maximum annual limit of .25% of the Fund's average daily
net assets, and for expenses of administration of this Plan.
(c) No payments whatsoever may be made from, or charged against, assets of
the Fund which directly or indirectly contribute to financing any activity which
is primarily intended to result in the sale of shares issued by the Fund except
those payments made pursuant to this Plan.
2. This Plan shall become effective immediately upon approval by a vote of
a majority of the outstanding voting securities of the Fund as defined in the
Act [Section 2 (42)], and shall continue in effect for a period of one (1) year
from the date of such approval unless terminated earlier as provided below.
Thereafter, the Plan shall continue in effect from year to year, provided that
the continuance is approved at least annually by a vote of the Board of
Directors of the Fund, including a majority of the Disinterested Directors who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on such Plan, or by a vote of a majority of the outstanding
voting securities of the Fund.
3. Any person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or any related agreement shall provide
to the Fund's Board of Directors, and the Board shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. No payments will be made by the Fund
hereunder after the date of termination of the Plan.
4. All material amendments to the Plan must be approved by the vote of the
Board of Directors of the Fund, including a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on such
amendments. However, this Plan may not be amended to increase materially the
amount to be spend by the Fund hereunder without approval by a vote of a
majority of the outstanding voting securities of the Fund.
5. So long as the Plan remains in effect, the selection and nomination of
persons to serve as those Directors of the Fund who are not "interested persons"
of the Fund shall be committed to the discretion of the Directors then in office
who are not "interested persons" of the Fund. However, nothing contained herein
shall prevent the participation of other persons in the selection and nomination
process, provided that a final decision on any such selection or nomination is
within the discretion of, and approved by, a majority of the Directors of the
Fund then in office who are not "interested persons" of the Fund.
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<PAGE>
6. Any agreement related to the Plan shall be in writing and shall provide:
(a) that such agreement may be terminated at any time as to the Fund, without
payment of any penalty and with no obligation to make any further payments, by
vote of a majority of the Disinterested Directors who have no direct or indirect
financial interest in the operation of the Plan or in any agreements relating to
the plan or by vote of a majority of the outstanding voting Shares of the Fund,
on not more than sixty (60) days' written notice to any other party to the
agreement; and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Fund shall preserve copies of the Plan and all reports made pursuant
to paragraph 4 hereof, together with minutes of all Directors meetings at which
the adoption, amendment or continuance of the Plan were considered (describing
the factors considered and the basis for decision), and any related reports or
minutes, as the case may be, for a period of not less than six (6) years from
the date of this Plan, the first two (2) years in an easily accessible place.
8. The Plan may be terminated at any time, without penalty, by the vote of
a majority of Disinterested Directors who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
cast in person at a meeting called for the purpose of voting on such Plan, or by
the vote of a majority of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, Investors Research Fund, Inc. has executed this
Distribution Plan on December 1, 1992.
INVESTORS RESEARCH FUND, INC.
By:___________/S/____________
Edgar T. Wells, Jr.
President
Attest:___________/S/_____________
Francis S. Johnson
Vice President
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<PAGE>
INVESTORS RESEARCH FUND, INC.
P.O. Box 30, Santa Barbara, CA 93102
(805) 569-1011
From: 12b-1 PLAN DEALER AND BROKER
SERVICING AGREEMENT
(Form A)
TO: INVESTORS RESEARCH FUND, INC.
P.O. Box 30
Santa Barbara, CA 93102
Gentlemen:
We desire to enter into this agreement (the "Agreement") with you in
connection with our distribution of shares (the "Shares") of Investors Research
Fund, Inc., pursuant to a Distribution Plan (the "Plan") adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"). This agreement defines the services to be provided by us, for which we
are to receive payment from you, pursuant to the Plan.
1. We are a member of the National Association of Securities Dealers, Inc.
and currently have an effective agreement with you for the distribution of
shares of Investors Research Fund, Inc. We agree to provide distribution
assistance and administrative support services in connection with the
distribution of shares of the Fund to customers who may from time to time
directly or beneficially own Shares, including but not limited to distributing
sales literature, answering routine customer inquiries regarding the Fund,
assisting in the establishment and maintenance of accounts in the Fund and in
processing of purchase and redemption of Share transactions, making the Fund's
investment plans and dividend options available, and providing such other
information and services in connection with the distribution of shares of the
Fund as you may reasonably request from time to time.
2. For such services, you shall pay us, within forty-five (45) days of the
end of each fiscal quarter of the Fund, a fee based upon the average daily net
asset value during the just ended fiscal quarter of Qualified Holdings owned by
use or by our customers for the minimum period determined from time to time by a
majority of the Fund's disinterested Directors (defined below), which fee shall
not exceed .0625% (.25% on an annual basis) of the average daily net asset value
of the Qualified Holdings during the quarter just ended; provided, however, that
no such payment shall be made to us for any quarter in which our Qualified
Holdings do not equal or exceed, at the end of such quarter, the Minimum
Qualified Holdings to be set by you with the approval of the Disinterested
Directors from time to time. You agree to notify us of the Minimum Qualified
Holdings and to provide us with written notice within thirty (30) days after any
change in that requirement.
3. We shall furnish you with such information as you shall reasonably
request with respect to the distribution assistance and administrative support
services furnished by us to our customers pursuant to this Agreement.
4. You may enter into other similar servicing agreements with any other
person without our consent.
5. This Agreement may be terminated at any time without payment of any
penalty by the vote of a majority of the Directors of the Fund who are not
"interested persons" of the Fund (as defined in the 1940 Act), and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Disinterested Directors"), or by a vote of a
majority (as defined in the 1940 Act) of the Fund's outstanding voting
securities, on not more than sixty (60) days written notice. It will also be
terminated by any act which terminates either the Plan of the agreement between
us for distribution of shares of the Fund, and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act).
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<PAGE>
6. The provisions of the Plan (including without limitation its definition
of terms that are capitalized in this Agreement) are incorporated herein by
reference. This Agreement shall become effective upon execution and delivery and
shall continue in full force and effect so long as the continuance of the plan
and this Agreement are approved at least annually by a vote of the Funds'
Directors, including a majority of the Disinterested Directors, cast in person
at a meeting called for the purpose of voting thereon. All notices hereunder
shall be to the respective parties at the addresses listed hereon, unless
changed by notice given in writing. This Agreement and all the rights and
obligations of the parties hereunder shall be governed and construed under the
laws of the State of California.
Accepted: Firm (Name)__________________________
(Address)___________________________
INVESTORS RESEARCH FUND, INC.
By: ______________________________ By: _________________________
Authorized Signature
Date:_____________________________ ________________________
Name
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