<PAGE> 1
As filed with the Securities and Exchange Commission on October 29, 1999
Registration Nos. 2-90949
811-4014
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No.18
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.19
MERIDIAN FUND, INC.(R)
(Exact name of Registrant as Specified in Charter)
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (415) 461-6237
Richard F. Aster, Jr.
Wood Island, Suite 306
60 E. Sir Francis Drake Blvd.
Larkspur, CA 94939
(Name and Address of Agent for Service)
----------------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
__X__ on November 1, 1999 pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)(1)
_____ 75 days after filing pursuant to Rule 485(a)(2)
_____ on ___________ pursuant to Rule 485(a)
-----------------
<PAGE> 2
MERIDIAN FUND, INC.(R)
CONTENTS OF REGISTRATION STATEMENT
This registration statement contains the following documents:
Facing Sheet
Contents of Registration Statement
Part A - Prospectus for
MERIDIAN FUND
MERIDIAN VALUE FUND(R)
Part B - Statement of Additional Information for
MERIDIAN FUND
MERIDIAN VALUE FUND(R)
Part C - Other Information
Signature Page
Exhibits
<PAGE> 3
-----------------------------------------------------------------
PART A
PROSPECTUS
MERIDIAN FUND, INC.(R)
------------------
MERIDIAN FUND
MERIDIAN VALUE FUND(R)
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<PAGE> 4
MERIDIAN FUND LOGO
MERIDIAN FUND, INC.(R)
------------------------------------
MERIDIAN FUND
MERIDIAN VALUE FUND(R)
------------------------------------
PROSPECTUS
November 1, 1999
THIS PROSPECTUS CONTAINS ESSENTIAL INFORMATION FOR ANYONE CONSIDERING AN
INVESTMENT IN THESE FUNDS.
PLEASE READ THIS DOCUMENT CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
Aster Capital Management, Inc.
Investment Adviser
------------------------------------
<PAGE> 5
MERIDIAN FUND, INC.(R)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES....................... 1
MERIDIAN FUND............................................. 1
MERIDIAN VALUE FUND(R).................................... 5
FURTHER INFORMATION ABOUT INVESTMENT OBJECTIVES, PRINCIPAL
INVESTMENT STRATEGIES AND RISKS........................... 9
General................................................... 9
Growth Investing.......................................... 9
Value Investing........................................... 9
Portfolio Turnover........................................ 10
Risks of Investing in Smaller, Newer Companies............ 10
High Yield Bonds.......................................... 10
Foreign Securities........................................ 10
Defensive Investments..................................... 11
Year 2000................................................. 11
ORGANIZATION AND MANAGEMENT................................. 12
The Investment Adviser.................................... 12
Portfolio Managers........................................ 12
Management Fees and Other Expenses........................ 12
The Transfer, Redemption and Disbursing Agent............. 13
Custodian................................................. 13
SHAREHOLDER INFORMATION..................................... 14
How to Purchase Shares.................................... 14
How to Redeem and Transfer Shares......................... 16
Distributions and Tax Status.............................. 18
THE FUNDS' PERFORMANCE...................................... 20
FINANCIAL HIGHLIGHTS........................................ 22
MERIDIAN FUND............................................. 22
MERIDIAN VALUE FUND(R).................................... 23
HOW TO OBTAIN ADDITIONAL INFORMATION........................ Back Cover
</TABLE>
<PAGE> 6
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
MERIDIAN FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
Objective: The MERIDIAN FUND seeks long-term growth of
capital.
Principal Investment
Strategies: The Fund invests primarily in a diversified
portfolio of publicly traded common stocks of
U.S. companies. The Fund emphasizes companies
that are relatively small in terms of total
assets, revenues and earnings and that the
Investment Adviser believes may have prospects
for above average growth in revenues and
earnings. These companies generally have
market capitalizations between $100 million
and $1.5 billion at the time of purchase.
The Fund may also invest in equity-related
securities (such as convertible debt
securities and warrants), bonds rated A or
better, and securities of foreign companies
(denominated in U.S. dollars or foreign
currencies), including emerging market
companies. However, the Fund currently does
not intend to invest more than 10% of its
total assets, calculated at the time of
purchase, in securities of foreign companies.
The Fund generally sells investments when the
Investment Adviser concludes that better
investment opportunities exist in other
securities, the security is fully valued, or
the issuer's circumstances or the political or
economic outlook have changed.
Principal Investment Risks: Because the values of the Fund's investments
will change with market conditions, so will
the value of your investment in the Fund. You
could lose money on your investment in the
Fund or the Fund could underperform other
investments.
The values of the Fund's stock investments
will fluctuate in response to the activities
of individual companies and general stock
market conditions. The stock prices of smaller
and newer companies tend to fluctuate more
than those of larger, more established
companies. The values of the Fund's bonds and
convertible securities are affected by
movements in interest rates; if rates rise,
the values may fall.
The values of the Fund's investments in
foreign securities also depend on changing
currency values, different political and
1
<PAGE> 7
economic environments and other overall
economic conditions in the countries where the
Fund invests. Emerging market securities
involve greater risk and more volatility than
those of companies in more developed markets.
PERFORMANCE
The charts on this page show how the Fund has performed and provide some
indication of the risks of investing in the Fund by showing how the performance
of the Fund's shares has varied from year to year. The bar chart shows changes
in the year-to-year performance of the Fund. The table below it compares the
performance of the Fund over time to the S&P 500(R), a widely recognized index
of U.S. common stocks, and the Russell 2000 Index, a broad based index of 2000
mid and small capitalization stocks.
Both charts assume reinvestment of distributions. Of course, past
performance does not indicate how the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31*
<TABLE>
<S> <C>
1989 19.57
1990 4.62
1991 56.82
1992 15.51
1993 13.05
1994 0.55
1995 22.43
1996 11.19
1997 19.23
1998 3.09
</TABLE>
During the period covered by this total return chart, the Fund's highest
quarterly return was 20.76% (for the quarter ended March 31, 1991); and the
lowest quarterly return was -18.79% (for the quarter ended September 30, 1998).
2
<PAGE> 8
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1998)*
<TABLE>
<CAPTION>
-------------------------------------------------
PAST PAST 5 PAST 10 SINCE INCEPTION
YEAR YEARS YEARS (AUGUST 1, 1984)
-------------------------------------------------
<S> <C> <C> <C> <C>
MERIDIAN FUND 3.09% 10.97% 15.73% 14.42%
-------------------------------------------------
S&P 500(R) Index 28.61% 24.05% 19.23% 19.23%
-------------------------------------------------
Russell 2000 Index (2.55)% 11.87% 12.93% 12.88%
- -------------------------------------------------------------------------------------------
</TABLE>
* For the period January 1, 1999 through June 30, 1999 the aggregate
(non-annualized) total return of the Fund was 8.19% versus 12.31% for the S&P
500(R) Index, and 8.46% for the Russell 2000 Index.
3
<PAGE> 9
FEES AND EXPENSES
The Fund has no sales, redemption, exchange or account fees, although some
institutions may charge you a fee for shares you buy through them. This table
describes the fees and expenses that you may pay if you buy and hold shares of
the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Load Imposed on Purchases NONE
------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends and
Distributions NONE
------------------------------------------------------------------
Deferred Sales Load NONE
------------------------------------------------------------------
Redemption Fees NONE
------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
Management fees 0.81%
Rule 12b-1 expenses NONE
------------------------------------------------------------------
Other expenses 0.20%
------------------------------------------------------------------
Total annual Fund operating expenses 1.01%
------------------------------------------------------------------
</TABLE>
EXAMPLE
Use this table to compare fees and expenses of the Fund with those of other
funds. It illustrates the amount of fees and expenses you would pay assuming the
following:
- $10,000 initial investment in the Fund
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------
<S> <C> <C> <C> <C>
$104 $323 $560 $1,241
- -------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 10
MERIDIAN VALUE FUND(R)
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
Objective: The MERIDIAN VALUE FUND(R) seeks long-term
growth of capital.
Principal Investment
Strategies: The Fund invests primarily in a diversified
portfolio of publicly traded common stocks of
U.S. companies.
The Fund emphasizes stocks which the
Investment Adviser believes are undervalued in
relation to the issuer's long-term earning
power or asset value, or the stock market in
general. It generally sells investments when
the Investment Adviser concludes that they are
fully valued. The Fund's investments are not
limited to companies of any particular size.
The Fund intends to invest at least 65% of its
total assets in common stocks and
equity-related securities (such as convertible
debt securities and warrants). The Fund may
invest up to 35% of its total assets in fixed
income securities, with emphasis on higher
yielding, higher risk, lower rated or unrated
corporate bonds, commonly referred to as "junk
bonds." These are bonds that are rated Ba or
below by Moody's Investors Service, Inc.
("Moody's") or BB or below by Standard &
Poor's ("S&P"), or unrated but of comparable
quality as determined by the Investment
Adviser. The Fund may invest up to 10% of its
total assets in securities rated below Ca by
Moody's or C by S&P, or, unrated but of
comparable quality.
The Fund may purchase high-yield bonds that
the Investment Adviser believes will increase
in value due to improvements in their credit
quality or ratings, anticipated declines in
interest rates or improved business conditions
for the issuer.
The Fund may also invest in securities of
foreign companies (denominated in U.S. dollars
or foreign currencies) including emerging
market companies. However, the Fund currently
does not intend to invest more than 10% of its
total assets, calculated at the time of
purchase, in securities of foreign companies.
5
<PAGE> 11
Principal Investment Risks: Because the values of the Fund's investments
will change with market conditions, so will
the value of your investment in the Fund. You
could lose money on your investment in the
Fund or the Fund could underperform other
investments.
The values of the Fund's stock investments
will fluctuate in response to the activities
of individual companies and general stock
market and economic conditions. The stock
prices of smaller and newer companies tend to
fluctuate more than those of larger, more
established companies.
The values of the Fund's bonds fluctuate in
response to movements in interest rates. If
rates rise, the values of bonds generally
fall; if rates fall, the values generally
rise. The longer the average maturity of the
Fund's bond portfolio, the greater the change
in value. The values of the Fund's convertible
securities are also affected by interest
rates. The values of any of the Fund's bond
investments may also decline in response to
events affecting the issuer or its credit
rating. The lower rated debt securities in
which the Fund invests are speculative and are
subject to greater volatility and risk of loss
through default than investment grade
securities, particularly in deteriorating
economic conditions.
The values of the Fund's investments in
foreign securities also depend on changing
currency values, different political and
economic environments and other overall
economic conditions in the countries where the
Fund invests. Emerging market securities
involve greater risk and more volatility than
those of companies in more developed markets.
6
<PAGE> 12
PERFORMANCE
The charts on this page show how the Fund has performed and provide some
indication of the risks of investing in the Fund by showing how the performance
of the Fund's shares has varied from year to year. The bar chart shows changes
in the year-to-year performance of the Fund. The table below it compares the
performance of the Fund over time to the S&P 500(R), a widely recognized index
of U.S. common stocks.
Both charts assume reinvestment of distributions. Of course, past
performance does not indicate how the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31*
<TABLE>
<S> <C>
1995 23.8
1996 32.34
1997 21.37
1998 18.94
</TABLE>
During the period covered by this total return chart, the Fund's highest
quarterly return was 21.17% (for the quarter ended June 30, 1997); and the
lowest quarterly return was -17.46% (for the quarter ended September 30, 1998).
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING DECEMBER 31, 1998)*
<TABLE>
<CAPTION>
---------------------------
PAST SINCE INCEPTION
YEAR FEBRUARY 10, 1994
---------------------------
<S> <C> <C>
MERIDIAN VALUE FUND(R) 18.94% 18.32%
---------------------------
S&P 500(R) Index 28.61% 24.24%
- -----------------------------------------------------------------------------------------
</TABLE>
* For the period January 1, 1999 through June 30, 1999, the aggregate
(non-annualized) total return of the Fund was 21.67% versus 12.31% for the S&P
500(R) Index.
7
<PAGE> 13
FEES AND EXPENSES
The Fund has no sales, redemption, exchange or account fees, although some
institutions may charge you a fee for shares you buy through them. This table
describes the fees and expenses that you may pay if you buy and hold shares of
the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Load Imposed on Purchases NONE
---------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends and
Distributions NONE
---------------------------------------------------------------------
Deferred Sales Load NONE
---------------------------------------------------------------------
Redemption Fees NONE
---------------------------------------------------------------------
Exchange Fee NONE
---------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
Management fees 1.00%
Rule 12b-1 expenses NONE
---------------------------------------------------------------------
Other expenses 0.63%
---------------------------------------------------------------------
Total annual Fund operating expenses 1.63%
---------------------------------------------------------------------
</TABLE>
EXAMPLE
Use this table to compare fees and expenses of the Fund with those of other
funds. It illustrates the amount of fees and expenses you would pay assuming the
following:
- $10,000 initial investment in the Fund
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--------------------------------------
<S> <C> <C> <C> <C>
$167 $518 $893 $1,945
- -------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 14
- --------------------------------------------------------------------------------
FURTHER INFORMATION ABOUT INVESTMENT OBJECTIVES,
PRINCIPAL INVESTMENT STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
GENERAL
In selecting investments to achieve the objective of long-term growth of
capital, the Investment Adviser considers the economic outlook and political
conditions as well as issuer-specific criteria. In addition to the factors
described below, those criteria include the issuer's growth relative to its
price-earnings ratio, its financial strength and management practices and
abilities, other valuation criteria, and the value of the individual securities
relative to other investment alternatives.
The application of each Fund's investment policies depends on the Investment
Adviser's judgment. The proportions of a Fund's assets invested in equity or
debt securities or cash, particular industries, and specific issues will shift
from time to time in accordance with the Investment Adviser's judgment.
Each Fund's investment objective and its investment policies other than those
listed as "fundamental" in the Statement of Additional Information (SAI) may be
changed by the Board of Directors without stockholder approval. Any such changes
may result in a Fund having investment objectives or policies different from
those which you considered appropriate at the time you invested in the Fund.
In addition, each Fund may use certain types of investments and investing
techniques that are described in more detail in the Statement of Additional
Information.
GROWTH INVESTING
The companies in which the MERIDIAN FUND invests may have prospects for
above-average growth in earnings and revenues because of many factors, including
high sales growth, high unit growth, industry growth, high or improving returns
on assets and equity and a strong balance sheet. The Fund may also invest in
companies not meeting these criteria if the Investment Adviser believes they
represent favorable investment opportunities for the Fund.
VALUE INVESTING
Securities in which the MERIDIAN VALUE FUND(R) invests may be undervalued
because of many factors, including market decline, poor economic conditions,
tax-loss selling or actual or anticipated unfavorable developments affecting the
issuer of the security. Any or all of these factors may provide buying
opportunities at attractive prices compared to historical or current market
price-earnings ratios, book value, underlying asset value, or the long-term
earning prospects of the company. If, in the Investment Adviser's opinion, a
stock has reached a fully valued position, it generally will be, but need not,
be sold and replaced by securities which are deemed to be undervalued in the
marketplace.
The Meridian Value Fund's policy of investing in securities that may be
temporarily out of favor differs from the investment approach followed by many
other mutual funds with a similar investment objective, including the MERIDIAN
FUND. Many such mutual funds typically do not invest in securities that have
declined sharply in price, are not widely followed, or are issued by companies
that have reported poor earnings or have suffered a downturn in business. The
Investment Adviser believes, however, that the securities of companies that may
be temporarily
9
<PAGE> 15
out of favor due to earnings declines or other adverse developments may offer
good investment opportunities for the Fund.
PORTFOLIO TURNOVER
Short-term trading is not intended to be the primary means by which either Fund
achieves its long-term investment objective. Each Fund, however, may engage in
active and frequent trading of portfolio securities to achieve its principal
investment strategies. Each Fund's annual portfolio turnover rate may exceed
100%, but is not expected to exceed 200%. These portfolio turnover rates and the
resultant commission expenses are higher on a relative basis than those of most
other mutual funds. See "Financial Highlights" for the Funds' past portfolio
turnover rates. Frequent trading can result in large distributions of capital
gains to shareholders. Short-term capital gains are taxable at higher rates than
long-term capital gains. A higher portfolio turnover rate will increase
aggregate brokerage commission expenses which must be borne directly by a Fund
and ultimately by that Fund's stockholders.
RISKS OF INVESTING IN SMALLER, NEWER COMPANIES
Each Fund's portfolio may include securities of smaller companies and
less-seasoned companies which have limited operating histories and may not yet
be profitable. Investments in these companies offer opportunities for capital
gains, but involve significant risks, including limited product lines, markets
or financial resources, dependence on a key group of managers, the absence of a
ready market for the securities (or securities which trade less frequently or in
a limited volume, or only in the over-the-counter market or on a regional stock
exchange), volatility of the stock price, and in the case of unseasoned
companies, the untested long-term viability of the firms' operations. A Fund
will not invest in a company having an operating history of less than three
years if immediately after and as a result of that investment the value of the
Fund's holdings of such securities exceeds 25% of the value of the Fund's total
assets.
HIGH YIELD BONDS
The MERIDIAN FUND will only purchase bonds rated A or better (or, if unrated,
are considered by the Investment Adviser to be of equivalent credit rating). The
MERIDIAN VALUE FUND(R) may purchase high-yield, high-risk bonds (bonds rated
less than Baa or BBB), which typically are subject to greater market
fluctuations and to greater risk of loss of income and principal due to default
by the issuer than are higher-rated bonds. Their values tend to reflect
short-term corporate, economic and market developments and investor perceptions
of the issuer's credit quality to a greater extent than lower yielding,
higher-rated bonds. In addition, it may be more difficult to dispose of, or to
determine the value of, high-yield, high-risk bonds. Bonds rated less than Baa
or BBB are considered speculative. Bonds rated Ca or CC are described by the
ratings agencies as "speculative in a high degree; often in default or having
other marked shortcomings." See the Appendix to the Statement of Additional
Information for a complete description of the bond ratings.
FOREIGN SECURITIES
A Fund may invest in the securities of non-U.S. companies. These companies are
not subject to uniform accounting, auditing and financial reporting standards
and practices, or regulatory requirements comparable to those applicable to U.S.
companies. There also may be less public information available about non-U.S.
companies.
10
<PAGE> 16
Additionally, specific local political and economic factors must be evaluated in
making these investments, including trade balances and imbalances, and related
economic policies; expropriation or confiscatory taxation; limitations on the
removal of funds or other assets; political or social instability; the diverse
structure and liquidity of the various securities markets; and nationalization
policies of governments around the world. However, investing outside the U.S.
can also reduce certain of these risks due to greater diversification
opportunities. Securities of non-U.S. issuers may be denominated in currencies
other than the U.S. dollar. If the currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the currency would
adversely affect the value of the security expressed in dollars. The value of
currencies may fluctuate in a manner unrelated to the investment performance of
the securities denominated in those currencies.
DEFENSIVE INVESTMENTS
When the Investment Adviser concludes, on the basis of its analyses of the
economy, political conditions, or its own valuation guidelines and standards,
that general market conditions warrant the reduction of some or all of a Fund's
equity securities holdings, a Fund may adopt a temporary defensive posture to
preserve capital and, if possible, to achieve positive returns in defensive type
investments. During such periods a Fund may hold a portion or all of its assets
in corporate debt obligations, preferred stocks, cash or money market
instruments. A Fund may not achieve its investment objective while it is
investing defensively.
YEAR 2000
Until recently, most computer systems have used two digits to identify the year.
Without modifications to adapt to the change from "99" to "00" at the turn of
the century, those systems may not be able to perform necessary functions. The
Funds' principal service providers have advised the Funds that they have been
actively working on implementing necessary changes to their systems, and that
they expect that their systems will be adapted in time, although there can be no
assurance of success. If their computer systems are not ready in time, there
could be a negative effect on Fund operations. The year 2000 issue affects
virtually all organizations and could adversely affect the Funds' investments.
To the extent a Fund invests in foreign securities, it may be at greater risk
because the computer systems of foreign issuers, governments or other entities
may not be ready for the year 2000.
EURO INTRODUCTION
On January 1, 1999, the European Union introduced a single European currency,
the Euro. The Investment Adviser and other key service providers have taken
steps to address Euro-related issues and their impact on the Funds' operations.
The Funds have not experienced any adverse operational effects from the Euro
conversion nor has it caused any apparent market disruptions. The Funds and the
Investment Adviser will continue to monitor the effects of the conversion on the
markets and issues in which the Funds invest.
11
<PAGE> 17
- --------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT
- --------------------------------------------------------------------------------
MERIDIAN FUND, INC.
Meridian Fund, Inc.(R) ("Meridian") is a no-load, open-end, diversified
management investment company consisting of two separate portfolios, the
MERIDIAN FUND and the MERIDIAN VALUE FUND(R).
THE INVESTMENT ADVISER
Meridian has retained as investment adviser Aster Capital Management, Inc. (the
"Investment Adviser"), 60 E. Sir Francis Drake Blvd., Wood Island, Suite 306,
Larkspur, California 94939. The Investment Adviser manages the investment of the
Funds' portfolios, provides administrative services and manages Meridian's other
business affairs. These services are subject to general oversight by Meridian's
Board of Directors.
The Investment Adviser is a professional investment management organization
founded in 1985. Richard F. Aster, Jr. owns 94% of the Investment Adviser, and
is President and a Director of Meridian and of the Investment Adviser.
PORTFOLIO MANAGERS
Richard F. Aster, Jr. has been primarily responsible for the day-to-day
management of the MERIDIAN FUND since inception. Mr. Aster has been President of
Aster Investment Management, Inc. for over fifteen years. Aster Investment
Management, Inc. is an investment adviser for individuals and institutions. Mr.
Aster and (since 1995) Kevin C. O'Boyle are co-managers of the MERIDIAN VALUE
FUND(R).
Mr. O'Boyle has been employed by the Investment Adviser since September 1994 as
Vice President of Research. Mr. O'Boyle earned his Master of Business
Administration degree from the Stanford University Graduate School of Business
in 1993.
MANAGEMENT FEES AND OTHER EXPENSES
Management Fees. MERIDIAN FUND pays the Investment Adviser an annual fee of 1%
of the first $50 million of the Fund's average daily net assets and 0.75% of the
Fund's average daily net assets in excess of $50 million. MERIDIAN VALUE FUND(R)
pays the Investment Adviser an annual fee of 1% of the Fund's average daily net
assets. The management fees are computed daily and paid monthly.
Expenses. Each Fund will pay all of its own expenses. Expenses which relate to
both Funds (such as, for example, the fees and expenses paid to the Meridian
Directors) will be allocated between Funds by the Investment Adviser in a
reasonable manner.
The Investment Adviser has contractually agreed until at least October 31, 2000
to reimburse each Fund in the amount, if any, by which the aggregate operating
expenses of the Fund in any fiscal year exceed 2.5% of the first $30 million of
the Fund's average net assets, 2.0% of the next $70 million of the average net
assets, and l.5% of the remaining average net assets. Any reimbursement will be
on a monthly basis, subject to year-end adjustment. Interest expense, taxes and
capital items such as brokerage fees and commissions are not included as
expenses for these purposes.
12
<PAGE> 18
THE TRANSFER, REDEMPTION AND DISBURSING AGENT
First Data Investor Services Group, Inc., a wholly owned subsidiary of First
Data Corporation ("First Data"), serves as Transfer, Redemption and Disbursing
Agent to each Fund. Its address is 211 South Gulph Road, P.O. Box 61767, King of
Prussia, Pennsylvania 19406.
CUSTODIAN
Bank of New York, 48 Wall Street, New York, NY 10286, serves as Custodian of all
securities and funds owned by the Funds.
13
<PAGE> 19
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
INITIAL PURCHASE
Minimum Initial Investment. You must invest at least $1,000 to open a
stockholder account.
Application. You may purchase shares from a Fund by sending a signed, completed
application form and a check or money order, payable in U.S. dollars, to:
MERIDIAN FUND, INC.(R)
c/o First Data Investor Services Group, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
Meridian does not accept purchases by third party checks, credit cards or cash.
The Funds reserve the right to suspend or modify the continuous offering of
their shares.
Application Forms and Questions. Call Shareholder Services at 1-800-446-6662.
Payments by Wire. If you want to pay for your initial shares by wiring funds,
call Shareholder Services at 1-800-446-6662 directly to have an account number
assigned and make arrangements for the timely submission of the application
form. See "Purchases By Wire" for further instructions.
Share Certificates. You may obtain share certificates, for full shares only, by
written request to the Transfer Agent.
Purchases through Third Parties. Meridian assumes no liability for the failure
of third party dealers to transmit your order promptly or accurately to either
Fund.
TAX-DEFERRED PLANS
You may be entitled to invest in the Funds through a tax-deferred account under
a prototype trust approved by the IRS (a "Plan Account"), such as an Individual
Retirement Account ("IRA"), a Simplified Employee Pension Plan ("SEP-IRA"), a
Savings Incentive Match Plan for Employees ("SIMPLE Plan"), a Roth IRA, or an
Education IRA. There is no service charge for the purchase of Fund shares
through a Plan Account but there is an annual maintenance fee of $12 per Plan
Account. Semper Trust Company serves as custodian for Plan Accounts offered by
Meridian. For more information about Plan Accounts along with the necessary
materials to establish a Plan Account, call 1-800-446-6662 or write to Meridian
Fund, Inc.(R), c/o First Data Investor Services Group, Inc., 211 South Gulph
Road, P.O. Box 61767, King of Prussia, PA 19406. You should consult your own tax
advisors regarding the tax consequences to you of establishing or purchasing
Fund shares through a Plan Account.
ADDITIONAL PURCHASES
Once you have opened an account, you may buy additional shares at any time by
sending the stub from your last statement together with a check or money order
for at least $50, payable in U.S. dollars, to:
Meridian Fund, Inc.(R)
c/o First Data Investor Services Group, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406.
Share purchase confirmations will include a form for sending additional funds.
You must include your account number.
14
<PAGE> 20
Automatic Deductions. If you wish to have automatic deductions from a checking
account, call Shareholder Services at 1-800-446-6662 for forms.
PURCHASES BY WIRE
You may wire funds to Meridian. You should make arrangements so that your funds
arrive at the same time as your instructions for the purchase of shares. Call
Shareholder Services at 1-800-446-6662. Transfer funds by wire via the Federal
Reserve Wire System as follows: Boston Safe Deposit and Trust, ABA #011001234,
for MERIDIAN FUND (or MERIDIAN VALUE FUNDS(R), A/C #003573, FBO Account of
(name(s) as registered), Shareholder A/C #(account number). Boston Safe Deposit
and Trust and Meridian are not liable for any loss incurred by delay in
receiving money submitted by wire transfer.
PURCHASES BY TELEPHONE
Meridian may, from time to time, accept telephone purchase orders from
broker-dealers and institutions previously approved by Meridian. Meridian does
not have a sales or service charge but those broker-dealers may charge you for
their services.
PRICE OF SHARES
Each Fund sells its shares at the next net asset value per share of the Fund
determined after the Transfer Agent has received properly identified purchase
funds. Net asset value per share is computed as of the close of business
(currently 4:00 p.m., New York time) each day the New York Stock Exchange is
open for trading.
Net asset value is determined by totaling the value of all portfolio securities,
cash, other assets, including accrued interest and dividends, held by a Fund,
and subtracting from that total all liabilities, including accrued expenses. The
total net asset value is divided by the total number of shares outstanding to
determine the net asset value of each share. Securities in the Fund's portfolio
are valued primarily on market quotes, or, if quotes are not available, by a
method that the Board of Directors of Meridian believes would reflect accurately
the securities' fair value. International markets may be open on days when U.S.
markets are closed. The value of foreign securities owned by a Fund could change
on days when Fund shares may not be bought or sold. Short-term securities with
original or remaining maturities more than 60 days are valued at the mean of
their quoted bid and asked prices. Short term securities with 60 days or less to
maturity are amortized to maturity based on their cost to the Fund if acquired
within 60 days of maturity or, if already held by the Fund on the 60th day,
based on the value determined on the 61st day.
Meridian's Transfer Agent will be closed on the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGES BETWEEN FUNDS
You may exchange shares from one Fund to the other Fund, subject to the minimum
investment requirements of the Fund purchased. To exchange shares, write
Meridian's Transfer Agent (see "Redemption and Transfer of Shares") or -- if you
have submitted a signed Account Application which indicates that you have not
declined the option -- telephone 1-800-446-6662 toll-free. The Fund and its
Transfer Agent employ reasonable procedures including providing written
confirmations to confirm that the instructions received from any person with
appropriate account information are genuine. If the
15
<PAGE> 21
Fund or its Transfer Agent fail to employ such procedures, they may be liable
for losses due to unauthorized or fraudulent instructions. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "How to Purchase Shares -- Price of
Shares.")
EXCHANGES HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
EXCHANGE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE FUND TO BE PURCHASED
MAY BE LEGALLY OFFERED AND MAY BE TERMINATED OR MODIFIED AT ANY TIME UPON 60
DAYS' WRITTEN NOTICE.
HOW TO REDEEM AND TRANSFER SHARES
BY MAIL
You may redeem shares of a Fund by mail by writing directly to Meridian's
Transfer Agent, First Data Investor Services Group, Inc., 211 South Gulph Road,
P.O. Box 61767, King of Prussia, PA 19406. If you send a redemption request to
Meridian directly, rather than to its Transfer Agent, Meridian will forward your
request to the Transfer Agent, but the effective date of redemption may be
delayed until the request is received by the Transfer Agent.
You must sign the redemption request exactly as your name appears on the
registration form and must include the account number. If more than one person
owns the shares, all owners must sign the redemption request exactly as their
names appear on the registration.
You must deliver stock certificates for any shares to be redeemed together with
the signed redemption request.
Signature guarantees, when required as described below, and any additional
documents required by Meridian for shares owned by corporations, executors,
administrators, trustees or guardians, also must accompany the redemption
request.
A request for redemption will not be processed until all of the necessary
documentation has been received in proper form by the Transfer Agent. If you
have questions about what documents are required, call Shareholder Services at
1-800-446-6662.
BY TELEPHONE OR TELEGRAM
Unless you have declined the option in your account application, you may redeem
shares of a Fund by telephone by calling Shareholder Services at 1-800-446-6662
during normal business hours. You also may send a telegram or an overseas cable
to First Data Investor Services Group, Inc., 211 South Gulph Road, P.O. Box
61767, King of Prussia, PA 19406-0903, for the account of the Fund.
You may elect at any time to use the telephone or telegram redemption service.
You may make that election on the initial application form or on other forms
prescribed by the Fund. An executed authorization form must be on file with the
Transfer Agent before you may use the service. Share certificates for the shares
being redeemed must be held by the Transfer Agent. A corporation (or
partnership) also must submit a corporate resolution (or certificate of
partnership) indicating the names, titles and the required number of signatures
authorized to act on its behalf. The authorization form must be signed by a duly
authorized officer(s) and the corporation seal affixed.
The Funds provide written confirmation of transactions initiated by telephone to
confirm that telephone transactions are genuine. If a Fund or the Transfer Agent
fails to employ this and other reasonable procedures, the Fund or the Transfer
Agent may be liable.
16
<PAGE> 22
When using the telephone or telegram redemption service, you must give the full
registration name, address, number of shares or dollar amount to be redeemed,
Fund account number and name of the Fund in order for the redemption request to
be processed.
First Data and Meridian reserve the right to refuse any telephone or telegram
instructions and may discontinue these redemption options upon 30 days written
notice.
At times of peak activity it may be difficult to place requests by phone. During
these times, consider sending your request in writing.
REDEMPTION BY WIRE
You can request transmittal of redemption proceeds directly to your
predesignated account at a domestic bank if the proceeds are at least $5,000.
Proceeds of less than $5,000 will be mailed to your registered address of
record. The Fund will pay wire charges and other costs. Any changes or
exceptions to the original election must be made in writing, with signature
guaranteed, and will be effective upon receipt by the Transfer Agent.
REDEMPTION PRICE AND CONDITIONS
All shares of the Funds may be redeemed at the next net asset value per share of
the Fund determined after receipt of a redemption request by mail, telephone,
telegraph or wire as described above, by the Transfer Agent. Because the net
asset value of a Fund's shares will fluctuate as a result of changes in the
market value of the securities it owns, the amount you receive upon redemption
may be more or less than the amount you paid for the shares. (See "How to
Purchase Shares -- Price of Shares.") Payment for shares redeemed in writing, by
telephone or by telegram, if in good order, will be made promptly after receipt,
but not later than seven business days after the valuation date. Requests for
redemption which are subject to any special conditions or which specify an
effective date other than as provided in this Prospectus cannot be accepted. In
accordance with the rules of the Securities and Exchange Commission (SEC), we
reserve the right to suspend redemptions under extraordinary circumstances.
Investment dealers handling redemption transactions may charge you for the
service. You will not be charged if you redeem shares directly through the
Transfer Agent.
Requests for redemptions will be honored but payment will be withheld until
checks (including certified checks or cashier's checks) received for the shares
purchased have cleared, which can take as long as fifteen days from date of
purchase. If you have questions about the proper form for redemption, call
Shareholder Services at 1-800-446-6662.
MANDATORY REDEMPTION
If your account in a Fund falls below $750 for any reason other than market
fluctuations, we will ask you to add to your account. If your account balance is
not brought up to the minimum or you do not send us other instructions, we will
redeem your shares and send you the proceeds. You will be given at least 60 days
notice to bring the account up to the minimum level before involuntary
redemption.
SIGNATURE GUARANTEE
To prevent fraudulent redemptions Meridian requires that the signature of each
stockholder be guaranteed for all redemptions greater that $25,000 or those
directed to an address or individual other than the holder of record.
17
<PAGE> 23
Signatures must be guaranteed by a representative of an eligible guarantor
institution. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. A broker-dealer
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program.
The signature guarantees must appear, together with the signatures of the
registered owners on one of the following: (1) a written request for redemption,
which identifies clearly the exact names in which the account is registered, the
account number and the number of shares or the dollar amount to be redeemed, (2)
a separate instrument of assignment which should specify the total number of
shares to be redeemed (this "stock power" may be obtained from Meridian or First
Data, or from most banks and stockbrokers), or (3) all stock certificates
tendered for redemption, or on the letter of stock power if shares are held by
the Transfer Agent.
SHARE TRANSFERS
You may transfer shares of a Fund by delivering to First Data: (1) a letter of
instructions, signed exactly as the shares are registered by each registered
owner, which identifies clearly the exact names in which the account presently
is registered, the account number, the number of shares to be transferred, and
the names, address and social security or tax identification number of the
account to which the shares are to be transferred, (2) stock certificates, if
any, which are the subject of the transfer, and (3) an instrument of assignment
("stock power"), which should specify the total number of shares to be
transferred and on which the signatures of the registered owners have been
guaranteed. (See "Signature Guarantee.") Additional documents are required for
transfers by corporations, executors, administrators, trustees and guardians. If
you have questions about the documents required, call Shareholder Services
(1-800-446-6662). If the transfer establishes a new account, you must also
submit a new application. Meridian is not bound to record any transfer on the
stock transfer books maintained by First Data until First Data has received all
required documents.
KEEPING YOU INFORMED
After you invest, during the year we will send you the following communications:
- - confirmation statements
- - account statements, mailed after the close of each calendar quarter
- - annual and semiannual reports, mailed approximately 60 days after June 30 and
December 31
- - 1099 tax form, sent by January 31
- - annual updated prospectus, mailed to existing stockholders in the Fall.
DISTRIBUTIONS AND TAX STATUS
DISTRIBUTIONS
Meridian declares and pays annually to the stockholders of each Fund dividends
from net investment income. The amount depends on earnings, the financial
condition of the Fund and other factors. We will distribute any net realized
capital gains to shareholders annually after the end of the fiscal year. A Fund
may make an additional dividend or capital gain distribution near the end of the
calendar year.
18
<PAGE> 24
We will automatically reinvest dividends and capital gain distributions in
shares, at net asset value (without sales charge), unless you otherwise instruct
the Transfer Agent in writing.
The value of shares will be reduced by the amount of dividends and
distributions. If you purchase shares shortly before the record date for a
dividend or the distribution of capital gains, you will pay the full price for
the shares and receive some portion of the price back as a taxable dividend or
distribution.
UNDELIVERABLE REDEMPTION CHECKS
If you choose to receive distributions in cash and distribution checks are
returned and marked as "undeliverable" or remain uncashed for six months, your
account will be changed automatically so that all future distributions are
reinvested in your account. Checks that remain uncashed for six months will be
cancelled and the money reinvested in the Fund. No interest is paid during the
time the check is outstanding.
FEDERAL INCOME TAXES
Distributions to you of net investment income, net short-term capital gain and
other distributions of certain items by the Fund are taxable as ordinary income.
Distributions of a Fund's net long-term capital gain will be taxable to you as a
net capital gain, regardless of how long you have held your Fund shares.
In general, distributions are taxable to you when paid, whether you take the
distributions in cash or automatically reinvest them in additional Fund shares.
However, distributions declared in October, November and December of one year
and paid in January of the following year will be taxable to you as if they were
paid on December 31 of the first year.
You will be notified in January each year about the federal tax status of
distributions made by the Funds. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Redemptions (including redemptions in-kind) and exchanges of Fund shares will
ordinarily result in a taxable capital gain or loss, depending on the amount you
receive for your shares (or are deemed to have received in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them.
A penalty is charged on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances. Foreign shareholders may be
subject to special withholding requirements.
The Funds may incur foreign income taxes in connection with some of their
foreign investments. Certain of these taxes may be credited to shareholders.
A Fund must withhold 31% of your distributions and redemption proceeds if you
have not provided the Fund your taxpayer identification number in compliance
with IRS rules and certified that you are not subject to back-up withholding. To
avoid this, make sure you provide your correct tax identification number (social
security number for most investors) and appropriate certification on your
account application. If you do not provide us with a correct taxpayer
identification number, you may also be subject to IRS penalties.
Further federal income tax information is contained in the SAI. You should
consult your individual tax advisors with respect to your particular tax
situations as well as the state, foreign, and local tax consequences of
investments in shares of the Funds.
19
<PAGE> 25
- --------------------------------------------------------------------------------
THE FUNDS' PERFORMANCE
- --------------------------------------------------------------------------------
MERIDIAN FUND
AS COMPARED TO S&P 500 AND RUSSELL 2000 INDEXES
<TABLE>
<CAPTION>
VALUE OF $10,000 INVESTED VALUE OF THE $10,000
S&P 500 MERIDIAN FUND INVESTED RUSSELL
------------------------- ------------- --------------------
<S> <C> <C> <C>
6/30/89 10000.00 10000.00 10000.00
6/30/90 11674.00 11971.00 10296.00
6/30/91 12518.00 12645.00 10433.00
6/30/92 14202.00 15300.00 11949.00
6/30/93 16138.00 19813.00 15057.00
6/30/94 16373.00 20503.00 15711.00
6/30/95 20640.00 23874.00 18871.00
6/30/96 26002.00 28983.00 23379.00
6/30/97 35023.00 33017.00 27195.00
6/30/98 45578.00 38603.00 31685.00
6/30/99 55934.00 39781.00 32160.00
</TABLE>
MANAGEMENT'S DISCUSSION OF MERIDIAN FUND PERFORMANCE
The Russell 2000 index was up 0.06% during the fiscal year ended June 30, 1999,
reflecting the lackluster performance of small and medium sized growth stocks.
This market condition materially affected the Fund's performance of 3.05% during
the fiscal year ended June 30, 1999. The Fund tends to emphasize investments in
companies that are relatively small in terms of total assets, revenues and
earnings, that the Investment Adviser believes may have prospects for above
average growth in revenues and earnings. Based on following this strategy, the
Fund's best performing sectors included cellular communications, energy, hotels
and lodging, industrial products and services, insurance, leisure and amusement,
restaurants, retail and telecommunications. The worst performing groups were
banking and finance, consumer products and services, correctional and detention
facilities, health services, real estate, technology and transportation. Of a
total of 82 investments, 46 advanced and 36 declined.
NEW BENCHMARK INDEX
The S&P 500(R) index is a market capitalization weighted index of 500 large
capitalization securities. The Adviser has determined that a more appropriate
benchmark for the Meridian Fund is the Russell 2000 index because the Meridian
Fund invests primarily in mid and small capitalization securities and that the
weighting given the largest capitalization securities within the S&P 500(R) has
increased dramatically over the past several years. The Russell 2000 is a broad
based index of 2000 mid and small capitalization securities. The returns of both
benchmark indices have been presented for comparison.
20
<PAGE> 26
MERIDIAN VALUE FUND(R)
<TABLE>
<CAPTION>
S&P 500(R) Meridian Value Fund(R)
---------- ----------------------
<S> <C> <C>
2/10/94 10000.00 10000.00
6/30/94 9579.00 9870.00
6/30/95 12075.00 10270.00
6/30/96 15212.00 15320.00
6/30/97 20490.00 18468.00
6/30/98 26665.00 23279.00
6/30/99 32724.00 27683.00
</TABLE>
MANAGEMENT'S DISCUSSION OF MERIDIAN VALUE FUND(R) PERFORMANCE
The S&P 500 with reinvested dividends returned 22.72% during the fiscal year
ended June 30, 1999. This market condition materially affected the Meridian
Value Fund's performance of 18.92% during the same period. The Fund's strategy
is to invest in stocks across a range of market capitalizations, including the
mid-to-large capitalizations of the S&P 500, as well as smaller companies that
the Investment Adviser believes are undervalued in relation to the issuer's
long-term earning power, asset value and/or stock market in general. Based on
following this strategy, the Fund's average return from inception to June 30,
1999 was 20.8% while the S&P 500 returned 24.6%. The Fund did not approach full
investment status until June 30, 1995, with cash comprising an average of
approximately 45-50% of the Fund's total portfolio from inception until June 30,
1995. For the four-year period June 30, 1995 to June 30, 1999, the Meridian
Value Fund's average annual return was 28.1% compared to 28.3% for the S&P with
dividends. During the fiscal year ended June 30, 1999, the Fund's strongest
performing sectors were technology, telecommunications/cable equipment, retail,
healthcare and consumer product sectors. The worst performing investments were
in the apparel/shoe and industrial services sectors.
21
<PAGE> 27
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial history. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the Funds' financial statements, is included in the Funds' annual reports, which
are available upon request and incorporated by reference in the SAI.
MERIDIAN FUND
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
FOR THE FISCAL YEARS ENDED JUNE 30,
- -----------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of
period $ 33.26 $ 33.20 $ 32.21 $ 27.29 $ 24.27 $ 23.87
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Income from Investment Operations
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Net Investment Income (loss) 0.16 0.27 0.40 0.30 0.27 0.09
- -----------------------------------------------------------------------------------------------------
Net Gains (Losses) on Securities
(both realized and unrealized) (0.50) 4.92 3.71 5.47 3.63 0.76
- -----------------------------------------------------------------------------------------------------
Total From Investment Operations (0.34) 5.19 4.11 5.77 3.90 0.85
- -----------------------------------------------------------------------------------------------------
Less Distributions
- -----------------------------------------------------------------------------------------------------
Distributions from net investment
income (0.14) (0.32) (0.36) (0.31) (0.18) (0.02)
- -----------------------------------------------------------------------------------------------------
Distributions from net realized
capital gains (6.50) (4.81) (2.76) (.54) (.70) (.43)
- -----------------------------------------------------------------------------------------------------
Total Distributions (6.64) (5.13) (3.12) (0.85) (0.88) (0.45)
- -----------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 26.28 $ 33.26 $ 33.20 $ 32.21 $ 27.29 $ 24.27
- -----------------------------------------------------------------------------------------------------
Total Return 3.05% 16.92% 13.92% 21.40% 16.44% 3.48%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------
Net Assets, End of Period (in
thousands) $185,683 $296,803 $353,029 $384,087 $328,153 $199,191
- -----------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets 1.01% 0.95% 0.96% 0.96% 1.06% 1.22%
- -----------------------------------------------------------------------------------------------------
Radio of Net Investment Income
(Loss) to Average Net Assets 0.49% 0.76% 1.23% 0.99% 1.18% 0.38%
- -----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 51% 38% 37% 34% 29% 43%
- -----------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------ -----------------------------------------
FOR THE FISCAL YEARS ENDED JUNE 30,
- ------------------------------------ -----------------------------------------
1993 1992 1991 1990
- ------------------------------------ -----------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of
period $ 18.97 $ 17.24 $ 17.71 $ 15.93
- -----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Income from Investment Operations
- ---------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Net Investment Income (loss) (0.01) 0.07 0.20 0.06
- -----------------------------------------------------------------------------------------------------
Net Gains (Losses) on Securities
(both realized and unrealized) 5.51 3.45 0.49 2.84
- -----------------------------------------------------------------------------------------------------
Total From Investment Operations 5.50 3.52 0.69 2.90
- -----------------------------------------------------------------------------------------------------
Less Distributions
- -----------------------------------------------------------------------------------------------------
Distributions from net investment
income (0.04) (0.09) (0.12) (0.48)
- -----------------------------------------------------------------------------------------------------
Distributions from net realized
capital gains (.56) (1.70) (1.04) (.64)
- -----------------------------------------------------------------------------------------------------
Total Distributions (0.60) (1.79) (1.16) (1.12)
- -----------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 23.87 $ 18.97 $ 17.24 $ 17.71
- -----------------------------------------------------------------------------------------------------
Total Return 29.50% 21.00% 5.62% 19.71%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------
Net Assets, End of Period (in
thousands) $78,581 $18,363 $12,350 $11,058
- -----------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets 1.47% 1.75% 1.68% 2.08%
- -----------------------------------------------------------------------------------------------------
Radio of Net Investment Income
(Loss) to Average Net Assets (.01%) 0.24% 0.98% 0.14%
- -----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 61% 61% 85% 66%
- -----------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 28
MERIDIAN VALUE FUND(R)
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE FISCAL YEARS ENDED JUNE 30,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994(+)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of
period $ 19.30 $ 17.40 $ 15.32 $ 10.27 $ 9.87 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- -------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (loss) (0.10) (0.19) (0.26) (0.10) (0.04) 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Net Gains (Losses) on Securities
(both realized and unrealized) 3.56 4.32 3.20 5.15 0.44 (0.13)
- -------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 3.46 4.13 2.94 5.05 0.40 (0.13)
- -------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from Net Realized
Capital Gains (0.47) (2.23) (0.86) 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (2.23) (0.86) 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 22.29 $ 19.30 $ 17.40 $ 15.32 $ 10.27 $ 9.87
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 18.92% 26.05% 20.55%+ 49.17%+ 4.05%+ (1.30)+
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period $24,912,455 $12,196,379 $7,340,110 $3,471,507 $715,021 $391,538
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets 1.63% 2.16% 2.51%* 2.55%* 2.78%* 1.28%*
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Loss to
Average Net Assets (0.65%) (1.35%) (1.96%)* (1.36%)* (0.58%)* (0.07%)*
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 124% 133% 144% 125% 77% 194%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(+) From commencement of operations on February 10, 1994.
+ The total returns would have been lower had certain expenses not been
reduced during the periods shown.
* Not representative of expenses incurred by the Fund as the Adviser waived
its fee and/or paid certain expenses of the Fund. Had these fees and
expenses not been reduced and absorbed, the ratio of expenses to average
net assets would have been 2.80%, 6.47%, 14.64% and 11.22%, and the ratio
of net investment income to average net assets would have been a loss of
2.25%, 5.28%, 12.44% and 10.02%, for the periods ended June 30, 1997
through June 30, 1994, respectively.
23
<PAGE> 29
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<PAGE> 30
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<PAGE> 31
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<PAGE> 32
For more information about MERIDIAN FUND, INC.(R) the following documents are
available free upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semiannual reports to shareholders contain detailed
information about the Funds' portfolios.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including operations
and investment strategies. It is incorporated by reference and is legally
considered a part of this Prospectus.
You can get free copies of the reports and the SAI, request other information or
make shareholder inquiries, by contacting us at:
MERIDIAN FUND, INC.(R)
C/O FIRST DATA INVESTORS SERVICES GROUP, INC.
211 SOUTH GULPH ROAD
P.O. BOX 61767
KING OF PRUSSIA, PA 19406
800-446-6662
You can also review the Fund's reports and SAI at the Public Reference Room of
the Securities and Exchange Commission. In addition, you can get text-only
copies:
- For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file No. 811-4014
<PAGE> 33
-----------------------------------------------------------------
PART B
STATEMENT OF ADDITIONAL INFORMATION
MERIDIAN FUND, INC.(R)
------------------
MERIDIAN FUND
MERIDIAN VALUE FUND(R)
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MERIDIAN FUND, INC.(R)
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
This Statement of Additional Information is not a prospectus, and it
should be read in conjunction with the Prospectus dated November 1, 1999, as
supplemented from time to time, which includes Meridian Fund and Meridian Value
Fund(R). Copies of the Prospectus may be obtained at no charge by writing to
Meridian Fund, Inc.(R) c/o First Data Investors Services Group, Inc., 211 South
Gulph Road, P.O. Box 61767, King of Prussia, PA 19406, or by calling
(800) 446-6662. In this Statement of Additional Information the Meridian Fund
and Meridian Value Fund(R) may be referred to collectively as the "Funds" or
individually as a "Fund." Aster Capital Management, Inc. (the "Investment
Adviser") is the investment adviser to the Funds. Each Fund is a separate,
diversified series of Meridian Fund, Inc.(R) ("Meridian"). Incorporated by
reference herein are the financial statements of the Funds contained in the
Funds' Annual Report to stockholders for the fiscal year ended June 30, 1999,
including the Auditors' Report dated July 26, 1999. Copies of the Funds' Annual
and Semiannual Reports to stockholders are available, upon request, by calling
(800) 446-6662 or by writing to Meridian Fund, Inc.(R), c/o First Data Investors
Services Group, Inc. 211 South Gulph Road, P.O. Box 61797, King of Prussia, PA
19406.
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND PORTFOLIO TECHNIQUES............. 1
INVESTMENT RESTRICTIONS.............................................. 5
DIRECTORS AND OFFICERS............................................... 7
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................. 8-9
INVESTMENT MANAGEMENT................................................ 9
EXECUTION OF PORTFOLIO TRANSACTIONS.................................. 10
PURCHASE, REDEMPTION AND PRICING OF SHARES........................... 12
FEDERAL INCOME TAXES................................................. 13
INVESTMENT RESULTS................................................... 15
FURTHER INFORMATION ABOUT MERIDIAN................................... 16
ADDITIONAL INFORMATION............................................... 17
FINANCIAL STATEMENTS................................................. 17
APPENDIX - DESCRIPTION OF BOND RATING................................ 18
</TABLE>
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MERIDIAN FUND, INC.(R)
Meridian was incorporated in Maryland as an open-end management
investment company on March 5, 1984. The authorized capital stock of Meridian
consists of 50,000,000 shares of Common Stock (par value $.01 per share), with
25,000,000 shares presently allocated to each of two series. Each of the Funds
corresponds to a distinct series of Meridian's Common Stock with a separate and
distinct diversified investment portfolio. Each of the Funds' shares has equal
dividend, distribution, redemption, liquidation and noncumulative voting rights.
In the future, from time to time, Meridian's Board of Directors (the "Board of
Directors") may, in its discretion, increase the amount of authorized shares
and/or establish additional funds and issue shares of additional series of
Meridian's Common Stock.
INVESTMENT OBJECTIVES, POLICIES AND PORTFOLIO TECHNIQUES
The Prospectus presents each Fund's investment objectives, policies and
techniques. The following discussion provides additional information on those
policies and identifies certain policies not discussed in the Prospectus.
SECURITY LOANS - Consistent with applicable regulatory requirements,
each Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans will be callable at any time on reasonable
notice by the Fund and must be secured fully at all times by cash or cash
equivalents. Such loans allow the Fund to receive income on the loaned
securities while earning interest on the collateral. This collateral will be
invested in short-term obligations. A Fund will not lend portfolio securities
which, when valued at the time of the loan, have a value in excess of 10% of the
Fund's total assets. The Fund will seek to negotiate loan terms requiring that
the value of the collateral always be maintained at some level relative to the
value of the loaned securities. When a security loan is made, the collateral and
loaned securities will be valued each business day, and the borrower may be
required to increase the amount of collateral if the market value of the loaned
securities increases. A loan may be terminated by the borrower or by the Fund at
any time on reasonable notice. The borrower, on termination of the loan, is
required to return the securities to the Fund. Any gain or loss in the market
price during the period of the loan would accrue to the Fund. If the borrower
fails to deliver the loaned securities within four days after receipt of notice,
the Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. When loaned
securities grant voting or consent rights, which pass to the borrower, the Fund
will call the securities to exercise such rights if the matters involved would
have a material effect on the Fund's investment in the securities.
As with any extensions of credit, there are risks of delay in recovery
and, in some cases, even loss of rights in the collateral should the borrower of
the securities fail financially. However, these loans of portfolio securities
will be made only to firms deemed by the Investment Adviser to be creditworthy
and when the income which can be earned from such loans justifies the attendant
risks. The Fund will pay reasonable finder's, administrative and custodial fees
in connection with a loan of its securities.
CASH-EQUIVALENT INSTRUMENTS - Other than as described under "Investment
Restrictions" below, the Funds are not restricted with regard to the types of
cash-equivalent investments they may make. When the Investment Adviser believes
that such investments are an appropriate part of a Fund's overall investment
strategy, the Fund may hold or invest a portion of its assets in any of the
following, denominated in U.S. dollars, foreign currencies, or multinational
currencies: cash; short-term U.S. or foreign government securities; commercial
paper rated at least A-2 by Standard & Poor's Corporation ("Standard & Poor's")
or P-2 by Moody's Investors Service, Inc. ("Moody's"), certificates of deposit
or other deposits of banks deemed creditworthy by the Investment Adviser
pursuant to standards adopted by the Board of Directors; time deposits and
bankers' acceptances (but the Funds may not enter into repurchase agreements
related to any of the foregoing). A certificate of deposit is a short-term
obligation of a commercial bank. A bankers' acceptance is a time draft drawn on
a commercial bank by a borrower, usually in connection with international
commercial transactions.
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NON-U.S. SECURITIES - Investing in foreign companies involves certain
risk considerations, including those set forth in the Prospectus and below,
which are not typically associated with investing in United States companies.
There may be less government supervision and regulation of foreign stock
exchanges, brokers and listed companies than exists in the United States.
The Funds could incur additional costs in connection with their
investment activities outside the U.S. The maintenance of assets in certain
jurisdictions may result in increased custodian costs as well as administrative
difficulties (for example, delays in clearing and settling portfolio
transactions or in receiving payment of dividends). Dividends or interest paid
by non-U.S. issuers may be subject to withholding and other foreign taxes which
may decrease the net return on such investments as compared to dividends or
interest paid to a Fund by United States issuers. A Fund will incur costs in
connection with foreign exchange transactions necessary for the purchase and
sale of non-U.S. securities and the receipt of dividends and interest.
The Funds will not hold currencies other than U.S. dollars or invest in
securities not denominated in U.S. dollars if such currencies are not fully
exchangeable into U.S. dollars without legal restriction at the time of
investment. The Funds may purchase securities that are issued by an issuer of
one nation but denominated in the currency of another nation (or a multinational
currency unit).
The Funds may hold foreign equity securities in the form of American
Depository Receipts or Shares ("ADRs"), European Depository Receipts ("EDRs"),
Continental Depository Receipts ("CDRs") or securities convertible into foreign
equity securities. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying securities. Generally, ADRs, in registered form, are
designed for use on the U.S. securities markets.
DEBT SECURITIES - There are a number of risks generally associated with
investments in debt securities, including convertible securities. Yields on
short, intermediate and long term securities generally depend on a variety of
factors including the general condition of the money and bond markets, the size
of a particular offering, the maturity of the obligation, and the rating of the
issue. Debt securities with longer maturities tend to produce higher yields and
are generally subject to greater potential capital appreciation and depreciation
than obligations with shorter maturities and lower yields.
The Prospectus describes the permissible range of credit ratings for
the securities in which each Fund is permitted to invest. Appendix A describes
the ratings. Credit ratings evaluate the safety of principal and interest
payment of securities, not their market value. The rating of an issuer is also
heavily weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated.
After its purchase by one of the Funds, a security may be assigned a
lower rating or cease to be rated by Moody's, Standard & Poor's or any other
rating organization. This would not require the Fund to sell the security, but
the Investment Adviser will consider such an event in determining whether the
Fund should continue to hold the security in the portfolio.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS (Meridian
Value Fund(R) only)
Sensitivity to Interest Rate and Economic Change - High-yield,
high-risk bonds are very sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of rising
interests rates, highly leveraged issuers may experience financial stress that
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaults on its obligations to pay interest
or principal or enters into bankruptcy proceedings, the Fund may incur losses or
expenses in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices and yields of high-yield, high-risk bonds and the
Fund's net asset value.
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Payment Expectations - High-yield, high-risk bonds may contain
redemption or call provisions. If an issuer exercises these provisions in a
declining interest rate market, the Fund may have to replace the security with a
lower yielding security, resulting in a decreased current return for investors.
Conversely, a high-yield, high-risk bond's value will decrease in a rising
interest rate market, as will the value of the Fund's assets. If the Fund
experiences unexpected net redemptions, this may force it to sell high-yield,
high-risk bonds without regard to their investment merits, thereby decreasing
the asset base upon which expenses can be spread and possibly reducing the
Fund's rate of return.
Liquidity and Valuation - There may be little trading in the
secondary market for particular bonds, which may affect adversely the Fund's
ability to value accurately or dispose of those bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
Legislation or Regulation - Future legislation or regulation
may limit the issuance of high-yield, high-risk bonds, which could have a
negative effect on the market for high-yield, high-risk bonds.
VARIABLE, FLOATING RATE AND SYNTHETIC OBLIGATIONS - Each Fund may
invest in fixed income securities with interest rates which fluctuate based upon
changes in market rates. Variable and floating rate obligations bear coupon
rates that are adjusted at designated intervals, based on the then current
market rates of interest on which the coupon rates are based. Variable and
floating rate obligations permit a Fund to "lock in" the current interest rate
for only the period until the next scheduled rate adjustment, but the rate
adjustment feature tends to limit the extent to which the market value of the
obligation will fluctuate. Each Fund may also invest in "synthetic" securities
whose value depends on the level of currencies, commodities, securities,
securities indexes, or other financial indicators or statistics. For example,
these could include fixed-income securities whose value or interest rate is
determined by reference to the value of a foreign currency relative to the U.S.
dollar, or to the value of different foreign currencies relative to each other.
The value or interest rate of these securities may increase or decrease as the
value of the underlying instrument changes.
CONVERTIBLE SECURITIES AND WARRANTS - Each Fund may invest in
convertible securities and warrants. The value of a convertible security is a
function of its "investment value" (determined by its yield in comparison with
the yields of other securities of comparable maturity and quality that do not
have conversion privilege) and its "conversion value" (the security's worth, at
market value, if converted into the underlying common stock). The credit
standing of the issuer and other factors may also affect the investment value of
a convertible security. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value. To the extent the
market price of the underlying common stock approaches or exceeds the conversion
price, the price of the convertible security will be increasingly influenced by
its conversion value.
A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt, securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised) resulting in a loss of the
Fund's investment.
TEMPORARY DEFENSIVE INVESTMENTS - When a Fund adopts a temporary
defensive posture, as described in the Prospectus, a portion or all of the
Fund's investments during that period may be held in corporate debt obligations,
preferred stocks, cash or money market instruments, including, but not limited
to, obligations issued or guaranteed as to principal or interest by the United
States government, its agencies or instrumentalities, certificates of deposit,
bankers' acceptances and other obligations of domestic banks, and short-term
commercial paper of U.S. corporations. Investment income may increase during
that period.
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PREFERRED STOCK - Preferred stock, unlike common stock, offers a stated
dividend rate payable from a corporation's earnings. Such preferred stock
dividends may be cumulative or non-cumulative, participating, or auction rate.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid prior to payment of dividends on
the issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of the holders of preferred stock on the distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with a corporation's debt securities.
INVESTMENT IN ILLIQUID SECURITIES - Each Fund may invest up to 10% of
the value of its net assets in illiquid securities. Securities may be considered
illiquid if a Fund cannot reasonably expect to receive approximately the amount
at which the Fund values those securities within seven days. The Investment
Adviser has the authority to determine whether certain securities held by a Fund
are liquid or illiquid pursuant to standards adopted by the Board of Directors.
The Investment Adviser takes into account a number of factors in
reaching liquidity decisions, including, but not limited to: the listing of the
security on an exchange or national market system; the frequency of trading in
the security; the number of dealers who publish quotes for the security; the
number of dealers who serve as market makers for the security; the apparent
number of other potential purchasers; and the nature of the security and how
trading is effected (e.g., the time needed to sell the security, how offers are
solicited, and the mechanics of transfer).
The Fund's investments in illiquid securities may include securities
that are not registered for resale under the Securities Act of 1933 (the
"Securities Act"), and therefore are subject to restrictions on resale. When a
Fund purchases unregistered securities, it may, in appropriate circumstances,
obtain the right to register those securities at the expense of the issuer. In
such cases there may be a lapse of time between the Fund's decision to sell the
security and the registration of the security permitting sale. During that time
the price of the security will be subject to market fluctuations.
The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not be
indicative of the liquidity of those investments. If the securities are subject
to purchase by institutional buyers in accordance with Rule 144A under the
Securities Act, the Investment Adviser may determine in particular cases,
pursuant to standards adopted by the Board of Directors, that the securities are
not illiquid securities notwithstanding the legal or contractual restrictions on
their resale. Investing in Rule 144A securities could have the effect of
increasing a Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing those securities.
PORTFOLIO TURNOVER - Neither Fund intends to engage in short-term
trading of portfolio securities as a means of achieving its investment objective
of seeking long-term growth of capital. However, either Fund may sell portfolio
securities regardless of the length of time they have been held whenever the
sale, in the Investment Adviser's opinion, will strengthen the Fund's position
and contribute to its investment objective. Changes in a Fund's portfolio will
be made whenever the Investment Adviser believes they are advisable (e.g. as a
result of securities having reached a price objective, or by reason of
developments not foreseen at the time of the investment decision such as changes
in the economics of an industry or a particular company). These investment
changes will be made usually without reference to the length of time a security
has been held and, therefore, there may be a significant number of short-term
transactions.
Each Fund, as a result of the investment policies described above,
expects to engage in a substantial number of portfolio transactions. Each Fund's
annual portfolio turnover rate may exceed 100%, but is not expected to exceed
200%. A 100% turnover rate would occur, for example, if the lesser of the value
of purchases or sales of portfolio securities for a year (excluding all
securities whose maturities at acquisition were one year or less) were equal to
100% of the average monthly value of the securities held
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by the Fund during that year. A higher portfolio turnover rate will increase
aggregate brokerage commission expenses, which must be borne directly by the
Fund and ultimately by the Fund's stockholders. (See "Execution of Portfolio
Transactions.")
ADDITIONAL CONSIDERATIONS - Investments by a Fund in equity securities
are subject to stock market risks. The U.S. stock market tends to be cyclical,
with periods when stocks generally rise and periods when stock prices generally
decline. As of the date of the Prospectus, the stock market, as measured by the
S&P 500 Index and other commonly used indices, was trading at close to record
levels. There can be no guarantee that those levels will continue.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment policies and
investment restrictions in addition to the policies and restrictions discussed
in the Prospectus. These policies and restrictions cannot be changed as to a
Fund without approval by the holders of a majority of the outstanding voting
securities of the Fund. The "vote of a majority of the outstanding voting
securities" of the Fund, as defined in Section 2(a)(42) of the Investment
Company Act of 1940, as amended (the "1940 Act"), means the vote (i) of 67% or
more of the voting securities of the Fund present or represented at any meeting,
if the holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) of more than 50% of the outstanding
voting securities of the Fund, whichever is less. The only voting security of
each Fund is its Common Stock. These restrictions provide that a Fund may not:
(1) invest more than 25% of the value of its assets in the securities
of a single issuer, nor may the remaining 75% of the assets contain any
investments in any other single issuer, which, immediately after such purchase,
exceed 5% of the value of the assets (except for obligations issued or
guaranteed by the United States Government, its agencies and instrumentalities);
(2) purchase the securities of companies in a particular industry if
thereafter more than 25% (for Meridian Value Fund(R), 25% or more) of the value
of the Fund's total assets would consist of securities issued by companies in
that industry. This restriction does not apply to obligations issued and
guaranteed by the United States Government, its agencies or instrumentalities;
(3) acquire more than 10% of the outstanding voting securities, or 10%
of all of the securities, of any one issuer; or
(4) purchase the securities of any other investment company, except by
purchase in the open market where, to the best information of the Fund, no
commission or profit to a sponsor or dealer (other than the customary broker's
commission) results from such purchase and after such purchase not more than 5%
of the value of the Fund's total assets would consist of such securities, or
except when such purchase is part of a merger, consolidation, acquisition of
assets, or other reorganization approved by the Fund's stockholders.
(5) invest in companies for the purpose of exercising control or
management;
(6) purchase or sell real estate; provided that the Fund may invest in
readily marketable securities secured by real estate or interest therein or
issued by companies which invest in real estate or interests therein (including
real estate investment trusts);
(7) purchase or sell commodities or commodities contracts, or interests
in oil, gas, or other mineral exploration or development programs;
(8) make loans of its funds or assets to any other person, which shall
not be considered as including: (i) the purchase of debt securities, including
the purchase of bank obligations such as certificates
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of deposit and bankers' acceptances, and (ii) lending portfolio securities with
a value not in excess of 10% of total assets at the time of the loan. The Fund
will not enter into repurchase agreements;
(9) make short sales of securities;
(10) purchase securities on margin, but it may obtain such short-term
credit from banks as may be necessary for the clearance of purchases and sales
of securities;
(11) underwrite the securities of other issuers except to the extent
that, in connection with the disposition of portfolio securities, the Fund may
be deemed an underwriter under Federal or State securities laws;
(12) invest in the securities of any issuer which shall have a record
of less than three years of continuous operation (including the operation of any
predecessor) if immediately after and as a result of such investment the value
of the Fund's holdings of such securities exceeds 25% of the value of the Fund's
total assets. This restriction does not apply to any obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities;
(13) borrow for investment purposes or issue senior securities. The
Fund, however, may borrow from banks an amount not to exceed 5% of the Fund's
total assets, determined immediately after the time of the borrowing, as a
temporary measure for extraordinary or emergency purposes;
(14) participate on a joint or a joint-and-several basis in any trading
account in securities (The aggregation of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of the
Investment Adviser to save brokerage costs or average prices among them is not
deemed to result in a securities trading account.);
(15) knowingly purchase from or sell portfolio securities to its
officers, directors, or other "interested persons" (as defined in the 1940 Act)
of the Fund, other than otherwise unaffiliated broker-dealers;
(16) purchase or retain the securities of an issuer if, to the Fund's
knowledge, one or more of the directors, officers or employees of the Fund or
the Investment Adviser individually own beneficially more than 1/2 of l% of the
securities of such issuer and together own beneficially more than 5% of such
securities;
(17) purchase or write put or call options; or
(18) invest more than 10% of its net assets in securities and other
assets for which there is no ready market.
For investment restriction (2) with respect to Meridian Fund, a
nonfundamental policy provides that the Fund will not purchase securities in any
one industry equaling 25% or more of the Fund's total net assets.
DETERMINATION OF PORTFOLIO PERCENTAGE RESTRICTIONS - If a percentage
restriction on investment or utilization of assets set forth under "Investment
Restrictions" and other fundamental restrictions is adhered to at the time an
investment is made, a later change in percentage resulting from changing market
values or a similar type of event will not be considered a violation of a Fund's
fundamental restrictions (except with respect to the limitation on borrowing).
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DIRECTORS AND OFFICERS
The names and addresses of the directors and officers of Meridian and
their principal occupations, certain other affiliations during the past five
years and age are given below.
<TABLE>
<S> <C> <C>
*+ Richard F. Aster, Jr. Chairman of the Board and Aug. 1985 - Present: Aster Capital
60 East Sir Francis Drake President Management, Inc., Pres.; March 1977
Boulevard, Suite 306 - Present: Aster Investment
Larkspur, CA 94939 Management Co., Inc., President.
Age: 59
* Michael S. Erickson Director May 1987 - Present: Private
** 1 Baja Court Investor; May 1993 - Sept. 1994:
Corte Madera, CA Aster Investment Management, Inc.,
94925-1801 Analyst; Sept. 1989 - Oct. 1992:
Age: 47 Romic Partners, Inc. a commodity pool operator,
President.
** James Bernard Glavin Director Sept. 1994 - Present: The Immune
5935 Darwin Court Response Corp. Pharmaceutical,
Carlsbad, CA 92008-7302 Chairman of the Board; Apr. 1987 -
Age: 64 Sept. 1994: The Immune Response Corp., CEO.
+ Michael Stolper Director Sept. 1975 - Present: Stolper &
One America Plaza Company Inc., investment
600 West Broadway adviser and broker-dealer, Pres.
Suite 1010
San Diego, CA 92101-3355
Age: 54
** Herbert Charles Kay Director Private Investor.
3906 Strand Avenue
Manhattan Beach, CA 90266
Age: 62
Gregg B. Keeling Principal Accounting April 1999 - Present: Aster
60 E. Sir Francis Drake Officer, Principal Capital Management, Inc., Vice
Boulevard, Suite 306 Financial Officer, Pres. of Operations; April 1999 -
Larkspur, CA 94939 Treasurer and Secretary Present: Aster Investment
Age: 44 Management Co., Inc., Vice Pres.
of Operations; Sept. 1998 - March
1999: IPEO, Inc., Professional
Employer Organization, CFO;
Aug. 1994 - Aug. 1998: Accountant,
Deloitte & Touche, LLP, Certified
Public Accountants.
</TABLE>
* Member, Executive Committee
** Member, Audit Committee
+ Director who is an "interested person," as defined in Section 2(a)(19)
of the 1940 Act.
- ----------
Mr. Stolper is a director of BDI Investment Company, a registered
investment company that invests primarily in tax exempt securities, and of Janus
Capital, a registered investment adviser that manages mutual funds. Mr. Stolper
owns 6% of Aster Capital Management, Inc., Meridian's Investment Adviser.
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Meridian pays no salaries or other compensation to its directors or
officers other than fees to directors who are unaffiliated with the Investment
Adviser. Each such unaffiliated director is paid a director's fee of $1,000 per
year, plus a $1,000 investment in one of the Funds, and expenses, for each Board
of Directors' meeting attended.
The total compensation paid by Meridian to each Director during the
fiscal year ended June 30, 1999 is set forth below:
<TABLE>
<CAPTION>
Total Compensation
Name of Director From Meridian
---------------- -------------
<S> <C>
Richard F. Aster, Jr. $ 0
Michael S. Erickson $ 2,000
James Bernard Glavin $ 2,534
Michael Stolper $ 0
Herbert Charles Kay $ 2,159
</TABLE>
For information as to the ownership of shares by officers and Directors
of Meridian, see below under "Control Persons and Principal Holders of
Securities."
All officers of Meridian are employees of the Investment Adviser.
Meetings of the Board of Directors are held after each Annual or Special
Shareholders Meeting and from time to time as the Board deems necessary. The
Executive Committee will meet, as required, when the full Board does not meet,
for the purpose of reviewing a Fund's investment portfolio. The Executive
Committee has the authority to exercise all of the powers of the Board of
Directors at any time when the Board is not in session, except the power to
declare dividends or distributions, to authorize the issuance of securities, to
amend Meridian's Bylaws, to recommend to stockholders of a Fund any action
requiring their approval, or as otherwise required by the 1940 Act. The Audit
Committee will meet from time to time with Meridian's independent accountants to
exchange views and information and to assist the full Board in fulfilling its
responsibilities relating to corporate accounting and reporting practices.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Beneficial ownership in the Funds by the Directors and officers as of
September 30, 1999, was as follows:
<TABLE>
<CAPTION>
Meridian Fund Meridian Value Fund
Name Shares (%) Shares (%)
---- ------ --- ------ ---
<S> <C> <C> <C> <C>
Richard Aster........ 286,208 4.28% 216,655 15.92%
James B. Glavin...... 126,808 1.90% 837 0.06%
Michael Stolper...... 47,020 0.66% 8,905 0.65%
Gregg B. Keeling..... 0 0.00% 0 0.00%
Herbert C. Kay....... 2,663 0.04% 0 0.00%
Michael S. Erickson.. 0 0.00% 347 0.03%
</TABLE>
As of September 30, 1999 the following persons were known to own,
beneficially or of record, five percent or more of Meridian Fund's outstanding
shares:
<TABLE>
<CAPTION>
Name and Address Percentage Ownership Capacity
------------------------------- -------------------- ----------
<S> <C> <C>
Charles Schwab 16.94% Record
Reinvest Account
Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104
Northern Trust Company 11.27% Beneficial
Trust McGraw Hill, Inc.,
Savings Investment & Plan Trust
P.O. Box 92956
Chicago, Il 60675
</TABLE>
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As of September 30, 1999 the following persons were known to own,
beneficially or of record, five percent or more of Meridian Value Fund's(R)
outstanding shares:
<TABLE>
<CAPTION>
Name and Address Percentage Ownership Capacity
------------------------------------- -------------------- ----------
<S> <C> <C>
Charles Schwab 42.75% Record
Reinvest Account
Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94014
Aster Investment Management Co., Inc. 7.99% Beneficial
Profit Sharing Plan
Richard Aster Jr. Trust Dtd 1/1/84,
Trustee
60 E. Sir Francis Drake Blvd. #306
Larkspur, CA 94939
Richard F. Aster Jr. Trustee 6.92% Beneficial
Aster Family Trust
Separate Property Dtd 3/25/92
60 E. Sir Francis Drake Blvd. #306
Larkspur, CA 94939
</TABLE>
INVESTMENT MANAGEMENT
Meridian has retained as investment adviser for each Fund, Aster
Capital Management, Inc. ("Aster" or the "Investment Adviser"), 60 E. Sir
Francis Drake Blvd., Wood Island, Suite 306, Larkspur, California 94939. The
Investment Adviser is a registered investment adviser initially incorporated in
1985 and organized as a Subchapter S corporation. Richard F. Aster, Jr. owns 94%
of the Investment Adviser and as a result may be deemed to be "in control" of
the Investment Adviser. Mr. Aster is President and a Director of Meridian and of
the Investment Adviser.
INVESTMENT MANAGEMENT AGREEMENT - The Investment Management Agreement,
Power of Attorney and Service Agreement (the "Management Agreement") with the
Investment Adviser, dated January 1, 1986, as amended to date, provides that the
Investment Adviser will advise each Fund with respect to its investments and
will determine the securities purchased or sold by the Funds.
Under the Management Agreement, the Investment Adviser, in addition to
providing investment advisory services, furnishes the services and pays the
compensation and travel expenses of persons to perform the executive,
administrative, clerical, and bookkeeping functions of Meridian, and provides
suitable office space, necessary small office equipment and utilities, and
general purpose accounting forms, supplies and postage used at the offices of
the Funds. The costs of sales and advertising materials are borne by the
Investment Adviser. The Funds will pay all expenses not assumed by the
Investment Adviser. Each Fund's expenses include: custodian, stock transfer, and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, proxy statements and notices to stockholders; cost of the
printing and distributing of prospectuses of the Fund and supplements thereto to
the Fund's stockholders; taxes; expenses of the issuance and redemption of
shares of the Fund (including stock certificates, registration and qualification
fees and expenses); legal and auditing expenses; compensation, fees, and
expenses paid to Meridian Directors unaffiliated with the Investment Adviser;
association dues; and costs of stationery and forms prepared exclusively for the
Fund. Expenses which relate to both Funds (such as, for example, the fees and
expenses paid to the Board of Directors) are allocated between Funds by the
Investment Adviser in a reasonable manner.
The Management Agreement continues in effect from year to year
if that continuance is approved as to a particular Fund at least annually by (i)
either the Board of Directors or the vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Fund, and (ii) the vote of a
majority of the directors of Meridian who are not parties to the Management
Agreement or interested persons (as that term is defined in the 1940 Act) of any
such party to the Management Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
The Management Agreement is nonassignable and will terminate
automatically upon assignment. Either party may terminate the Management
Agreement at any time without penalty on 60 days' written notice. Amendments to
the Management Agreement require the approval of a majority (as defined in the
1940 Act) of the outstanding voting securities of the Fund. The Investment
Adviser shall not be liable under the Management Agreement to Meridian or to
stockholders of a Fund for any error of judgment, act or omission not involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations and duties under the Management Agreement.
9
<PAGE> 44
As compensation for the services the Investment Adviser provides the
Funds under the Management Agreement, each Fund pays management fees at an
annualized rate of its average daily assets, as described in the Prospectus. For
the fiscal years ended June 30, 1999, 1998 and 1997 the amounts of the advisory
fees earned by the Investment Adviser:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
ended June 30, 1999 ended June 30, 1998 ended June 30, 1997
Contractual Contractual Contractual
Advisory Fees Advisory Fees Advisory Fees
------------- ------------- -------------
<S> <C> <C> <C>
Meridian Fund $1,769,180 $2,679,074 $2,897,147
Meridian Value
Fund(R) $ 176,137 $ 90,889 $ 55,055
</TABLE>
The Investment Adviser has agreed in the Management Agreement to limit
each Fund's expenses as described in the Prospectus. For the fiscal years ended
June 30, 1999 and 1998, no reductions in fees or reimbursement of expenses
were required by the terms of that agreement. There were $15,883 of expenses
reimbursed and/or waived in 1997.
Aster and its affiliated companies have adopted a personal investing
policy consistent with Investment Company Institute guidelines. This policy
includes: a ban on acquisitions of securities pursuant to an initial public
offering; restrictions on acquisitions of private placement securities;
pre-clearance and reporting requirements; review of duplicate confirmation
statements; annual certification of compliance with code of ethics; disclosure
of personal holdings by certain investment personnel prior to recommendation for
purchase for the fund; blackout periods on personal investing for certain
investment personnel; ban on short-term trading profits for investment
personnel; limitations on service as a director of publicly traded companies;
and disclosure of personal securities transactions.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for a Fund's portfolio securities transactions are placed by the
Investment Adviser. The objective of each Fund is to obtain the best available
prices in its portfolio transactions taking into account a broker's services,
costs and promptness of executions. There is no agreement or commitment to place
orders with any broker-dealer and the Investment Adviser expects that a number
of broker-dealers will be used in various transactions. The Investment Adviser
evaluates a wide range of criteria in seeking the most favorable price and
market for the execution of transactions, including the broker's commission
rate, execution capability, positioning and distribution capabilities,
back-office efficiency, ability to handle difficult trades, financial stability,
and prior performance in serving the Investment Adviser and its clients.
Purchases and sales in typical transactions executed in the over-the-counter
market generally will be transacted directly with principal market-makers except
in those circumstances where, in the opinion of the Investment Adviser, better
prices and executions are available elsewhere.
When circumstances relating to a proposed transaction indicate that a
particular broker-dealer is in a position to obtain the best execution, the
order is placed with that broker-dealer. This may or may not be a broker-dealer
which has provided research, statistical or other related services to the
Investment Adviser or its affiliate, Aster Investment Management Co., Inc.
Subject to the requirement of seeking the best available prices and executions,
the Investment Adviser may give preferences, in circumstances in which two or
more broker-dealers are in a position to offer comparable prices and execution,
to broker-dealers which have provided research, statistical, and other related
services to the Investment Adviser for the benefit of the Fund and/or of other
accounts served by the Investment Adviser or Aster Investment Management Co.,
Inc. if, in its judgment, the Fund will obtain prices and executions comparable
with those available from other qualified firms. Substantially all of the total
brokerage commissions paid by the Meridian Fund during the period July 1, 1997
through June 30, 1999, were paid to brokers so selected.
10
<PAGE> 45
The Board of Directors has adopted a policy which permits the
Investment Adviser, subject to the objective of obtaining the best execution, to
consider a broker-dealer's sale of Fund shares as a factor in selecting from
among broker-dealers qualified to offer comparable prices and execution of
portfolio transactions. This policy does not imply a commitment by a Fund to
execute portfolio transactions through all broker-dealers who sell shares of the
Fund. Meridian has executed transactions, subject to obtaining the best
execution, with broker-dealers who have marketed Fund shares. The Board of
Directors will monitor executions of portfolio transactions periodically to
assure itself that the best execution objective continues to be paramount in the
selection of executing broker-dealers.
Meridian does not consider that it has an obligation to obtain the
lowest available commission rate to the exclusion of price, service and
qualitative considerations. Nevertheless, the personnel of the Investment
Adviser are authorized to negotiate payment only for brokerage services rendered
and not for research, statistical, or other services. Meridian does not
authorize the payment of commissions to brokers, in recognition of their having
provided research, statistical or other related services, or of their having
sold Fund shares, in excess of commissions other qualified brokers would have
charged for handling comparable transactions.
The Investment Adviser may perform investment management services for
various clients. There may be occasions in which portfolio transactions for a
Fund may be executed as part of concurrent authorizations to purchase or sell
the same security for other of the accounts served by the Investment Adviser or
Aster Investment Management Co., Inc. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the Fund, they
will be effected only when the Investment Adviser believes that to do so will be
in the best interest of its clients, including the Funds. When such concurrent
authorizations occur, the objective will be to allocate the executions in a
manner which is deemed equitable to the accounts involved, including the Funds.
A Fund, in some instances, may deal in securities which are not listed
on a national securities exchange but are traded in the over-the-counter market.
Where transactions are executed in the over-the-counter market, a Fund will seek
to deal with the primary market-makers; but, when necessary in order to obtain
the best price and execution, it will utilize the services of others.
Each Fund in all cases will attempt to negotiate the best market price and
execution.
The foreign and domestic debt securities and money market instruments
in which the Funds may invest are generally traded in the OTC markets.
Fixed-income securities are generally traded on a "net" basis with a dealer
acting as principal for its own account without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are usually purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.
Each Fund contemplates purchasing most foreign equity securities in OTC
markets or stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located, if that
is the best available market. The fixed commissions paid in connection with most
foreign stock transactions generally are higher than negotiated commissions on
United States transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.
A Fund may hold foreign equity securities in the form of American
Depository Receipts or Shares (ADRs), European Depository Receipts (EDRs),
Continental Depository Receipts (CDRs) or securities convertible into foreign
equity securities. ADRs, EDRs and CDRs may be listed on stock exchanges, or
traded in the OTC markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates.
For the fiscal years ended June 30, 1997, 1998 and 1999 the Funds paid
total brokerage commissions as follows:
11
<PAGE> 46
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
1997 1998 1999
<S> <C> <C> <C>
Meridian Fund $331,721 $427,887 $351,073
Meridian Value Fund(R) $95,529 $54,154 $57,394
</TABLE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus provides general information concerning the purchase and
redemption of each Fund's shares. The following discussion explains further some
of that information and discloses certain policies not presented in the
Prospectus.
PRICE OF SHARES - Each Fund calculates the net asset value per share in
the following manner:
1. Securities listed or traded on the New York Stock Exchange ("NYSE")
are valued at the last sale price or, if no sale, at the last-reported bid
price. Non-convertible bonds and debentures, and other long-term debt securities
normally are valued at prices obtained for the day of valuation from a major
dealer in bonds. However, when such prices are unavailable or in circumstances
where the Investment Adviser deems it appropriate to do so, another bond pricing
service or an over-the-counter or exchange quotation may be used. United States
Treasury Bills, and other obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities, certificates of deposit issued by
banks, corporate short-term notes and other short-term investments with original
or remaining maturities in excess of 60 days normally are valued at the mean of
representative quoted bid and asked prices or, if such prices are not available,
quoted bid and asked prices for securities of comparable maturity, quality and
type. Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Fund if acquired within 60 days of maturity
or, if already held by the Fund on the 60th day, based on the value determined
on the 61st day unless the Board determines that this does not represent the
securities' fair value. Other securities are valued on the basis of last sale or
bid prices in what is, in the opinion of the Investment Adviser, the broadest
and most representative market which may be either a securities exchange or the
over-the-counter market. Where quotations are not readily available, securities
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors. The fair value of all other assets is added to the
value of securities to derive the Fund's total assets.
2. The NYSE and Meridian's Transfer Agent will be closed, and the Funds
will not compute their respective net asset values, on the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Also, neither Fund is required to compute its net asset value on
any day on which no order to purchase or redeem its shares is received.
3. The liabilities of the Fund, including proper accruals of taxes and
other expense items, are deducted from the Fund's total assets to derive the
Fund's net asset value.
4. The net asset value is divided by the total number of shares
outstanding, and the result, rounded to the nearest cent, is the net asset value
per share.
REJECTION OF ORDERS - Any purchase order may be rejected by Meridian.
THE OPEN ACCOUNT - When you make an initial investment in a Fund, a
stockholder account is opened in accordance with your registration instructions.
Each time there is a transaction in your account, such as an additional
investment or the reinvestment of a dividend or distribution, you will receive
from the Transfer Agent a confirmation statement showing the current transaction
in your account along with a summary of the status of the account as of the
transaction date.
12
<PAGE> 47
SHARE CERTIFICATES - Share certificates are issued only for full
shares, and only upon your specific request to the Transfer Agent. You may
request issuance of certificates representing all or any part of the full shares
in your account. Meridian will not charge you for the issuance of certificates.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may
indicate at any time a choice of certain elections with respect to income
dividends and distributions. You may elect to have both income dividends and
distributions declared on your shares of a Fund reinvested automatically in
additional shares of the Fund at the closing net asset value per share on the
reinvestment date determined by the Board of Directors. You also may elect to
receive income dividends in cash while accepting capital gain distributions in
additional shares of the Fund. Alternatively, you may elect to receive both
income dividend and capital-gain distributions in cash. If you make no election,
all dividend and capital-gain distributions will be applied automatically to the
purchase of shares of the Fund at net asset value per share. You may change
these elections at any time by written notification to the Fund's Transfer
Agent, but, to be effective as to a particular distribution, the change must be
received by the Transfer Agent sufficiently in advance of the reinvestment date
(approximately 10 business days) to permit the change to be entered in your
record. The Federal income tax status of dividends and distributions is the same
whether taken in cash or reinvested in shares of a Fund.
Dividend and distributions on all shares in your account are reinvested
in full and fractional shares at the net asset value per share unless you
instruct the Fund to do otherwise.
SUSPENSION OF REDEMPTION - The redemption price of redeemed shares of a
Fund will be paid on or before the seventh day following proper tender, except a
postponement may be permissible under the 1940 Act when (a) the New York Stock
Exchange is closed (other than for weekends and holidays) or trading on the NYSE
is restricted, (b) an emergency exists making disposal of portfolio securities
or the valuation of net assets of the Fund not reasonably practicable, or (c)
the SEC has by order permitted suspension of redemptions for the protection of
the Fund's stockholders. The Commission, by rules and regulations, determines
the conditions under which trading of securities are restricted and the
conditions under which an emergency exists. Investment dealers handling
redemption transactions may make a service charge. There is no charge as
described in the foregoing paragraphs for redemption of shares tendered directly
to the Transfer Agent.
MANDATORY REDEMPTION - The Board of Directors has established a policy,
which is subject to change, to require redemption of accounts of a Fund that
drop as a result of redemptions to a value of less than $750 (determined, for
this purpose only, as the greater of the stockholder's cost or the current net
asset value of the shares, including any shares acquired through the
reinvestment of income dividends and capital gains distributions). Prior notice
of at least 60 days will be given to a stockholder within which to bring the
account up to the minimum determined as set forth above before the involuntary
redemption provision is made effective with respect to the stockholder's
account.
FEDERAL INCOME TAXES
GENERAL - Each Fund intends to separately meet all the requirements of,
and has elected the tax status of, a "regulated investment company" under the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, if the Fund distributes within specified times at least 90% of its net
investment income, net short-term capital gains and certain other distributions
by the Fund, it will be taxed only on that portion of its net investment income
and net capital gain, if any, which it retains.
To qualify, the Fund must (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock or securities or currencies; and (b)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities and other securities, limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested
13
<PAGE> 48
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses.
EXCISE TAX - A 4% nondeductible excise tax will be imposed on each Fund
(other than to the extent of its tax-exempt interest income, if any) to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. Each Fund intends to actually or be deemed to distribute
substantially all of its net investment income and net capital gain by the end
of each calendar year and, thus, expects not to be subject to the excise tax.
TAXATION OF FUND INVESTMENTS - Except as otherwise provided herein,
gains and losses realized by a Fund on the sale of portfolio securities
generally will be capital gains and losses. Such gains and losses ordinarily
will be long-term capital gains and losses if the securities have been held by
the Fund for more than one year at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation purchased by a
Fund at a market discount (generally at a price less than its principal amount)
will be treated as ordinary income to the extent of the portion of market
discount which accrued, but was not previously recognized pursuant to an
available election, during the term the Fund held the debt obligation.
If a Fund enters into a "constructive sale" of any appreciated position
in stock, a partnership interest, or certain debt instruments, the Fund must
recognize gain (but not loss) with respect to that position. For this purpose, a
constructive sale occurs when the Fund enters into one of the following
transactions with respect to the same or substantially identical property: (i) a
short sale; (ii) an offsetting notional principal contract; (iii) a futures or
forward contract; or (iv) other transactions identified in future Treasury
Regulations.
If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If the Fund invests in a PFIC, the Fund intends
to make an available election to mark-to-market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the difference, if any, between the fair market value of its
interest in the PFIC shares and its basis in such shares. In some circumstances,
the recognition of loss may be suspended. The Fund will adjust its basis in the
PFIC shares by the amount of income (or loss) recognized. Although such income
(or loss) will be taxable to the Fund as ordinary income (or loss)
notwithstanding any distributions by the PFIC, under the election the Fund will
not be subject to federal income tax or the interest charge with respect to
certain distributions from or dispositions of its share of the PFIC if it makes
the election.
FOREIGN TAXES - The Funds may be required to pay withholding and other
taxes imposed by foreign countries on income attributable to such foreign
countries which would reduce the Fund's investment income. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. If more than 50% of the total assets of a Fund consists of securities of
foreign issuers, the Fund will be eligible to elect to "pass through" foreign
tax credits to stockholders. However, each Fund does not expect to qualify for
this election.
CAPITAL GAIN DISTRIBUTION - Distributions which are designated by a
Fund as capital gain distributions will be taxed to stockholders as long-term
term capital gain (to the extent such distributions do exceed the Fund's actual
net capital gains for the taxable year), regardless of how long a stockholder
has held Fund shares. Such distributions will be designated as capital gain
distributions in a written notice mailed by the Fund to the stockholders not
later than 60 days after the close of the Fund's taxable year.
DISPOSITION OF FUND SHARES - A disposition of Fund shares pursuant to
redemption (including a redemption in-kind) or exchanges ordinarily will result
in a taxable capital gain or loss, depending on the amount received for the
shares (or deemed to be received in the case of an exchange) and the cost of the
shares.
If a stockholder exchanges or otherwise disposes of Fund shares within
90 days of having acquired such shares and if, as a result of having acquired
those shares, the stockholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred acquiring the Fund's shares shall not be taken
into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a stockholder receives a designated capital gain distribution (to be
treated by the stockholder as long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as long-term capital loss to the extent of the designated capital gain
distribution. This loss disallowance rule does not apply to losses realized
under a periodic redemption plan.
FEDERAL INCOME TAX RATE - As of the printing of this SAI, the maximum
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual tax rate applicable to net
capital gains is 20% and the maximum corporate marginal tax rate applicable to
ordinary income and capital gain is 35% (marginal tax rates may be higher for
some corporations to reduce or eliminate the benefit of lower marginal income
tax rates). Obviously, the amount of tax payable by any taxpayer will be
affected by a combination of tax laws covering, for example, deductions,
credits, deferrals, exemptions, sources of income and other matters.
FOREIGN STOCKHOLDERS - Under the Code, distributions of net investment
income, net short-term gain and certain other items by a Fund to a nonresident
alien individual, foreign trust (i.e. trust which an U.S. court is not able to
exercise primary supervision over administration of that trust and one or more
U.S. persons do not have authority to control substantial decisions of that
trust), foreign estate (i.e., the income of which is not subject to U.S. tax
regardless of source), foreign corporation, or foreign partnership (a "foreign
stockholder") will be subject to federal withholding tax (at a rate of 30% or,
in an income tax treaty applies, at the lower treaty rate, if any). Such tax
withheld generally is not refundable. Withholding will not apply if a
distribution paid by a Fund to a foreign stockholder is "effectively connected"
with a U.S. trade or business (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the foreign stockholder), in
which case the reporting and withholding requirements applicable to U.S. persons
will apply. Disposition of Fund shares and distributions of net capital gain are
generally not subject to tax withholding applicable to foreign stockholders.
14
<PAGE> 49
CORPORATE STOCKHOLDERS - Corporate stockholders of a Fund may be
eligible for the dividends-received deduction on the dividend distributions paid
by the Fund to the extent that the distributions are derived from dividends
(which, if received directly, would qualify for such deduction) received from
domestic corporations. In order to qualify for the dividends-received deduction,
a corporate stockholder must hold the Fund shares paying the distribution upon
which the deduction is claimed for at least 46 days during a 90 day period that
begins 45 days prior to the date upon which the stockholder became entitled to
the distribution, and the Fund must have held the shares of corporate stock
giving rise to the dividend for at least 46 days during a 90 day period that
begins 45 days prior to the date upon which the Fund became entitled to the
dividend.
NEW REGULATIONS - On October 6, 1997, the Treasury Department issued
new regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign stockholders. The New Regulations will generally be
effective for payments made after December 31, 2000, subject to certain
transition rules. Among other things, the New Regulations will permit a Fund to
estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign stockholders which will be subject to U.S. income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
The foregoing is limited to a summary of certain federal tax matters.
It should not be viewed as a comprehensive discussion of the items referred to
nor as covering all provisions of the Code relevant to investors. Dividends and
distributions may also be subject to state or local taxes. You should consult
your own tax adviser for additional details and the possible effect of the Code
on your particular tax status.
INVESTMENT RESULTS
Average annual total return ("T") of a Fund is calculated as follows:
an initial hypothetical investment of $1,000 ("P") is divided by the net asset
value of shares of the Fund as of the first day of the period in order to
determine the initial number of shares purchased. Subsequent dividend and
capital gain distributions by a Fund are paid at net asset value on the payment
date determined by the Board of Directors. The sum of the initial shares
purchased and shares acquired through distributions is multiplied by the net
asset value per share of the Fund as of the end of the period ("n") to determine
ending redeemable value ("ERV"). The ending value divided by the initial
investment converted to a percentage equals total return. The formula thus used,
as required by the SEC, is:
P(1+T)(n) = ERV
The resulting percentage indicates the positive or negative investment
results that an investor would have experienced from reinvested dividend and
capital gain distributions and changes in share price during the period.
15
<PAGE> 50
The following assumptions will be reflected in computations of average
annual total return: (1) all share sales at net asset value, without a sales
load deduction from the $1000 initial investment; (2) reinvestment of dividends
and capital gains distributions at net asset value on the reinvestment date
determined by the Board; and (3) a complete redemption at the end of any period
illustrated. Total annual average return may be calculated for one year, five
years, ten years and for other periods, and will be updated on a quarterly
basis.
The calculation of nonstandardized total returns for a Fund differs
from the calculation of standardized average annual total returns only in that
nonstandardized total returns relate to nonstandardized periods, and in that
they represent aggregate (rather than average) total return.
Investment results of each Fund will vary from time to time depending
upon market conditions, the composition of the Fund's portfolio and operating
expenses of the Fund and should not be considered representative of what an
investment in the company may earn in any future period.
The Funds may in advertising refer to results compiled by organizations
such as Lipper Analytical Services, Morningstar, Inc. and Wiesenberger
Investment Companies Services. Additionally, the Funds may, from time to time,
refer to results published in various newspapers or periodicals, including
Barrons, Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance
Magazine, Money, U.S. News and World Report and The Wall Street Journal.
A Fund may from time to time compare its investment results with, e.g.,
the following
(1) The Standard & Poor's 500 Composite Stock Price Index, which is a
capitalization-weighted index of 500 stocks that attempts to measure performance
of the broad domestic economy through changes in the aggregate market value of
500 stocks representing major industries.
(2) The Russell 2000 Index, which is composed of the 2,000 smallest
securities in the Russell 3000 Index, which is composed of the 3,000 largest
U.S. companies based on market capitalization and represents approximately 98%
of the investable U.S. equity market.
(3) 3-months weekly average yield of 90-day U.S. Treasury Bills, as
reported by the Federal Reserve Bank of St. Louis.
(4) The Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (e.g. food,
clothing, shelter, fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
FURTHER INFORMATION ABOUT MERIDIAN
DESCRIPTION OF COMMON STOCK - There are no conversion or preemptive
rights in connection with any shares of the Funds. All shares of each Fund when
duly issued will be paid in full and non-assessable. The rights of the holders
of shares of Common Stock of a Fund may not be modified except by vote of the
majority of the outstanding voting securities of that Fund. Certificates are not
issued unless requested and are never issued for fractional shares. Fractional
shares are liquidated at net asset value per share at the time a stockholder
account is closed.
Shares have non-cumulative voting rights, which means that the holders
of more than 50% of the shares of the Funds (in the aggregate) voting for the
election of directors can elect 100% of the directors if they wish to do so. In
such event the holders of the remaining less than 50% of the shares voting for
the election of directors will not be able to elect any person or persons to the
Board of Directors.
16
<PAGE> 51
ADDITIONAL INFORMATION
STOCKHOLDER REPORTS - The fiscal year of each Fund ends on June 30 of
each year. Each Fund will issue to its stockholders semi-annual and annual
reports; each annual report will contain a schedule of the Fund's portfolio
securities and audited annual financial statements. Stockholders, in addition,
will receive unaudited quarterly statements of the status of the Fund. The
Federal income tax status of stockholders' distributions also will be reported
to stockholders after the end of each calendar year.
LEGAL OPINIONS - The validity of the shares offered by this Prospectus
has been passed upon by Morrison & Foerster LLP, 2000 Pennsylvania Avenue, N.W.,
Suite 5500, Washington D.C. 20006. Morrison & Foerster acts as counsel to
Meridian and to the Investment Adviser in various matters.
INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 333 Market
Street, San Francisco, California 94105, have been appointed as independent
accountants for Meridian. The financial statements of the Funds as of June 30,
1999 included in the Statement of Additional Information have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
CUSTODIAN AND TRANSFER AGENT - First Data Investor Services Group, Inc.
("First Data"), with offices at 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, Pennsylvania 19406 and 211 South Gulph Road, P.O. Box 61767, King of
Prussia, PA 19406 serves as the coordinator for custody services
provided by the custodian and as transfer agent for the Funds under a Custody
Administration and Agency Agreement. The Bank of New York, 48 Wall Street, New
York, New York 10286, serves as the Funds' custodian under a separate Custody
Agreement.
SHAREHOLDER AND ACCOUNTING SERVICES - First Data also provides the
Funds with shareholder services under a Shareholder Services Agreement and
accounting services under an Accounting Services Agreement.
REGISTRATION STATEMENT - The Prospectus and this SAI, together, do not
contain all of the information set forth in the Fund's registration statement
and related forms filed with the Securities and Exchange Commission. Certain
information is omitted in accordance with rules and regulations of the
Commission. The registration statement and related forms may be inspected at the
Public Reference Room of the Commission at Room 1024, 450 5th Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and copies thereof may be obtained from
the Commission at prescribed rates. It is also available on the SEC's Internet
Web site at http://www.sec.gov. Statements contained in the Prospectus or this
SAI as to the contents of any contract or other document referred to herein or
in the Prospectus are not necessarily complete, and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
Meridian's registration statement, each such statement being qualified in all
respects by such reference.
FINANCIAL STATEMENTS
Audited financial statements and the accompanying Independent
Accountant's Report for the fiscal year ended June 30, 1999 for the Meridian
Fund and Meridian Value Fund(R), as contained in the Annual Report to
Shareholders for the fiscal year ended June 30, 1999, are incorporated herein by
reference to that report.
17
<PAGE> 52
- --------------------------------------------------------------------------------
APPENDIX
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued
by various entities from "Aaa" to "C," according to quality as described below:
"AAA -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large, or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues."
"AA -- High quality by all standards. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"BAA -- Medium grade obligations. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have speculative
characteristics as well."
"BA -- Have speculative elements; future cannot be considered as well
assured. The protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B -- Generally lack characteristics of the desirable investment; assurance
of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small."
"CAA -- Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"CA -- Speculative in a high degree; often in default or have other marked
shortcomings."
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
18
<PAGE> 53
STANDARD & POOR'S CORPORATION rates the long-term securities debt of
various entities in categories ranging from "AAA" to "D" according to quality as
described below:
"AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree."
"A -- Have a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions, than debt in higher rate categories."
"BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal than for debt in higher
rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions."
"C1 -- Reserved for income bonds on which no interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is
in arrears."
19
<PAGE> 54
-----------------------------------------------------------------
PART C
OTHER INFORMATION
-----------------------------------------------------------------
<PAGE> 55
MERIDIAN FUND, INC.(R)
-------------
FORM N-1A
-------------
PART C
-------------
Item 23. Exhibits
(a) Articles of Incorporation.
(b) By-Laws.
(c) Instruments Defining Rights of Security Holders (not
applicable).
(d) Investment Management Agreement.
(e) Underwriting Contracts (not applicable).
(f) Bonus or Profit Sharing Contracts (not applicable).
(g)(1) Custodian Agreement and Depository Contract, as
amended.
(h)(1) Custody Administration and Agency Agreement.
(h)(2) Shareholder Services Agreement.
(h)(3) Accounting Services Agreement.
(i) Legal Opinion (filed as an Exhibit to Amendment 18 to
registrant's Form N-1A Registration Statement on
November 1, 1999 and incorporated herein by
reference).
(j) Consent of Independent Public Accountants.
(k) Financial Statements omitted from Item 22 (not
applicable).
(l) Form of Investment Representation Agreement.
(m) Rule 12b-1 Plan (not applicable).
(n) Rule 18f-3 Plan (not applicable).
Item 24:
Persons Controlled by or Under Common Control with Registrant: None
Item 25: Indemnification
C-1
<PAGE> 56
Subsection (B) of Section 2-418 of the General Corporation Law of
Maryland empowers a corporation to indemnify 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
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director of that corporation or a director, officer,
employee or agent of another corporation or enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and (I) in the case of conduct in the
director's official capacity with the corporation, in a manner he reasonably
believed to be in the best interests of the corporation, and, (ii) in all other
cases, in a manner not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Subsection (B) of Section 2-418 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect to any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation.
Section 2-418 further provides that to the extent a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to in Subsection (B), he shall be indemnified against
reasonable expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith that the scope of indemnification extends to
directors, officers, employees or agents of a constituent corporation absorbed
in a consolidation or merger and persons serving in that capacity at the request
of the constituent corporation for another; and empowers the corporation to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 2-418.
Article V of the Bylaws of the Fund contains indemnification provisions
meant to conform to the above statute and to the provisions of Section 17 of the
Investment Company Act of 1940, as amended, and to Investment Company Act
Release No. 11330 (September 4, 1980). These Bylaws provide "reasonable and fair
means" to determine whether indemnification shall be made which include: (1)
reference to a final decision on the merits by a court or other body that
liability did not occur by reason of disabling conduct, or (2) in the absence of
such a decision, a reasonable, factually based decision to the same effect by
(a) a vote of a majority of a quorum of directors who are neither "interested
persons" of the company (as defined in Section 2(a)(19) of the Investment
Company Act) nor parties to the proceeding, or (b) an independent legal counsel
in a written opinion.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Fund pursuant to the Fund's Articles of Incorporation and Bylaws, or
otherwise, the Fund has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in said Act, and is, therefore unenforceable. The Fund, unless in the opinion of
its counsel the matter has been settled by controlling precedent, will submit to
a court of appropriate jurisdiction the question whether indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue in the event that a claim for indemnification
against such liabilities (other than the payment by the Fund of expenses
incurred or paid by a director, officer or controlling person of the Fund, in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered.
Item 26: Business and Other Connections of Investment Adviser
See the material following the caption "Investment Management"
appearing as a portion of Part A and Part B hereof.
C-2
<PAGE> 57
Item 27: Principal Underwriter
(a) None
(b) None
(c) None
Item 28: Location of Accounts and Records
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained and held in
the offices of the Funds and their investment adviser located at 60 E. Sir
Francis Drake Boulevard, Wood Island, Suite 306, Larkspur, California. Records
covering shareholder accounts and portfolio transactions are maintained and kept
also by the Fund's transfer agent, First Data Investor Services Group, Inc.,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, and 211
South Gulph Road, P.O. Box 61767, King of Prussia, PA 19406 and custodian,
Bank of New York, 48 Wall Street, New York, NY 10286.
Item 29: Management Services
None
Item 30: Undertakings
Previously filed
C-3
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Larkspur and State of California on
the 1st day of November, 1999.
MERIDIAN FUND, INC.(R) (Registrant)
/s/ RICHARD F. ASTER, JR.
Richard F. Aster, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
*Richard F. Aster, Jr. Director and Principal November 1, 1999
Richard F. Aster, Jr. Executive Officer
*Michael S. Erickson Director November 1, 1999
Michael S. Erickson
*James B. Glavin Director November 1, 1999
James B. Glavin
*Herbert C. Kay Director November 1, 1999
Herbert C. Kay
*Michael Stolper Director November 1, 1999
Michael Stolper
*Gregg B. Keeling Principal Financial Officer, November 1, 1999
Gregg B. Keeling Principal Accounting Officer,
Treasurer and Secretary
*By: /s/ RICHARD F. ASTER, JR.
Richard F. Aster, Jr.,
Attorney-in-Fact
C-4
<PAGE> 59
EXHIBIT INDEX
MERIDIAN FUND, INC.(R)
AMENDMENT NO. 18 TO
FORM N-1A REGISTRATION STATEMENT
FILE NO. 811-4014
Exhibit No. Title of Exhibit
----------- ----------------
(a) Articles of Incorporation.
(b) By-Laws.
(c) Instruments Defining Rights of Security Holders (not
applicable).
(d) Investment Management Agreement.
(e) Underwriting Contracts (not applicable).
(f) Bonus or Profit Sharing Contracts (not applicable).
(g)(1) Custodian Agreement and Depository Contract, as
amended.
(h)(1) Custody Administration and Agency Agreement.
(h)(2) Shareholder Services Agreement.
(h)(3) Accounting Services Agreement.
(i) Legal Opinion (filed as an Exhibit to Amendment 18 to
registrant's Form N-1A Registration Statement on
November 1, 1999 and incorporated herein by
reference).
(j) Consent of Independent Public Accountants.
(k) Financial Statements omitted from Item 22 (not
applicable).
(l) Form of Investment Representation Agreement.
(m) Rule 12b-1 Plan (not applicable).
(n) Rule 18f-3 Plan (not applicable).
C-5
<PAGE> 1
Exhibit (a)
MERIDIAN FUND, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
Meridian Fund, Inc., a Maryland corporation having its principal office in
Baltimore, Maryland (which is hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and restated to
read in its entirety as follows:
MERIDIAN FUND, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
I.
I, the undersigned, Kenneth S. Taymor, c/o Morrison & Foerster, One Market
Plaza, Spear Street Tower, San Francisco, California 94105, being at least 18
years of age, hereby form a corporation under and by virtue of the General Laws
of the State of Maryland authorizing the formation of corporations.
II.
NAME
The name of the corporation (hereinafter called the "Corporation") is:
Meridian Fund, Inc.
III.
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed and the business or
objects to be transacted, carried on and promoted by it are as follows:
(1) To conduct and carry on the business of an investment company of the general
management type.
<PAGE> 2
(2) To hold, invest and reinvest its assets, and in connection therewith to hold
part or all of its assets in cash, and to purchase, subscribe for or otherwise
acquire, hold for investment or otherwise, sell, assign, negotiate, transfer,
exchange, pledge, lend or otherwise dispose of or realize upon, securities
(which term "securities" shall for the purposes of the Charter, without
limitation of the generality hereof, be deemed to include any bonds, debentures,
notes, certificates of deposit, mortgages, future contracts for financial
instruments and securities indexes, obligations, evidences of indebtedness,
stocks, shares, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or in any
property or assets, or in general any interest or instrument commonly known as a
security) created, issued or guaranteed by any persons, firms, associations,
corporations, syndicates, combinations, organizations, governments or political
subdivisions, agencies or instrumentalities thereof; and to exercise, as owner
or holder of any securities, all rights, powers and privileges in respect
thereof; and to do any and all acts and things for the preservation, protection,
improvement and/or enhancement in value of any and all of its assets.
(3) To issue and sell shares of its own capital stock in such amounts and on
such terms and conditions, for such purposes and for such amount or kind of
consideration (including, without limitation, securities) now or hereafter
permitted by the laws of the State of Maryland and by the Charter, as its Board
of Directors may determine.
(4) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock, in any manner and to the extent
now or hereafter permitted by the laws of the State of Maryland and by the
Charter.
(5) To conduct its business at one or more offices in any part of the world,
without restriction or limit as to extent.
(6) To borrow or raise money for any purpose and from time to time draw, make,
accept, endorse, execute, issue or assume promissory notes, drafts, bills of
exchange and other negotiable and nonnegotiable instruments and evidences of
indebtedness and to pledge or hypothecate the assets of the Corporation in
connection therewith.
(7) To consolidate or merge with, enter into a share exchange with, or acquire
the assets of, any other company, whether incorporated or unincorporated, and to
do all acts and things necessary or incidental to effectuate such consolidation,
merger, share exchange or acquisition.
(8) To carry out all or any of the foregoing objects and purposes as principal
or agent, and alone or with associates or, to the extent now or hereafter
permitted by the laws of the State of Maryland, as a member of, or as the owner
or holder of any security of, or interest in, any firm, association,
corporation, trust or syndicate; and in connection therewith to make or enter
into such deeds or contracts with any persons, firms, associations,corporations,
syndicates, governments or political subdivisions or agencies or
instrumentalities thereof, and to do such acts and things and to exercise such
powers, that a natural person could lawfully make, enter into, do or exercise.
(9) To do any and all such further acts or things and to exercise any and all
such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
2
<PAGE> 3
The foregoing objects and purposes shall, except as otherwise expressly
provided, 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 the Charter, and
shall each be regarded as independent and construed as powers as well as objects
and purposes, and the enumeration of specific purposes, objects and powers shall
not be construed to limit or restrict in any manner the meaning of general terms
or the general powers of the Corporation now or hereafter conferred by the laws
of the State of Maryland, nor shall the expression of one thing be deemed to
exclude another, though it be of like nature, not expressed; provided, however,
that the Corporation shall not have power to carry on within the State of
Maryland any business whatsoever the carrying on of which would preclude it from
being classified as an ordinary business corporation under the laws of said
State.
IV.
PRINCIPAL OFFICE AND RESIDENT AGENT
The principal address of the Corporation in the State of Maryland is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The
name and address of the Corporation's resident agent is The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202.
V.
CAPITAL STOCK
(1) The total number of shares of capital stock which the Corporation shall have
the authority to issue is fifty million (50,000,000) shares of the par value of
$0.01 per share and of the aggregate par value of five hundred thousand dollars
($500,000). There shall initially be one series of shares, designated as the
"Meridian Fund," initially consisting of fifty million (50,000,000) shares. The
Board of Directors of the Corporation may from time to time increase or decrease
the number of shares of capital stock so classified. All such shares are
initially classified as "Class A Common Stock" of the class or series. The Board
of Directors may classify or reclassify any unissued shares of capital stock of
the class or series (whether or not such shares have been previously classified
or reclassified) from time to time by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock.
(2) Any fractional share shall carry proportionately all the rights of a whole
share, excepting any right to receive a certificate evidencing such fractional
share, but including the right to vote and tile right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of this Charter and the By-Laws of the
Corporation.
(4) As used in this Amended and Restated Charter, a "series" of shares represent
interests in the same assets, liabilities, income, earnings and profits of the
Corporation.
3
<PAGE> 4
The Board of Directors shall have authority to classify and reclassify any
authorized but unissued shares of capital stock from time to time by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of the capital stock. Subject to the
provisions of this Article V and applicable law, the power of the Board of
Directors to classify or reclassify any of the shares of capital stock shall
include, without limitation, authority to classify or reclassify any such stock
into one or more series of capital stock and to divide and classify shares of
any series into one or more classes of such series, by determining, fixing or
altering one or more of the following:
(a) The distinctive designation of such class or series and the number of shares
to constitute such class or series; provided that, unless otherwise prohibited
by the terms of such class or series, the number of shares of any class or
series may be decreased by the Board of Directors in connection with any
classification or reclassification of unissued shares and the number of shares
of such class or series may be increased by the Board of Directors in connection
with any such classification or reclassification, and any shares of any class or
series which have been redeemed, purchased or otherwise acquired by the
Corporation shall remain part of the authorized capital stock and be subject to
classification and reclassification as provided herein;
(b) Whether and, if so, the rates, amounts and times at which, and the condition
under which, dividends shall be payable on shares of such class or series;
(c) Whether shares of such class or series shall have voting rights in addition
to any general voting rights provided by law and the charter of the Corporation
and, if so, the terms of such additional voting rights; and
(d) The rights of the holders of shares of such class or series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation.
(5) Shares of capital stock of the Corporation shall have the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption:
(a) Assets Belonging to the Class or Series. All consideration received by the
Corporation from the issue or sale of shares of the class or series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to the class or series for all purposes, subject only
to the rights of creditors, and shall be so recorded upon the books of account
of the Corporation. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, together with
any General Items allocated to the class or series as provided in the following
sentence, are herein referred to as "assets belonging to" the class or series.
In the event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular class or series (collectively "General Items"), such General
Items shall be allocated by or under the supervision of the Board of Directors
to the class or series in
4
<PAGE> 5
such manner and on such basis as the Board of Directors, in its sole discretion,
deems fair and equitable; and any General Items so allocated to the class or
series shall belong to that series. Each such allocation by the Board of
Directors shall be conclusive and binding for all purposes.
(b) Liabilities Of the Class or Series. The assets belonging to the class or
series shall be charged with the liabilities of the Corporation in respect of
that series and all expenses, costs, charges and reserves attributable to that
series, and any general liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any particular
class or series shall be allocated and charged by or under the supervision of
the Board of Directors to the class or series in such manner and on such basis
as the Board of Directors, in its sole discretion, deems fair and equitable. The
liabilities, expenses, costs, charges and reserves allocated and so charged to
the class or series are herein referred to as "liabilities belonging to" that
series. Each allocation of liabilities, expenses, costs, charges and reserves by
the Board of Directors shall be conclusive and binding for all purposes.
(c) Income Belonging to the Class or Series. The Board of Directors shall have
full discretion, to the extent not inconsistent with the Maryland General
Corporation Law and the Investment Company Act of 1940 (the "1940 Act"), to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding.
Income belonging to the class or series includes all income, earnings and
profits derived from assets belonging to the class or series less any expenses,
costs, charges or reserves belonging to the class or series for the relevant
time period, all determined in accordance with generally accepted accounting
principles.
(d) Dividends and Distributions. Dividends and distributions on shares of the
class or series may be paid with such frequency, in such form and in such amount
as the Board of Directors may from time to time determine. Dividends may be
daily or otherwise pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Board of Directors may determine, after
providing for actual and accrued liabilities belonging to the class or series.
All dividends on shares of the class or series shall be paid only out of the
income belonging to the class or series and capital gains distributions on
shares of the class or series shall be paid only out of the capital gains
belonging to the class or series. Subject to subsection (l) below, all dividends
and distributions on shares of the class or series shall be distributed pro rata
to the holders of the class or series in proportion to the number of shares of
the class or series held by such holders at the date and time of record
established for the payment of such dividends or distributions, except that in
connection with any dividend or distribution program or procedure, the Board of
Directors may determine that no dividend or distribution shall be payable on
shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Board of Directors under such
program or procedure.
5
<PAGE> 6
The Corporation intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, or any successor or comparable
statute thereto, and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax purposes may vary
from the computation thereof on the books of the Corporation, the Board of
Directors shall have the power, in its sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability of the Corporation for federal income tax in
respect of that year. However, nothing in the foregoing shall limit the
authority of the Board of Directors to make distributions greater than or less
than the amount necessary to qualify as a regulated investment company and to
avoid liability of the Corporation for such tax.
Dividends and distributions may be made in cash, property or additional shares
of the class or series or another class or series, or a combination thereof, as
determined by the Board of Directors or pursuant to any program that the Board
of Directors may have in effect at the time for the election by each Shareholder
of the mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in shares will be paid at the net asset
value thereof as defined in subsection (i) below.
(e) Liquidation. In the event of the liquidation or dissolution of the
Corporation, the shareholders of the class or series shall be entitled to
receive, as a series and in preference to any other series, when and as declared
by the Board of Directors, the excess of the assets belonging to the class or
series over the liabilities belonging to that series and such shareholders shall
not be entitled thereby to any distribution upon liquidation of any other class
or series. The assets so distributable to the shareholders of the class or
series shall be distributed among such shareholders in proportion to the number
of shares of that series held by them and recorded on the books of the
Corporation. The liquidation of the class or series may be authorized by vote of
a majority of the Board of Directors then in office, subject to the approval of
a majority of the outstanding securities of that series, as defined in the 1940
Act, and without the vote of the holders of any other class or series. The
liquidation or dissolution of the class or series may be accomplished, in whole
or in part, by the transfer of assets of such series to another class or series
or by the exchange of shares of such series for the shares of another class or
series.
(f) Voting. On each matter submitted to a vote of the shareholders of the
Corporation, each holder of a share of the class or series shall be entitled to
one vote for each share of the class or series standing in his name on the books
of the Corporation, and all shares of all classes or series shall vote as a
single class or series ("Single Class Voting"); provided, however, that (a) as
to any matter with respect to which a separate vote of the class or series or of
any class or classes thereof is required by the 1940 Act or by the Maryland
General Corporation Law (including, without limitation, approval of any plan,
agreement or other arrangement referred to in subsection (1)(ii)3) below), such
requirement as to a separate vote by the class or series or of any class or
classes thereof shall apply in lieu of Single Class Voting as described above;
(b) in the event that the separate vote requirements referred to in (a) above
apply with respect to one or more classes of series, then, subject to (c) below,
the shares of all other classes or series shall vote as a single class or
series; and (c) as to any matter which does not affect the interest of the class
or series, or of any class or classes thereof, the holders of shares of the
class or series, or of any class or classes thereof, as the case may be, shall
not be entitled to vote.
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As to any matter with respect to which a separate vote of the class or series is
required pursuant to proviso (a) above, notwithstanding any provision of law
requiring any action on that matter to be taken or authorized by the holders of
a greater proportion than a majority of the class or series entitled to vote
thereon, such action shall be valid and effective if taken or authorized by the
affirmative vote of the holders of a majority of shares of the class or series
outstanding and entitled to vote thereon.
(g) Redemption by Shareholder. Each holder of shares of the class or series
shall have the right at such times as may be permitted by the Corporation, but
no less frequently than once each week, to require the Corporation to redeem all
or any part of his shares of the class or series at a redemption price per share
equal to the net asset value per share of the class or series next determined
(in accordance with subsection (9.)) after the Shares are properly tendered for
redemption, less such redemption charge (which may, but is not required to be,
the same for the shares of each class of the class or series) as is determined
by the Board of Directors. Payment of the redemption price shall be in cash;
provided, however, that if the Board of Directors determines, which
determination shall be conclusive, that conditions exist which make payment
wholly in cash unwise or undesirable, the Corporation may make payment wholly or
partly in securities or other assets belonging to the class or series at the
value of such securities or assets used in such determination of net asset
value.
Notwithstanding the foregoing, the Corporation may postpone payment of the
redemption price and may suspend the right of the holders of shares of the class
or series to require the Corporation to redeem shares of that series during any
period or at any time when and to the extent permissible under the 1940 Act.
(h) Redemption by Corporation. The Board of Directors may cause the Corporation
to redeem at net asset value the shares of the class or series from a holder who
holds shares of that class or series having an aggregate net asset value
(determined in accordance with subsection (i)) of an amount equal to $100 less
than the minimum initial investment in or less in his account (or such lesser
amount as may be set from time to time by the Corporation), provided that at
least sixty (60) days' prior written notice of the proposed redemption has been
given to such holder by postage paid mail to his last known address. For the
purposes of this calculation the Corporation shall only consider account value
reductions due to redemptions by the holder. Upon redemption of such shares
pursuant to this subsection, the Corporation shall promptly cause payment of the
full redemption price to be made to the holder of such shares so redeemed.
(i) Net Asset Value Per Share. Subject to subsection (12.) below, the net asset
value per share of the class or series shall be the quotient obtained by
dividing the value of the net assets of that series (being the value of the
assets belonging to that series less the liabilities belonging to that series)
by the total number of shares of the class or series outstanding, all determined
by the Board of Directors in accordance with generally accepted accounting
principles and not inconsistent with the 1940 Act.
The Board of Directors may determine to maintain the net asset value per share
of the class or series at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
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continuing declarations of income attributable to that series as dividends
payable in additional shares of the class or series at the designated constant
dollar amount and for the handling of any losses attributable to that series.
Such procedures may provide that in the event of any loss, each shareholder
shall be deemed to have contributed to the capital of the Corporation
attributable to the class or series his pro rata portion of the total number of
shares required to be cancelled in order to permit the net asset value per share
of the class or series to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each shareholder of the class or series shall
be deemed to have agreed, by his investment in such series, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
j) Equality. Subject to subsection (1) below, all shares of the class or series
shall represent an equal proportionate interest in the assets belonging to the
class or series (subject to the liabilities belonging to that series), and each
share of the class or series shall be equal to each other share of that series.
The Board of Directors may from time to time divide or combine the shares of the
class or series, or any class or classes thereof, into a greater or lesser
number of shares of the class or series or any class or classes thereof, as the
case may be, without thereby changing the proportionate beneficial interest in
the assets belonging to the class or series or in any way affecting the rights
of shares of the class or series, or any class thereof.
(k) Conversion or Exchange Rights. Subject to compliance with the requirements
of the 1940 Act, the Board of Directors shall have the authority to provide that
holders of shares of the class or series shall have the right to convert or
exchange said shares into shares of one or more other classes or series of
shares in accordance with such requirements and procedures as may be established
by the Board of Directors.
(l) Designation of Classes.
(i) The class or series of Common Stock may have such number of classes of
Common Stock as shall be designated by the Board of Directors from time to time.
Any class of Common Stock of the class or series shall be referred to herein
individually as a "Class" and collectively, together with any further class or
classes of such Series from time to time established, as the "Classes".
Each Class shall consist of, until further changed, such number of shares as
shall be designated by the Board of Directors from time to time, provided that
the total number of shares of all Classes of the class or series shall not
exceed the number of shares classified from time to time as capital stock of the
class or series. All such shares are initially classified as Class A Common
Stock of the class or series. Designations of shares among the Classes by the
Board of Directors shall be effectuated through the filing from time to time of
articles supplementary to the Corporation's Charter.
(ii) All Classes of the class or series shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation, and other rights
with any other shares of Common Stock of that Series; provided, however, that
notwithstanding anything in this Charter to the contrary:
1) The shares of Class A Common Stock shall be sold without front-end sales
loads; provided, however, if no other Class is at that time
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established, that the Board of Directors may in its discretion authorize the
sale of Class A Common Stock with front-end sales loads, contingent deferred
sales charges or such other sales or redemption charge arrangements as are in
accordance with the 1940 Act and applicable rules and regulations (if any) of
the National Association of Securities Dealers, Inc. ("NASD").
2) Articles supplementary hereafter adopted by the Board of Directors in
connection with the designation of any additional Classes may provide that
shares of each additional Class may be subject to such no-load arrangements,
front-end sales loads, contingent deferred sales charges or such other sales or
redemption charge arrangements as may be established from time to time by the
Board of Directors in accordance with the 1940 Act and applicable rules and
regulations (if any) of the NASD.
3) Expenses related solely to a particular Class (including, without limitation,
distribution expenses under a 1940 Act Rule 12b-1 plan and administrative
expenses under an administration or service agreement, plan or other
arrangement, however designated) shall be borne by that Class and shall be
appropriately reflected (in the manner determined by the Board of Directors) in
the net asset value, dividends, distribution and liquidation rights of the
shares of that Class.
4) Articles supplementary hereafter adopted by the Board of Directors in
connection with the designation of any additional Classes may provide that on an
anniversary (as designated in such articles supplementary) of the first business
day of the month following the month in which shares of a Class were purchased
by a stockholder, such shares (as well as a pro rata portion of any shares
purchased through the reinvestment of dividends and other distributions paid in
respect of all shares of that Class held by such stockholder) may automatically
convert to shares of Class A Common Stock or any other Class as may be
designated in the articles supplementary; provided, however, that such
conversion may be subject to the continuing availability of an opinion of
counsel to the effect that the conversion of the shares of that Class does not
constitute a taxable event under federal income tax law. The Board of Directors,
in its sole discretion, may suspend the conversion of shares of that Class if
such opinion is no longer available.
(m) Fractional Shares. The Corporation may issue and sell fractions of shares of
the class or series, or any class or classes thereof, having pro rata all the
rights of full shares of the class or series, or any class thereof, including,
without limitation, the right to vote and to receive dividends, and wherever the
words "share" or "shares" are used in the Articles or in the By-Laws, they shall
be deemed to include fractions of shares of the class or series, or any class or
classes thereof, as the case may be, where the context does not clearly indicate
that only full shares are intended.
(n) Stock Certificates. The Corporation shall not be obligated to issue
certificates representing shares of the class or series, or any class or classes
thereof, unless it shall receive a written request therefor from the record
holder thereof in accordance with procedures established in
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the By-Laws or by the Board of Directors.
VI.
DIRECTORS
The number of directors of the Corporation shall be six (6), and the names of
those who currently serve as directors and shall act as such until the next
annual meeting or until their successors are duly chosen and qualify are as
follows:
Richard Aster Michael Stolper
Michael S. Erickson Herbert Kay
James Glavin Michael P. Mork
However, the By-Laws of the Corporation may fix the number of directors at a
number greater or lesser than that named in the Charter and may authorize the
Board of Directors, by the vote of a majority of the entire Board of Directors,
to increase or decrease the number of directors fixed by the Charter or by the
By-Laws within limits specified in the By-Laws and to fill the vacancies created
by any such increase in the number of directors; provided that in no case shall
the authorized number of directors be less than three (3). The directors of the
Corporation need not be stockholders of the Corporation.
VII.
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND
OF THE DIRECTORS AND SHAREHOLDERS
(1) No holder of any stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preemptive right to subscribe for or
purchase any stock or any other securities of the Corporation other than such,
if any, as the Board of Directors, in its sole discretion, may determine and at
such price or prices and upon such other terms as the Board of Directors, in its
sole discretion, may fix; and any stock or other securities which the Board of
Directors may determine to offer for subscription may, as the Board of Directors
in its sole discretion shall determine, be offered to the holders of any class,
series or type of stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series or types of stock
or other securities at the time outstanding.
(2) Any contract, transaction or act of the Corporation or of the Board of
Directors which shall be ratified by a majority of a quorum of the stockholders
having voting powers at any annual meeting, or at any special meeting called for
such purposes, shall so far as permitted by law be as valid and as binding as
though ratified by every stockholder of the Corporation.
(3) Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of shares of
all classes of capital stock or of the total number of shares of any class of
capital stock, such action shall be valid and effective if
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authorized by the affirmative vote of the holders of a majority of the total
number of shares of all classes outstanding and entitled to vote thereon, except
as otherwise provided in the Charter.
(4) The Corporation shall indemnify (a) its directors to the full extent
provided by the general laws of the State of Maryland now or hereafter in force,
including the advance of expenses under the procedures provided by such laws;
(b) its officers to the same extent it shall indemnify its directors; and (c)
its officers who are not directors to such further extent as shall be authorized
by the Board of Directors and be consistent with law. The foregoing shall not
limit the authority of the Corporation to indemnify other employees and agents
consistent with law.
(5) In addition to the powers and authority hereinbefore, hereinafter or by
statute expressly conferred upon them, the Board of Directors may exercise all
such powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the express provisions of the laws of the
State of Maryland, of the Charter and of the By-Laws of the Corporation.
VIII.
DETERMINATION BINDING
(1) Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practices by or pursuant to the
direction of the Board of Directors as to (a) the amount of the assets,
obligations or liabilities of the Corporation, (b) the amount of the net income
of the Corporation from dividends and interest for any period or amounts at any
time legally available for the payment of dividends, (c) the amount of any
reserves or charges set up and the propriety thereof, (d) the time of or purpose
for treating any reserves or charges, (e) the use, alteration or cancellation of
any reserves or charges (whether or not any 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),
(f) the price or closing bid or asked price of any security owned or held by the
Corporation, (g) the market value or fair value of any security or any other
asset owned by the Corporation, (h) the number of shares of the Corporation
outstanding or deemed to be outstanding, (1) the impracticability or
impossibility of liquidating securities in orderly fashion, (j) the method of
payment for any such shares repurchased or (i) any other matters relating to the
issue, sale, redemption, repurchase, and/or other acquisition or disposition of
securities or shares of the capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors as to whether any
transaction constitutes a purchase of any securities on "margin", a sale of any
securities "short", or an underwriting of the sale of, or a participation in any
underwriting or selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of shares of its capital stock, past present and
future. Shares of the capital stock of the Corporation are issued and sold on
the condition and understanding that any and all such determinations shall be
binding as aforesaid.
(2) No provision of this Charter shall be effective to (a) require a waiver of
compliance with any provision of the Securities Act of 1933 or the Investment
Company Act of 1940, as amended, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder, or (b) protect or purport to
protect any director or officer of the Corporation against any liability to the
Corporation or its security holders to which such person would otherwise be
subject to reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
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person's office.
IX.
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
X.
AMENDMENT
From time to time any of the provisions of the Charter may be amended, altered
or repealed (including any amendment which changes the terms of any of the
outstanding stock by classification, reclassification or otherwise), upon the
vote of the holders of a majority of the shares of Common Stock of the
Corporation at the time outstanding and entitled to vote, and other provisions
which might under the statutes of the State of Maryland at the time in force be
lawfully contained in the Charter, may be added or inserted upon the vote of the
holders of a majority of the shares of Common Stock of the Corporation at the
time outstanding and entitled to vote, and all rights at any time conferred upon
the stockholders of the Corporation by this Charter are granted subject to the
provisions of this Article X.
The term "the Charter" as used herein and in the By-Laws of the Corporation
shall be deemed to mean these Amended and Restated Articles of Incorporation as
from time to time amended and restated.
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SECOND: (a) The foregoing amendment and restatement of the Charter of the
Corporation does not increase or decrease the authorized stock of the
Corporation.
(b) The amendment contains a description, as amended, of each class,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
THIRD: The provisions set forth in these Articles of Amendment and
Restatement are all the provisions of the Charter currently in effect.
FOURTH: These Articles of Amendment and Restatement were advised by the
Board of Directors and approved by the stockholders.
IN WITNESS WHEREOF, I have signed these Amended and Restated Articles on this
28th day of January, 1994.
ATTEST: MERIDIAN FUND, INC.
By:
Paul A. Robinson, Secretary Richard F. Aster, Jr., President
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THE UNDERSIGNED, President of Meridian Fund, Inc., who executed on behalf of
said Corporation the foregoing Amended and Restated Articles of Incorporation,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Amended and Restated Articles of
Incorporation to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
Richard F. Aster, Jr.
President
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Exhibit (b)
BY-LAWS
OF
MERIDIAN FUND, INC.
(as amended July 29, 1987)
ARTICLE I.
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of stockholders shall be held
during the month of October at such date and time as may be designated from time
to time by the Board of Directors for the election of directors and the
transaction of any other business within the powers of the Corporation. Any
business of the Corporation may be transacted at an annual meeting without being
specifically designated in the notice, except such business as is specifically
required by statute or by the Charter to be stated in the notice. Failure to
hold an annual meeting at the designated time shall not, however, invalidate the
corporate existence or affect otherwise valid corporate acts.
Section 1.02. Special Meetings. At any time in the interval between annual
meetings, special meetings of the stockholders may be called by the Chairman of
the Board or the President or by a majority of the Board of Directors by vote at
a meeting or in writing with or without a meeting. Special meetings of the
stockholders shall be called by the Secretary upon the written request of the
holders of shares entitled to not less than 25% of all the votes entitled to be
cast at such meeting, provided that (a) such request shall state the purposes of
such meeting and the matters proposed to be acted on, and (b) the stockholders
requesting such meeting shall have paid to the Corporation the reasonably
estimated cost of preparing and mailing the notice thereof, which cost estimate
the Secretary shall determine and specify to such stockholders. No special
meeting need be called upon the request of the holders of shares entitled to
less than a majority of all votes entitled to be cast at such meeting to
consider any matter which is substantially the same as a matter voted upon at
any special meeting of the stockholders held during the preceding twelve months.
Section 1.03. Place of Meeting. Meetings of the stockholders shall be held at
such time and place in the United States of America as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
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Section 1.04. Notice of Meetings. Not less than ten days nor more than ninety
days before the date of every stockholders' meeting, the Secretary shall give to
each stockholder entitled to vote at such meeting, written notice stating the
time and place of the meeting and, in case of a special meeting or if notice of
the purpose is required by statute, the purpose or purposes for which the
meeting is called, either by mail or by presenting it to him personally or by
leaving it at his residence or usual place of business. Notwithstanding the
foregoing provision, a waiver of notice in writing, signed by the person or
persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the meeting
in person or by proxy, shall be deemed equivalent to the giving of such notice
to such persons. A meeting of stockholders convened on the date for which it was
called may be adjourned from time to time without further notice to a date not
more than 120 days after the original record date.
Section 1.05. Quorum. Unless statute or the Charter provides otherwise, at any
meeting of stockholders the presence in person or by proxy of stockholders
entitled to cast a majority of the votes thereat shall constitute a quorum; but
this Section shall not affect any requirements under statute or under the
Charter of the Corporation for the vote necessary or the adoption of any
measure. In the event that at any meeting a quorum exists for the transaction of
some business but does not exist for the transaction of other business, the
business as to which a quorum is present may be transacted by the holders of
stock present in person or by proxy who are entitled to vote thereon. In the
absence of a quorum the stockholders present in person or by proxy, by majority
vote and without notice, may adjourn the meeting from time to time until a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called.
Section 1.06. Votes Required. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be sufficient
to take or authorize action upon any matter which may properly come before the
meeting, except that a plurality of all the votes cast at a meeting at which a
quorum is present is sufficient to elect a director, and unless more than a
majority of votes cast is required by statute or by the Charter. Each
outstanding share of stock shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders and fractional shares shall be
entitled to corresponding fractions of one vote on such matters.
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Section 1.07. Proxies. A stockholder may vote the shares owned of record by him
either in person or by proxy executed in writing by the stockholder or by his
duly authorized attorney-in-fact. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. Every proxy shall be in
writing, subscribed by the stockholder or his duly authorized attorney, but need
not be sealed, witnessed or acknowledged.
Section 1.08. List of Stockholders. At each meeting of stockholders, a full,
true and complete list in alphabetical order of all stockholders entitled to
vote at such meeting, certifying the number of shares held by each, shall be
made available by the Secretary.
Section 1.09. Voting. In all elections for directors every stockholder shall
have the right to vote, in person or by proxy, the shares owned of record by
him, for as many persons as there are directors to be elected and for whose
election he has a right to vote. At all meetings of stockholders, unless the
voting is conducted by inspectors, the proxies and ballots shall be received,
and all questions regarding the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting. If demanded by stockholders, present in person or by
proxy, entitled to cast 10% in number of votes, or if ordered by the chairman,
the vote upon any election or question shall be taken by ballot. Upon like
demand or order, the voting shall be conducted by two inspectors in which event
the proxies and ballots shall be received, and all questions regarding the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided, by such inspectors. Unless so demanded or
ordered, no vote need be by ballot, and voting need not be conducted by
inspectors. Inspectors may be elected by the stockholders at their annual
meeting, to serve until the close of the next annual meeting and their election
may be held at the same time as the election of directors. In case of a failure
to elect inspectors, or in case an inspector shall fail to attend, or refuse or
be unable to serve, the stockholders at any meeting may choose an inspector or
inspectors to act at such meeting, and in default of such election the chairman
of the meeting may appoint an inspector or inspectors. No candidate for election
as a director at a meeting shall serve as an inspector thereat.
Section 1.10. Action by Stockholders Other than at a Meeting. Any action
required or permitted to be taken at any meeting of stockholders may be taken
without a meeting, if a consent in writing, setting forth such action, is
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signed by all the stockholders entitled to vote on the subject matter thereof
and any other stockholders entitled to notice of a meeting of stockholders (but
not to vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the records
of the Corporation.
ARTICLE II.
BOARD OF DIRECTORS
Section 2.01. Powers. The business and affairs of the Corporation shall be
managed under the direction of its Board of Directors. All the powers of the
Corporation may be exercised by or under authority of the Board of Directors,
except such as are by statute or the Charter or these By-Laws conferred upon or
reserved to the stockholders. The Board of Directors shall keep full and fair
accounts of its transactions.
Section 2.02. Number of Directors. The number of directors of the Corporation
shall be five (5) until such number be changed as herein provided. By vote of a
majority of the entire Board of Directors, the number of directors may be
increased or decreased, from time to time, not to exceed eleven (11), or be less
than three, directors; but the tenure of office of a director shall not be
affected by any decrease in the number of directors so made by the Board.
Section 2.03. Election and Removal of Directors. Until the first annual meeting
of stockholders or until successors or additional directors are duly elected and
qualify, the Board shall consist of the persons named as such in the Charter. At
the first annual meeting of stockholders and at each annual meeting thereafter,
the stockholders shall elect directors to hold office until the next succeeding
annual meeting or until their successors are elected and qualify. At any meeting
of stockholders, duly called and at which a quorum is present, the stockholders
may, by the affirmative vote of a majority of the votes entitled to be cast for
the election of directors, with or without cause, remove any director or
directors from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed directors.
Section 2.04. Regular Meetings. After each meeting of stockholders at which a
Board of Directors shall have been elected, the Board of Directors so elected
shall meet as soon as practicable for the purpose of organization and the
transaction of other business. No notice of such first meeting shall be
necessary if held immediately after the adjournment, and at the site, of such
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meeting of stockholders. Other regular meetings of the Board of Directors shall
be held on such dates and at such places as may be designated from time to time
by the Board of Directors.
Section 2.05. Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board, the President or the
Secretary of the Corporation, or by a majority of the Board of Directors by vote
at a meeting, or in writing with or without a meeting. Such special meetings
shall be held at such places as may be designated in the calls.
Section 2.06. Notice of Meetings. Except as provided in Section 2.04, notice of
the place, day and hour of every regular and special meeting shall be given to
each director two days (or more) before the meeting, orally in person or by
telephone, or in writing by delivering such written notice to him by telegraph,
or by leaving the same at his residence or usual place of business; in the
alternative, such written notice may be given to a director by mailing the same
three days (or more) before the meeting, postage prepaid, and addressed to him
at his last known business or residence post office address, according to the
records of the Corporation. Unless required by these By-Laws or by resolution of
the Board of Directors, no notice of any meeting of the Board of Directors need
state the purpose of such meeting or the business to be transacted thereat. No
notice of any meeting of the Board of Directors need be given to any director
who attends, or to any director who in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives such
notice. Any meeting of the Board of Directors, regular or special, may adjourn
from time to time to reconvene at the same or some other place, and no notice
need be given of any such adjourned meeting other than by announcement.
Section 2.07. Quorum. At all meetings of the Board of Directors, one third of
the entire Board of Directors (but in no event fewer than two directors) shall
constitute a quorum for the transaction of business. Except in cases in which it
is by statute, by the Charter or by these By-Laws otherwise provided, the vote
of a majority of such quorum at a duly constituted meeting shall be sufficient
to elect and pass any measure. In the absence of a quorum, the directors present
by majority vote and without notice other than by announcement at the meeting
may adjourn the meeting from time to time until a quorum shall attend. At any
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
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Section 2.08. Vacancies. Any vacancy occurring in the Board of Directors for any
cause other than by reason of an increase in the number of directors may be
filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum. Any vacancy occurring by reason of
an increase in the number of directors may be filled by action of a majority of
the entire Board of Directors; provided, in either case, that immediately after
filling such vacancy at least two-thirds of the directors then holding office
shall have been elected to such office by the stockholders at an annual or
special meeting thereof. If at any time after the first annual meeting of
stockholders of the Corporation a majority of the directors in office shall
consist of directors elected by the Board of Directors, a meeting of the
stockholders shall be called forthwith for the purpose of electing the entire
Board of Directors, and the terms of office of the directors then in office
shall terminate upon the election and qualification of such Board of Directors.
A director elected by the Board of Directors or the stockholders to fill a
vacancy shall be elected to hold office until the next annual meeting of
stockholders or until his successor is elected and qualified.
Section 2.09. Compensation and Expenses. Directors may, pursuant to resolution
of the Board of Directors, be paid fees for their services, which fees may
consist of an annual fee or retainer and/or a fixed fee for attendance at
meetings. In addition, directors may in the same manner be reimbursed for
expenses incurred in connection with their attendance at meetings or otherwise
in performing their duties as directors. Members of committees may be allowed
like compensation and reimbursement. Nothing herein contained shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 2.10. Action by Directors Other than at a 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 a written consent to such
action is signed by all members of the Board of Directors or of such committee,
as the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.
Section 2.11. Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified members at any meeting of the committee;
provided, however, that in the absence or disqualification
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of any member of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution, shall have
and may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to declare dividends
or other distributions on stock, elect directors, issue stock other than as
provided in the next sentence, recommend to the stockholders any action which
requires stockholder approval, amend the By-Laws, or approve any merger or share
exchange which does not require stockholder approval. If the Board of Directors
has given general authorization for the issuance of stock, a committee of the
Board, in accordance with a general formula or method specified by the Board by
resolution or by adoption of a plan, may fix the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 2.12. Holding of Meetings by Conference Telephone Call. At any regular
or special meeting of the Board of Directors or any committee thereof, members
thereof may participate in such meeting by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
ARTICLE III.
OFFICERS
Section 3.01. Executive Officers. The Board of Directors shall choose a Chairman
of the Board from among the directors, and shall choose a President, a Secretary
and a Treasurer who need not be directors. The Board of Directors may choose an
Executive Vice President, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers, none of whom need be a director. Any two or more of the
above-mentioned offices, except those of President and a Vice President,
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may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument be required
by law, by the Charter, by the By-Laws or by resolution of the Board of
Directors to be executed by any two or more officers. Each such officer shall
hold office until his successor shall have been duly chosen and qualified, or
until he shall have resigned or shall have been removed. Any vacancy in any of
the above offices may be filled for the unexpired portion of the term by the
Board of Directors at any regular or special meeting.
Section 3.02. Chairman of the Board. The Chairman of the Board, if one be
elected, shall preside at all meetings of the Board of Directors and of the
stockholders at which he is present. He shall have and may exercise such powers
as are, from time to time, assigned to him by the Board of Directors.
Section 3.03. President. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the stockholders and of the Board of
Directors at which he shall be present; he shall have general charge and
supervision of the assets and affairs of the Corporation; he may sign and
execute, in the name of the Corporation, all authorized deeds, mortgages, bonds,
contracts or other instruments, except in cases in which the signing and
execution thereof shall have been expressly delegated to some other officer or
agent of the Corporation; and, in general, he shall perform all duties incident
to the office of a president of a corporation, and such other duties as are from
time to time assigned to him by the Board of Directors.
Section 3.04. Vice Presidents. The Vice President or Vice Presidents, at the
request of the President or in his absence or during his inability or refusal to
act, shall perform the duties and exercise the functions of the President, and
when so acting shall have the powers of the President. If there be more than one
Vice President, the Board of Directors may determine which one or more of the
Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board of Directors, the
President may make such determination. The Vice President or Vice Presidents
shall have such other powers and perform such other duties as may be assigned to
him or them by the Board of Directors or the President.
Section 3.05. Secretary and Assistant Secretaries. The Secretary shall keep
the minutes of the meetings of the stockholders, of the Board of Directors and
of any committees, in books provided for the purpose; he shall see that all
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notices are duly given in accordance with the provisions of these By-Laws or as
required by law; he shall be custodian of the records of the Corporation; he
shall see that the corporate seal is affixed to all documents the execution of
which, on behalf of the Corporation, under its seal, is duly authorized, and
when so affixed may attest the same; and in general, he shall perform all duties
incident to the office of a secretary of a corporation, and such other duties
as, from time to time, may be assigned to him by the Board of Directors, the
Chairman of the Board of Directors, or the President.
The Assistant Secretary, or if there be more than one, the Assistant Secretaries
in the order determined by the Board of Directors or the President shall, in the
absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 3.06. Treasurer and Assistant Treasurer. The Treasurer shall have charge
of and be responsible for all funds, securities, receipts and disbursements of
the Corporation, and shall deposit, or cause to be deposited in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors in accordance with Section 6.04 of these By-Laws; he shall render to
the President, the Chairman of the Board of Directors and to the Board of
Directors, whenever requested, an account of the financial condition of the
Corporation, and in general, he shall perform all the duties incident to the
office of a treasurer of a corporation, and such other duties as may be assigned
to him by the Board of Directors or the President.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board of Directors or the President
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 3.07. Subordinate Officers. The Board of Directors may from time to time
appoint such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period and perform such duties as the Board of
Directors or the President may prescribe. The Board of Directors may, from time
to time, authorize any committee or officer to appoint and remove
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subordinate officers and prescribe the duties thereof.
Section 3.08. Removal. Any officer or agent of, the Corporation may be removed
by the Board of Directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contractual rights, if any, of the person so removed.
ARTICLE IV.
STOCK
Section 4.01. Certificates. Each stockholder shall be entitled to a certificate
or certificates which shall represent and certify the number of shares of stock
owned by him in the Corporation. Each stock certificate shall include on its
face the name of the corporation that issues it, the name of the stockholder or
other person to whom it is issued, and the class of stock and number of shares
it represents. Such certificates shall be signed by the Chairman of the Board,
the President or a Vice President and countersigned by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with
the seal of the Corporation or a facsimile of such seal. The signatures may be
either manual or facsimile signatures and the seal may be either facsimile or
any other form of seal. No certificates shall be issued for fractional shares.
Stock certificates shall be in such form, not inconsistent with law or with the
Charter, as shall be approved by the Board of Directors. In case any officer of
the Corporation who has signed any certificate ceases to be an officer of the
Corporation, whether because of death, resignation or otherwise, before such
certificate is issued, the certificate may nevertheless be issued and delivered
by the Corporation as if the officer had not ceased to be such officer as of the
date of its issue. Stock certificates need not be issued except to stockholders
who request such issuance in writing.
Section 4.02. Transfers. The Board of Directors shall have power and authority
to make such rules and regulations as it may deem necessary or expedient
concerning the issue, transfer and registration of certificates of stock; and
may appoint transfer agents and registrars thereof. The duties of transfer agent
and registrars, if any, may be combined.
Section 4.03. Stock Ledgers. A stock ledger, containing the names and
addresses of the stockholders of the Corporation and the number of shares
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of each class held by them respectively, shall be kept by the Transfer Agent of
the Corporation. The stock ledger may be in written form or in any other form
which can be converted within a reasonable time into written form for visual
inspection.
Section 4.04. Record Dates. The Board of Directors is hereby empowered to fix,
in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of stockholders,
or stockholders entitled to receive payment of any dividend, capital gains
distribution or the allotment of any rights, or in order to make a determination
of stockholders for any other proper purpose. Such date in any case shall be not
more than ninety days, and in case of a meeting of stockholders, not less than
ten days, prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
Section 4.05. Replacement Certificates. The Board of Directors may direct a new
stock certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that act by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4.06. Certification of Beneficial Owners. The Board of Directors may
adopt by resolution a procedure by which a stockholder of the Corporation may
certify in writing to the Corporation that any shares of stock registered in the
name of the stockholder are held for the account of a specified person other
than the stockholder. The resolution shall set forth the class of stockholders
who may certify; the purpose for which the certification may be made; the form
of certification and the information to be contained in it; if the certification
is with respect to a record date or closing of the stock transfer books, the
time after the record date or closing of the stock transfer books within which
the certification must be received by the Corporation; and any other provisions
with respect to the Procedure which the
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Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this
Section, the person specified in the certification is, for the purpose set forth
in the certification, the holder of record of the specified stock in place of
the stockholder who makes the certification.
ARTICLE V.
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
Section 5.01. 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 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, may be indemnified by the Corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding in the manner and on the terms provided by, and to the fullest extent
authorized by, applicable state law, and shall be indemnified by the Corporation
against such expenses, judgments, fines, and amounts in the manner and to the
fullest extent required by applicable state law. However, no indemnification may
be made under this section in the absence of a judicial or administrative
determination absolving the prospective indemnitee of liability to the
Corporation or its security holders unless, based upon a review of all material
facts, (1) a majority of a quorum of directors who are neither interested
persons of the Corporation nor parties to the proceeding, or (2) independent
legal counsel in a written opinion, concludes that such person was not guilty of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties initiated in the conduct of his office.
Section 5.02. No expenses incurred by a director, officer, employee, or agent of
the Corporation in defending a civil or criminal action, suit, or proceeding to
which he is a party may be paid or reimbursed by the Corporation in advance of
the final disposition of such action, suit, or proceeding unless:
(1) One of the following determines, on the basis of the facts then known to it,
that there is reason to believe that indemnification would be permissible:
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(a) a majority of a quorum of disinterested non-party directors, or, if such a
quorum cannot be obtained, a majority of a committee of two or more
disinterested non-party directors duly designated to act in the matter by a
majority vote of the full board;
(b) special legal counsel selected by such a committee or such a quorum of
disinterested non-party directors; or
(c) the stockholders; and
(2) the Corporation receives the following from the prospective recipient of the
advance:
(a) a written affirmation of his good faith belief that he met the standard of
conduct necessary for indemnification; and
(b) an undertaking to repay the advance if it is ultimately determined that he
is not entitled to indemnification under this Article.
Section 5.03. The Corporation is authorized to purchase and maintain insurance
on behalf of any person who 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 against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article. Anything in this Article V
to the contrary notwithstanding, however, the Corporation shall not pay for
insurance which protects any director or officer against liabilities arising
from action involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office;
provided, that any such insurance may cover any of such categories if it
provides only for payment to the Corporation and/or third parties of any damages
caused by a director or officer, and also provides that the insurance company
would be subrogated to the rights of the Corporation to recover from the
director or officer.
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ARTICLE VI.
GENERAL PROVISIONS
Section 6.01. Dividends. Dividends or distributions upon the capital stock of
the Corporation, subject to provisions of the Charter, if any, may be declared
by the Board of Directors at any time pursuant to law. Dividends or
distributions may be paid in cash, property or in shares of the capital stock,
subject to the provisions of the Charter.
Before payment of any dividend or distribution there may be set aside out of any
funds of the Corporation available for dividends or distributions such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for maintaining any
property of the Corporation, or for such other purpose as the directors shall
think conducive to the interest of the Corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
Section 6.02. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 6.03. Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
Section 6.04. Custodian. All securities and cash of the Corporation shall be
held by a custodian which shall be a bank or trust company having (according to
its last published report) not less than $2,000,000 aggregate capital, surplus
and undivided profits, provided such a custodian can be found ready and willing
to act. The Corporation shall enter into a written contract with the custodian
regarding the powers, duties and compensation of the custodian with respect to
the cash and securities of the Corporation held by the custodian. Said contract
and all amendments thereto shall be approved by the Board of Directors of the
Corporation. The Corporation shall upon the resignation or inability to serve of
the custodian use its best efforts to obtain a successor custodian; require that
the cash and securities owned by the Corporation be delivered directly to the
successor custodian; and in the event that no successor custodian can be found,
submit to the stockholders, before permitting delivery of the cash and
securities owned by the Corporation to other than a successor custodian, the
question whether the Corporation shall
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be liquidated or shall function without a custodian.
Section 6.05. Prohibited Transactions. No officer or director of the Corporation
or of its investment adviser shall deal for or on behalf of the Corporation with
himself, as principal or agent, or with any corporation or partnership in which
he has a financial interest. This prohibition shall not prevent: (a) officers or
directors of the Corporation from having a financial interest in the
Corporation, or its investment adviser; (b) the purchase of securities for the
portfolio of the Corporation or the sale of securities owned by the Corporation
through a securities dealer, one or more of whose partners, officers or
directors is an officer or director of the Corporation, provided such
transactions are handled in the capacity of broker only and provided commissions
charged do not exceed customary brokerage charges for such service; or (c) the
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent, or custodian having a partner, officer or director who is an officer or
director of the Corporation, provided only customary fees are charged for
services rendered to or for the benefit of the Corporation.
Section 6.06. Seal. The Board of Directors may provide a suitable seal, bearing
the name of the Corporation, which seal, if one is provided, shall be in the
custody of the Secretary. The Board of Directors may authorize one or more
duplicate seals and provide for the custody thereof. If the Corporation is
required to place its corporate seal to a document, it is sufficient to meet the
requirement of any law, rule, or regulation relating to a corporate seal to
place the word "Seal" adjacent to the signature of the person authorized to sign
the document on behalf of the Corporation.
Section 6.07. Bonds. The Board of Directors may require any officer, agent or
employee of the Corporation to give a bond to the Corporation, conditioned upon
the faithful discharge of his duties, with one or more sureties and in such
amount as may be satisfactory to the Board of Directors. The Board of Directors
shall, in any event, require the Corporation to provide and maintain a bond
issued by a refutable fidelity insurance company, 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 or bonds to be in
such reasonable amount as a majority of the Board of Directors who
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are not such officers or employees of the Corporation shall determine with due
consideration to the value of the aggregate assets of the Corporation to which
any such officer or employee may have access, or in any amount or upon such
terms as the Securities and Exchange Commission may prescribe by order, Rule or
Regulation.
Section 6.08. Voting Upon Shares in Other Corporations. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice President, or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
ARTICLE VII.
AMENDMENT OF BY-LAWS
Subject to the special provisions of Section 2.02, the By-Laws of the
Corporation may be altered, amended, added to or repealed by the stockholders or
by majority vote of the entire Board of Directors.
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MERIDIAN FUND, INC.
The following amendment to the Meridian Fund, Inc. Bylaws was adopted
unanimously by the Board of Directors on July 29, 1987.
Section 1.01. Annual Meetings. The annual meeting of stockholders shall be held
during the month of October, at such date and time as may be designated from
time to time by the board of Directors for the election of directors and the
transaction of any business within the powers of the Corporation, except that
the Corporation shall not be required to hold an annual meeting in any year in
which none of the following matters is required to be acted upon by shareholders
under the Investment company Act of 1940: election of directors, approval of the
Investment Advisory and Service Agreement, ratification of the selection of
independent public accountants or approval of the Distribution Agreement. Any
business of the Corporation may be transacted at an annual meeting without being
specifically designated in the notice, except such business as is specifically
required by statute or by the Articles of Incorporation to be stated in the
notice. Failure to hold an annual meeting at the designated time shall not,
however, invalidate the corporate existence or affect otherwise valid corporate
acts.
<PAGE> 1
Exhibit (d)
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this 20th day of November, 1985, by and between
Aster Capital Management, Inc. (the "Investment Manager") and Meridian Fund,
Inc. (the "Company").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
Subject to the express provision and limitations set forth in the Company's
Articles of Incorporation, By-Laws, Form N-lA Registration Statement under the
Investment Company Act of 1940, as amended (the "1940 Act") under the Securities
Act of 1933, as amended (the "1933 Act"), and prospectus as in use from time to
time, as well as to the factors affecting the Company's status as a "regulated
investment company" under the Internal Revenue Code of 1954, as amended, the
Company hereby grants to the Investment Manager and the Investment Manager
hereby accepts full discretionary authority to manage the investment and
reinvestment of the cash and securities in the account of the Company (the
"Portfolio") presently held by First Pennsylvania Bank, N.A. (the "Custodian"),
the proceeds thereof, and any additions thereto, in the Investment Manager's
discretion. In its duties hereunder, the Investment Manager shall further be
bound by any and all determinations by the Board of Directors of the Company
relating to investment policy, which determinations shall in writing be
communicated to the Investment Manager. The Investment Manager shall, for all
purposes herein, be deemed an independent contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
The Investment Manager is empowered, through any of its officers or employees:
(a) to invest and reinvest in equity securities, debt securities and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in money market
instruments, and in loans and deposits at interest on call or on time, whether
or not secured by collateral;
(b) to buy, sell, and exercise warrants and other rights to subscribe for or
sell stock or other securities; and
(c) to take such other action, or direct the Custodian to take such other
action, as may be necessary or desirable to carry out the purpose and intent of
the foregoing.
The Investment Manager is not empowered to have custody or possession of, or
have authority to obtain custody or possession of securities or funds of the
Company.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and qualified
personnel for the placement of, and shall place, orders for the purchase, or
other acquisition, and sale, or other disposition, of portfolio securities and
other assets for the Company;
(b) unless otherwise specified in writing to the Investment Manager by the
Company, all orders for the purchase and sale of securities for the Portfolio
shall be placed in such markets and through such brokers as in the Investment
Manager's best judgment shall offer the most favorable price and market for the
execution of each transaction; provided, however, that, subject to the above,
the Investment Manager may place orders with brokerage firms which have sold
shares of the Company or which furnish statistical and other information to the
Investment Manager, taking into account the value and quality of the brokerage
services of such firms, including the availability and quality of such
statistical and other information. Receipt by the Investment Manager of any such
statistical and other information and service shall not be deemed to give rise
to any requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto;
(c) The Company understands and agrees that the Investment Manager may effect
securities transactions which cause the Company to pay an amount of commission
in excess of the amount of commission another broker or dealer would have
charged; provided, however, that the Investment Manager determines in good faith
that such amount of commission is reasonable in relation to the value of the
Company share sales, statistical brokerage and other services provided by such
broker or dealer, viewed in terms of either the specific transaction of the
Investment Manager's overall responsibilities to the Company and other
non-investment company clients for which the Investment Manager exercises
investment discretion. The Company also understands that the receipt and use of
such services will not reduce the Investment Manager's customary and normal
research activities;
(d) the Company understands and agrees:
(i) that the Investment Manager performs investment management services for
various clients and the Investment Manager may take action with respect to any
of its other clients which may differ from action taken or from the timing or
nature of action taken with respect to the Portfolio, so long as it is the
Investment Manager's policy, to the extent practical, to allocate investment
opportunities to the Portfolio over a period of time on a fair and equitable
basis relative to other clients;
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(ii) that the Investment Manager shall have no obligation to purchase or sell
for the Portfolio any security or other assets which the Investment Manager or
its officers or employees, may purchase or sell for its or their own accounts or
the account of any other client, if in the opinion of the Investment Manager
such transaction or investment appears unsuitable, impractical or undesirable
for the Portfolio; and
(iii) that on occasions when the Investment Manager deems the purchase or sale
of a security or other asset to be in the best interests of the Company as well
as other clients of the Investment Manager, the Investment Manager, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased when the Investment Manager believes that to
do so will be in the best interests of the Company. Allocation, in such event,
of the securities or other assets so purchased or sold, as well as the expenses
incurred in the transaction, shall be made by the Investment Manager in the
manner the Investment Manager considers to be the most equitable and consistent
with its fiduciary obligations to the Company and to such other clients.
4. ALLOCATION OF EXPENSES OF THE COMPANY
(a) The Company is responsible for payment of the following ordinary operating
expenses: (i) brokerage and commission expenses; (ii) Federal state or local
taxes, incurred by, or levied on, the Company; (iii) interest charges on
borrowings, (iv) charges and expenses of the Company's custodian, stock transfer
and dividend disbursing agents; (v) cost of the designing, printing and mailing
of reports, proxy statements and notices to stockholders; (vi) cost of the
printing and distributing of the prospectuses of the Company and supplements
thereto to the Company's stockholders; (vii) expenses of the issuance and
redemption of the shares of the Company (including stock certificates,
securities registration and qualification fees and expenses); (viii) legal and
auditing expenses; (ix) compensation, fees and expenses paid to Company
directors unaffiliated with the Investment Manager; (x) association dues; (xi)
cost of stationery and forms prepared exclusively for the Company; and (xii)
payment of all investment management or advisory fees, including fees and
expenses payable under Section 5 hereof and Appendix A hereto.
(b) the Investment Manager shall pay for all costs of organizing the Company,
shall provide persons to perform all executive, administrative, clerical and
bookkeeping functions of the Company and shall assume all ordinary operating
expenses not assumed by the Company under 4(a) hereof.
(c) the Company is responsible for payment of any extraordinary expenses
incurred. A good faith determination of what constitutes an
3
<PAGE> 3
extraordinary expense shall be made by the Board of Directors of the Company,
which good faith determination shall include the affirmative vote of all
non-interested directors of the Company.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment Manager
hereunder, the Company will pay or cause to be paid to the Investment Manager,
as they become due and payable, management fees determined in accordance with
the attached schedule of fees (Appendix A). In the event of termination any
management fees paid in advance pursuant to such fee schedule will be prorated
as of the date of termination and the unearned portion thereof will be returned
to the Company.
(b) The net asset value of the Company used in fee calculations shall be
determined in the manner set forth in the Articles of Incorporation, Bylaws and
Prospectus of the Company after the close of the New York Stock Exchange
composite tape on each business day on which the New York Stock Exchange is
open.
(e) The Company hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full amount of
fees as they become due and payable pursuant to the attached schedule of fees;
provided, however, that a copy of a fee statement covering said payment shall be
sent to the Custodian and to the Company.
6. EXPENSE LIMITATION
The Manager agrees to reduce the fee payable to it under this Agreement by the
amount by which the ordinary operating expenses of the Fund for any fiscal year
of the Fund, excluding interest, taxes and extraordinary expenses, shall exceed
the amount, if any, by which ordinary operating expenses of the Company for the
preceding fiscal year (except interest, taxes and extraordinary expenses) exceed
the most stringent limits prescribed by any state in which the Fund shares are
offered for sale (the "Expense Limit"). Costs incurred in connection with
brokerage fees and commissions, which are capitalized in accordance with
generally accepted accounting principles applicable to investment companies,
shall be accounted for as capital items and not as expenses. Proper accruals
shall be made by the Fund for any projected reduction hereunder and
corresponding amounts shall be withheld from the fees paid by the Fund to the
Manager. Any additional reduction computed at the end of the fiscal year shall
be deducted from the fee for the last month of such fiscal year, and any excess
shall be paid to the Fund immediately after the Fund's fiscal year end, and in
any event prior to publication of the Fund's annual report, as a reduction of
the fees previously paid during the fiscal year.
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<PAGE> 4
7. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management, distribution
or other services for other investment companies and other persons, trusts or
companies, or to prohibit affiliates of the Investment Manager from engaging in
such business or in other related or unrelated businesses.
8. INDEMNIFICATION
The Investment Manager shall have no liability to the Company, or its
stockholders, for any error of judgment, mistake of law, or for any loss arising
out of its obligations to the Company not involving willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties
hereunder.
9. DURATION OF AGREEMENT
This Agreement shall be effective on January 1, 1986, and shall, unless
terminated as hereinafter provided, continue in effect until the close of
business on December 31, 1987. This Agreement may be renewed thereafter from
year to year by mutual consent, provided that such renewal shall be specifically
approved at least annually by (I) the Board of Directors of the Company, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Company, and (II) a majority of those directors who are not
parties to this Agreement or interested persons (as defined in the 1940 Act) of
any such approval. Such mutual consent to renewal shall not be deemed to have
been given unless evidenced by a writing signed by both parties hereto.
10. TERMINATION
This Agreement may be terminated at any time, without payment of any penalty, by
the Board of Directors of the Company or by the vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of the Company on sixty
(60) day's written notice to the Investment Manager, or by the Investment
Manager on like notice to the Company. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate originals by their officers thereunto duly authorized as of the
date first above written.
ASTER CAPITAL MANAGEMENT INC.
MERIDIAN FUND INC.
By: By:
Richard F. Aster, Jr. Michael S. Erickson
President Vice President
ATTEST: ATTEST:
Paul A. Robinson Paul A. Robinson
Vice President of Operations Secretary
6
<PAGE> 6
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN ASTER CAPITAL MANAGEMENT, INC. AND MERIDIAN FUND, INC.
SCHEDULE OF FEES
Effective Date: January 1, 1986
The fee for each one-month period from the effective date referred to above
shall be the amount obtained by computing the Net Asset Value of the Portfolio
as of the close of business on each business day, computing the total of such
figures on the last day of each month and multiplying the resultant total Net
Asset Value by 1/365 of the applicable annual fee rate indicated below. This fee
shall be payable upon receipt of the Fee Statement.
On all sums from $0 through $50 million: 1% per Annum
On all sums in excess of $50 million: 3/4 of 1% per Annum
Dated:
ASTER CAPITAL MANAGEMENT, INC. MERIDIAN FUND, INC.
By By
Richard F. Aster, Jr. Michael S. Erickson
President Vice President
ATTEST: ATTEST:
Paul A. Robinson Paul A. Robinson
Vice President of Operations Secretary
7
<PAGE> 7
AMENDMENT TO INVESTMENT MANAGEMENT AGREEMENT,
POWER OF ATTORNEY, AND
SERVICE AGREEMENT
This Amendment ("Amendment") to Investment Management Agreement, Power of
Attorney, and Service Agreement (the "Agreement") is entered into this 7th day
of February, 1994, by and between Aster Capital Management, Inc. (the
"Investment Manager") and Meridian Fund, Inc. (the "Company").
(1) Meridian Fund.
Effective as of January 6, 1994, the Company has adopted and filed an Amended
and Restated Articles of Incorporation establishing the Company as a series
investment company and designating the initial portfolio of the Company to
constitute the "Meridian Fund" series. It is understood and agreed among the
parties that references in the Agreement to the "Portfolio" shall, except as
provided hereinbelow, hereinafter refer to the Meridian Fund series of the
Company unless the context otherwise requires. The Schedule of Fees attached as
Appendix A to the Agreement, and dated as of January 1, 1989, shall be in force
and effect with respect to the Investment Manager's services under the Agreement
with respect to the Meridian Fund series.
(2) Meridian Value Fund; Additional Series.
(a) In connection with the reorganization of the Company into series investment
company format, the Company has as of February 7, 1994, established the Meridian
Value Fund Series as an additional series of the Company. The Company desires to
retain the Investment Manager to render management and investment advisory
services under the Agreement with respect to the Meridian Value Fund series, and
the Investment Manager is willing and able to provide such services. The
Investment Manager agrees to provide to the Company all services enumerated in
the Agreement, and to bear all responsibilities related thereto, as if the
Meridian Fund series and the Meridian Value Fund series were each referred to as
the "Portfolio" in the Agreement. For all purposes hereafter, unless the context
shall otherwise require, the references to "Portfolio" in the Agreement shall
refer, individually and collectively, to the Meridian Fund series and to the
Meridian Value Fund series.
(b) In consideration of the services performed by the Investment Manager under
the Agreement with respect to the Meridian Value Fund series, the Company will
pay or cause to be paid to the Investment Manager, as they become due and
payable, management fees determined in accord with the attached Schedule of Fees
(Appendix B). In the event of termination any management fees paid in advance
pursuant to such Schedule of Fees will be prorated as of the date of termination
and the unearned portion thereof will be returned to the Company.
(c) In the event that the Company establishes one or more series of shares other
than the Meridian Fund series and the Meridian Value Fund series with respect to
which the Company desires to retain the Investment Manager to render management
and investment advisory services under the Agreement, the Company shall so
notify the Investment Manager in writing, indicating the advisory fee which will
be payable with respect to the additional series of shares. If the Investment
Manager is willing to render such services, it shall so notify the Company in
writing, whereupon such series of shares shall be considered a "Portfolio" under
the Agreement as provided herein.
page 1 of 3
<PAGE> 8
(3) Expense Limitation
The administration of the "Expense Limit" as provided in Section 6 of the
Agreement is hereby amended to provide that such Expense Limit shall be
calculated and administered separately with respect to each separate series of
the Company, as opposed to the Company in the aggregate, if and to the extent so
required by state securities authorities.
(4) Duration of Agreement
(a) The Agreement, as amended herein, with respect to the Meridian Value Fund
series shall be effective on February 7, 1994, and shall, unless terminated as
hereinafter provided, continue in effect until the close of business on December
31, 1994. This Agreement, with respect to the Meridian Value Fund shall be
renewed thereafter from year to year by mutual consent, provided that such
renewal shall be specifically approved at least annually by (i) the Board of
Directors of the Company, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of the
Meridian Value Fund series, and, (ii) a majority of those Directors who are not
parties to the Agreement or interested persons (as defined in the Investment
company Act of 1940) of any such approval. Such mutual consent to renewal shall
not be deemed to have been given unless evidenced by a writing signed by both
parities hereto.
(b) The Agreement, as amended herein, with respect to the Meridian Value Fund
may be terminated as provided in Section 10 of the Agreement.
(5) Agreement as Amended.
The Agreement and this Amendment, shall hereafter constitute the Agreement in
its entirety unless and to the extent that it shall be further amended or
terminated in whole or in part by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Agreement
to be executed and duplicate originals by their officers hereon to be duly
authorized as of the date first above written.
ASTER CAPITAL MANAGEMENT, INC. MERIDIAN FUND, INC.
BY: BY:
Richard F. Aster, Jr. Richard F. Aster, Jr.
President President
ATTEST: ATTEST:
Paul A. Robinson Paul A. Robinson
Vice President of Operations Secretary
page 2 of 3
<PAGE> 9
APPENDIX B
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN ASTER CAPITAL MANAGEMENT, INC. AND MERIDIAN FUND, INC.
SCHEDULE OF FEES
MERIDIAN VALUE FUND
Effective Date: February 7, 1994
With respect to the Meridian Value Fund series, the fee for each one-month
period from the effective date referred to above shall be the amount obtained by
computing the Net Asset Value of the Portfolio as of the close of business on
each business day, computing the total of such figures on the last day of each
month and multiplying the resultant total Net Asset Value by 1/365 of the
applicable annual fee rate indicated below. This fee shall be payable upon
receipt of the Fee Statement.
On all sums: 1% per Annum
Dated: February 7, 1994
ASTER CAPITAL MANAGEMENT, INC. MERIDIAN FUND, INC.
BY: BY:
Richard F. Aster, Jr. Richard F. Aster, Jr.
President President
ATTEST: ATTEST:
Paul A. Robinson Paul A. Robinson
Vice President of Operations Secretary
page 3 of 3
<PAGE> 1
Exhibit (g)(1)
CUSTODY AGREEMENT
Agreement made as of this 12th day of December 1994, between MERIDIAN FUND,
INC., a corporation organized and existing under the laws of the state of
Maryland, having its principal office and place of business at 60 East Sir
Francis Drake Blvd., 306, Larkspur, CA, 94939 (hereinafter called the "Fund"),
and THE BANK OF NEW YORK, a New York corporation authorized to do a banking
business, having its principal office and place of business at 48 Wall Street,
New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H:
WHEREAS, the Fund represents that pursuant to the Custody Administration and
Agency Agreement between Fund/Plan Services, Inc. ("Fund/Plan") and the Fund,
Fund/Plan (a) has agreed to perform certain administrative functions which may
include the functions of administrator, transfer agent and accounting services
agent and (b) has been appointed by the Fund to act as its agent in respect of
certain transactions contemplated in this Agreement; and
WHEREAS, the Fund represents that (a) Fund/Plan has agreed to act as Fund's
agent in respect of certain transactions contemplated in this Agreement and (b)
the Bank is authorized and directed to rely upon and follow Certificates and
instructions given by Fund/Plan, the Fund's agent, in respect of transactions
contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth,
the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
<PAGE> 2
1. "Administrator" shall mean Fund/Plan Services, Inc. and such successors or
permitted assigns as may succeed and perform its duties under the Administration
Agreement.
2. "Administration Agreement" shall mean that certain separate agreement
entitled "Custody Administration and Agency Agreement" dated as of December lst,
1994 between the Fund and the Fund/Plan Services, Inc.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system
for United States and federal agency securities, its successor or successors and
its nominee or nominees.
4. "Call Option" shall mean an exchange traded option with respect to Securities
other than Stock Index Options, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include instructions
communicated to the Custodian by the Administrator by Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a clearing
member under the rules of O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated which is
specifically allocated to a Series and pledged to the Custodian as security for,
and in consideration of the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article V herein, or (b)
any receipt described in Article V or VIII herein.
8. "Covered Call Option" shall mean an exchange traded option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission,
2
<PAGE> 3
its successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or successors
and its nominee or nominees, specifically identified in a certified copy of a
resolution of the Fund's Board of Directors specifically approving deposits
therein by the Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or sell
fixed income securities including, without limitation, U.S. Treasury Bills, U.S.
Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an agreed upon
price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with respect to a Futures
Contract.
13. "Margin Account" shall mean a segregated account in the name of a broker,
dealer, futures commission merchant, or a Clearing Member, or in the name of the
Fund for the benefit of a broker, dealer, futures commission merchant, or
Clearing member, or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant or a Clearing
Member (a "Margin Account Agreement"), separate and distinct from the custody
account, in which certain Securities and/or money of the Fund shall be deposited
and withdrawn from time to time in connection with such transactions as the Fund
may from time to time determine. Securities held in the Book-Entry System or the
Depository shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in its books
and records.
14. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
15. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
3
<PAGE> 4
16. "Officers" shall be deemed to include the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
including officers or employees of the Administrator, whether or not any such
other person is an officer of the Fund, duly authorized by the Board of
Directors of the Fund to execute any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the Custodian from
time to time.
17. "Option" shall mean a Call Option, Covered Call Option, Stock Index Option
and/or a Put Option.
18. "Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an officer or from a person reasonably believed by the Custodian
to be an Officer.
19. "Put Option" shall mean an exchange traded option with respect to Securities
other than Stock Index Options, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer thereof for the
exercise price.
20. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which the
Fund sells Securities and agrees to repurchase such Securities at a described or
specified date and price.
21. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks
and other securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
22. "Senior Security Account" shall mean an account maintained and specifically
allocated to a Series under the terms of this Agreement as a segregated account,
by recordation or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically
4
<PAGE> 5
allocated to such Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
23. "Series" shall mean the various portfolios, if any, of the Fund as described
from time to time in the current and effective prospectus for the Fund and
listed on Appendix B hereto as amended from time to time.
24. "Shares" shall mean the shares of beneficial interest of the Fund, each of
which is, in the case of a Fund having Series, allocated to a particular Series.
25. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
stock index at the close of the last business day of the contract and the price
at which the futures contract is originally struck.
26. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
26. "Terminal Link" shall mean an electronic data transmission link between the
Administrator on behalf of the Fund and the Custodian requiring in connection
with each use of the Terminal Link by or on behalf of the Administrator on
behalf of the Fund use of an authorization code provided by the Custodian and at
least two access codes established by the Administrator on behalf of the Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of the
Securities and moneys at any time owned by the Fund during the period of this
Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
5
<PAGE> 6
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, the Fund will deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and moneys deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Directors, substantially in the
6
<PAGE> 7
form of Exhibit C hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis, until instructed to the contrary by a
Certificate actually received by the Custodian, to accept, utilize and act in
accordance with such confirmations as provided in this Agreement with respect to
such Series.
2. The Custodian shall establish and maintain separate accounts, in the name of
each Series, and shall credit to the separate account for each Series all moneys
received by it for the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed by the Custodian
only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of the person to
whom the payment is to be made, the Series account from which payment is to be
made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and liabilities
of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall furnish
the Administrator with confirmations and a summary, on a per Series basis, of
all transfers to or from the account of the Fund for a Series, either hereunder
or with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Administrator with a detailed statement, on a per Series basis, of the
Securities and moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, all Securities held by the Custodian hereunder, which are issued or
issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish or cause to be furnished to the Custodian appropriate
7
<PAGE> 8
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository any Securities which it may hold
hereunder and which may from time to time be registered in the name of the Fund.
The Custodian shall hold all such Securities specifically allocated to a Series
which are not held in the Book-Entry System or in the Depository in a separate
account in the name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such Securities
which are called, but only if either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears in one or more of the
publications listed in Appendix C annexed hereto, which may be amended at any
time by the Custodian without the prior notification or consent of the Fund;
(c) Present for payment and collect the amount payable upon all Securities which
mature;
(d) Surrender Securities in temporary form for definitive Securities;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the Depository with
respect to Securities therein deposited, for the account of a Series, all rights
and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or
through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such Certificate
proxies, consents, authorizations, and any other instruments whereby the
authority of the Fund as owner of any Securities held by the
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Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series specified in
such Certificate, and take such other steps as shall be stated in such
Certificate to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable upon Securities not
described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian shall
not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form
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customarily used by brokers, dealers, or future commission merchants with
respect to such Futures Contracts, Options, or Futures Contract Options, as the
case may be, confirming that such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the Fund, provided,
however, that notwithstanding the foregoing, payments to or deliveries from the
Margin Account and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a purchase
of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall
deliver or cause the Administrator to deliver to the Custodian (i) with respect
to each purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money Market Securities,
a Certificate or Oral Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of the moneys held for
the account of such Series the total
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amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale of any
Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver or cause the Administrator to deliver to the
Custodian (i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate or Oral Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were specifically allocated;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or principal amount sold, and accrued interest, if any; (d) the date of
sale; (e) the sale price per unit; (f) the total amount payable to the Fund upon
such sale; (g) the name of the broker through whom or the person to whom the
sale was made, and the name of the clearing broker, if any; and (h) the name of
the broker to whom the Securities are to be delivered. The Custodian shall
deliver the Securities specifically allocated to such Series to the broker
specified in the Certificate against payment upon receipt of the total amount
payable to the Fund upon such sale, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any option by the Fund, the Fund shall deliver
or cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to each Option purchased: (a) the Series to which such Option is
specifically allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such option or, in the
case of a Stock Index Option, the stock index to which such Option relates and
the number of Stock Index Options purchased; (d) the expiration date; (e) the
exercise price; (f) the dates of purchase and settlement; (g) the total amount
payable by the Fund in connection with such purchase; (h) the name of the
Clearing Member through whom such option was purchased; and (i) the name of the
broker to whom payment is to be made. The Custodian shall pay, upon receipt of a
Clearing Member's statement confirming the purchase of such Option held by such
Clearing Member for the account of the Custodian (or any duly appointed and
registered nominee of the Custodian) as custodian for the Fund, out of moneys
held for the account of the Series to which such option is to be specifically
allocated, the total amount payable upon such purchase to the
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Clearing Member through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to each such sale: (a)
the Series to which such Option was specifically allocated; (b) the type of
Option (put or call); (c) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options sold;
(d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the
total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1 of this Article with respect
to such option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Call Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Call Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing Member through
whom such Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of the moneys
held for the account of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the total amount
payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Put Option: (a) the Series to which such Put Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing Member
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<PAGE> 13
through whom such Put Option was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put option, deliver or direct the
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series to which such Stock Index Option was
specifically allocated; (b) the type of Stock Index Option (put or call); (c)
the number of Options being exercised; (d) the stock index to which such option
relates; (e) the expiration date; (f) the exercise price; (g) the total amount
to be received by the Fund in connection with such exercise; and (h) the
Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and number of
shares for which the Covered Call Option was written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was written; and (g)
the name of the Clearing Member through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to such Covered Call Option,
such receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate instructing
the Custodian to deliver, or to direct the Depository to deliver, the Securities
subject to such Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing Member
to whom the underlying Securities are to be delivered;
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<PAGE> 14
and (d) the total amount payable to the Fund upon such delivery. Upon the return
and/or cancellation of any receipts delivered pursuant to paragraph 6 of this
Article, the Custodian shall deliver, or direct the Depository to deliver, the
underlying Securities as specified in the Certificate against payment of the
amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Put option: (a) the Series for which such Put Option was written; (b)
the name of the issuer and the title and number of shares for which the Put
Option is written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f) the date such
Put Option is written; (g) the name of the Clearing Member through whom the
premium is to be received and to whom a Put Option guarantee letter is to be
delivered; (h) the amount of cash, and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; and (I) the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the Certificate, issue a
Put Option guarantee letter substantially in the form utilized by the Custodian
on the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding
paragraph is exercised, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the Series to which such
Put Option was written; (b) the name of the issuer and title and number of
shares subject to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount payable by the
Fund upon such delivery; (e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be withdrawn from the
Collateral Account for such Series and (f) the amount of cash and/or the amount
and kind of Securities, specifically allocated to such Series, if any, to be
withdrawn from the Senior Security Account. Upon the return and/or cancellation
of any Put Option guarantee letter or similar document issued by the Custodian
in connection with such Put Option, the Custodian shall pay out of the moneys
held for the account of the Series to
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<PAGE> 15
which such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) whether such Stock Index Option is a put or a
call; (c) the number of options written; (d) the stock index to which such
option relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and (k) the amount of
cash and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall, upon receipt of
the premium specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1) deliver
such receipts, if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account specified
in the Certificate, or (2) make the deposits into the Margin Account specified
in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) such information as may be necessary to identify
the Stock Index Option being exercised; (c) the Clearing Member through whom
such Stock Index option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to the Fund; (e) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Margin Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account for such Series. Upon the return
and/or cancellation of the receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay out of the moneys
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<PAGE> 16
out of the moneys held for the account of the Series to which such Stock Index
Option was specifically allocated to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a previously written
Option described in paragraphs, 6, 8 or 10 of this Article in a transaction
expressly designated as a "Closing Purchase Transaction" in order to liquidate
its position as a writer of an Option, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to the Option being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the option was written; (c) the name of
the issuer and the title and number of shares subject to the option, or, in the
case of a Stock Index Option, the stock index to which such Option relates and
the number of Options held; (d) the exercise price; (e) the premium to be paid
by the Fund; (f) the expiration date; (g) the type of option (put or call); (h)
the date of such purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium and the return and/or cancellation of any
receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to
the Option being liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall deliver
or cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Futures Contract, (or with respect to any
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<PAGE> 17
number of identical Futures Contract(s)): (a) the Series for which the Futures
Contract is being entered; (b) the category of Futures Contract (the name of the
underlying stock index or financial instrument); (c) the number of identical
Futures Contracts entered into; (d) the delivery or settlement date of the
Futures Contract(s); (e) the date the Futures Contract(s) was (were) entered
into and the maturity date; (f) whether the Fund is buying (going long) or
selling (going short) on such Futures Contract(s); (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer, or futures
commission merchant through whom the Futures Contract was entered into; and (i)
the amount of fee or commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the moneys specifically allocated to such Series of
the fee or commission, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made by
the Fund to a broker, dealer, or futures commission merchant with respect to an
outstanding Futures Contract, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker, dealer, or
futures commission merchant to the Fund with respect to an outstanding Futures
Contract, shall be received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained by
the Fund until delivery or settlement is made on such Futures Contract, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying: (a) the Futures Contract and the Series to which the
same relates; (b) with respect to a Stock Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to or from whom
payment or delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein.
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4. Whenever the Fund shall enter into a Futures Contract to offset a Futures
Contract held by the Custodian hereunder, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in paragraph 1 of this
Article, and (b) the Futures Contract being offset. The Custodian shall make
payment out of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and delete the Futures Contract
being offset from the statements delivered to the Fund pursuant to paragraph 3
of Article III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund, the
Fund shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Futures Contract Option: (a) the
Series to which such option is specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option purchased; (d) the expiration date; (e) the exercise
price; (f) the dates of purchase and settlement; (g) the amount of premium to be
paid by the Fund upon such purchase; (h) the name of the broker or futures
commission merchant through whom such option was purchased; and (i) the name of
the broker, or futures commission merchant, to whom payment is to be made. The
Custodian shall pay out of the moneys specifically allocated to such Series, the
total amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to each such sale: (a) Series to which such Futures Contract Option was
specifically allocated; (b) the type of Future Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option; (d) the
date of sale; (e) the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of the
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broker of futures commission merchant through whom the sale was made. The
Custodian shall consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount payable to the Fund,
provided the same conforms to the total amount payable as set forth in such
Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option (put or call) being exercised; (c) the type
of Futures Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission merchant through whom
the Futures Contract Option is exercised; (f) the net total amount, if any,
payable by the Fund; (g) the amount, if any, to be received by the Fund; and (h)
the amount of cash and/or the amount and kind of Securities to be deposited in
the Senior Security Account for such Series. The Custodian shall make, out of
the moneys and Securities specifically allocated to such Series, the payments,
if any, and the deposits, if any, into the Senior Security Account as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series for which such
Futures Contract Option was written; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price; (f) the
premium to be received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in the Senior Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of the moneys and
Securities specifically allocated to such Series the deposits into the Senior
Security Account, if any, as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call is
exercised, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the series to which such Futures
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Contract Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon its receipt of the
net total amount payable to the Fund, if any, specified in such Certificate make
the payments, if any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and which is
a put is exercised, the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying: (a) the Series to which such Option
was specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying such Futures Contract
Option; (d) the name of the broker or futures commission merchant through whom
such Futures Contract Option is exercised; (e) the net total amount, if any,
payable to the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in, the Senior Security
Account for such Series, if any. The Custodian shall, upon its receipt of the
net total amount payable to the Fund, if any, specified in the Certificate, make
out of the moneys and Securities specifically allocated to such Series, the
payments, if any, and the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to the Futures Contract Option being
purchased: (a) the Series to which such Option is specifically allocated; (b)
that the transaction is a closing transaction; (c) the type of Future Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid; and (h) the
amount of cash and/or the amount
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and kind of Securities, if any, to be withdrawn from the Senior Security Account
for such Series. The Custodian shall effect the withdrawals from the Senior
Security Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction with
respect to, any Futures Contract Option written or purchased by the Fund and
described in this Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in the case of an
exercise such deposits into the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures
Contract Option described in this Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon ,such sale, if any, as specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of the Custodian) as custodian
of the Fund, issue a receipt or make the deposits into the Margin Account and
the Senior Security Account specified in the Certificate.
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<PAGE> 22
2. In connection with the closing-out of any short sale, the Fund shall deliver
or cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to each such closing out: (a) the Series for which such transaction
is being made; (b) the name of the issuer and the title of the Security; (c) the
number of shares or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to the broker; (d) the
dates of closing-out and settlement; (e) the purchase price per unit; (f) the
net total amount payable to the Fund upon such closing-out; (g) the net total
amount payable to the broker upon such closing-out; (h) the amount of cash and
the amount and kind of Securities to be withdrawn, if any, from the Margin
Account; (i) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out. The Custodian shall,
upon receipt of the net total amount payable to the Fund upon such closing-out,
and the return and/ or cancellation of the receipts, if any, issued by the
Custodian with respect to the short sale being closed-out, pay out of the moneys
held for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with respect to
Securities and money held by the Custodian hereunder, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate, or in the
event such Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions specifying: (a) the Series for which the
Reverse Repurchase Agreement is entered; (b) the total amount payable to the
Fund in connection with such Reverse Repurchase Agreement and specifically
allocated to such Series; (c) the broker or dealer through or with whom the
Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities
to be delivered by the Fund to such broker or dealer; (e) the date of such
Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in a Senior Security Account for such Series in connection with such
Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total
amount payable to the Fund specified in the Certificate or Oral Instructions
make the delivery to the broker or dealer, and the deposits, if any, to the
Senior Security Account, specified in such Certificate or Oral Instructions.
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<PAGE> 23
2. Upon the termination of a Reverse Repurchase Agreement described in preceding
paragraph 1 of this Article, the Fund shall deliver or cause the Administrator
to deliver a Certificate or, in the event such Reverse Repurchase Agreement is a
Money Market Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase \ Agreement being terminated and the
Series for which same was entered; (b) the total amount payable by the Fund in
connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker
or dealer with or through whom the Reverse Repurchase Agreement is to be
terminated; and (f) the amount of cash and/or the amount and kind of Securities
to be withdrawn from the Senior Securities Account for such Series. The
Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate or Oral Instructions, make the
payment to the broker or dealer, and the withdrawals, if any, from the Senior
Security Account, specified in such Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated to a
Series held by the Custodian hereunder, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to each such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of cash collateral and
the premium, if any, separately identified, and (f) the name of the broker,
dealer, or financial institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
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<PAGE> 24
2. Promptly after each termination of the loan of Securities by the Fund, the
Fund shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or withdrawals
from, a Senior Security Account as specified in a Certificate received by the
Custodian. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event the
Certificate fails to specify the Series, the name of the issuer, the title and
the number of shares or the principal amount of any particular Securities to be
deposited by the Custodian into, or withdrawn from, a Senior Securities Account,
the Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Administrator.
2. The Custodian shall make deliveries or payments from a Margin Account to the
broker, dealer, futures commission merchant or Clearing Member in whose name, or
for whose benefit, the account was established as specified in the Margin
Account Agreement.
3. Amounts received by the Custodian as payments or distributions with respect
to Securities deposited in any Margin Account shall be dealt with in accordance
with the terms and conditions of the Margin Account Agreement.
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<PAGE> 25
4. The Custodian shall have a continuing lien and security interest in and to
any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a statement
with respect to each Margin Account in which money or Securities are held
specifying as of the close of business on the previous business day: (a) the
name of the Margin Account; (b) the amount and kind of Securities held therein;
and (c) the amount of money held therein. The Custodian shall make available
upon request to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Administrator with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying the then
market value of the Securities described in such statement. In the event such
then market value is indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option guarantee letter or similar document, the
Fund shall promptly specify or cause the Administrator to promptly specify in a
Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to deliver to the Custodian
a copy of the resolution of the Board of Directors of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, either (i)
setting forth with respect to the Series specified
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<PAGE> 26
therein the date of the declaration of a dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to the Series specified
therein the declaration of dividends and distributions on a daily basis and
authorizing the Custodian to rely on Oral Instructions or a Certificate setting
forth the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions or
Certificate, as the case may be, the Custodian shall pay out of the moneys held
for the account of each Series the total amount payable to the Dividend Agent
and any sub-dividend agent or co-dividend agent of the Fund with respect to such
Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause the
Administrator to deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale of such
Shares and specifically allocated to the separate account in the name of such
Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian to
make payment out of the money held by the Custodian hereunder
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<PAGE> 27
in connection with a redemption of any Shares, it shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the Series
and number of Shares received by the Transfer Agent for redemption and that such
Shares are in good form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in the separate account in the name of the
Series the total amount specified in the Certificate delivered pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any Shares,
whenever any Shares are redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an advice from the
Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the moneys held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on behalf of
any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement, (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to it over the
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<PAGE> 28
average federal funds rate as computed from the Federal Reserve Bank of New
York's daily determination of the effective rate for federal funds, such rate to
be adjusted daily to reflect any change in such federal funds rate. In addition,
the Fund hereby agrees that the Custodian shall have a continuing lien and
security interest in and to any property specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Series, credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank (including,
if the borrowing is pursuant to a separate agreement, the Custodian) from which
it borrows money for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a) the Series to
which such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered into, (e)
the date on which the loan becomes due and payable, (f) the total amount payable
to the Fund on the borrowing date, (g) the market value of Securities to be
delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any particular
Securities, and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's prospectus.
The Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Certificate. The
Custodian
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may, at the option of the lending bank, keep such collateral in its possession,
but such collateral shall be subject to all rights therein given the lending
bank by virtue of any promissory note or loan agreement. The Custodian shall
deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the Administrator on behalf of
the Fund be obligated to have or utilize the Terminal Link, and the provisions
of this Article shall apply if, but only if, the Fund in its sole and absolute
discretion directs the Administrator to utilize the Terminal Link to transmit
Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Administrator on behalf of the
Fund only for the purpose of providing Certificates to the Custodian with
respect to transactions involving Securities or for the transfer of money to be
applied to the payment of dividends, distributions or redemptions of Fund
Shares, and shall be utilized by the Custodian only for the purpose of providing
notices to the Administrator. Such use shall commence only after the Fund shall
have delivered or caused the Administrator to have delivered to the Custodian a
Certificate substantially in the form of Exhibit D and shall have established
access codes. Each use of the Terminal Link by the Administrator shall
constitute a representation and warranty that the Terminal Link is being used
only for the purposes permitted hereby, that at least two Officers have each
utilized an access code, that such safekeeping procedures have been established,
and that such use does not contravene the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
3. The Administrator shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the Custodian shall not be
responsible for the reliability or availability of any such equipment or
services.
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4. The Fund and the Administrator acknowledges that any databases made available
as part of, or through the Terminal Link and any proprietary data, software,
processes, information and documentation (other than any such which are or
become part of the public domain or are legally required to be made available to
the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund and the Administrator shall,
and shall cause others to which either discloses the Information, to keep the
Information confidential by using the same care and discretion it uses with
respect to its own confidential property and trade secrets, and shall neither
make nor permit any disclosure without the express prior written consent of the
Custodian.
5. Upon termination of this Agreement for any reason, the Fund and the
Administrator shall return to the Custodian any and all copies of the
Information which are in its respective possession or under its respective
control, or which either distributed to third parties. The provisions of this
Article shall not affect the copyright status of any of the Information which
may be copyrighted and shall apply to all Information whether or not
copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time to
time without notice to the Fund or the Administrator except that the Custodian
shall give the Administrator notice not less than 75 days in advance of any
modification which would materially adversely affect the Administrator's
operation, and the Administrator agrees that the it shall not modify or attempt
to modify the Terminal Link without the Custodian's prior written consent. The
Fund acknowledges that any software or procedures provided the Fund as part of
the Terminal Link are the property of the Custodian and, accordingly, the
Administrator agrees that any modifications to the Terminal Link, whether by the
Administrator, or by the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes or the
Fund utilizes in connection with the Terminal Link makes any warranties or
representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. The Administrator will cause its officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and the Fund and the Administrator irrevocably authorizes the
Custodian to act in accordance with and rely on Certificates received by it
through the Terminal Link. The Fund and the Administrator acknowledge that it is
their respective responsibility to assure that only Officers use the
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Terminal Link, and that Custodian shall not be responsible nor liable for use of
the Terminal Link by persons other than such persons or Officers, or by only a
single officer, nor for any alteration, omission, or failure to promptly
forward.
9(a). Except as otherwise specifically provided in Section 9(b) of this Article,
the Custodian shall have no liability for any losses, damages, injuries, claims,
costs or expenses arising out of or in connection with any failure, malfunction
or other problem relating to the Terminal Link except for money damages suffered
as the direct result of the negligence of the Custodian in an amount not
exceeding for any incident $100,000 provided, however, that the Custodian shall
have no liability under this Section 9 if the Administrator fails to comply with
the provisions of Section 11.
9(b). The Custodian's liability for its negligence in executing or failing to
execute a transfer of funds in accordance with a Certificate received through
Terminal Link shall be only with respect to a transfer of funds which is not
made in accordance with such Certificate after such Certificate shall have been
duly acknowledged by the Custodian, and shall be contingent upon the
Administrator complying with the provisions of Section 12 of this Article, and
shall be limited to (i) restoration of the principal amount mistransferred, if
and to the extent that the Custodian would be required to make such restoration
under applicable law, and (ii) compensation for the loss of the use of the
mistransferred funds or the funds which were not transferred, as the case may
be, at a rate per annum equal to 1% over the average federal funds rate as
computed from the Federal Reserve Bank of New York's daily determination of the
effective rate for federal funds, for the period during which a Fund has lost
use of such funds. In no event shall the Custodian have any liability for
failing to execute in accordance with a Certificate a transfer of funds where
the Certificate is received by the Custodian through Terminal Link other than
through the applicable transfer module for the particular instructions contained
in such Certificate.
10. Without limiting the generality of the foregoing, in no event shall the
Custodian or any manufacturer or supplier of its computer equipment, software or
services relating to the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the Fund or the Administrator may
incur or experience by reason of its use of the Terminal Link even if the
Custodian or any manufacturer or supplier has been advised of the possibility of
such damages, nor with respect to the use of the Terminal Link shall the
Custodian or any such manufacturer or supplier be liable for acts of God, or
with respect to the following to the extent beyond such person's reasonable
control: machine or computer breakdown or malfunction,
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interruption or malfunction of communication facilities, labor difficulties or
any other similar or dissimilar cause.
11. The Fund shall cause the Administrator to notify the Custodian of any
errors, omissions or interruptions in, or delay or unavailability of, the
Terminal Link as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Terminal Link.
12. The Custodian shall verify to the Administrator, by use of the Terminal
Link, receipt of each Certificate the Custodian receives through the Terminal
Link, and in the absence of such verification the Custodian shall not be liable
for any failure to act in accordance with such Certificate and neither the Fund
nor the Administrator may claim that such Certificate was received by the
Custodian. Such verification, which may occur after the Custodian has acted upon
such Certificate, shall be accomplished on the same day on which such
Certificate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian for
each Series' Foreign Securities (as such term is defined in paragraph (c)(1) of
Rule 17f-5 under the Investment Company Act of 1940, as amended) and other
assets, the foreign banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to
carry out their respective responsibilities in accordance with the terms of the
sub-custodian agreement between each such Foreign Sub-Custodian and the
Custodian, copies of which have been previously delivered to the Fund and
receipt of which is hereby acknowledged (each such agreement, a "Foreign
Sub-Custodian Agreement"). Upon receipt of a Certificate, together with a
certified resolution substantially in the form attached as Exhibit E of the
Fund's Board of Directors, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to act
as the Custodian's agent, as its sub-custodian and any
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<PAGE> 33
such additional foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate, the Custodian shall cease the employment of any one or
more Foreign Sub-Custodians for maintaining custody of the Fund's assets and
such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the form
previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series of the
Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian.
At the election of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims by the Fund or any Series against a
Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense,
liability or claim sustained or incurred by the Fund or any Series if and to the
extent that the Fund or such Series has not been made whole for any such loss,
damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms of
the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and other assets of each Series
held by Foreign Sub-Custodians, including but not limited to, an identification
of entities having possession of each Series' Foreign Securities and other
assets, and advices or notifications of any transfers of Foreign Securities to
or from each custodial account maintained by a Foreign Sub-Custodian for the
Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually agreed upon,
information concerning the Foreign Sub-Custodians employed by the Custodian.
Such information shall be similar in kind and scope to that furnished to the
Fund in connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information pertaining to (i)
the Foreign Custodians' financial strength, general reputation and standing in
the countries in which they are located and their ability to provide the
custodial services required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of securities not
materially different form those prevailing in the
33
<PAGE> 34
United States. The Custodian shall monitor the general operating performance of
each Foreign Sub-Custodian, and at least annually obtain and review the annual
financial report published by such Foreign Sub-Custodian to determine that it
meets the financial criteria of an "Eligible Foreign Custodian" under Rule
17f-5(c)(2)(i) or (ii). The Custodian will promptly inform the Fund in the event
that the Custodian learns that a Foreign Sub-Custodian no longer satisfies the
financial criteria of an "Eligible Foreign Custodian" under such Rule. The
Custodian agrees that it will use reasonable care in monitoring compliance by
each Foreign Sub-Custodian with the terms of the relevant Foreign Sub-Custodian
Agreement and that if it learns of any breach of such Foreign Sub-Custodian
Agreement believed by the Custodian to have a material adverse effect on the
Fund or any Series it will promptly notify the Fund of such breach. The
Custodian also agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices, reports or
other written information received pertaining to the Fund's Foreign Securities,
including without limitation, notices of corporate action, proxies and proxy
solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary, settlement
and payment for securities received for the account of any Series and delivery
of securities maintained for the account of such Series may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the contrary, with
respect to any losses or damages arising out of or relating to any actions or
omissions of any Foreign Sub-Custodian the sole responsibility and liability of
the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
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<PAGE> 35
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI neither the
Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund, at the Fund's expense or of its own counsel, at its expense, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or written by
or for the Fund, the legality of the purchase, sale or writing thereof, or the
propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the propriety of
the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by the Fund;
(d) The legality of any borrowing by the Fund using Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor shall the Custodian be
under any duty or obligation to see to it that any cash collateral delivered to
it by a broker, dealer, or financial institution or held by it at any time as a
result of such loan of portfolio Securities of the Fund is adequate collateral
for the Fund against any loss it might sustain as a
35
<PAGE> 36
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article XIV of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or Securities held in
any Margin Account, Senior Security Account or Collateral Account in connection
with transactions by the Fund. In addition, the Custodian shall be under no duty
or obligation to see that any broker, dealer, futures commission merchant or
Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian of,
any money, whether or not represented by any check, draft, or other instrument
for the payment of money, received by it on behalf of the Fund until the
Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository. Notwithstanding the foregoing, the Custodian shall be
considered the custodian of such check, draft, or other instrument until the
same is placed in the collection process.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the
36
<PAGE> 37
Depository the Custodian shall make a claim against the Depository on behalf of
the Fund, except that the Custodian shall not be under any obligation to appear
in, prosecute or defend any action suit or proceeding in respect to any
Securities held by the Depository which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount due to the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-Custodians
pursuant to Article XVI appoint one or more banking institutions as Depository
or Depositories, as Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking institutions located in
foreign countries, of Securities and moneys at any time owned by the Fund, upon
such terms and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it or by any Foreign
Sub-Custodian, for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to the
Custodian all out-of-pocket expenses and such compensation as may be agreed upon
from time to time between the Custodian and the Fund. The Fund represents that
the Administrator has agreed to pay such compensation and expenses promptly upon
receipt of statements therefor, and hereby directs the Custodian to (i) send all
statements for compensation to its attention care of
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<PAGE> 38
Fund/Plan at the following address: Fund/Plan Services, Inc., 2 W. Elm Street,
Conshohocken, PA 19428, Attention: Mr. Elmer Gardner, Senior Vice President, and
(ii) accept all payments made by Fund/Plan in the Fund's name as if such
payments were made directly by the Fund. The Fund shall pay to Fund/Plan fees
for services (including custodian services provided by the Custodian) in
accordance with the Administration Agreement. The Custodian's compensation for
services rendered hereunder is set forth in a separate agreement between the
Custodian and Fund/Plan. Should Fund/Plan fail to pay or remit such compensation
to the Custodian, the Custodian will be entitled to debit the Custody Account
directly for such compensation. The Custodian may charge such compensation and
any expenses with respect to a Series incurred by the Custodian in the
performance of its duties pursuant to such agreement against any money
specifically allocated to such Series. Unless and until the Fund or the
Administrator instructs the Custodian by a Certificate to apportion any loss,
damage, liability or expense among the Series in a specified manner, the
Custodian shall also be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such Series net asset
value at the time of the charge to the aggregate net asset value of all Series
at that time) of the amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not limited to, the
expenses of sub-custodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the purchase and sale
of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian. The Fund agrees to
forward or cause the Administrator to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not received
by the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Officer.
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<PAGE> 39
11. The Custodian shall be entitled to rely upon any instrument, instruction or
notice received by the Custodian and reasonably believed by the Custodian to be
given in accordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing, the Custodian shall
be under no duty to inquire into, and shall not be liable for, the accuracy of
any statements or representations contained in any such instrument or other
notice including, without limitation, any specification of any amount to be paid
to a broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the possession of
the Custodian shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the Investment Company Act of 1940, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records during the Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
the Custodian to the Fund or the Fund's authorized representative, and the Fund
shall reimburse the Custodian its expenses of providing such copies. Upon
reasonable request of the Fund, the Custodian shall provide in hard copy or on
micro-film, whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or are
similarly maintained, and the Fund shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the Custodian
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or non-payment of checks
pursuant to paragraph 6 of Article XIII as part of any check redemption
privilege program of the Fund, except for any such liability, claim, loss and
demand arising out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, including, without
limitation, those contained in Article XVI the Custodian may deliver and receive
Securities, and receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in accordance with the customs
prevailing from time to time among brokers or dealers in
39
<PAGE> 40
such Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to Certificates or instructions of the Fund or the
Administrator which responsibility and liability shall continue until final
payment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Fund that the Fund is no longer
utilizing the services of the Administrator, then the Custodian shall furnish or
give to the Fund the statements or notices described above as to be furnished or
given to the Administrator.
17. The Custodian shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason of any terms or
provisions in the Administration Agreement, and if such Administration Agreement
shall cease to be in effect the Custodian shall have no additional duties
hereunder.
ARTICLE XVIII
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to the
other party a notice in writing specifying the date of such termination, which
shall be not less than ninety (90) days after the date of giving of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing
to terminate this Agreement and designating a successor custodian or custodians,
each of which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board of Directors of the
Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, designating a successor custodian or custodians. In the absence
of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set
40
<PAGE> 41
forth in such notice this Agreement shall terminate, and the Custodian shall
upon receipt of a notice of acceptance by the successor custodian on that date
deliver directly to the successor custodian all Securities and moneys then owned
by the Fund and held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the Fund or the Custodian in
accordance with the preceding paragraph, the Fund shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by the Fund be
deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities,pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present
Officers of the Fund under its seal, setting forth the names and the signatures
of the present Officers. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present Officer ceases to
be an officer or in the event that other or additional officers are elected or
appointed. Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the present Officers as set forth in the last
delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, shall be sufficiently given if addressed
to the Custodian and mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as the Custodian may
from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Fund shall be sufficiently given if addressed to
the Fund and mailed or delivered to it at its office at the address for the Fund
first above written, or at such other place as the Fund may from time to time
designate in writing, and any notice or other instrument in writing authorized
or required to be given to the Administrator shall be sufficiently
41
<PAGE> 42
given if addressed to the Administrator at such address as the Administrator may
from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the State of
New York without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute arising hereunder and
hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers, thereunto duly authorized and their respective
seals to be hereunto affixed, as of the day and year first above written.
MERIDIAN FUND, INC.
[SEAL]
By:
Attest:
THE BANK OF NEW YORK
[SEAL]
By:
Attest:
43
<PAGE> 44
APPENDIX A
I, Richard F. Aster, Jr., President, and I, Paul A. Robinson, Treasurer
of Meridian Fund, Inc., a corporation organized and existing under the laws of
the state of Maryland (the "Fund"), do hereby certify that:
The following individuals including officers and employees of the
Administrator have been duly authorized by the Board of Directors of the Fund in
conformity with the Fund's Articles of Incorporation and By-Laws to give
Certificates or Oral Instructions on behalf of the Fund, and the signatures set
forth opposite their respective names are their true and correct signatures:
Name Signature
Richard F. Aster, Jr.
Paul A. Robinson
Wayne Weiss
Nancy Clary
Linda E. Newman
Kevin C. O'Boyle
<PAGE> 45
APPENDIX B
SERIES
Name Cusip # NASDAQ SYMBOL
Meridian Fund 589619 10 5 MERDX
Meridian Value Fund 589619 20 4 N/A
<PAGE> 46
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 47
EXHIBIT A
CERTIFICATION
The undersigned, Paul A. Robinson, hereby certifies that he or she is the duly
elected and acting secretary of Meridian Fund, Inc., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors of
the Fund by unanimous consent on December 8, 1994, and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of December 12,
1994, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to deposit in the Book-Entry System, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the Series
to which the same are specifically allocated, and to utilize the Book-Entry
System to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Meridian Fund,
Inc., as of the 9th day of December, 1994.
Paul. A. Robinson
[SEAL]
<PAGE> 48
EXHIBIT B
CERTIFICATION
The undersigned, Paul A. Robinson, hereby certifies that he or she is the duly
elected and acting secretary of Meridian Fund, Inc., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors of
the Fund by unanimous consent on December 8, 1994, and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of December 12,
1994, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository, as defined in
the Custody Agreement, all securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Meridian Fund,
Inc., as of the 9th day of December, 1994.
Paul A. Robinson
[SEAL]
<PAGE> 49
EXHIBIT B-1
CERTIFICATION
The undersigned, Paul A. Robinson, hereby certifies that he or she is the duly
elected and acting secretary of Meridian Fund, Inc., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors of
the Fund by unanimous consent on December 8, 1994, and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of December 12,
1994, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Participants Trust Company
as Depository, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the extent possible
in connection with its performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Meridian Fund,
Inc., as of the 9th day of December 1994.
Paul A. Robinson
[SEAL]
<PAGE> 50
EXHIBIT C
CERTIFICATION
The undersigned, Paul A. Robinson, hereby certifies that he or she is the duly
elected and acting secretary of Meridian Fund, Inc., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors of
the Fund by unanimous consent on December 8, 1994, and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of December 12,
1994, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Meridian Fund,
Inc., as of the 9th day of December 1994.
Paul A. Robinson
[SEAL]
<PAGE> 51
EXHIBIT D
The undersigned, Paul A. Robinson, hereby certifies that he or she is the duly
elected and acting secretary of Meridian Fund, Inc., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors of
the Fund by unanimous consent on December 8, 1994, and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of December 12,
1994 (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on Certificates (as defined
in the Custody Agreement) given by to the Custodian by a Terminal Link (as
defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to Officers of the fund as defined in the Custody Agreement,
shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes, shall limit its use of
the Terminal Link to those purposes permitted by the Custody Agreement, shall
require at least two such Officers to utilize their respective access codes in
connection with each such Certificate, and shall use the Terminal Link only in a
manner that does not contravene the Investment Company Act of 1940, as amended,
or the rules and regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the establishment of such
access codes and such internal safekeeping procedures, advise the Custodian that
the same have been established by delivering a Certificate, as defined in the
Custody Agreement, and the Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Meridian Fund,
Inc., as of the 9th day of December 1994.
Paul A. Robinson
[SEAL]
<PAGE> 52
EXHIBIT E
The undersigned, Paul Robinson, hereby certifies that he is the duly elected and
acting Secretary of Meridian Fund, Inc., a corporation organized and existing
under the laws of the state of Maryland (the "Fund"), and further certifies that
the following resolutions were adopted by the Board of Directors of the Fund at
a meeting duly held on September 27, 1995, at which a quorum was at all times
present, and that such resolutions have not been modified or rescinded and are
in full force and effect as of the date hereof.
Approval under Rule 17f-5 of Foreign Sub-Custodian Arrangements
WHEREAS, Meridian Fund, Inc. (the "Fund") is subdivided into two separate
series (each is hereinafter referred to as a "Portfolio"); and
WHEREAS, each Portfolio, in accord with its investment objective and techniques,
may invest in "foreign securities" (as such term is defined in Rule 17f-5 (c)
(1) under the Investment Company Act of 1940); and
WHEREAS, the Board of Directors has been advised by the Manager of the Fund,
Aster Capital Management, Inc., and by the Bank of New York, custodian for the
Fund's assets, that foreign securities may only be acquired on non-U.S.
securities markets and in such a manner that it is considered necessary and
appropriate to employ non-U.S. custodians, securities depositories and clearing
agencies and non-U.S. branches of U.S. banks in connection with the
custodianship of such foreign securities acquired by the Fund; and
WHEREAS, the Bank of New York ("Custodian") has been engaged by the Fund in
conjunction with its custodianship activities to identify and utilize eligible
foreign custodians (as defined in Rule 17f-5 (c) (2) under the Investment
Company Act of 1940) to hold the Fund's foreign securities; and
WHEREAS, the Board of Directors of the Fund has various obligations in
connection with the oversight and review of such foreign custodianship
activities, as set forth in Investment Company Act Release No. 13724 (January
17, 1984) and said Rule 17f-5, and in conjunction therewith, the Custodian has
prepared and submitted to the Board of Directors substantial information
concerning the eligible foreign custodians with which the Custodian has made
arrangements for Fund assets;
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors has determined that
the foreign securities of each Portfolio of the Fund shall be maintained in the
foreign countries where respectively acquired, or in an appropriate clearing
agency or depository and that such maintenance is necessary and appropriate
given the operations of the foreign markets in which the Fund trades, and that
such maintenance is consistent with the best interests of the Fund and its
shareholders; and
RESOLVED, that the maintenance of the Fund's assets in each country listed in
Schedule I hereto be, and hereby is, approved by the Board of Directors as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign branches of
Custodian listed in Schedule I located in the countries specified therein, and
with the foreign sub-custodians and depositories listed in Schedule I located in
the countries specified therein be, and hereby is, approved by the Board of
Directors as consistent with the best interest of the Fund and its shareholders;
and further
RESOLVED, that the Sub-custodian Agreements presented to this meeting between
Custodian and each of the foreign sub-custodians and depositories listed in
Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Directors as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby authorized to
place assets of the Fund with the aforementioned foreign branches and foreign
sub-custodians and depositories as hereinabove provided; and further
RESOLVED, that no less frequently than annually, the officers of the Fund and of
the Manager shall present to the Board of Directors an annual review of the
operations of the eligible foreign custodians such that the Board of Directors
shall consider whether to approve the continuance of such arrangement as
consistent with the best interests of the Fund and of its shareholders, and that
such continuance shall be authorized only upon agreement of at least a majority
of the Board of Directors; and further
RESOLVED, that the appropriate officers of the Fund, or any of them, are
authorized to do any and all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to be necessary or desirable and
proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of Meridian Fund, Inc.,
as of the 28th day of September, 1995.
Paul A. Robinson
[SEAL] Corporate Secretary
<PAGE> 53
S C H E D U L E I
BANK OF NEW YORK BRANCHES
AND
ELIGIBLE FOREIGN CUSTODIANS
COUNTRY BANK NAME AND ADDRESS STATUS
Argentina The Bank of Boston Correspondent
Florida 99
1005 Buenos Aires
Australia ANTZ Banking Group Limited Correspondent
530 Collins Street (level 25)
Melbourne, Victoria 3001
Austria GiroCredit Bank AG Correspondent
Schubertring 5
A-1011 Vienna
Bangladesh Standard Chartered Bank Correspondent
18-20 Motijheel Commercial Area
P.O. Box 536
Dhaka 1000
Belgium Banque Bruxelles Lambert Correspondent
Administration Centrale
Cours Saint Michel 60
B-1040 Brussels
Brazil The Bank of Boston Correspondent
Rua Libero Badaro 501
01009 Sao Paulo
Canada Royal Bank of Canada Correspondent
200 Bay Street
Toronto, Ontario M5J 2J5
Chile The Bank of Boston Correspondent
Moneda 799 - Casilla 1946
Santiago
<PAGE> 54
Page 2
COUNTRY BANK NAME AND ADDRESS STATUS
China Standard Chartered Bank Correspondent
(Equitor Group)
SIF Edinburgh Tower
The Landmark, 15 Queens Road Central
Hong Kong
Czech Republic Ceskoslovenska Obchodni Banka Correspondent
Na Prikope 14
11520 Prague
Colombia Cititrust, Colombia Correspondent
Avenida, Jimenez N8-89
Bogota, Colombia
Denmark Den Danske Bank Correspondent
2-12 Holmens Kanal
DK-1092 Copenhagen
Euromarket Cedel S.A. Correspondent
67 Blvd. Grande Dutchesse Charlotte
L-1010 Luxembourg
Finland Union Bank of Finland Correspondent
Aleksanterinkatu 30
Helsinki
France Banque Paribas Correspondent
BP 141, 3 rue d'Antin
75078 Paris Cedex 02
Germany Dresdner Bank AG Correspondent
Jurgen-Ponto-Platz 1
Postfach 11 06 61
6000 Frankfurt 11
<PAGE> 55
Page 3
COUNTRY BANK NAME AND ADDRESS STATUS
Greece Alpha Credit Bank Correspondent
40 Stadiou Street
GRIO252 Athens
HongKong HongKong & Shanghai Banking Corp. Correspondent
Securities Department-BL1
1 Queens Road Central
Hungary Citibank Hungary Correspondent
Custody Operations
Budapest V
Deak Ferenc utca 5.1.154
Hungary
India HongKong & Shanghai Banking Corp. Correspondent
52/60 Mahatma Gandhi Road
Bombay 406001
Indonesia HongKong & Shanghai Banking Corp. Correspondent
World Trade Centre -4th Floor
JL. Jend. Sudirman Kav 29-3 1
P.O. Box 2307
Jakarta 10023
Ireland Allied Irish Bank Correspondent
Custodial Services
P.O. Box 518
I.F.S.C.
Dublin I
Israel Israel Discount Bank Limited Correspondent
27-31 Yehuda Halevi Street
65 546 Tel Aviv
Italy Citibank, N.A. Correspondent
Foro Buonaparte, 16
20121 Milan
<PAGE> 56
Page 4
COUNTRY BANK NAME AND ADDRESS STATUS
Japan Yasuda Trust & Banking Co. Correspondent
2-1 Yaesu, 1 Chome
Chuo-ku
Tokyo 103
Korea Bank of Seoul Correspondent
Investment Trust Division
10-1, 2-Namdaemoon-Ro, 2 Ga June-Gu
Seoul
Luxembourg Kredietbank S.A. Correspondent
Boulevard Royal
P.O. Box 1108
Luxembourg
Malaysia HongKong Bank Malaysia Berhad Correspondent
Securities Department
2, Leboh Ampang
50100 Kuala Lumpur
Mexico Citibank N.A. Correspondent
Sucursal en Mexico
Paseo de la Reforma 390
Mexico City 06695 DF
Netherlands ABN-AMRO Bank Correspondent
Kemelstede 2
4817 St. Breda
New Zealand ANZ Banking Group Limited Correspondent
UDC Tower
113-119, The Terrace
Wellington
Norway Den norske Bank Correspondent
Head Office
P.O. Box 1171 Sentrum
0107 Oslo I
<PAGE> 57
Page 5
COUNTRY BANK NAME AND ADDRESS STATUS
Pakistan Standard Chartered Bank Correspondent
Box 4896
Ismail Ibrahim Chundrigar Road
Karachi 2,
Peru Citibank, N.A. Correspondent
Ave Camino Real 456-Piso 5
Lima 27 Peru
Philippines HongKong & Shanghai Banking Corp. Correspondent
HongKong Bank Centre
San Miguel Avenue
Ortigas Centre
Pasig, Metro Manila
Poland Bank Handlowy w Warszawie S.A. Correspondent
Custody Department
Capital Markets Center - V Branch
ul. Kasprzaka 18/20
01-211 Warzawa
Portugal Banco Commercial Portugues Correspondent
Avenida Jose Malhoa
Lote 1686, 7th Floor
1000 Lisbon
Singapore United Overseas Bank Correspondent
1 Bonham Street
Raffles Place
South Africa Standard Bank of South Africa Ltd. Correspondent
P.O. 3720
Johannesburg 2000
Spain Banco Bilbao Vizcaya Correspondent
Invex Department
Clara Del Rey 26, 3rd Floor
28002 Madrid
<PAGE> 58
Page 6
COUNTRY BANK NAME AND ADDRESS STATUS
Sri Lanka Standard Chartered Bank Correspondent
P.O. Box 27
17 Janadhipathi Mawatha
Colombo 1
Sweden Skandinaviska Enskilda Banken Correspondent
Trust Department
Jakobsgatan 6
Stockholm S-106 40
Switzerland Union Bank of Switzerland Correspondent
Banhofstrasse 45
8021 Zurich
Taiwan HongKong & Shanghai Banking Corp. Correspondent
333 Section 1, Keelung Road
Taipei 10548
Thailand Siam Commercial Bank Correspondent
1060 Phetchburi Road
Bangkok 10400
Turkey Citibank N.A. Correspondent
Abdi Ipekci Cad. 65
80200 Macka
Istanbul
United Kingdom The Bank of New York Branch
3 Birchin Lane
London EC3V 9BY
<PAGE> 1
Exhibit (h)(1)
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This AGREEMENT, dated as of the 1st day of December, 1994, made by
and between Meridian Fund, Inc., (the "Fund"), a corporation operating
as a registered investment company under the Investment Company Act of 1940,
as amended, and duly organized and existing under the laws of the state of
Maryland and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund desires to retain Fund/Plan to perform certain
custody administration services; and
WHEREAS, the Fund desires that Fund/Plan act as its agent for the specific
purpose of taking receipt of, and making payment for, custody services
performed on the Fund's behalf by The Bank of New York pursuant to an
agreement between The Bank of New York and the Fund; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
Section 1. The Fund hereby grants to Fund/Plan, and Fund/Plan hereby
accepts such grant, as an agent of the Fund for the limited purpose of: (i)
accepting invoices for custody services from The Bank of New York which invoices
reflect charges to the Fund for custody services performed by The Bank of New
York on the Fund's behalf, and (ii) remitting payment to The Bank of New York
for such services performed in amounts as set forth in Schedule "A" attached
hereto.
CUSTODY ADMINISTRATION SERVICES
Section 2. As Custody Administrator, Fund/Plan shall:
a) coordinate and process portfolio trades through client terminal links with
The Bank of New York
b) input and verify portfolio trades
c) monitor pending and failed security trades
<PAGE> 2
d) coordinate communications between brokers and banks to resolve any
operational problems
e) advise the Fund of any corporate action information, address and follow up on
any dividend or interest discrepancies
f) process the Funds' expenses
g) interface with the Accounting Services and the Transfer Agent to research and
resolve Custody cash problems
h) provide daily and monthly reports
FEES
Section 3. The Fund agrees to pay Fund/Plan compensation for its
services and to reimburse Fund/Plan for actual expenses incurred, at the rates
and amounts as set forth in Schedule "A" attached hereto which the Fund hereby
authorizes Fund/Plan to collect by debiting the Fund's custody account for
invoices which are rendered for the applicable function. The invoices performed
will be sent to the Fund after such debiting with the indication that payment
has been made.
For the purpose of determining fees payable to Fund/Plan, the value of
Fund's net assets shall be computed at the times and in the manner specified in
Fund's then current Prospectus and Statement of Additional Information.
During the term of this Agreement, should the Fund seek services or
functions in addition to those stated, a written amendment to this Agreement
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Fund.
GENERAL PROVISIONS
Section 4.
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement that results from willful misfeasance, bad faith, negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee or
employee of the Fund, shall be deemed, when rendering services to such entity or
acting on any business of the Fund, (other than services or business in
connection with Fund/Plan's duties hereunder), to be rendering such services
<PAGE> 3
to or acting solely for the Fund and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of Fund/Plan
even though that person is being paid salary by Fund/Plan.
(c) Fund/Plan shall give written notice to the Fund within ten (10)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Fund of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Fund
of any liability arising under this Section or otherwise, except to the extent
that failure to give notice prejudices the Fund.
(d) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of Fund/Plan
at its own expense and through counsel of its own choosing if it gives written
notice to Fund/Plan within ten (10) business days of receiving notice of such
claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
the Fund chooses to defend or prosecute such claim, the parties shall cooperate
in the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(e) The Fund shall not settle any claim under (d) and (e) above without
Fund/Plan's express written consent, which consent shall not be unreasonably
withheld. Fund/Plan shall not settle any such claim under (d) and (e) above
without the Fund's express written consent which likewise shall not be
unreasonably withheld.
Section 5.
(a) The fee schedule set forth in Schedule 'A' attached shall be fixed
for (1) year after the effective date of this Agreement. At the end of the first
year, the fee schedule will be subject to annual review and adjustment.
(b) After one year, the Fund or Fund/Plan may give written notice to
the other of the termination of this Agreement, such termination to take effect
at the time specified in the notice, which date shall not be less than ninety
(90) days after the date of giving notice. Upon the effective termination date,
the Fund shall pay to Fund/Plan such compensation as may be due as of the date
of termination and shall likewise reimburse Fund/Plan for any out-of-pocket
expenses and disbursements reasonably incurred by Fund/Plan to such date.
<PAGE> 4
(c) In the event that a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Fund by appropriate
and timely written notice to Fund/Plan, Fund/Plan shall, promptly upon such
termination and at-the expense of the Fund, transfer all pertinent records and
shall cooperate in the transfer of such duties and responsibilities.
Section 6. This Agreement may be amended from time to time by a
supplemental agreement executed by the Fund and Fund/Plan.
Section 7. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid, to the respective parties as follows:
If to the Fund: If to Fund/Plan:
Meridian Fund, Inc. Fund/Plan Services, Inc.
60 E. Sir Francis Drake Blvd. 2 West Elm Street
Wood Island, Suite 306 Conshohocken, PA 19428
Larkspur, CA 94939 Attn: Kenneth J. Kempf, President
Attn: Paul A. Robinson, Vice President
Section 8. The Fund represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the Fund
has been duly and validly authorized by resolution of the Board of Directors of
the Fund.
Section 9. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 10. This Agreement shall extend to and shall be binding upon,
the Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Fund, authorized
or approved by a resolution of their Boards of Directors.
Section 11. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Philadelphia County, Commonwealth of Pennsylvania.
Section 12. No provision of this Agreement may be amended or modified,
in any manner except in writing, properly authorized and executed by Fund/Plan
and the Fund.
<PAGE> 5
Section 13. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
consisting in its entirety of six type written pages, together with Schedule
"A," to be signed by their duly authorized officers, as of the day and year
first above written.
Meridian Fund, Inc. Fund/Plan Services, Inc.
By: Paul A. Robinson, Kenneth J. Kempf
Vice President President
<PAGE> 6
AMENDMENT TO
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This Amendment dated as of February 28, 1999, is entered into by
MERIDIAN FUND, INC. (the "Company") and FIRST DATA INVESTOR SERVICES GROUP, INC.
("Investor Services Group"), the successor in interest to FPS SERVICES, INC.
("FPS").
WHEREAS, the Company and FPS entered into a Custody Administration and
Agency Agreement dated as of December 1, 1994, which agreement was assigned to
Investor Services Group effective February 23, 1998 (as amended and
supplemented, the "Agreement");
WHEREAS, the Company and Investor Services Group wish to amend the Agreement
to extend the term of the Agreement and revise certain schedules to the
Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
hereby agree as follows:
I. The Agreement shall continue in effect for an initial period ending
February 28, 2000 (the "Initial Term"). Upon the expiration of the Initial Term,
the Agreement shall automatically renew for successive terms of one year
("Renewal Terms") each, unless the Company or Investor Services Group provides
written notice to the other of its intent not to renew. Such notice must be
received not less than ninety (90) days nor more than one-hundred eighty (180)
days prior to the expiration of the Initial Term or the then-current Renewal
Term.
II. Any references to out-of-pocket expenses in Schedule "A" to the
Agreement shall be deleted and replaced with the attached Supplement to Schedule
"A".
III. Except to the extent amended hereby, the Agreement shall remain
unchanged and in full force and effect and is hereby ratified and confirmed in
all respects as amended hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date and year first written above.
MERIDIAN FUND, INC.
By:
Paul A. Robinson
Treasurer
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By:
Kenneth J. Kempf
Senior Vice President
<PAGE> 7
SCHEDULE A
FEE SCHEDULE FOR
MERIDIAN FUND, INC. MERIDIAN VALUE FUND, INC.
(All fees are quoted a term of one (1) year)
CUSTODY OF FUND ASSETS (THROUGH THE BANK OF NEW YORK - BONY)
1. Annual Custody Fee Schedule per portfolio (1/12th payable monthly)
<TABLE>
<S> <C>
.00065 on first $ 10 million of average net assets
.00035 on the next $ 20 million of average net assets
.00025 on the next $ 20 million of average net assets
.000175 on the next $ 50 million of average net assets
.00015 on the next $150 million of average net assets
.000125 over $250 million of average net assets
</TABLE>
Minimum monthly fee of $300 per month per portfolio
II. Custody Domestic Securities Transaction Charge: (payable monthly)
<TABLE>
<S> <C>
Book Entry DTC, Federal Book Entry........................ $14.00
Physical Securities/Options/GNMA/RIC's.................... $24.50
GNMA's IPTC............................................... $18.00
Mortgage Backed Securities Principal Pay Down Per Pool.... $11.00
NOW Account............................................... $ 2.75
Euro Dollar CD's and TD's and Euroclear/Cedel............. $45.00
</TABLE>
III. When Issued, Securities Lending, Options, Index Futures:
Should any of these investment vehicles require a separate
segregated Custody Account, a fee of $250 per account per month
will apply.
OUT-OF-POCKET EXPENSES
The Funds will reimburse Fund/Plan Services monthly for all reasonable
out-of-pocket expenses, including telephone postage, telecommunications,
special reports and record retention. The cost of copying and sending
materials to auditors for audits will be an additional expense.
ADDITIONAL SERVICES
To the extend the Funds commences using investment techniques such as Futures,
Security Lending, Swaps, Leveraging, Short Sales, Derivatives, non-US dollar
denominated securities and Precious Metals, additional fees may apply.
Activities of a non-recurring nature such as issuance of multiple classes of
shares, unitholder inkinds, trust consolidations, mergers or reorganizations
will be subject to negotiation. Any additional/enhanced services or reports
will be quoted upon request. Should there be subsequent regulatory changes/
requirements, additional fee revision may be necessary.
<PAGE> 8
Supplement to
Schedule "A"
Out-of-Pocket Expenses
The Company shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Postage - direct pass through to the Fund
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Shipping, Certified and Overnight mail and insurance
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
- Duplicating services
- Courier services
- Overtime, as approved by the Company
- Temporary staff, as approved by the Company
- Travel and entertainment, as approved by the Company
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
- Third party audit reviews
- Insurance
- Pricing services (or other services used to determine Fund
NAV)
- Vendor pricing comparison
- EDGAR filing fees
- Such other expenses as are agreed to by Investor Services
Group and the Company
The Company agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition,
the Company will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Company
and Investor Services Group mutually agree that such expenses are not
otherwise properly borne by Investor Services Group as part of its duties and
obligations under the Agreement.
Miscellaneous Charges
The Company shall be charged for the following products and services as
applicable:
- Ad hoc reports
- Ad hoc SQL time
- Manual Pricing
- Materials for Rule 15c-3 Presentations
- COLD Storage
- Digital Recording
<PAGE> 9
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Pre-Printed Stock, including business forms, certificates,
envelopes, checks and stationary
Fee Adjustments
After the one year anniversary of the effective date of this Amendment,
Investor Services Group may adjust the fees described in the above sections
once per calendar year, upon thirty (30) days prior written notice in an
amount not to exceed the cumulative percentage increase in the Consumer
Price Index for All Urban Consumers (CPI-U) U.S. City Average, All items
(unadjusted) - (1982-84=100), published by the U.S. Department of Labor
since the last such adjustment in the Client's monthly fees (or the
Effective Date of the Amendment absent a prior such adjustment).
<PAGE> 1
Exhibit(h)(2)
SHAREHOLDER SERVICES AGREEMENT
This Agreement, dated as of the 5th day of February 1994, made by and between
Meridian Value Fund (the "Fund"), a separate series of shares of Meridian Fund,
Inc., a corporation operating as a registered investment company under the
Investment Company Act of 1940, as amended, and duly organized and existing
under the laws of the state of Maryland and Fund/Plan Services, Inc.
("Fund/Plan"), a corporation duly organized and existing under the laws of the
State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund desires to retain Fund/Plan to perform share transfer
agency, redemption and dividend disbursing services as set forth in this
Agreement and in Schedule "A" attached hereto, and to perform certain other
functions in connection with these duties; and
WHEREAS, Fund/Plan is registered with the Securities and Exchange
Commission as a Transfer Agent as required under Section 17(A)(c) of the
Securities Exchange Act of 1934, as amended; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
Share Certificates shall mean the certificates representing shares of stock of
the Fund.
Shareholders shall mean the registered owners of the Shares of the Fund in
accordance with the share registry records maintained by Fund/Plan for the Fund.
Shares shall mean the issued and outstanding shares of the Fund.
Signature Guarantee shall mean the guarantee of signatures by an "eligible
guarantor institution" as defined in rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended. Eligible guarantor institutions include banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be members of a
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clearing corporation or maintain net capital of at least $100,000. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program.
Oral Instruction shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to Fund/Plan in person or by
telephone, telegram, telecopy or other mechanical or documentary means lacking
original signature, by a person or persons reasonably identified to Fund/Plan to
be a person or persons so authorized by a resolution of the Board of Directors
of the Fund.
Written Instruction shall mean an authorization, instruction, approval, item or
set of data or information of any kind transmitted to Fund/Plan in an original
writing containing an original signature or a copy of such document transmitted
by telecopy including transmission of such signature reasonably identified to
Fund/Plan to be the signature of a person or persons so authorized by a
resolution of the Board of Directors of the Fund to give Written Instructions to
Fund/Plan.
TRANSFER AGENCY SERVICES
Section 2. The Fund shall furnish to Fund/Plan as Transfer Agent a
sufficient supply of blank Share Certificates and from time to time will renew
such supply upon the request of Fund/Plan, Such blank Share Certificates shall
be signed manually or by facsimile signatures of officers of the Fund authorized
by law or the by-laws of the Fund to sign Share Certificates and, if required,
shall bear the seal of the Fund, or a facsimile thereof.
Section 3. Fund/Plan as Transfer Agent, shall make original issues of
Shares in accordance with Section 14 and 15 below and with the Fund's then
current Prospectus and Statement of Additional Information upon the written
request of the Fund, and upon being furnished with (i) a certified copy of a
resolution or resolutions of the Board of Directors of the Fund authorizing such
issue; (ii) an opinion of counsel as to the validity of such additional Shares;
and (iii) necessary funds for the payment of any original issue tax applicable
to such additional Shares.
Section 4. Transfers of Shares shall be registered and new Share
Certificates issued by Fund/Plan upon surrender of outstanding Share
Certificates, (i) in the form deemed by Fund/Plan to be properly endorsed for
issue, (ii) with all necessary endorser's signatures guaranteed pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, accompanied by,
(iii) such assurances as Fund/Plan shall deem necessary or
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<PAGE> 3
appropriate to evidence the genuineness and effectiveness of each necessary
endorsement, and (iv) satisfactory evidence of compliance with all applicable
laws relating to the payment or collection of taxes.
Section 5. When mail is used for delivery of Share Certificates,
Fund/Plan shall forward Share Certificates in "non-negotiable" form by
first-class mail, and Share Certificates in "negotiable" form by registered
mail, all mail deliveries to be covered while in transit to the addressee by
insurance to be arranged by Fund/Plan.
Section 6. In registering transfers, Fund/Plan as Transfer Agent may
rely upon the commercial code or any other applicable law which, in the written
opinion (a copy of which shall previously have been furnished to the Fund) of
counsel, protect Fund/Plan and the Fund in not requiring complete documentation,
in registering transfer without inquiry into adverse claim, in delaying
registration for purposes of such inquiry, or in refusing registration where in
its judgment an adverse claim requires such refusal.
Section 7. Fund/Plan as Transfer Agent may issue new Share Certificates
in place of Share Certificates represented to have been lost, destroyed or
stolen, upon receiving indemnity satisfactory to Fund/Plan and may issue new
Share Certificates in exchange for and upon surrender of mutilated Share
Certificates.
Section 8. In case any officer of the Fund who shall have signed
manually or whose facsimile signature shall have been affixed to blank Share
Certificates shall die, resign or be removed prior to the issuance of such Share
Certificates, Fund/Plan as Transfer Agent may issue or register such Share
Certificates as the Share Certificates of the Fund notwithstanding such death,
resignation or removal; and the Fund shall file promptly with Fund/Plan such
approval, adoption or ratification as may be required by law.
Section 9. With respect to confirmed trades received by Fund/Plan as
Transfer Agent for the Fund, Fund/Plan shall periodically notify the Fund of the
current status of outstanding confirmed trades. Fund/Plan is authorized to
cancel confirmed trades which have been outstanding for thirty (30) days. Upon
such cancellation, the Transfer Agent shall instruct the accounting agent to
adjust the books of the Fund accordingly.
Section 10. Fund/Plan will maintain stock registry records in the usual
form in which it will note the issuance, transfer and redemption of Shares and
the issuance and transfer of Share Certificates. Fund/Plan is responsible to
provide reports of Share purchases, redemptions, and total Shares outstanding on
the next business day after each net asset valuation. Fund/Plan is
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authorized to keep records, which will be part of the stock transfer records, in
which it will note the names and registered address of Shareholders and the
number of Shares and fractions thereof owned by them.
Section 11. Fund/Plan will issue Share Certificates for Shares of the
Fund, only upon receipt of a written request from a Shareholder. In all other
cases, the Fund authorizes Fund/Plan to dispense with the issuance and
countersignature of Share Certificates whenever Shares are purchased. In such
case Fund/Plan as Transfer Agent, shall merely note on its Shareholder
registration records the issuance of the Shares and fractions (if any) and shall
credit the proper number of Shares and fractions to the respective Shareholders'
accounts. Likewise, whenever Fund/Plan has occasion to surrender for redemption
Shares and fractions owned by Shareholders, it shall be unnecessary to issue
Share Certificates for redemption purposes. The Fund authorizes Fund/Plan in
such cases to process the transactions by appropriate entries in its Share
transfer records, and records of issued Shares outstanding.
Section 12. Fund/Plan in its capacity as Transfer Agent will, in
addition to the duties and functions above-mentioned, perform the usual duties
and functions of a Stock Transfer Agent for a corporation as listed in Schedule
"A". It will countersign for issuance or reissuance Share Certificates
representing original issue or reissued Shares as directed by the Written
Instructions of the Fund and will transfer Share Certificates registered in the
name of Shareholders from one Shareholder to another in the usual manner.
Fund/Plan may rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share Certificate or other
instrument or paper believed by it in good faith to be genuine and unaltered,
and to have been signed, countersigned, or executed by duly authorized person or
persons, or upon the instructions of any officer of the Fund, or upon the advice
of counsel for the Fund or for Fund/Plan. Fund/Plan may record any transfer of
Share Certificates which is reasonably believed by it to have been duly
authorized or may refuse to record any transfer of Share Certificates if in good
faith Fund/Plan in its capacity as Transfer Agent deems such refusal necessary
in order to avoid any liability either of the Fund or Fund/Plan. Absent
negligence on the part of Fund/Plan the Fund agrees to indemnify and hold
harmless Fund/Plan from and against any and all losses, costs, claims, and
liability which it may suffer or incur by reason of so relying or acting or
refusing to act. Fund/Plan shall maintain and reconcile all operating bank
accounts necessary to facilitate all transfer agency processes; including, but
not limited to, distribution disbursements, redemptions and payment clearance
accounts.
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Section 13. In case of any request or demand for the inspection of the
Share records of the Fund, Fund/Plan as Transfer Agent shall endeavor to notify
the Fund and to secure instructions as to permitting or refusing such
inspection. Fund/Plan may, however, exhibit such records to any person in any
case where it is advised by its counsel that it may be held liable for failure
to do so.
ISSUANCE OF SHARES
Section 14. Prior to the daily determination of net asset value in
accordance with the Fund's then current Prospectus and Statement of Additional
Information, Fund/Plan shall process all purchase orders received since the last
determination of the Fund's net asset value. Fund/Plan shall calculate daily the
amount available for investment in Shares at the net asset value determined by
the Fund's pricing agent as of the close of regular trading on the New York
Stock Exchange, the number of Shares and fractional Shares to be purchased and
the net asset value to be deposited with the Custodian. Fund/Plan as agent for
the Shareholders shall place a purchase order daily with the appropriate Fund
for the proper number of Shares and fractional Shares to be purchased and
confirm such number to the Fund, in writing.
Section 15. Fund/Plan having made the calculations provided for in
Section 14, shall thereupon pay over the net asset value of Shares purchased to
the Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder Registration Records.
The Shares and fractional Shares purchased for each Shareholder will be credited
by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to
each Shareholder a confirmation of each purchase, with copies to the Fund, if
requested. Such confirmations will show the prior Share balance, the new Share
balance, the Shares for which Stock Certificates are outstanding (if any), the
amount invested and the price paid for the newly purchased Shares.
REDEMPTIONS
Section 16. Fund/Plan shall, prior to the daily determination of net
asset value in accordance with the Fund's Prospectus and Statement of Additional
Information, process all requests from Shareholders to redeem Shares and
determine the number of Shares required to be redeemed to make monthly payments,
automatic payments or the like. Thereupon, Fund/Plan shall advise the Fund of
the total number of Shares available for redemption and
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<PAGE> 6
the number of Shares and fractional Shares requested to be redeemed. Fund/Plan
as Pricing Agent shall then determine the applicable net asset value, whereupon
Fund/Plan shall furnish the Fund with an appropriate confirmation of the
redemption and process the redemption by filing with the Custodian an
appropriate statement and make the proper distribution and application of the
redemption proceeds in accordance with the Fund's Prospectus and Statement of
Additional Information. The stock registry books recording outstanding Shares,
the Shareholder Registration Records and the individual account of the
Shareholder shall be properly debited.
Section 17. The proceeds of redemption shall be remitted by Fund/Plan in
accordance with the Fund's Prospectus and Statement of Additional Information,
by check mailed to the Shareholder at the Shareholder's registered address or
wired to an authorized bank account. If Share certificates have been issued for
Shares being redeemed, then such Share Certificates and a stock power with a
Signature Guarantee pursuant to Rule 17Ad-15 under the Securities Exchange Act
of 1934 (as defined in Section 1 of this Agreement), shall accompany the
redemption request.
For the purposes of redemption of Shares which have been purchased
within 15 days of a redemption request, the Fund shall provide Fund/Plan, from
time to time, with Written Instructions concerning the time within which such
requests may be honored.
DIVIDENDS
Section 18. The Fund shall notify Fund/Plan of the date of each dividend
declaration or capital gains distribution and the record date for determining
the Shareholders entitled to payment. The per-share payment amount of any
dividend or capital gain shall be determined by the Fund after receipt of
necessary information from and consultation with Fund/Plan.
Section 19. On or before each payment date, the Fund will notify
Fund/Plan in its capacity as dividend disbursing agent of the total amount of
the dividend or distribution currently payable. Fund/Plan will, on the
designated payment date, automatically reinvest all dividends in additional
Shares except in cases where Shareholders have elected to receive distribution
in cash, in which case Fund/Plan will mail distribution checks to the
Shareholders for the proper amounts payable to them from monies transferred by
the Custodian to Fund/Plan for that purpose.
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FEES
Section 20. The Fund agrees to pay Fund/Plan compensation for its
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Fund and Fund/Plan. The Fund agrees and
understands that Fund/Plan's compensation be comprised of two components:
(i) An annual Shareholder account maintenance fee calculated by
multiplying the monthly average number of accounts in each Fund by one twelfth
(1/12th) the per account fee as stated in Schedule "B", subject to a minimum fee
per Fund, which fee the Fund hereby authorizes Fund/Plan to collect by debiting
the Fund's custody account for invoices which are rendered for such services
performed. The invoices for the services performed will be sent to the Fund
after such debiting with the indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by Fund/Plan on
behalf of the Fund, which out-of-pocket expenses will be billed to the Fund
within the first ten calendar days of the month following the month in which
such out-of-pocket expenses were incurred. The Fund agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
Fund's net assets shall be computed at the times and in the manner specified in
Fund's then current Prospectus and Statement of Additional Information.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Fund.
GENERAL PROVISIONS
Section 21. Fund/Plan shall maintain records (which may be part of the
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestments, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each for which no Share Certificates are
outstanding. Fund/Plan agrees to make available upon request and to preserve for
the periods prescribed in Rule 3la-2 under the Investment Company Act of
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1940, as amended, any records relating to services provided under this Agreement
which are required to be maintained by Rule 3la-I under the Act.
Section 22. In addition to the services as Transfer Agent and dividend
disbursing agent set forth above, Fund/Plan will perform other services for the
Fund as agreed upon from time to time, including but not limited to, preparation
of and mailing Federal Tax Information Forms and mailing semi-annual reports to
shareholders of the Fund.
Section 23. Nothing contained in this Agreement is intended to or shall
require Fund/Plan in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange are closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next business day on which both the New York Stock Exchange and the
Custodian are open.
Section 24.
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement that results from willful misconduct, bad faith, negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of the Fund, shall be deemed, when rendering services to such
entity or acting on any business of the Fund, (other than services or business
in connection with Fund/Plan's duties hereunder), to be rendering such services
to or acting solely for the Fund and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of Fund/Plan even
though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith hereunder; (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon any
Certificate, instrument, order, or stock
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certificate or other document reasonably believed by it to be genuine and to be
signed, countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund or upon
the opinion of legal counsel to the Fund, or its own counsel; or (iii) any
action taken or omitted to be taken by Fund/Plan in connection with its
appointment under this agreement, which action or omission was taken in good
faith in reliance upon any law, act, regulation or interpretation of the same
even though the same may thereafter have been altered, changed, amended, or
repealed. Indemnification under this subparagraph, however, shall not apply to
actions or omissions of Fund/Plan or its directors, officers, employees,
shareholders, or agents in cases of its or their own negligence, willful
misconduct, bad faith, or reckless disregard of its or their own duties
hereunder and Fund/Plan will indemnify the Fund under such circumstances.
(d) Fund/Plan shall give written notice to the Fund within ten (10)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Fund of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Fund
of any liability arising under this Section or otherwise, except to the extent
that failure to give notice prejudices the Fund.
(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of Fund/Plan
at its own expense and through counsel of its own choosing if it gives written
notice to Fund/Plan within ten (10) business days of receiving notice of such
claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
the Fund chooses to defend or prosecute such claim, the parties shall cooperate
in the defense or prosecution thereof unless counsel determines that a conflict
may exist between the interests of the Parties, and shall furnish such records
and other information as are reasonably necessary.
(f) The Fund shall not settle any claim under (d) and (e) above, without
Fund/Plan's express written consent, which consent shall not be unreasonably
withheld. Fund/Plan shall not settle any such claim without the Fund's express
written consent which likewise shall not be unreasonably withheld.
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Section 25. Upon established written procedures established by the Fund,
Fund/Plan is authorized, upon receipt of Written Instructions from the Fund, to
make payment upon redemption of Shares without a signature guarantee. Absent
negligence on the part of Fund/Plan, the Fund hereby agrees to indemnify and
hold Fund/Plan, its successors and assigns, harmless of and from any and all
expenses, damages, claims, suits, liabilities, actions, demands, losses
whatsoever arising out of or in connection with a payment by Fund/Plan upon
redemption of Shares pursuant to Written Instructions and without a signature
guarantee; upon the request of Fund/Plan, the Fund shall assume the entire
defense of any action, suit or claim subject to the foregoing indemnity.
Fund/Plan shall notify the Fund of any such action, suit or claim within ten
(10) days after receipt by Fund/Plan of notice thereof.
Section 26.
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the execution date ("effective date") of this Agreement.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years after the effective date of this Agreement.
(c) After the initial two year term of this Agreement, the Fund or
Fund/Plan may give written notice to the other of the termination of this
Agreement, such termination to take effect at the time specified in the notice,
which date shall not be less than one hundred twenty (120) days after the date
of giving notice. Upon the effective termination date, the Fund shall pay to
Fund/Plan such compensation as may be due as of the date of termination and
shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) In the event that in connection with termination of this Agreement a
successor to any of Fund/Plan's duties or responsibilities under this Agreement
is designated by the Fund by written notice to Fund/Plan, Fund/Plan shall,
promptly upon such termination and at the expense of the Fund, transfer all
Shareholder records and shall cooperate in the transfer of such duties and
responsibilities.
Section 27. The Fund shall file with Fund/Plan a certified copy of each
resolution of its Board of Directors authorizing the execution of Written
Instructions or the transmittal of Oral Instructions, as provided in Section 1
of this Agreement.
Section 28. This Agreement may be amended from time to time by a
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supplemental agreement executed by the Fund and Fund/Plan.
Section 29. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid, to the respective parties as follows:
If to the Fund: If to Fund/Plan:
Meridian Value Fund, a separate series
shares of Meridian Fund, Inc.
Wood Island, Suite 306 Fund/Plan Services, Inc.
60 East Sir Francis Drake Blvd. 2 West Elm Street
Larkspur, CA 94939 Conshohocken, PA 19428
Attention: Richard F. Aster, Jr., Attention: Kenneth J. Kempf,
Chairman & President President
Section 30. The Fund represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the Fund
has been duly and validly authorized by resolution of the Board of Directors of
the Fund.
Section 31. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 32. This Agreement shall extend to and shall be binding upon the
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Fund, authorized
or approved by a resolution of their respective Boards of Directors.
Section 33. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
Section 34. No provision of this Agreement may be amended or modified,
in any manner except in writing, properly authorized and executed by Fund/Plan
and the Fund.
Section 35. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
substantially impaired.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting in its entirety, of twelve type written pages, together with
Schedules "A" and "B," to be signed by their duly authorized officers, as of the
day and year first above written.
Meridian Fund, Inc. Fund/Plan Services, Inc.
By: Richard F. Aster, Jr. By: Kenneth J. Kempf
Chairman and President President
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Schedule "A"
The following is a list of Transfer Agency Services to be provided:
- - Opening new accounts and entering demographic data into shareholder base.
- - Real-time Customer Information File (CIF) to link accounts within the Fund and
across Funds. Facilitates account maintenance, lead tracking, quality control,
household mailings and combined statements.
- - 100% Quality Control of new accounts opened on a same-day basis, checked by a
separate staff.
- - Account Maintenance with quality control.
- - Processing all investments to include:
- initial investments
- subsequent investments
- pre-authorized investments through ACH
- - Processing tax ID certifications and NRA processing and handling back-up
withholding.
- - Processing regular and legal transfers of accounts.
- - Exchange processing via automated exchange system. Calls will be
automatically recorded.
- - Responding to shareholder calls and written inquires. Calls are recorded.
- - Generating account statements and combined statements with copies to
appropriate interested parties.
- - Combined statements are available.*
- - Redemption processing to include:
- complete and partial redemptions
- selected group redemptions
- - Issuing and canceling of certificates.
- - Replacement of certificates through surety bonds.
- - Processing dividends.
- - Maintain Blue Sky reporting and produce daily and monthly reports. Daily
reports reflect a "warning system" that informs the Fund when it is within a
certain percentage of shares registered in a state, or within a certain time
period for permit renewal.
Schedule "A"; Page 1
<PAGE> 14
- - Producing daily, monthly or periodic reports of shareholder activity.
- - Producing shareholder lists, labels, ad hoc reports to management, etc.*
- - Addressing, mailing, and tabulation of annual proxy cards, as necessary.
- - Preparation of federal tax information forms to include 1099-DIV's,
1099-B's, 1042's, etc. to shareholders with tape to IRS.
- - Microfilming and indexing in PC system of all application, correspondence and
other pertinent older documents to provide automated location of these records.
Also, all checks presented for payment are microfilmed.
- - System access by PC through dedicated line. Conduct training and provide
user manuals.
- - Daily off site back-up of data with access to Sunguard's disaster recovery
systems and multiple off-site processing areas.
- - Fund/Plan agrees that it will promptly make available to the Fund all system
upgrades, service and product extensions and favorable pricing revisions for
such products and services to the same extent as such are made available or
provided to other registered investment company customers of Fund/Plan.
Fund/Plan shall promptly inform the Fund as to the availability of such products
and services on a timely basis.
* Additional fees shall apply.
Schedule 'A'; Page 2
<PAGE> 15
Schedule "B"
FEE SCHEDULE FOR
MERIDIAN VALUE FUND
a separate series of shares of Meridian Fund, Inc.
--------------------------------------------------
(All fees are quoted for a term of two (2) years from effective date.)
SHAREHOLDER SERVICES AND TRANSFER AGENT
I. The following is our schedule for Shareholder Services and Transfer
Agent Services:
$12.00 per Account per Year
Minimum Yearly Fee of $24,000
II. Retirement Plan Fees:
$12.00 per Account - Annual Maintenance Fee
OUT-OF-POCKET-EXPENSES
The Fund will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including telephone, postage, telecommunications, special reports,
record retention, special transportation costs as incurred. The cost of copying
and sending materials to auditors for off-site audits will be an additional
expense.
ADDITIONAL SERVICES
Activities of a non-recurring nature such as fund consolidations, mergers, or
reorganizations will be subject to negotiation. To the extent the Funds should
decide to issue multiple/separate classes of shares, additional fees will apply.
Any services or reports will be quoted upon request.
<PAGE> 16
AMENDMENT TO
SHAREHOLDER SERVICES AGREEMENT
This Amendment dated as of February 28, 1999, is entered into by MERIDIAN
FUND, INC. (the "Company") and FIRST DATA INVESTOR SERVICES GROUP, INC.
("Investor Services Group"), the successor in interest to FPS SERVICES,
INC. ("FPS").
WHEREAS, the Company and FPS entered into a Shareholder Services
Agreement dated as of February 5, 1994, which agreement was assigned to Investor
Services Group effective February 23, 1998 (as amended and supplemented, the
"Agreement");
WHEREAS, the Company and Investor Services Group wish to amend the
Agreement to extend the term of the Agreement and revise certain schedules to
the Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
I. The Agreement shall continue in effect for an initial period ending
February 28, 2000 (the "Initial Term"). Upon the expiration of the Initial Term,
the Agreement shall automatically renew for successive terms of one year
("Renewal Terms") each, unless the Company or Investor Services Group provides
written notice to the other of its intent not to renew. Such notice must be
received not less than ninety (90) days nor more than one-hundred eighty (180)
days prior to the expiration of the Initial Term or the then-current Renewal
Term.
II. Schedule "A" to the Agreement is revised to include the following:
Cash Management Services. Funds received by Investor Services Group in
the course of performing its services hereunder will be held in bank accounts
and/or money market fund accounts. With respect to funds maintained in money
market fund accounts, Investor Services Group shall retain any interest
generated or earned. With respect to funds maintained in bank accounts, Investor
Services Group shall retain any excess balance credits or excess benefits earned
or generated by or associated with such bank accounts or made available by the
institution at which such bank accounts are maintained after such balance
credits or benefits are first applied towards banking service fees charged by
such institution in connection with banking services provided on behalf of the
Company.
Lost Shareholders. Investor Services Group shall perform such services
as are required in order to comply with Rules 17a-24 and 17Ad-17 of the '34 Act
(the "Lost Shareholder Rules"), including, but not limited to those set forth
below. Investor Services Group may, in its sole discretion, use the services of
a third party to perform the some or all such services.
- documentation of electronic search policies and procedures;
- execution of required searches; - creation and mailing of confirmation
letters;
- taking receipt of returned verification forms;
- providing confirmed address corrections in batch via electronic media;
- tracking results and maintaining data sufficient to comply with the
Lost Shareholder Rules; and
- preparation and submission of data required under the Lost Shareholder
Rules.
III. Any references to out-of-pocket expenses in Schedule "B" to the
Agreement shall be deleted and replaced with the attached Supplement to Schedule
"B".
IV. Except to the extent amended hereby, the Agreement shall remain
unchanged and in full force and effect and is hereby ratified and confirmed in
all respects as amended hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date
and year first written above.
MERIDIAN FUND, INC.
By:
Paul A. Robinson
Treasurer
FIRST DATA INVESTOR SERVICES GROUP, INC.
BY:
Kenneth J. Kempf
Senior Vice President
<PAGE> 17
Supplement to
Schedule "B"
Lost Shareholder Search/Reporting $2.75 per account search*
*The per account search fee shall be waived until June 2000 so long as
the Fund retains Keane Tracers, Inc. ("KTI") to provide the Fund with KTI's
"In-Depth Research Program" services.
Out-of-Pocket Expenses
The Company shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Postage - direct pass through to the Fund
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Shipping, Certified and Overnight mail and insurance
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Overtime, as approved by the Company
- Temporary staff, as approved by the Company
- Travel and entertainment, as approved by the Company
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Pricing services (or other services used to determine Fund NAV)
- Vendor pricing comparison
- EDGAR filing fees
- Such other expenses as are agreed to by Investor Services Group and
the Company
The Company agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Company will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Company
and Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
<PAGE> 18
Miscellaneous Charges
The Company shall be charged for the following products and services as
applicable:
- Ad hoc reports
- Ad hoc SQL time
- Manual Pricing
- Materials for Rule 15c-3 Presentations
- COLD Storage
- Digital Recording
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Pre-Printed Stock, including business forms, certificates,
envelopes, checks and stationery
Fee Adjustments
After the one year anniversary of the effective date of this Amendment, Investor
Services Group may adjust the fees described in the above sections once per
calendar year, upon thirty (30) days prior written notice in an amount not to
exceed the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) -
(1982-84=100), published by the U.S. Department of Labor since the last such
adjustment in the Client's monthly fees (or the Effective Date of the Amendment
absent a prior such adjustment).
<PAGE> 1
Exhibit (h)(3)
ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the 5th day of February, 1994 made by and between
Meridian Value Fund (the "Fund"), a separate series of shares of Meridian Fund,
Inc., a corporation organized under the laws of the state of Maryland operating
as an open end management investment company registered under the Investment
Company Act of 1940, as amended and Fund/Plan Services, Inc. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint Fund/Plan as Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Fund (the
"Accounts and Records") and to perform certain other functions in connection
with such Accounts and Records; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below; and
WHEREAS, the Fund will provide certain information concerning the Fund
to Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. For purposes of this Agreement:
Oral Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to Fund/Plan in
person or by telephone, telegram, telecopy, or other mechanical or documentary
means lacking a signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons authorized by a resolution of the Board of
Directors of the Fund, to give such oral instructions on behalf of the Fund.
Written Instructions shall mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Fund/Plan in
original writing containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person authorized by a
resolution of the Board of Directors of the Fund to give written instructions on
behalf of the Fund.
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<PAGE> 2
The Fund shall file with Fund/Plan a certified copy of each resolution of its
Board of Directors authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 2. To the extent Fund/Plan receives the necessary information
from the Fund or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records relating to the
business of the Fund in such form as may be mutually agreed upon between the
Fund and Fund/Plan:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings
Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
(m) Listing of Portfolio Holdings - showing cost, market value
and percentage of portfolio comprised of each security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of Fund's net asset value as provided below, is to be furnished by
Written or Oral Instructions to Fund/Plan daily (in accordance with the time
frame identified in Section 7) prior to the close of regular trading on the New
York Stock Exchange.
Section 3. Fund/Plan shall perform the ministerial calculations
necessary to compute the Fund's net asset value each day the New York Stock
Exchange is open, in accordance with (i) the Fund's then current Prospectus and
Statement of Additional Information and (ii) procedures with respect thereto
approved by the Board of Directors of the Fund and supplied in writing to
Fund/Plan's Accounting Services Unit. Portfolio items for which market
quotations are available by Fund/Plan's use of an automated financial
information service (the "Service") shall be based on the closing prices of such
Service except where the Fund has given or caused to be given specific Written
or Oral Instructions to use a different value. All of the portfolio securities
shall be given such values as the Fund provides by Written or Oral Instructions
including all restricted securities and other securities requiring valuation not
readily ascertainable solely by such Service. Fund/Plan shall not have any
responsibility or liability for the accuracy of
2
<PAGE> 3
prices quoted by such Service; for the accuracy of the information supplied by
the Fund; or for any loss, liability, damage, or cost arising out of any
inaccuracy of such data. Fund/Plan shall have no responsibility or duty to
include information or valuations to be provided by the Fund in any computation
unless and until it is timely supplied to Fund/Plan in usable form. Fund/Plan
shall record corporate action information as received from the Custodian, the
Service, or the Fund. Fund/Plan shall not have any duty to gather or record
corporate action information not supplied by these sources.
Fund/Plan will not assume any liability for price changes caused by: the
investment adviser(s), custodian, suppliers of security prices, corporate action
and dividend information, or any party other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price change,
consideration must be given to the effect of the price change and Fund/Plan
shall accept liability as provided below:
Notwithstanding the provisions of Section 11, the following provisions
govern Fund/Plan's liability for errors in calculating the net asset value
("NAV") of the Fund:
If the NAV should have been higher for a date or dates in the
past, the error would have the effect of having given more shares to
subscribers and less money to redeemers to which they were entitled.
Conversely, if the NAV should have been lower, the error would have the
effect of having given less shares to subscribers and overpaying
redeemers.
If the error affects the prior business day's NAV only, and the prior
day's work can be rerun before shareholder statements and checks are
mailed, the Fund hereby accepts this manner of correcting the error.
If the error spans five (5) business days or less, Fund/Plan
shall reprocess shareholder purchases and redemptions where redeeming
shareholders have been underpaid. Fund/Plan shall assume liability to
the Fund for overpayments to shareholders who have redeemed.
If the error spans more than five (5) business days, Fund/Plan
would bear the liability to the Fund for, 1) buying in for excess shares
given to shareholders if the NAV should have been higher, or, 2) funding
overpayments to shareholders who have redeemed if the NAV should have
been lower. The cost of any reprocessing required for shareholders who
have been credited with fewer shares than
3
<PAGE> 4
appropriate, or for redeeming shareholders who are due additional
amounts of money will also be borne by Fund/Plan.
Section 4. For all purposes under this Agreement, Fund/Plan is
authorized to act upon receipt of the first of any Written or Oral Instruction
it receives from the Fund or its agents on behalf of the Fund. In cases where
the first instruction is an Oral Instruction that is not in the form of a
document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where Fund/Plan receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Fund shall cause the
broker/dealer to send a written confirmation to Fund/Plan. Fund/Plan shall be
entitled to rely on the first Instruction received, and for any act or omission
undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Fund, provided however, that in the event a
Written or Oral Instruction received by Fund/Plan is countermanded by a timely
later Written or Oral Instruction received by Fund/Plan prior to acting upon
such countermanded Instruction, Fund/Plan shall act upon such later Written or
Oral Instruction. Fund/Plan shall only be liable for losses which occur due to
Fund/Plan's negligence. The sole obligation of Fund/Plan with respect to any
follow-up or confirmatory Written Instruction, Oral Instruction in documentary
or written form, or broker/dealer written confirmation shall be to make
reasonable efforts to detect any such discrepancy between the original
Instruction and such confirmation and to report such discrepancy to the Fund.
The Fund shall be responsible, at the Fund's expense, for taking any action,
including any reprocessing, necessary to correct any discrepancy or error, and
to the extent such action requires Fund/Plan to act, the Fund shall give
Fund/Plan specific Written Instruction as to the action required.
Section 5. The Fund shall cause its Custodian (the "Custodian") to
forward to Fund/Plan a daily statement of cash and portfolio transactions and,
at the end of each month, the Fund shall cause the Custodian to forward to
Fund/Plan a monthly statement of portfolio transactions, which Fund/Plan will
reconcile with its Accounts and Records maintained on behalf of the Fund.
Fund/Plan will report any discrepancies to the Custodian, and report any
unreconciled items to the Fund.
Section 6. Fund/Plan shall promptly supply daily and periodic reports to
the Fund as requested by the Fund and agreed upon by Fund/Plan.
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<PAGE> 5
Section 7. The Fund shall provide and shall require each of its agents
(including the Custodian) to provide Fund/Plan as of the close of each business
day, or on such other schedule as the Fund determines is necessary, with Written
or Oral Instructions (to be delivered to Fund/Plan by 11:00 a.m., Eastern time,
the next following business day) containing all data and information necessary
for Fund/Plan to maintain the Fund's Accounts and Records and Fund/Plan may
conclusively assume that the information it receives by Written or Oral
Instructions is complete and accurate. Fund/Plan, as Transfer Agent, accepts
responsibility for providing reports of share purchases, redemptions, and total
shares outstanding, on the next business day after each net asset valuation.
Section 8. The Accounts and Records, in the agreed-upon format,
maintained by Fund/Plan shall be the property of the Fund and shall be made
available to the Fund promptly upon request and shall be maintained for the
periods prescribed in Rules 3la-1 and 3la-2 under the Investment Company Act of
1940, as amended. Fund/Plan shall assist the Fund's independent auditors, or
upon approval of the Fund, or upon demand, any regulatory body, in any requested
review of the Fund's Accounts and Records but shall be reimbursed for all
expenses and employee time invested in any such review outside of routine and
normal periodic review and audits. Upon receipt from the Fund of the necessary
information, Fund/Plan shall supply the necessary data for the Fund or an
independent auditor's completion of any necessary tax returns, questionnaires,
periodic reports to Shareholders and such other reports and information requests
as the Fund and Fund/Plan shall agree upon from time to time.
Section 9. In case of any request or demand for the inspection of the
Share records of the Fund, Fund/Plan, as Accounting Services Agent, shall
endeavor to notify the Fund and to secure instructions as to permitting or
refusing such inspection. Fund/Plan may however, exhibit such records to any
person in any case where it is advised by its counsel that it may be held liable
for failure to do so after notice to the Fund.
Section 10. Fund/Plan and the Fund may from time to time adopt such
procedures as agreed upon in writing, and Fund/Plan may conclusively assume that
any procedure approved by the Fund or directed by the Fund, does not conflict
with or violate any requirements of the Fund's registration statement, articles
of incorporation, by-laws, or any rule or regulation of any regulatory body or
governmental agency. The Fund shall be responsible for notifying Fund/Plan of
any changes in regulations or rules which might
5
<PAGE> 6
necessitate changes in Fund/Plan's procedures, and for working out with
Fund/Plan such changes.
Section 11.
(a) Fund/Plan, its directors, officers, employees, shareholders, and
agents shall only be liable for an error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Fund/Plan except
matters resulting from willful misfeasance, bad faith, negligence or reckless
disregard on the part of Fund/Plan in the performance of its obligations and
duties under this Agreement; or
(ii) in reliance upon any certificate, instrument, order or
stock certificate or other document reasonably believed by it to be genuine and
to be signed, countersigned or executed by any duly authorized person, upon the
Oral Instructions or Written Instructions of an authorized person of the Fund or
upon the written opinion of legal counsel for the Fund or Fund/Plan; or
(iii) any action taken or omitted to be taken in good faith by
Fund/Plan in connection with its appointment, in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended, or repealed. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders, or agents in cases of its or
their own negligence, misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
(c) Likewise, as it pertains to this agreement, Fund/Plan shall
indemnify and hold harmless the Fund, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which the Fund may sustain or incur or which may
6
<PAGE> 7
be asserted against the Fund by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by the Fund except
matters resulting from willful misfeasance, bad faith, negligence or reckless
disregard on the part of the Fund in the performance of its obligations and
duties under this Agreement.
(d) Fund/Plan shall give written notice to the Fund within ten (10)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to so notify the Fund of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Fund
of any liability arising from this Section or otherwise, except to the extent
failure to give notice prejudices the Fund.
(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of Fund/Plan
at its own expense and through counsel of its own, choosing if it gives written
notice to Fund/Plan within ten (10) business days of receiving notice of such
claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. If the Fund
chooses to defend or prosecute such claim, then the Parties shall cooperate in
the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
Section 12. All financial data provided to, processed by, and reported
by Fund/Plan under this Agreement shall be stated in United States dollars.
Fund/Plan shall have no obligation to convert to, equate, or deal in foreign
currencies or values, and expressly assumes no liability for any currency
conversion or non-U.S. dollar denominated computations relating to the affairs
of the Fund.
Section 13. The Fund agrees to pay Fund/Plan compensation for its
services, and to reimburse it for expenses, at the rates and amounts as set
forth in Schedule "B" attached hereto, and as shall be set forth in any
amendments to such Schedule "B" agreed upon in writing by the Fund and
Fund/Plan. The Fund agrees and understands that Fund/Plan's compensation be
comprised of two components and payable on a monthly basis as follows:
(i) A fixed fee for each Fund, together with a combined asset
based fee which the Fund hereby authorizes Fund/Plan to collect by debiting the
Fund's custody account for invoices which are rendered for the services
performed for the applicable function. The invoices for the services performed
will be sent to the Fund after such debiting with the
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<PAGE> 8
indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by
Fund/Plan on behalf of the Fund, which out-of-pocket expenses will be billed to
the Fund within the first ten calendar days of the month following the month in
which such out-of-pocket expenses were incurred. The Fund agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
the Fund's net assets shall be computed at the times and in the manner specified
in the Fund's then current Prospectuses and Statement of Additional Information.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Fund.
Section 14. Nothing contained in this Agreement is intended to or shall
require Fund/Plan, in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next succeeding business day
on which the New York Stock Exchange is open. Notwithstanding the foregoing,
Fund/Plan shall compute the net asset value of the Fund on each day required
pursuant to (i) Rule 22c-I promulgated under the Investment Company Act of 1940,
as amended, and (ii) the Fund's then current Prospectus and Statement of
Additional Information.
Section 15.
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the execution date ("effective date") of this Agreement.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years after the effective date of this Agreement.
(c) After the initial two year term of this Agreement, the Fund or
Fund/Plan may give written notice to the other of the termination of this
Agreement, such termination to take effect at the time specified in the notice,
which date shall not be less than one hundred twenty (120) days after the date
of giving notice. Upon the effective termination date, the Fund shall pay to
Fund/Plan such compensation as may be due as of the date of
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<PAGE> 9
termination and shall likewise reimburse Fund/Plan for any out-of-pocket
expenses and disbursements reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by the Fund by written notice to Fund/Plan in
connection with the termination of this Agreement, Fund/Plan shall promptly upon
such termination and at the expense of the Fund, transfer all Required Records
and shall cooperate in the transfer of such duties and responsibilities.
Section 16. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid to the respective parties as follows:
If to the Fund: If to Fund/Plan:
Meridian Value Fund, a separate series
shares of Meridian Fund, Inc. Fund/Plan Services, Inc.
Wood Island, Suite 306 2 West Elm Street
60 East Sir Francis Drake Blvd. Conshohocken, PA 19428
Larkspur, CA 94939 Attention: Kenneth J. Kempf,
Attention: Richard F. Aster, Jr., President
Chairman & President
Section 17. This Agreement may be amended from time to time by
supplemental agreement executed by the Fund and Fund/Plan and the compensation
stated in Schedule "B" attached hereto may be adjusted accordingly as mutually
agreed upon.
Section 18. The Fund represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the Fund
has been duly and validly authorized by resolution of the Board of Directors of
the Fund.
Section 19. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 20. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of Fund/Plan or by Fund/Plan without the written consent of the Fund,
authorized or approved by a resolution of its respective Boards of Directors.
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<PAGE> 10
Section 21. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 22. No provision of this Agreement may be amended or modified,
in any manner except by a written agreement properly authorized and executed by
Fund/Plan and the Fund.
Section 23. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of ten type written pages, together with Schedules "A" and "B," to be
signed by their duly authorized officers as of the day and year first above
written.
Meridian Fund, Inc. Fund/Plan Services, Inc.
By: Richard F. Aster, Jr. By: Kenneth J. Kempf
Chairman and President President
10
<PAGE> 11
Schedule "A"
Daily Accounting Services
1) Calculate Net Asset Value Per Share:
- Update the daily market value of securities held by the Fund using
Fund/Plan Services' standard agents for pricing domestic equity, bond
and foreign securities. The standard domestic equity pricing service is
Quotron Systems, Inc., Interactive Data and Muller Data Corporation/
Extel Financial are used for bond and foreign prices/exchange rates.
- If necessary, enter manual prices supplied by Meridian and/or broker.
- Prepare NAV proof sheet. Review components of change in NAV for
reasonableness.
- Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by client.
Verify US dollar security prices exceeding variance levels by notifying
client and pricing sources of noted variances.
- Complete daily variance analysis on foreign exchange rates and local
foreign prices. Notify Meridian of changes exceeding established levels
for the Meridian's verification. (Meridian should establish tolerance
levels for each country/currency so that local price changes and foreign
exchange rate changes exceeding this tolerance are identified and NAV
problems minimized.)
- Review for ex-dividend items indicated by pricing sources; trace to
general ledger for agreement.
- Communicate required pricing information (NAV) to Meridian, Transfer
Agent and, electronically, to NASDAQ.
2) Determine and Report Cash Availability to Fund by 10:00 AM Eastern Time:
- Receive daily cash and transaction statements from the Custodian by
8:30 AM Eastern time.
- Receive daily shareholder activity reports from the Fund's Transfer
Agent by 8:30 AM Eastern time.
- Fax hard copy Cash Availability calculations with all details to
Meridian.
- Supply client with 5-day cash projection report.
- Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the custodian/
Meridian.
- The Fund's Transfer Agent will also support Meridian in receipt of
timely cash information.
3) Reconcile and Record All Daily Expense Accruals:
- Accrue expenses based on Meridian supplied budget either as
percentage of Fund's net assets or specific dollar amounts.
- If applicable, monitor expense limitations established by Meridian.
- If applicable, accrue daily amortization of Organizational Expense.
- If applicable, complete daily accrual of 12b-I expenses.
<PAGE> 12
4) Verify and Record All Daily Income Accruals for Debt Issues:
- Review and verify all system generated Interest and Amortization
reports.
- Establish unique security codes for bond issues to permit segregated
Trial Balance income reporting.
5) Monitor Domestic Securities Held for Cash Dividends, corporate actions
and capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
- Monitor electronically received information from Muller Data
Corporation for all domestic securities.
- Review current daily security trades for dividend activity.
- Interface with custodian to monitor timely collection and postings of
corporate actions, dividends and interest.
- Process international dividend and capital change information received
from the Custodian and Advisor. If selected by Meridian, back-up
information on foreign dividends and corporate actions may also be
obtained from Muller Data Corporation or Interactive Data Corporation
(as pricing vendor for the Fund).
- Provide mark-to-market analysis for currency exchange rate
fluctuations on unsettled dividends and interest.
6) Enter All Security Trades on Investment Accounting System (IAS) based on
written instructions from Meridian.
- Review system verification of trade and interest calculations.
- Verify settlement through the Custodian statements.
- Maintain security ledger transaction reporting.
- Maintain tax lot holdings.
- Determine realized gains or losses on security trades.
- Provide complete broker commission reporting.
- Provide foreign currency exchange rate realized and unrealized
gains/losses detail.
7) Enter All Fund Share Transactions on IAS:
- Process activity identified on the Transfer Agent reports.
- Verify settlement through the Custodian statements.
- Reconcile to the Fund/Plan Services' Transfer Agent report
balances.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing
all asset, liability, equity, income and expense accounts)
- Post manual entries to the general ledger.
- Post custodian bank activity.
- Post shareholder and security transactions.
- Post and verify system generated activity, i.e., income and expense
accruals.
- Segregate foreign tax expense.
- Prepare general ledger net cash proof used in NAV calculation.
- Prepare daily mark-to-market analysis for all unrealized foreign
currency exchange rate gains/losses by asset/liability category.
<PAGE> 13
9) Review and Reconcile With Custodian Statements:
- Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to
and resolved by the Custodian.)
- Post all cash settlement activity to the Trial Balance.
- Reconcile to ending cash balance accounts.
- Clear IAS subsidiary reports with settled amounts.
- Track status of past due items and failed trades handled by the
Custodian.
10) Submission of Daily Accounting Reports to Meridian: (Additional reports
readily available.)
- Trial Balance
- Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security).
- NAV Calculation Report
- Cash Availability and 5-day Cash Projection Reports
Monthly Accounting Services
1) Full Financial Statement Preparation (automated Statements of Assets
and Liabilities, of Operations and of Changes in Net Assets) and
submission to client by 10th business day.
2) Submission of Monthly Automated IAS Reports to Fund/Meridian:
- Security Purchase/Sales Journal
- Interest and Maturity Report
- Brokers Ledger (Commission Report)
- Security Ledger Transaction Report with Realized Gains/Losses
- Security Ledger Tax Lot Holdings Report
- Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
- Report any security balance discrepancies to the custodian/Meridian.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
Accounts, such as:
- Security cost and realized gains/losses
- Interest/dividend receivable and income
- Payable/receivable for securities purchased and sold
- Payable/receivable for fund shares; issued and redeemed
- Expense payments and accruals analysis
- Unrealized and realized currency gains/losses.
<PAGE> 14
5) If Appropriate, Prepare and Submit to Meridian:
- Income by state reporting
- Standard Industry Code Valuation Report
- Alternative Minimum Tax Income segregation schedule
Annual (and Semi-Annual) Accounting Services
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. during the
year in accordance with standard audit assistance requirements.
2) Provide NSAR Reporting (Accounting Questions):
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63,
64B, 71, 72, 73, 74, 75, 76
<PAGE> 15
ACCOUNTING SERVICES UNIT BASIC ASSUMPTIONS FOR MERIDIAN VALUE FUND,
A SEPARATE SERIES OF SHARES OF MERIDIAN FUND, INC.
Basic Assumptions:
1) The Fund's Administrator will complete all necessary compliance
reports (Sub-Chapter "M"), as well as monitoring of the various prospectus
limitations and restrictions.
2) It is assumed that the portfolio asset composition will be primarily
common stocks, corporate/government bonds and "junk bonds". While the Fund may
choose to invest in foreign securities, we understand that initial international
investments would be in the form of US dollar denominated ADR's. Should this
change the foreign investment fee schedule described in Section 2 will apply.
Should you desire to invest in foreign securities, the following
assumptions will reference services to be used and steps to be taken.
3) Trading activity is expected to be comparable to the Meridian Fund
which averages 77 trades per month on 48 securities.
4) The Fund has a tax year-end which coincides with its fiscal year-end.
No additional accounting requirements are necessary to identify or maintain
book-tax differences.
To the extent tax accounting for certain securities differs from the
book accounting, it will be done by the Fund's Administrator or the Fund's
Independent Accountant. We would recommend book/tax differences be minimized.
The Accounting Services Unit will supply segregated Trial Balance
account details to assist the administrator in proper identification by category
of all appropriate realized gains/losses.
5) The Fund would foresee no difficulty in using Fund/Plan's standard
current pricing agents for domestic equity, bond, ADR and foreign securities. We
currently use Quotron Systems, Inc. for domestic equities and listed ADR's, and
Muller Data Corporation/Extel Financial for bonds and foreign issues.
It is expected that Muller Data Corporation would be the Fund's primary
foreign security pricing vendor and supply ASU with daily (spot) foreign
exchange rates to be used in market value calculations of non-US dollar
denominated securities and currency mark-to-market requirements. To the extent
Muller Data is unable to supply certain foreign security prices, they will be
provided by the Fund's investment advisor or a Meridian recommended pricing
source. (The Accounting Unit will be able to supply Meridian with information on
Muller's sources of exchange rates and ADR/foreign security prices.)
If appropriate, Telerate Systems, Inc. is available for daily
forward currency contract prices.
<PAGE> 16
It is assumed that the Accounting Unit will work closely with Meridian
to ensure the accuracy of the Fund's NAV and to obtain the most satisfactory
pricing sources and specific methodologies prior to the actual start-up date. We
would propose the Fund establish clear cut security variance procedures by
country/currency to minimize NAV miscalculations.
6) To the extent the Fund requires daily security prices (limited in
number) from specific brokers for domestic or foreign securities, these manual
prices will be obtained by the Fund's Investment Advisors (or brokers) and faxed
to ASU by approximately 4:00 PM Eastern time for inclusion in the NAV
calculations. Meridian will supply ASU with the appropriate pricing contacts for
these manual quotes.
Based on our current clients' experience, we believe the Fund's
Investment Advisor will have better success in obtaining accurate and timely
broker quotes on a more consistent basis than Fund/Plan Services.
7) To the extent the Fund should ever purchase/hold open-end registered
investment companies (RIC's), procedural discussions should take place between
ASU and Fund management clarifying the appropriate pricing and dividend rate
sources. Depending on the methodologies selected by the Fund, additional fees
may apply.
8) ASU will supply daily Portfolio Valuation Reports (via fax) to the
Fund's Investment Advisor or manager identifying current security positions,
original/amortized cost, security market values and changes in unrealized
appreciation/depreciation.
It will be the responsibility of the Fund's Investment Advisor to review
these reports and to promptly notify ASU of any possible problems, trade
discrepancies, incorrect security prices, corporate action/capital change
information or exchange rate discrepancies that could result in a misstated Fund
NAV.
9) The Fund does not currently expect to invest in Futures, Swaps,
Foreign Currency Options and Futures, Interest Rate Futures, Hedges, Forward
Currency Contracts, Security Lending, Leveraging, Short Sales, Foreign Trading,
or precious metals. To the extent these investment strategies should change,
additional fees, as noted above, will apply after the appropriate procedural
discussions have taken place between ASU and Fund management. (Advance notice is
requested should the Fund commence trading in the above investments.)
10) To the extent applicable, all foreign currency will be held within
the custodian and sub-custodian network. Time deposits and interest bearing
currency accounts will all be reflected on the Fund's custodian asset listings.
The Fund or custodian will supply ASU with appropriate (timely) information for
any trades/changes in the currency accounts, as well as interest rates to ensure
income accrual accuracy for the debt issues, time deposits, and currency
accounts. Income accrual adjustments (expected to be immaterial) will be
completed when the interest is actually collected and posted on the custodian's
statements.
11) It is assumed for all debt issues that the Advisor will supply the
Accounting Unit with critical income information such as accrual
<PAGE> 17
methods, interest payment frequency details, coupon payment dates, floating rate
reset dates, and complete security descriptions with issue types and sedol/cusip
numbers. If applicable, for proper income accrual accounting, ASU will look to
the Fund's Advisor to supply PSA and related cash flow models for the
mortgage/asset-backed securities or IO/PO positions held in the Fund.
12) The custodian will provide the Accounting Unit with daily custodian
statements (or on-line access to the custody system) reflecting all prior day
cash activity on behalf of each portfolio by 8:30 AM Eastern time. Complete and
clear descriptions of any postings, inclusive of Sedol/cusip numbers,
interest/dividend payment dates, capital stock details, expense authorizations,
beginning/ending balances, etc. will be provided by the custodian's reports or
system.
13) It will be the responsibility of the Fund's custodian to supply the
foreign dividend, capital change information, and interest rate changes to
Accounting in a timely manner. The advisor will supplement and support as
appropriate. If selected by Meridian and appropriate, ASU can receive
supplemental capital change and dividend information on foreign positions from
Muller Data Corporation as the pricing vendor for the Fund's foreign securities.
14) It is assumed that the custodian will handle and report on all
settlement problems, failed trades and resolve unsettled
dividends/interest/paydowns and capital changes. Additionally, the custodian
will process all applicable capital change and foreign reclaim paperwork based
upon advice from Meridian. ASU will supply segregated Trial Balance reporting
and supplemental reports to assist in this process.
15) With respect to Mortgage/Asset-Backed securities such as GNMA's,
FHLMC's, FNMA's, CMO's, ARM's, etc., the Custodian (or a Meridian supplied
source) will provide ASU with current principal repayment factors on a timely
basis in accordance with the appropriate securities' schedule. Income accrual
adjustments (to the extent necessary) based upon initial estimates will be
completed by ASU when actual principal/income payments are collected by the
Custodian.
16) To the extent applicable, Accounting will maintain US dollar
denominated qualified covered call options and index options reporting on the
daily Trial Balance and value the respective options and underlying positions
daily. To the extent tax classifications are required, they will be done by the
Fund's Administrator or Independent Accountant.
The Fund does not currently expect to invest in domestic options or
designated hedges. (Advance notice is requested should the Fund commence trading
in the above investments to clarify operational procedures between ASU and the
advisor.)
17) To the extent the Fund should establish a Line of Credit in
segregated accounts with the custodian for temporary administrative purposes,
and/or leveraging/hedging the portfolio, the investment advisor will complete
the appropriate paperwork/monitoring for segregation of assets and adequacy of
collateral. Accounting will reflect appropriate Trial Balance account entries
<PAGE> 18
and interest expense accrual charges on the daily Trial Balance adjusting as
necessary at month-end.
18) Fund management or the Administrator will supply ASU with portfolio
specific expense accrual procedures and monitor the expense accrual balances for
adequacy based on outstanding liabilities monthly. The Fund's Administrator will
promptly communicate to the Accounting Unit any adjustments needed.
19) Specific deadlines and complete Fund supplied information will be
identified for all security trades in order to minimize any settlement problems,
NAV miscalculations or income accrual/distribution rate adjustments.
Trade Authorization Forms, with the appropriate officer's signature,
should be faxed on all security trades placed by the Fund no later than
settlement/value date by 11:30 AM Eastern time for money market and currency
issues (It is assumed trade date equals settlement date for money market/
currency issues.), and by 11:30 AM Eastern time on trade date plus one for
non-money market securities. Receipt of trade information within these
identified deadlines may be via telex, fax, or on-line system access. Should the
investment advisor communicate trade information directly to the Fund's Custody
Administrator, F/PS Custody will forward copies to ASU in accordance with the
above time frames.
Foreign exchange contracts will be completed by the Fund's custodian or
advisor and communicated to the Accounting Unit in a timely manner, i.e., the
earlier of trade date plus one or value date. For security trade information
called in after the above stated deadlines, there is no assurance it can be
included in that day's work.
CUSIP numbers and/or ticker symbols for all US dollar denominated trades
and Sedol numbers for all foreign trades will be supplied by the Investment
Advisor via the Trade Authorization, telex or on-line support. We would find it
difficult to be responsible for NAV changes that resulted from incomplete
information about a trade.
20) To the extent that Meridian utilizes Purchases In-Kind as a method
for shareholder subscriptions, ASU will provide Meridian with recommended
procedures to properly handle and process security in-kinds. Should Meridian
prefer procedures other than those provided by Fund/Plan Services, additional
fees may apply. (Discussions must take place in advance between Fund/Plan
Services and Meridian to clarify the appropriate In-Kind operational procedures
to be followed.)
21) It is assumed that the Fund's Investment Advisor or Administrator
will complete the applicable performance and rate of return calculations as
required by the SEC for the Fund.
22) With respect to amortization and accretion requirements for the debt
issues in the Fund, the ASU Investment Accounting System (IAS) offers a very
comprehensive and fully automated level of support. We are capable of reflecting
market discounts and acquisition premiums either utilizing the straight-line or
yield-to-maturity (scientific) method. It is extremely important that the Fund's
requirements and proper amortization procedures
<PAGE> 19
be clarified prior to start-up.
It is assumed that the Fund will not hold any issues with Original Issue
Discounts (OID). It is our position that OID is a tax requirement and, as such,
not necessarily reflected on the books of the Fund. ASU's current clients have
not required any OID support. To the extent the Fund should, in the future, own
securities with OID, it is expected that the Fund's auditors will complete the
necessary OID adjustments for financial statements and/or tax reporting.
23) The Fund is not currently expected to issue separate classes of
shares. To the extent they do so, additional fees will be negotiated.
<PAGE> 20
SCHEDULE "B"
FEE SCHEDULE FOR
MERIDIAN VALUE FUND
a separate series of shares of Meridian Fund, Inc.
--------------------------------------------------
(All fees are quoted for a term of one (1) year from effective date.)
FUND ACCOUNTING AND PORTFOLIO VALUATION FEES
NOTE: THE FUND WILL INITIALLY INVEST IN DOMESTIC OR ADR SECURITIES FOR
WHICH THE DOMESTIC SCHEDULE WILL APPLY. SHOULD THE FUND INVEST IN FOREIGN
(NON-US DOLLAR DENOMINATED) SECURITIES, THE FOREIGN SCHEDULE WOULD BECOME
EFFECTIVE. FOREIGN CUSTODY SCHEDULE IS BASED UPON CHASE MANHATTAN'S CURRENT
SCHEDULE TO FUND/PLAN SERVICES, AND IS SUBJECT TO CHANGE.
I. Domestic and ADR Securities Annual Fee Schedule for Portfolio
(1/12th payable monthly)
$24,000 Minimum to $ 10 Million of Average Net Assets
.0004 On Next $ 40 Million of Average Net Assets
.0003 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
II. Annual Fees for Funds with Foreign Securities (1/12th payable monthly)
$40,000 Minimum to $ 10 Million of Average Net Assets
.0004 On Next $ 40 Million of Average Net Assets
.0003 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
III. Pricing Service Quotation Fee: (Based upon individual cusip or security
identification numbers.)
Specific costs will be identified based upon options selected by the
client and will be billed monthly.
A) Muller Data Corporation * (if applicable)
* Based on current vendor costs, subject to change.
GNMA Quotes $.25 per Quote per Bond
Government/Corporate Short &
Long Term Quotes $.50 per Quote per Bond
Tax-Exempt Short & Long Term Quotes $.55 per Quote per Bond
Tax-Exempt Variable Rate Change
Information $.55 per Rate Change per Issue
<PAGE> 21
Foreign Security Quotes $ .50 per Quote per Security
Foreign Security Supplemental Corporate
Actions, Dividends & Capital Changes $1.00 per Issue per Month
Minimum Weekly File Transmission is Assumed
There are currently no charges for the domestic dividend and capital
change information transmitted daily to Fund/Plan Services from Muller
Data Corporation.
B) Telerate Systems, Inc. * (if applicable)
* Based on current vendor costs, subject to change.
C) Quotron Systems, Inc.
There is currently no charge for the domestic security prices supplied
by Quotron Systems, Inc.
D) Interactive Data Corp. * (if applicable)
* Based on current vendor costs, subject to change.
Domestic Equities and Options $.15 per Quote per Issue
Corporate/Government/Agency Bonds
including Mortgage-Backed Securities
(evaluated, seasoned, and/or closing) $.50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $.80 per Quote per Issue
International Equities and Bonds $.50 per Quote per Issue
Domestic Dividends and
Capitalization Changes $3.50 per Month per Holding
International Dividends and
Capitalization Changes $4.00 per Month per Holding
Interactive Data also charges monthly transmission costs and disk
storage charges.
OUT-OF-POCKET-EXPENSES
The Fund will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including telephone, postage, telecommunications, special reports,
record retention, special transportation costs as incurred. The cost of copying
and sending materials to auditors for off-site audits will be an additional
expense.
ADDITIONAL SERVICES
To the extent the Funds commence using investment techniques such as Security
Lending, Short Sales, Futures, Leveraging, Precious Metals and/or foreign
trading, additional fees will apply.
<PAGE> 22
Activities of a non-recurring nature such as fund consolidations, mergers, or
reorganizations will be subject to negotiation. To the extent the Funds should
decide to issue multiple/separate classes of shares, additional fees will apply.
Any enhanced services or reports will be quoted upon request.
<PAGE> 23
AMENDMENT TO
ACCOUNTING SERVICES AGREEMENT
This Amendment dated as of February 28, 1999, is entered into by
MERIDIAN FUND, INC. (the "Company") and FIRST DATA INVESTOR SERVICES GROUP,
INC. ("Investor Services Group"), the successor in interest to FPS SERVICES,
INC. ("FPS").
WHEREAS, the Company and FPS entered into an Accounting Services
Agreement dated as of February 5, 1994, which agreement was assigned to Investor
Services Group effective February 23, 1998 (as amended and supplemented, the
"Agreement");
WHEREAS, the Company and Investor Services Group wish to amend the
Agreement to extend the term of the Agreement and revise certain schedules to
the Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
I. The Agreement shall continue in effect for an initial period ending
February 28, 2000 (the "Initial Term"). Upon the expiration of the Initial Term,
the Agreement shall automatically renew for successive terms of one year
("Renewal Terms") each, unless the Company or Investor Services Group provides
written notice to the other of its intent not to renew. Such notice must be
received not less than ninety (90) days nor more than one-hundred eighty (180)
days prior to the expiration of the Initial Term or the then-current Renewal
Term.
II. Any references to out-of-pocket expenses in Schedule "B" to the
Agreement shall be deleted and replaced with the attached Supplement to Schedule
"B".
III. Except to the extent amended hereby, the Agreement shall remain
unchanged and in full force and effect and is hereby ratified and confirmed in
all respects as amended hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date
and year first written above.
MERIDIAN FUND, INC.
By:
Paul A. Robinson
Treasurer
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By:
Kenneth J. Kempf
Senior Vice President
<PAGE> 24
Supplement to
Schedule "B"
Out-of-Pocket Expenses
The Company shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Postage - direct pass through to the Fund
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Shipping, Certified and Overnight mail and insurance
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Overtime, as approved by the Company
- Temporary staff, as approved by the Company
- Travel and entertainment, as approved by the Company
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Pricing services (or other services used to determine Fund NAV)
- Vendor pricing comparison
- EDGAR filing fees
- Such other expenses as are agreed to by Investor Services Group and
the Company
The Company agrees that postage and mailing expenses will be paid on the day of
or prior to mailing as agreed with Investor Services Group. In addition, the
Company will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Company
and Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
Miscellaneous Charges
The Company shall be charged for the following products and services as
applicable:
- Ad hoc reports
- Ad hoc SQL time
- Manual Pricing
- Materials for Rule 15c-3 Presentations
- COLD Storage
- Digital Recording
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
Fee Adjustments
After the one year anniversary of the effective date of this Amendment, Investor
Services Group may adjust the fees described in the above sections once per
calendar year, upon thirty (30) days prior written notice in an amount not to
exceed the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) -
(1982-84=100), published by the U.S. Department of Labor since the last such
adjustment in the Client's monthly fees (or the Effective Date of the Amendment
absent a prior such adjustment).
<PAGE> 1
Exhibit (i)
[MORRISON & FOERSTER LLP LETTER HEAD]
November 1, 1999
Meridian Fund, Inc.
60 E. Sir Francis Drake Blvd.
Wood Island, Suite 306
Larkspur, CA 94939
Re: Shares of Common Stock of
Meridian Fund, Inc.
Ladies and Gentlemen:
We refer to Post-Effective Amendment No. 18 and Amendment No. 19 to
the Registration Statement on Form N-1A (SEC File No. 2-90949; 811-4014)
(the "Registration Statement") of Meridian Fund, Inc. (the "Company") relating
to the registration of an indefinite number of units of common stock of the
Meridian Fund and the Meridian Value Fund (collectively, the "Shares").
We have been requested by the Company to furnish this opinion as Exhibit
23(i) to the Registration Statement.
We have examined documents relating to the organization of the Company
and its series and the authorization and issuance of shares of its series. We
have examined such records, documents, instruments, certificates of public
officials and of the Company, made such inquiries of the Company, and examined
such questions of law as we have deemed necessary for the purpose of rendering
the opinion set forth herein. This firm represented the Company in connection
with the preparation of the above-referenced Post-Effective Amendment. As part
of this representation, we had various conferences and discussions with officers
of the Company and its investment advisor. Based on these conferences and
discussions, we are not aware of any disclosures contained in such
Post-Effective Amendment which would render it ineligible to become effective
pursuant to Rule 485(b).
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company have been duly and
validly authorized by all appropriate action and, assuming delivery by sale or
in accord with the Company's dividend reinvestment plan in accordance with the
description set forth in the
<PAGE> 2
Meridian Fund, Inc.
November 1, 1999
Page 2
Registration Statement, as amended, the Shares will be validly issued, fully
paid and nonassessable.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to our firm and to the description of advice rendered by our firm
under the caption "Legal Opinions" in the Statement of Additional Information,
which is included as part of the Registration Statement.
Very truly yours,
/S/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE> 1
Exhibit (J)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus and Statement of
Additional Information constituting parts of this Post-Effective Amendment No.
18 to the registration statement on Form N-1A of Meridian Fund, Inc. (the
"Registration Statement") of our reports dated July 26, 1999, relating to the
financial highlights appearing in the June 30, 1999 Annual Report to
Shareholders of Meridian Fund and Meridian Value Fund which is also
incorporated by reference into the Registration Statement. We also consent to
the references to our firm under the heading "Financial Highlights" in the
Prospectus and "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
San Francisco, California
October 25, 1999
<PAGE> 1
Exhibit (L)
INVESTMENT REPRESENTATIONS OF PURCHASER
The undersigned ("Purchaser") represents and warrants to Meridian Fund, Inc.
(the "Fund") as follows:
(a) Purchaser is acquiring 5,000 shares of Fund Common Stock
(hereinafter referred to as the "Stock") for its own account for the purpose
of investment and not with a view to or for sale in connection with any
distribution of such Stock, nor with any present intention of distributing or
selling such Stock, but subject, nevertheless, to any requirement of law that
the disposition of its property should at all times be and remain within its
control.
(b) Purchaser understands and agrees that the Stock has not been
registered under the Securities Act of 1933 ("1933 Act") nor qualified under
any state securities laws, and that the Stock may not be sold or otherwise
transferred by it in the absence of such registration or qualification or an
exemption being available therefrom under the 1933 Act and any applicable state
securities law. Purchaser confirms that it has consulted with counsel with
respect to such limitations on resale, and that it is fully familiar with the
position of the Securities and Exchange Commission limiting the resale to the
public of the Stock being acquired by it hereunder.
(c) (i) Purchaser acknowledges that Purchaser has received and read and is
familiar with all material information relating to the Fund and its business
and prospects, that Purchaser was able to ask questions of and receive answers
from the Fund or persons acting on its behalf concerning the terms and
conditions of the transactions referred to herein and the business and
prospects of the Fund and that in connection therewith at no time was Purchaser
presented with or solicited by any leaflet, public promotional meeting,
newspaper or magazine article, radio or television advertisement or any other
form of general advertising or general solicitation;
Page 1
<PAGE> 2
(ii) Purchaser acknowledges that Purchaser's investment in the Stock may be
long term and is by its nature speculative. Purchaser is aware that the Fund
has no financial or operating history; that the Stock is a speculative
investment which involves a high degree of risk by Purchaser of Purchaser's
entire investment in the Fund; that there are substantial restrictions on the
transferability of the Stock; and that there is no public market for the Stock
or any current prospects therefor, although the Stock is redeemable at the
option of the holder.
PURCHASER:
ASTER INVESTMENT MANAGEMENT CO., INC.,
a California corporation
DATE: April,_, 1984 By:
Its: President
Secretary's Attest:
Secretary,
Aster Investment Management Co., Inc.
Page 2
