As filed with the Securities and Exchange Commission on August 24, 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[X]
Midas Fund, Inc. (File No. 2-98229): Post-Effective Amendment No. 17
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940[X]
Midas Fund, Inc. (File No. 811-4316): Post-Effective Amendment No. 17
MIDAS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11 Hanover Square, New York, New York, 10005
(Address of Principal Executive Offices) (Zip Code)
(212) 785-0900
(Registrant's Telephone Number, including Area Code)
William J. Maynard
11 Hanover Square, New York, New York, 10005
(Name and Address of Agent for Service)
Copy to:
R. Darrell Mounts, Esq.
Kirkpatrick & Lockhart
1800 M Street, N.W.
South Lobby --Ninth Floor
Washington, D.C. 20036-5891
_____ immediately upon filing pursuant to paragraph (b) of rule 485
_____ X on August 28, 1995 pursuant to paragraph (b) of rule 485
_____ 60 days after filing pursuant to paragraph (a) of rule 485 on
_____ (specify date) pursuant to paragraph (a) of rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on April 19, 1995.
* Effective as of the close of business on August 28, 1995 ("Effective Date"),
Midas Fund, Inc., an open-end management investment company organized as a
Maryland corporation ("Midas"), will succeed to all of the assets, rights,
obligations and liabilities of Excel Midas Gold Shares, Inc. Midas hereby
expressly adopts this Registration Statement of Excel Midas Gold Shares, Inc.
(Nos. 2-98229 and 811-4316) as its own, effective as of the Effective Date, for
all purposes of the Securities Act of 1933, the Securities Exchange Act of 1934
and the Investment Company Act of 1940.
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Maxi Proposed Maxi Amount of
Amount of Shares mum Offering mum Aggregate Registration
Title of Securities Being Registered Being Registered Price Per Unit(1) Offering Price(2) Fee(2)
Shares of Common Stock of Midas Fund, 220,335 $4.69 $290,000 $100.00
Inc., Par Value $0.01.
</TABLE>
(1) The fee for the above shares to be registered by this filing has been
computed on the basis of the price in effect on August 17, 1995 pursuant to Rule
457(d) under the Securities Act of 1933.
(2) Calculation of the proposed maximum aggregate offering price has been made
pursuant to Rule 24e-2 under the Investment Company Act of 1940. During its
fiscal year ended December 31, 1994, Registrant redeemed or repurchased 507,398
shares. Registrant used 70,754 of the shares it redeemed or repurchased during
its fiscal year ended December 31, 1994, for a reduction pursuant to paragraph
(c) of Rule 24f-2 under the Investment Company Act of 1940 (shares sold;
excluding shares issued in reinvestment of dividends). Registrant is using this
post-effective amendment to register the remaining 436,644 (507,398 minus
70,754) shares redeemed or repurchased during its fiscal year ended December 31,
1994 plus 61833 shares ($290,000/$4.69). During the current fiscal year, the
Registrant has filed no other post-effective amendments for the purpose of the
reduction pursuant to paragraph (a) of Rule 24e-2.
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CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
ITEM NO.
OF FORM N-LA CAPTION IN PROSPECTUS
1 Cover Page
2 "Fees and Expenses"
3 "Financial Highlights"; "Performance Information"
4 "Investment Objectives and Policies of the Fund"; "Investments
the Fund Will Not Make; Restrictions"; "Appendix A"
5 "The Investment Manager"; "The Subadviser"; "Custodian and
Transfer Agent"
5A "Management's Discussion of Fund Performance"
6 Cover Page; "The Investment Manager"; "The Subadviser"; "Dis-
tributions and Taxes"; "Determination of Net Asset Value";
"Shareholder Services"
7 "How to Purchase Shares"; "Shareholder Services"; "Determi-
nation of Net Asset Value"; "Distribution of Shares"
8 "How to Redeem Shares"; "Determination of Net Asset Value"
9 Not Applicable
Caption in Statement of Additional Information
10 Cover Page
11 "Table of Contents"
12 Not Applicable
13 "Investment Restrictions"; "Allocation of Brokerage"
14 "Officers and Directors"
15 "Officers and Directors"; "The Investment Manager"
16 "Officers and Directors"; "The Investment Manager"; "The
Subadviser and the Subadvisory Agreement"; "Distribution of
Shares"; "Custodian, Transfer and Dividend Disbursing Agent";
"Auditors"
17 "Allocation of Brokerage"
18 Not Applicable
19 "Purchase of Shares"
20 "Distributions and Taxes"
21 Not Applicable
22 "Calculation of Performance Data"
23 "Financial Statements"
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MIDAS FUND
Prospectus Dated August 28, 1995
Midas Fund (the "Fund") is a mutual fund that continuously offers its
shares for sale. The investment objectives of the Fund are primarily capital
appreciation and protection against inflation and, secondarily, current income.
The Fund seeks to achieve these objectives by investing primarily in (i)
securities of United States and Canadian companies primarily involved, directly
or indirectly, in the business of mining, processing, fabricating, distributing
or otherwise dealing in gold, silver, platinum or other natural resources and
(ii) gold, silver and platinum bullion. Such investments are considered
speculative and subject to substantial price fluctuations and risks. There can
be no assurance that the Fund will achieve its investment objectives. Prior to
August 28, 1995, the Fund was known as Excel Midas Gold Shares, Inc.
Midas Management Corporation is the Fund's Investment Manager, and Lion
Resource Management Limited is the Fund's Subadviser. Since 1992, Mr. Kjeld
Thygesen, Managing Director of the Subadviser, has been a portfolio manager of
the Fund. Based in London (U.K.), the Subadviser is a part of Lion Mining Group,
which specializes in gold mining and resource company investment management,
corporate finance and consulting.
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NEWSPAPER LISTING. Shares of the Fund are sold at the net asset
value per share which is shown daily in the mutual fund section of
newspapers nationwide under the heading "Midas Fund."
-------------------------------------------------------------------------------
This prospectus contains information you should know about the Fund,
which is an open-end, management investment company, before investing. You
should read it to decide if an investment in the Fund is right for you. Please
keep it with your investment records for future reference. The Fund has filed a
Statement of Additional Information (also dated August 28, 1995) with the
Securities and Exchange Commission. The Statement of Additional Information is
available free of charge by calling 1-800-400-MIDAS, and is incorporated by
reference in this prospectus. Fund shares are not bank deposits or obligations
of, or guaranteed or endorsed by any bank or any affiliate of any bank, and are
not Federally insured by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Expense Table. The tables and example below are designed to help you understand
the various costs and expenses that you will bear directly or indirectly as an
investor in the Fund. A $2 monthly account fee is charged if your average
monthly balance is less than $100, unless you are in the Automatic Investment
Program (see "How to Purchase Shares").
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases..................NONE
Sales Load Imposed on Reinvested Dividends.......NONE
Deferred Sales Load..............................NONE
Redemption Fee within 30 days of purchase ( as a percentage
of net asset value of shares redeemed).........1.00%
Redemption Fee after 30 days of purchase.........NONE
Exchange Fee.....................................NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees ................................1.00%
12b-1 Fees......................................0.25%
Other Expenses ................................ 0.90%
Total Fund Operating Expenses...................2.15%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following expenses on a $1,000 investment, assuming a $22 $67 $115 $248
5% annual return and a redemption at the end of each time period........
</TABLE>
The example set forth above assumes reinvestment of all dividends and other
distributions and uses an assumed 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). The example is an illustration only
and should not be considered an indication of past or future returns and
expenses. Actual returns and expenses may be greater or less than those shown.
The percentages given for annual Fund expenses are based on the Fund's operating
expenses and average daily net assets during its fiscal year ended December 31,
1994. Long term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc.'s ("NASD") rules regarding investment companies. "Other
Expenses" includes amounts paid to the Fund's former investment manager,
custodian, and transfer agent for certain custodian, accounting, administrative
and shareholder services, and does not include interest expense from the Fund's
bank borrowing.
Financial Highlights are presented below for a share of capital stock
outstanding throughout each period since the Fund's inception. The following
information is supplemental to the Fund's financial statements and report
thereon of Squire & Co., independent accountants, appearing in the December 31,
1994 Annual Report to Shareholders and incorporated by reference in the
Statement of Additional Information.
Years Ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA**
Net asset value, beginning of year........... $4.16 $2.35 $2.55 $2.59 $3.12 $2.58 $3.16 $2.63 $2.33
----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss)................. (0.05) (0.01) 0.01 0.03 - (0.01) (0.02) 0.00 (0.01)
Net gain (loss) on securities (both realized
unrealized)..................................an(0.67) 2.34 (0.19) (0.04) (0.53) 0.57 (0.58) 0.92 0.31
------ ---- ------ ------ ------ ---- ------ ---- ----
Total from investment operations........... (0.72) 2.33 (0.18) (0.01) (0.53) 0.56 (0.60) 0.92 0.30
Less distributions:
Dividends from net investment income......... - (0.52) (0.02) (0.03) - - - - -
Distributions from capital gains............. (0.12) - - - - - - (0.33) -
Return of capital distributions.............. - - - - - - - (0.06) -
Total distributions........................ (0.12) (0.52) (0.02) (0.03) 0.00 0.00 0.00 (0.39) 0.00
------ ------ ------ ------ ---- ---- ---- ------ ----
Net asset value, end of year................. $3.32 $4.16 $2.35 $2.55 $2.59 $3.12 $2.56 $3.16 $2.63
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN.................................(17.27)% 99.24% (7.16)%(0.20)%(16.99)% 21.88%(18.99)% 34.77% 12.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (In 000's)........... $7,052$10,357 $4,943 $8,202 $7,571 $11,168 $12,726 $19,145 $7,367
Ratio of expenses to average net assets(a):.. 2.15% 2.18% 2.25% 2.25% 2.25% 2.20% 1.82% 1.79% 1.97%
Ratio of net investment income (loss) to
average net assets(b):........................ (1.26)%(0.25)% 0.56% 1.10% 0.06% (0.32)% (0.42)% 0.36% (1.05)%
Portfolio Turnover .......................... 52.62% 63.44% 72.23% 77.26% 58.46% 23.60% 7.52% 27.29% 8.28%
</TABLE>
----------------------------------
*From commencement of operations, January 8, 1986. **Per share net investment
loss and net realized and unrealized gain (loss) on investments have been
computed using the average number of shares outstanding. (a) Ratio prior to
reimbursement by the Investment Manager was 2.47%,2.51%, and 2.53% for 1990,
1991, and 1992, respectively. (b) Ratio prior to reimbursement by the Investment
Manager was (0.16)%, 0.83%, and 0.28% for 1990, 1991, and 1992, respectively.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Transaction and Operating Expenses....................... Determination of Net Asset Value.........................
Financial Highlights..................................... The Investment Manager and Subadviser....................
Investments the Fund Will Not Make; Distribution of Shares...................................
Restrictions.............................................
How to Purchase Shares................................... Performance Information..................................
Shareholder Services..................................... Capital Stock............................................
How to Redeem Shares..................................... Custodian and Transfer Agent.............................
Distributions and Taxes.................................. Appendix.................................................
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Fund are primarily capital appreciation and
protection against inflation and, secondarily, current income. The Fund seeks to
achieve these objectives by investing primarily in (i) securities of United
States and Canadian companies primarily involved, directly or indirectly, in the
business of mining, processing, fabricating, distributing or otherwise dealing
in gold, silver, platinum or other natural resources and (ii) gold, silver and
platinum bullion. Of course, there can be no assurance that the Fund will
achieve its investment objectives.
Only the holders of a "majority" of the Fund's outstanding voting securities
as defined in the Investment Company Act of 1940 (the "1940 Act") can change the
Fund's investment objectives described above and any policies designated as
"fundamental". Policies not designated as "fundamental" may be changed by the
Fund's Board of Directors.
Investments the Fund May Make
Midas Management Corporation, the Fund's investment manager (the "Investment
Manager"), believes that the precious metals investment medium offers an
opportunity to achieve capital appreciation and protection against inflation.
The Investment Manager believes that investments in precious metals, especially
gold, and shares of companies in related industries have historically tended to
provide a hedge against inflation and the risks associated with uncertain and
unstable political, monetary and social conditions. Under normal circumstances,
at least 65% of the value of the Fund's total assets will be invested in (i)
securities of companies primarily involved, directly or indirectly, in the
business of mining, processing, fabricating, distributing or otherwise dealing
in gold and (ii) gold and other bullion. Additionally, up to 35% of the value of
the Fund's total assets may be invested in companies that derive a portion of
their gross revenues, directly or indirectly, from the business of mining,
processing, fabricating, distributing or otherwise dealing in gold, silver,
platinum or other natural resources (which, together with securities of
companies "primarily involved" in such activities are referred to herein as
"Mining Securities").
No more than 20% of the value of the Fund's total assets will be invested
in Mining Securities of issuers domiciled or having principal operations in
countries other than Canada and the United States. See "Risk Considerations."
The Mining Securities held by the Fund may include both equity and debt
securities. Investments in equity Mining Securities have generally acted as a
hedge against inflation. Debt Mining Securities generally will not react to
fluctuations in the prices of precious metals except that lower rated debt
Mining Securities may react to lower prices of precious metals. Therefore, an
investment in debt Mining Securities cannot be expected to provide the hedge
against inflation that may be provided through investments in equity Mining
Securities. The market performance of debt Mining Securities, which as a
non-fundamental investment policy will be primarily of investment grade, can be
expected to be comparable to that of other debt obligations.
Not more than 10% of the value of the Fund's total assets (taken at cost)
may be invested directly in gold, silver and platinum bullion. Gold, silver and
platinum bullion in the form of coins will be purchased only
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if there is an actively quoted market for the coins, as exists, for
example, for the Canadian Maple Leaf, the South African Krugerrand, the Mexican
Peso and Onza, the Austrian Corona, and the Noble of the Isle of Man. Coins will
only be purchased for their metallic value and not for their currency or
numismatic value. See "Risk Considerations."
The Fund will generally hold approximately 5% to 10% of its net assets in
cash or high quality, short term fixed income investments in order to maintain
the liquidity necessary for timely responses to investment opportunities and for
satisfaction of redemption requests. These short term fixed income investments
will be limited to obligations rated at the time of purchase within the two
highest rating categories of either Standard & Poor's or Moody's Investors
Service, Inc. ("Moody's") or, if not so rated, determined by the Fund's
Investment Manager to be of equivalent quality.
In the event of economic, political or financial conditions that would
adversely affect the Mining Securities and precious metals markets, the Fund may
depart from its normal policies and assume a temporary defensive position by
investing a substantial portion of its assets in debt securities other than
Mining Securities, such as bonds, debentures, commercial paper, repurchase
agreements and certificates of deposit, or holding cash. These debt securities
will be limited to obligations rated at the time of purchase within the four
highest rating categories of Standard & Poor's or Moody's or, if not so rated,
determined by the Fund's Investment Manager to be of equivalent quality. Debt
securities in the lowest of these four rating categories are medium grade
obligations and may be considered speculative. It is expected that the emphasis
of defensive security selection will be on short term instruments (i.e, those
maturing in one year or less from the date of purchase), since such securities
usually can be disposed of quickly at prices not involving significant gains or
losses when management wishes to increase the portion of the portfolio invested
in securities selected for appreciation possibilities. The Fund does not have a
current intention of investing more than 5% of its net assets in repurchase
agreements. See Appendix A hereto for a description of repurchase agreements and
certain of the risks associated therewith.
The Fund may invest up to 10% of its total assets in securities the sale of
which is limited by contract or law. See "Investments the Fund Will Not Make;
Restrictions." Such restricted securities may be sold only in a privately
negotiated transaction. Because of such restrictions, the Fund may not be able
to dispose of a block of restricted securities for a substantial period of time
or at prices as favorable as those prevailing in the open market should like
securities of an unrestricted class of the same issuer be freely traded.
Short Term Trading
The Fund purchases securities for investment and does not, as a policy,
trade for short term profits. But if the Fund feels it is wise to sell a
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security, it will not hesitate even if it has had the security just a short
time. Turnover of the Fund's assets will affect brokerage costs and may affect
the taxes you pay. The Fund calculates its portfolio turnover as the ratio of
the lesser of annual purchases or sales of portfolio securities to average
monthly portfolio value (not including short term securities, if any). If the
Fund had a 100% turnover rate, it would mean that the Fund replaced all of its
portfolio securities within a year. The Fund's turnover rate for the year ended
December 31, 1994 was 52.62%.
Risk Considerations
Although there is some degree of risk in all investments, there are special
risks inherent in the Fund's investment policies. As a result, an investment in
the Fund should not be considered a complete investment program. The risks
related to the Fund's investment policy of concentrating in Mining Securities
and gold, silver and platinum bullion include, among others, the following:
1. Risk of Price Fluctuations. Precious metals prices may be affected by a
variety of factors such as economic conditions, political events, monetary
policies and other factors. As a result, prices of Mining Securities and gold,
silver and platinum bullion may fluctuate sharply. The price of gold, in
particular, has fluctuated dramatically at times during recent years.
2. Potential Effects of Concentration of Sources of Gold Supply and Controls of
Gold Sales. The four largest producers of gold, in current order of magnitude,
are the Republic of South Africa, the United States, Australia, and the
Commonwealth of Independent States (formerly the Union of Soviet Socialist
Republics). Economic and political conditions and objectives prevailing in these
countries may have a direct effect on the production and marketing of newly
produced gold and sales of central bank gold holdings.
3. Concentration. As a fundamental policy, the Fund concentrates its
investments in Mining Securities and in gold, silver and platinum bullion. By so
concentrating its investments, the Fund will not enjoy the protections of an
industry-varied portfolio, and will be subject to the risk of industry-wide
adverse developments.
4. United States and Canadian Issuers. Under normal circumstances, at least 60%
and up to 100% of the Fund's assets will be invested in Mining Securities issued
by United States and Canadian companies. Many of these companies are small or
thinly capitalized, and investment in their securities may be considered
speculative.
5. Foreign Securities. The Fund may invest up to 20% of the value of its total
assets in Mining Securities of foreign (other than Canadian) issuers, and up to
100% of its assets in Mining Securities of Canadian issuers. Investments in
foreign securities may involve risks greater than those attendant to investments
in securities of United States issuers. Among other things, the financial and
economic policies of some countries in which the Fund may invest are not as
stable as in the United States. Furthermore, foreign issuers are not generally
subject to uniform accounting, auditing and financial standards and requirements
comparable to those applicable to U.S. corporate issuers. There may also be less
government supervision and regulation of foreign securities exchanges, brokers
and issuers than exist in the United States. Restrictions and controls on
investment in the securities markets of some countries may have an adverse
effect on the availability and costs to the Fund of investments in those
countries. In addition, there may be the possibility of expropriations, foreign
withholding taxes, confiscatory taxation, political, economic or social
instability or diplomatic developments which could affect assets of the Fund
invested in issuers in foreign countries.
There may be less publicly available information about foreign issuers than
is contained in reports and reflected in ratings published for U.S. issuers.
Some foreign securities markets have substantially less volume than the New York
Stock Exchange, and some foreign government securities may be less liquid and
more volatile than U.S. Government securities. Transaction costs on foreign
securities exchanges may be higher than in the United States, and foreign
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securities settlements may, in some instances, be subject to delays and related
administrative uncertainties.
When purchasing foreign securities, the Fund will ordinarily purchase
securities which are traded in the U.S. or purchase American Depository Receipts
("ADR's") which are certificates issued by U.S. banks representing the right to
receive securities of a foreign issuer deposited with that bank or a
correspondent bank. However, the Fund may purchase foreign securities directly
in foreign markets so long as in management's judgment an established public
trading market exists (that is, there are a sufficient number of shares traded
regularly relative to the number of shares to be purchased by the Fund).
6. New Developing Markets for Private Gold Ownership. Between 1933 and December
31, 1974, a market did not exist in the United States in which gold bullion
could be purchased by individuals for investment purposes. Since then, gold
bullion markets have begun to develop in the United States. The Fund intends to
purchase and sell gold bullion principally in the New York market, the principal
U.S. market for gold bullion.
7. Tax Status. The Fund intends to continue to qualify as a regulated investment
company under the Internal Revenue Code so that the Fund will not be subject to
Federal income taxes on its taxable income to the extent distributed to
shareholders. By investing in gold, silver and platinum bullion, the Fund risks
failing to qualify as a regulated investment company. This would occur if (i)
more than 10% of the Fund's gross income in any year were derived from its
investments in gold, silver and platinum bullion, (ii) more than 50% of the
value of the Fund's assets, at the end of any quarter, were invested in gold,
silver and platinum bullion or (iii) certain other requirements are not
satisfied. Accordingly, the Fund's Investment Manager will endeavor to manage
the Fund's portfolio within these limitations.
8. Unpredictable International Monetary Policies and Economic and Political
Conditions. There is the possibility that, under unusual international monetary
or political conditions, the Fund's assets might be less liquid or that changes
in value of its assets might be more volatile than would be the case with other
investments. In particular, the price of gold is affected by its direct and
indirect use to settle net deficits and surpluses between nations. Because the
prices of precious metals may be affected by unpredictable international
monetary policies and economic conditions, there may be greater likelihood of a
more dramatic impact upon the market prices of the Fund's investments than of
other investments.
9. Lack of Income on Gold, Silver and Platinum Investments. Investments in gold,
silver and platinum bullion do not generate income and will subject the Fund to
taxes and insurance, shipping and storage costs. The sole source of return to
the Fund from such investments would be gains realized on sales, and a negative
return would be realized if such investments are sold at a loss.
Earning Income in Other Ways
Consistent with the Fund's primary objectives of capital appreciation and
protection against inflation and secondary objective of current income, the Fund
may engage in certain special investment techniques involving derivative
securities.
Options. The Fund may write "covered" call options on the securities and gold
and silver bullion in its portfolio, stock indexes of companies representative
of the precious metals industry ("Mining Securities Indexes") and gold and
silver futures contracts. Call options may be written by the Fund if (i)
thereafter not more than 25% of its total assets are subject to call options;
(ii) the call options are listed on a domestic securities or commodities
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exchange or quoted on the automatic quotation systems of the Nasdaq; and (iii)
the call options are "covered," i.e., during the period the call option is
outstanding, the Fund owns (a) in the case of a call option on portfolio
securities or gold or silver bullion, the assets subject to the call, (b) in the
case of a call option on a Mining Securities Index, Mining Securities in an
amount at least equal to the value of the securities subject to the call, or (c)
in the case of a call option on gold or silver futures contracts, gold or silver
bullion in an amount at least equal to the value of all futures contracts
subject to the call. For further information about covered call options, see
Appendix A.
The Fund's writing of "covered" call options on Mining Securities Indexes
involves certain special risks not present in its writing of "covered" call
options on securities or gold or silver bullion in its portfolio, or gold or
silver futures contracts. When the Fund writes a call option on securities or
gold or silver bullion in its portfolio, or gold or silver futures contracts,
the Fund will own the underlying assets throughout the term of the option.
Ownership of such assets negates the risk to the Fund of an increase in the
market price of the underlying assets above the exercise price of the call
option during the term the option is outstanding . When the Fund writes a call
option on a Mining Securities Index, the Fund will not own the assets underlying
such option. Rather, the Fund will own Mining Securities in an amount at least
equal to the value of the securities subject to the call. Unless such Mining
Securities exactly mirror the securities underlying such Mining Securities
Index, price movements of such Mining Securities will not correlate exactly with
price movements of such Mining Securities Index. Because of this imperfect
correlation, ownership of Mining Securities in an amount at least equal to the
value of securities subject to a call option written on a Mining Securities
Index will provide the Fund with only an imperfect hedge against the risk of an
increase in such Mining Securities Index.
The Fund may purchase and sell put and call options written by others as a
trading technique to facilitate buying and selling securities for investment
reasons. This technique involves the sale of a call option or the purchase of a
put option with the expectation that the option would be exercised immediately
and would be used to take advantage of any disparity which might exist between
the price of the underlying security on the stock market and its price on the
options market. It is anticipated that the proposed trading technique will be
utilized to effect a securities transaction when the price of the security plus
the option price will be as good or better than the price at which the security
could be bought or sold directly. When using this trading technique and buying
the option, the Fund pays a premium and a commission. It then pays a second
commission on the purchase or sale of the underlying security when the option is
exercised. For record keeping and tax purposes, the price obtained on the
purchase or sale of the underlying security will be the combination of the
exercise price, the premium and both of the commissions. For further information
about put and call options, see Appendix A.
The Fund may purchase "protective" put options on the securities in its
portfolio and Mining Securities Indexes. Put options may be purchased by the
Fund if (i) the put options are listed on a domestic securities exchange or
quoted on Nasdaq; (ii) after any purchase, the value of all puts held by the
Fund does not exceed 5% of the Fund's total assets (at the time of purchase);
and (iii) during the period the put option is outstanding, the Fund owns
(a) in the case of a put option on portfolio securities, the assets subject to
the put and (b) in the case of a put option on Mining Securities Indexes, Mining
Securities in an amount at least equal to the value of the securities subject to
the put. Buying a protective put permits the Fund to protect itself during the
put period against a decline in the value of the underlying securities below the
exercise price by selling them through the exercise of the put.
The Fund's purchasing of "protective" put options on Mining Securities
Indexes involves certain special risks not present in its purchasing of
"protective" put options on securities in its portfolio. When the Fund purchases
a put option on securities in its portfolio, the Fund will own the underlying
securities throughout the term of the option. Ownership of the put option
negates the risk to the Fund of a decrease in the market price of the underlying
securities below the exercise price of the put option during the period the
option is held. When the Fund purchases a put option on a Mining Securities
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Index, the Fund will not own the securities underlying such option. Rather, the
Fund will own Mining Securities in an amount at least equal to the value of the
securities subject to the put. Unless such Mining Securities exactly mirror the
securities underlying such Mining Securities Index, price movements of such
Mining Securities Index will not correlate exactly with price movements of such
Mining Securities. As a result of this imperfect correlation, ownership of a put
option on a Mining Securities Index will provide the Fund with only an imperfect
hedge against the risk of a decrease in the price of Mining Securities owned by
the Fund.
Lending. The Fund may from time to time lend securities representing up to 25%
of its net assets. If the Fund makes such loans it will get the market price in
cash as collateral. The Fund will then invest the cash collateral in short-term
securities. If the market price of the loaned securities goes up, the Fund will
get additional cash. A risk of lending its securities is that the borrower may
not be able to give additional cash or return the securities. The Fund will not,
however, loan its securities unless the opportunity for additional income
outweighs the risk. If some major event affecting the Fund's investment is going
to be considered, the Fund will try to vote loaned securities by asking for
their return. Also, during the existence of the loan, the Fund receives cash
payments equivalent to all dividends, interest or other distributions paid on
the loaned securities.
INVESTMENTS THE FUND WILL NOT MAKE; RESTRICTIONS
The Fund has adopted certain investment restrictions set forth in their
entirety in the Statement of Additional Information, which restrictions,
together with the fundamental investment objectives and policies of the Fund,
cannot be changed without approval by holders of a majority of the Fund's
outstanding voting securities, as explained in the Statement of Additional
Information. These restrictions include, but are not limited to, the following
items:
Not more than 10% of the Fund's net assets will, at any time, be subject to
repurchase agreements which mature in more than seven days.
The Fund will not invest more than 10% of its total assets, in restricted
securities. Restricted securities are those the sale of which is limited by
contract or law. They are usually traded in private, direct negotiations.
The Fund will not invest in exploration or development programs such as oil
or gas programs.
If a percentage limitation described above is adhered to at the time of the
investment by the Fund, a later increase or decrease in the percentage resulting
from any change in the value of the Fund's net assets will not constitute a
violation of the restriction.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value per
share next determined after receipt and acceptance of the order by Investor
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $500 for regular and gifts/transfers to minors custody accounts,
and $100 for Midas retirement plans, which include Individual Retirement
Accounts ("IRAs"), SEP-IRAs, rollover IRAs, profit sharing and money purchase
plans, and 403(b) plan accounts. The minimum subsequent investment is $50. The
initial investment minimums are waived if you elect to invest $50 or more each
month in the Fund through the Midas Automatic Investment Program (see
"Additional Investments" below).
Initial Investment. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
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payable to Midas Fund, mailed to Investor Service Center, Box 419789, Kansas
City, MO 64141-6789. Initial investments also may be made by having your bank
wire money, as set forth below, in order to avoid mail delays.
Additional Investments. Additional investments may be made conveniently at
any time by any one or more of the following methods:
o Midas Automatic Investment Program. With the Midas Automatic Investment
Program, you can establish a convenient and affordable long term investment
program through one or more of the Plans explained below. Each Plan is
designed to facilitate an automatic monthly investment of $50 or more into
your Fund account.
The Midas Bank Transfer Plan lets you purchase Fund shares on a certain
day each month by transferring electronically a specified dollar amount
from your regular checking account, NOW account, or bank money market
deposit account.
In the Midas Salary Investing Plan, part or all of your salary may be
invested electronically in shares of the Fund on each pay date,
depending upon your employer's direct deposit program.
The Midas Government Direct Deposit Plan allows you to deposit
automatically part or all of certain U.S. Government payments into your
Fund account. Eligible U.S. Government payments include Social
Security, pension benefits, military or retirement benefits, salary,
veteran's benefits and most other recurring payments.
For more information concerning these Plans, or to request the necessary
authorization form(s), please call Investor Service Center, 1-800-400-MIDAS. You
may modify or terminate the Bank Transfer Plan at any time by written notice
received at least 10 days prior to the scheduled investment date. To modify or
terminate the Salary Investing Plan or Government Direct Deposit Plan, you
should contact, respectively, your employer or the appropriate U.S. government
agency. The Fund reserves the right to redeem any account if participation in
the Program is terminated and the account's value is less than $500. The Program
does not assure a profit or protect against loss in a declining market, and you
should consider your ability to make purchases when prices are low.
o Check. Mail a check or other negotiable bank draft ($50 minimum), made
payable to Midas Fund, together with a Midas FastDeposit form to Investor
Service Center, Box 419789, Kansas City, MO 64141-6789. If you do not use
that form, please send a letter indicating the account number to which the
subsequent investment is to be credited, and name(s) of the registered
owner(s).
o Electronic Funds Transfer (EFT). With EFT, you may purchase
additional shares of the Fund quickly and simply, just by calling Investor
Service Center, 1-800-400-MIDAS. We will contact the bank you designate on
your Account Application or Authorization Form to arrange for the EFT,
which is done through the Automated Clearing House system, to your Fund
account. For requests received by 4 p.m., eastern time, the investment will
be credited to your Fund account ordinarily within two business days. There
is a $50 minimum for each EFT investment. Your designated bank must be an
Automated Clearing House member and any subsequent changes in bank account
information must be submitted in writing with a voided check or deposit
slip.
o Federal Funds Wire. You may wire money, by following the procedures set
forth below, to receive that day's net asset value per share.
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Investing by Wire. For an initial investment by wire, you must first telephone
Investor Service Center, 1-800- 400-MIDAS, to give the name(s) under which the
account is to be registered, tax identification number, the name of the bank
sending the wire, and to be assigned a Midas Fund account number. You may then
purchase shares by requesting your bank to transmit immediately available funds
("Federal funds") by wire to: United Missouri Bank NA, ABA #10-10-00695; for
Account 98-7052-724-3; Midas Fund. Your account number and name(s) must be
specified in the wire as they are to appear on the account registration. You
should then enter your account number on your completed Account Application and
promptly forward it to Investor Service Center, Box 419789, Kansas City, MO
64141-6789. This service is not available on days when the Federal Reserve wire
system is closed. Subsequent investments by wire may be made at any time without
having to call Investor Service Center by simply following the same wiring
procedures.
Shareholder Accounts. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends and other distributions that are paid in additional shares (see
"Distributions and Taxes"). Stock certificates will be issued only for full
shares when requested in writing. In order to facilitate redemptions and provide
safekeeping, we recommend that you do not request certificates. You will receive
transaction confirmations upon purchasing or selling shares, and quarterly
statements.
When Orders are Effective. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Investor
Service Center of a purchase order in proper form. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be drawn
in U.S. dollars on a U.S. bank. The Fund reserves the right to reject any order.
Accounts are charged $30 by the Transfer Agent for submitting checks for
investment which are not honored by the investor's bank. The Fund may in its
discretion waive or lower the investment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's special
plans or services at any time. Shares or cash should not be withdrawn from any
tax-advantaged retirement plan described below, however, without consulting a
tax adviser concerning possible adverse tax consequences. Additional information
regarding any of the following services is available from Investor Service
Center, 1-800-400- MIDAS.
Electronic Funds Transfer (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account through Midas's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated box on
the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Fund may require the signature to be
guaranteed), with a voided check or deposit slip.
Systematic Withdrawal Plan. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed or variable amounts, subject to a minimum amount of
$100. Under the Systematic Withdrawal Plan, all dividends and other
distributions, if any, are reinvested in the Fund.
Assignment. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center, 1-800-400-MIDAS.
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Tax-Advantaged Retirement Plans. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible for Federal income
tax purposes as noted below. Information on any of the plans described below is
available from Investor Service Center, 1-800-400-MIDAS.
The minimum investment to establish a Midas IRA or other retirement plan is
$100. Minimum subsequent investments are $50. The initial investment minimums
are waived if you elect to invest $50 or more each month in the Fund through the
Midas Automatic Investment Program. There are no set-up fees for any Midas
Retirement Plans. Subject to change on 30 days' notice, the plan custodian
charges Midas IRAs a $10 annual fiduciary fee, $10 for each distribution prior
to age 59 1/2, and a $20 plan termination fee; however, the annual fiduciary fee
is waived if your IRA has assets of $10,000 or more or if you invest regularly
through the Midas Automatic Investment Program.
|X| Individual Retirement Accounts. Anyone with earned income who is less than
age 70 1/2 at the end of the tax year, even if also participating in another
type of retirement plan, may establish an IRA and contribute each year up to
$2,000 or 100% of earned income, whichever is less, and an aggregate of
up to $2,250 when a non-working spouse is also covered in a separate spousal
account. If each spouse has at least $2,000 of earned income each year, they
may contribute up to $4,000 annually. Employers may also make contributions
to an IRA on behalf of an individual under a Simplified Employee Pension
Plan ("SEP") in any amount up to 15% of up to $150,000 of compensation.
Generally, taxpayers may contribute to an IRA during the tax year and
through the next year until the income tax return for that year is due,
without regard to extensions. Thus, most individuals may contribute for the
1995 tax year from January 1, 1995 through April 15, 1996.
Deductibility. IRA contributions are fully deductible for most taxpayers.
For a taxpayer who is an active participant in an employer-maintained
retirement plan (or whose spouse is), a portion of IRA contributions is
deductible if adjusted gross income (before the IRA deductions) is
$40,000-$50,000 (if married) and $25,000-$35,000 (if single). Only IRA
contributions by a taxpayer who is an active participant in an
employer-maintained retirement plan (or whose spouse is) and has adjusted
gross income of more than $50,000 (if married) and $35,000 (if single) will
not be deductible. An eligible individual may establish a Midas IRA under
the prototype plan available through the Fund, even though such individual
or spouse actively participates in an employer-maintained retirement plan.
o IRA Transfer and Rollover Accounts. Special forms are available from
Investor Service Center, 1- 800-400-MIDAS, which make it easy to transfer
or roll over IRA assets to a Midas IRA. An IRA may be transferred from one
financial institution to another without adverse tax consequences.
Similarly, no taxes need be paid on a lump-sum distribution which you may
receive as a payment from a qualified pension or profit sharing plan due to
retirement, job termination or termination of the plan, so long as the
assets are put into an IRA Rollover account within 60 days of the receipt
of the payment. Withholding for Federal income tax purposes is required at
the rate of 20% for "eligible rollover distributions" made from any
retirement plan (other than an IRA) that are not directly transferred to an
"eligible retirement plan," such as a Midas Rollover Account.
o Profit Sharing and Money Purchase Plans. These provide an opportunity to
accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and their employees generally
to contribute (and deduct) up to $30,000 annually or, if less, 25% (15% for
profit sharing plans) of compensation or self-employment earnings of up to
$150,000. Corporations and partnerships, as well as all self-employed
persons, are eligible to establish these Plans. In addition, a person who is
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both salaried and self-employed, such as a college professor who serves as a
consultant, may adopt these retirement plans based on self-employment
earnings.
|X| Section 403(b) Accounts. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment of custodial accounts
on behalf of employees of public school systems and certain tax-exempt
organizations. A participant in such a plan does not pay taxes on any
contributions made by the participant's employer to the participant's
account pursuant to a salary reduction agreement, up to a maximum amount, or
"exclusion allowance." The exclusion allowance is generally computed by
multiplying the participant's years of service times 20% of the
participant's compensation included in gross income received from the
employer (reduced by any amount previously contributed by the employer to
any 403(b) account for the benefit of the participant and excluded from the
participant's gross income). However, the exclusion allowance may not exceed
the lesser of 25% of the participant's compensation (limited as above) or
$30,000. Contributions and subsequent earnings thereon are not taxable until
withdrawn, when they are received as ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below. Requests
for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
By Mail. You may request that the Fund redeem any amount of shares by submitting
a written request to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, signed by the record owner(s). If the written request is sent to the
Fund, it will be forwarded to the above address. If stock certificates have been
issued for shares being redeemed, they must accompany the written request.
By Telephone. You may telephone Investor Service Center, 1-800-400-MIDAS, to
expedite redemption of Fund shares if share certificates have not been issued.
You may redeem as little as $250 worth of shares by requesting Electronic
Funds Transfer (EFT) service. With EFT, you can redeem Fund shares quickly
and conveniently because Investor Service Center will contact the bank
designated on your Account Application or Authorization Form to arrange for
the electronic transfer of your redemption proceeds (through the Automated
Clearing House system) to your bank account. EFT proceeds are ordinarily
available in your bank account within two business days.
If you are redeeming $1,000 or more worth of shares, you may request that
the proceeds be mailed to your address of record or mailed or wired to your
authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time
will be redeemed from your account that day, and if after, on the next Fund
business day. Any subsequent changes in bank account information must be
submitted in writing, signature guaranteed, with a voided check or deposit slip.
Redemptions by telephone may be difficult or impossible to implement during
periods of rapid changes in economic or market conditions.
Redemption Price and Fees. The redemption price is the net asset value per share
next determined after receipt of the redemption request in proper form. The Fund
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is designed as a long term investment, and short term trading is discouraged.
Accordingly, if shares of the Fund held for 30 days or less are redeemed or
exchanged, the Fund will deduct a redemption fee equal to one percent of the net
asset value of shares redeemed or exchanged. The fee will be retained by the
Fund and used to offset the transaction costs that short term trading imposes on
the Fund and its shareholders. If an account contains shares with different
holding periods (i.e. some shares held 30 days or less, some shares held 31 days
or more), the shares with the longest holding period will be redeemed first to
determine if the Fund's redemption fee applies. Shares acquired through the
Dividend Sweep Privilege and the reinvestment of dividends and capital gains or
redeemed under the Systematic Withdrawal Plan are exempt from the redemption
fee. Registered broker/dealers, investment advisers, banks, and insurance
companies may open accounts and redeem shares by telephone or wire and may
impose a charge for handling purchases and redemptions when acting on behalf of
others.
Redemption Payment. Payment for shares redeemed will be made as soon as
possible, ordinarily within seven days after receipt of the redemption request
in proper form. The right of redemption may not be suspended, or date of payment
delayed more than seven days, except for any period (i) when the New York Stock
Exchange is closed or trading thereon is restricted as determined by the SEC;
(ii) under emergency circumstances as determined by the SEC that make it not
reasonably practicable for the Fund to dispose of securities owned by it or
fairly to determine the value of its assets; or (iii) as the SEC may otherwise
permit. The mailing of proceeds on redemption requests involving any shares
purchased by personal, corporate, or government check or EFT transfer is
generally subject to a ten business day delay to allow the check or transfer to
clear. The ten day clearing period does not affect the trade date on which a
purchase or redemption order is priced, or any dividends and other distributions
to which you may be entitled through the date of redemption. The clearing period
does not apply to purchases made by wire. Due to the relatively higher cost of
maintaining small accounts, the Fund reserves the right, upon 45 days' notice,
to redeem any account, other than IRA and other Midas prototype retirement plan
accounts, worth less than $500 except if solely from market action, unless an
investment is made to restore the minimum value.
Telephone Privileges. You automatically have all telephone privileges to, among
other things, authorize purchases and redemptions with EFT or by other means,
unless declined on the Account Application or otherwise in writing. Neither the
Fund nor Investor Service Center shall be liable for any loss or damage for
acting in good faith upon instructions received by telephone and believed to be
genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine and if it does not, it may be liable for
losses due to unauthorized or fraudulent transactions. These procedures include
requiring personal identification prior to acting upon telephone instructions,
providing written confirmation of such transactions, and tape recording
telephone conversations. The Fund may modify or terminate any telephone
privileges or shareholder services (except as noted) at any time without notice.
Signature Guarantees. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the National Association of Securities Dealers, Inc. A notary
public may not guarantee signatures. The Transfer Agent may require further
documentation, and may restrict the mailing of redemption proceeds to your
address of record within 30 days of such address being changed unless you
provide a signature guarantee as described above.
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DISTRIBUTIONS AND TAXES
Distributions. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record, on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains. Dividends and other
distributions are made in additional Fund shares, unless you elect to receive
cash on the Account Application or so elect subsequently by calling Investor
Service Center, 1-800-400-MIDAS. For Federal income tax purposes, dividends and
other distributions are treated in the same manner whether received in
additional Fund shares or in cash. Any election will remain in effect until you
notify Investor Service Center to the contrary.
Taxes. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (generally consisting
of net investment income, net short term capital gains, and net gains from
certain foreign currency transactions) and net capital gain (the excess of net
long term capital gain over net short term capital loss) that is distributed to
its shareholders. Dividends paid by the Fund from its investment company taxable
income (whether paid in cash or in additional Fund shares) generally are taxable
to shareholders, other than shareholders that are not subject to tax on their
income, as ordinary income to the extent of the Fund's earnings and profits; a
portion of those dividends may be eligible for the corporate dividends-received
deduction. Distributions by the Fund of its net capital gain (whether paid in
cash or in additional Fund shares), when designated as such by the Fund, are
taxable to the shareholders as long term capital gains, regardless of how long
they have held their Fund shares. The Fund notifies its shareholders following
the end of each calendar year of the amounts of dividends and capital gain
distributions paid (or deemed paid) that year and of any portion of those
dividends that qualifies for the corporate dividends-received deduction. Any
dividend or other distribution paid by the Fund will reduce the net asset value
of Fund shares by the amount of the distribution. Furthermore, such
distribution, although similar in effect to a return of capital, will be subject
to taxes.
The Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Such withholding also is required with respect
to shareholders who are otherwise subject to backup withholding.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other tax
considerations may apply, you should consult your tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net assets.
The Fund's net assets are the total of the Fund's investments and all other
assets minus any liabilities. The value of one share is determined by dividing
the net assets by the total number of shares outstanding. This is referred to as
"net asset value per share," and is determined as of the close of regular
trading on the New York Stock Exchange (currently, 4 p.m. eastern time, unless
weather, equipment failure or other factors contribute to an earlier closing)
each business day of the Fund. A business day of the Fund is any day on which
the New York Stock
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Exchange is open for trading. The following are not business days of the Fund:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if readily available. Foreign securities are
valued on the basis of quotations from a primary market in which they are traded
and are translated from the local currency into U.S. dollars using current
exchange rates. Securities and other assets for which quotations are not readily
available will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.
THE INVESTMENT MANAGER AND SUBADVISER
Midas Management Corporation (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including regularly furnishing advice with respect to portfolio transactions.
The Investment Manager also furnishes or obtains on behalf of the Fund all
services necessary for the proper conduct of the Fund's business and
administration. The Investment Manager retains final discretion in the
investment and reinvestment of the Fund's assets, subject to the control and
oversight of the Board of Directors. The Investment Manager is authorized to
place portfolio transactions with an affiliated broker/dealer, and may allocate
brokerage transactions by taking into account the sales of shares of the Fund
and other affiliated investment companies. The Investment Manager may allocate
transactions to broker/dealers that remit a portion of their commissions as a
credit against the Fund's expenses.
For its services, the Investment Manager receives a fee based on the average
daily net assets of the Fund, at the annual rate of 1% on the first $200 million
and declining thereafter as a percentage of average daily net assets. This fee
is higher than fees paid by most other investment companies. During the fiscal
year ended December 31, 1994, investment management fees paid by the Fund to
Excel Advisors, Inc., its former investment adviser, represented approximately
1.00% of average daily net assets. The Investment Manager provides certain
administrative services to the Fund at cost. Bassett S. Winmill may be deemed a
controlling person of the Investment Manager.
The Investment Manager has entered into a subadvisory agreement with the
Subadviser for certain subadvisory services. The Subadviser advises and consults
with the Investment Manager regarding the selection, clearing and safekeeping of
the Fund's portfolio investments and assists in pricing and generally monitoring
such investments. The Subadviser also provides the Investment Manager with
advice as to allocating the Fund's portfolio assets among various countries,
including the United States, and among equities, bullion, and other types of
investments, including recommendations of specific investments. The Investment
Manager, not the Fund, pays the Subadviser monthly a percentage of the
Investment Manager's net fees based upon the Fund's performance and its total
net assets ranging from ten to fifty percent. The Subadviser, whose principal
business address is 7 - 8 Kendrick Mews, London, U.K. SW7 3HG, is a
majority-owned subsidiary of Lion Mining Group, which is controlled by Andrew F.
Malim. The Subadviser has not served directly as an investment adviser to a U.S.
mutual fund, although Mr. Kjeld Thygesen, its Managing Director, has been the
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Fund's portfolio manager since January 1992. Effective as of the date hereof,
Mr. Thygesen will continue to serve as the Fund's portfolio manager together
with the Investment Manager's Investment Policy Committee. Mr. Thygesen has been
a Managing Director of Lion Mining Group since 1989.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement between the Fund and its affiliate
Investor Service Center, Inc., 11 Hanover Square, New York, NY 10005, (the
"Distributor"), the Distributor acts as the Fund's principal agent for the sale
of Fund shares. The Fund has also adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund pays
the Distributor a distribution fee in an amount of 0.25% percent per annum of
the Fund's average daily net assets. This fee may be retained by the Distributor
or passed through to brokers, banks and others who provide services to their
customers who are Fund shareholders at the rate of thirty-five basis points on
such customer balances. The Fund will pay the fee to the Distributor until
either the Plan is terminated or not renewed. In that event, the Distributor's
expenses in excess of fees received or accrued through the termination day will
be the Distributor's sole responsibility and not obligations of the Fund. During
the period they are in effect, the Distribution Agreement and Plan obligate the
Fund to pay fees to the Distributor as compensation for its service and
distribution activities. If the Distributor's expenses exceeds the fee, the Fund
will not be obligated to pay any additional amount to the Distributor. If the
Distributor's expenses are less than the fee, it may realize a profit.
PERFORMANCE INFORMATION
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that the investor's shares when
redeemed may be worth more or less than their original cost. In addition to
advertising average annual total return and cumulative total return, comparative
performance information may be used from time to time in advertising the Fund's
shares, including data from Lipper Analytical Services, Inc., the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Toronto Stock
Exchange Gold Sub-Index Average and other industry publications. "Average annual
total return" is the average annual compounded rate of return on a hypothetical
$1,000 investment made at the beginning of the advertised period. In calculating
average annual total return, all dividends and distributions are assumed to be
reinvested. "Cumulative total return" is calculated by subtracting a
hypothetical $1,000 payment to the Fund from the ending redeemable value of such
payment (at the end of the relevant advertised period), dividing such difference
by $1,000 and multiplying the quotient by 100. In calculating ending redeemable
value, all income and capital gain distributions are assumed to be reinvested in
additional Fund shares. For more information regarding how the Fund's average
annual total return and cumulative total return is calculated, see "Calculation
of Performance Data" in the Statement of Additional Information. The Fund's
annual report to shareholders contains further information about the Fund's
performance, and is available free of charge upon request.
CAPITAL STOCK
The Fund is a non-diversified open-end management investment company
organized as a Maryland corporation (the "Corporation") in 1995. Prior to August
28, 1995, the Fund operated under the name "Excel Midas Gold Shares, Inc.," a
Minnesota corporation organized in 1985. The Corporation is authorized to issue
up to 1,000,000,000 shares ($.01 par value). The Board of Directors of the
Corporation may establish additional series or classes of shares, although it
has no current intention of doing so.
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The Fund's stock is freely assignable by way of pledge (as, for example,
for collateral purposes), gift, settlement of an estate and also by an investor
to another investor. Each share has equal dividend, voting, liquidation and
redemption rights with every other share. The shares have no preemptive,
conversion or cumulative voting rights and they are not subject to further call
or assessment.
The Fund's By-Laws provide that there will be no annual meeting of
shareholders in any year except as required by law. In practical effect, this
means that the Fund will not hold an annual meeting of shareholders in years in
which the only matters which would be submitted to shareholders for their
approval are the election of Directors and ratification of the Directors'
selection of accountants, although holders of 10% of the Fund's shares may call
a meeting at any time. There will normally be no meetings of shareholders for
the purpose of electing Directors unless fewer than a majority of the Directors
holding office have been elected by shareholders. Shareholder meetings will be
held in years in which shareholder vote on the Fund's investment management
agreement, plan of distribution, or fundamental investment objectives, policies
or restrictions is required by the 1940 Act.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts as
custodian of the Fund's assets and may appoint one or more subcustodians
provided such subcustodianship is in compliance with the rules and regulations
promulgated under the 1940 Act. The Fund may maintain a portion of its assets in
foreign countries pursuant to such subcustodianships and related foreign
depositories. Utilization by the Fund of such foreign custodial arrangements and
depositories will increase the Fund's expenses. All of the Fund's gold,
platinum, and silver bullion is held by Wilmington Trust Company, Rodney Square
North, Wilmington, DE 19890. The custodian also performs certain accounting
services for the Fund.
The Fund's transfer and dividend disbursing agent is DST Systems, Inc., Box
419789, Kansas City, MO 64141-6789. The Distributor provides certain shareholder
administration services to the Fund and is reimbursed its cost by the Fund.
17
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APPENDIX
Options
When the Fund writes a call, it receives a premium and agrees to sell the
callable securities to a purchaser of a call during the call period (usually not
more than 9 months except in the case of certain debt securities) at a fixed
exercise price (which may differ from the market price of the underlying
security) regardless of market price changes during the call period. If the call
is exercised, the Fund foregos any gain from an increase in the market price
over the exercise price. To terminate its obligation on a call which it has
written, the Fund may purchase a call in a "closing purchase transaction." A
profit or loss will be realized depending on the amount of option transaction
costs and whether the premium previously received is more or less than the price
of the call purchased. A profit may also be realized if the call lapses
unexercised, because the Fund retains the underlying security and the premium
received. Any such profits are considered short term gains for federal tax
purposes and, when distributed by the Fund, are taxable to its shareholders as
ordinary income.
When the Fund buys a put, it pays a premium and has the right to sell the
underlying security to the seller of the put during the put period at a fixed
exercise price. If the market price of the underlying securities is above the
exercise price and, as a result, the put is not exercised or resold (whether or
not at a profit), the put will become worthless at its expiration date.
An option position may be closed out only on an exchange which provides a
secondary market for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The put and call
activities of the Fund may affect its turnover rate and brokerage commission
payments. The exercise of calls written by the Fund may cause the Fund to sell
portfolio securities, thus increasing the Fund's turnover rate in a manner
beyond the Fund's control. The exercise of puts may also cause the sale of
securities, also increasing turnover; although such exercise is within the
Fund's control, holding a protective put might cause the Fund to sell the
underlying securities for reasons which would not exist in the absence of the
put. The put and call activities of the Fund will be restricted by the limited
availability of options relating to Mining Securities and gold and silver that
are listed on domestic exchanges or quoted at some future date on Nasdaq. The
Fund will pay a brokerage commission each time it buys or sells a put or call or
sells an asset in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct purchases or
sales or portfolio assets. The Fund's custodian or a securities depository
acting for it will act as the Fund's escrow agent as to the securities on which
the Fund has written calls, or as to other securities acceptable for such
escrow, so that pursuant to the rules of the Option Clearing Corporation and
certain exchanges, no margin deposit will be required of the Fund. Until the
securities are released from escrow, they cannot be sold by the Fund; this
release will take place on the expiration of the call or the Fund's entering
into a closing purchase transaction. For information on the valuation of puts
and calls, see "Valuing Shares" in the Prospectus.
The Commodity Futures Trading Commission (the "CFTC"), a Federal agency,
regulates trading activity on the commodity exchanges pursuant to the Commodity
Exchange Act, as amended. The CFTC requires the registration of "commodity pool
operators," defined as any person engaged in a business which is of the nature
of an investment trust, syndicate or similar form of enterprise, and who, in
connection therewith, solicits, accepts or receives from others, funds,
securities or property, either directly or through capital contributions, the
sale of stock or other forms of securities or otherwise, for the purpose of
trading in any commodity for future delivery on or subject to the rules of any
contract market, but does not include such persons not within the intent of this
definition as the CFTC may specify by rule, regulation or order. The CFTC has
adopted certain regulations which exclude from the definition of "commodity pool
operator" an investment company, like the Fund, registered with the SEC under
the 1940 Act, and any principal or employee thereof, which investment company
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<PAGE>
files a notice of eligibility with the CFTC and the National Futures Association
containing certain information about the investment company and representing
that it (i) will use commodity futures or commodity options contracts solely for
bona fide hedging purposes, or for other purposes so long as aggregate initial
margin and premiums required in connection with non-hedging positions do not
exceed 5% of the liquidation value of the Fund's portfolio, (ii) will not be,
and has not been, marketing participations to the public as or in a commodity
pool or otherwise as or in a vehicle for trading in the commodity futures or
commodity options markets, (iv) will disclose in writing to each prospective
participant the purpose of and the limitations on the scope of the commodity
futures and commodity options trading in which the entity intends to engage, and
(v) will submit to such special calls as the CFTC may make to require the
qualifying entity to demonstrate compliance with these representations. The
"bona fide hedging" transactions and positions authorized by these regulations
mean transactions or positions in a contract for future delivery on any contract
market, where such transactions or positions normally represent a substitute for
transactions to be made or positions in a contract for future delivery on any
contract market, where such transactions or positions normally represent a
substitute for transactions to be made or positions to be taken at a later time
in a physical marketing channel, and where they are economically appropriate to
the reduction of risks in the conduct and management of a commercial enterprise,
and where they arise from (i) the potential change in the value of assets which
a person owns, produces, manufactures, processes or merchandises or anticipates
owning, producing, manufacturing, processing or merchandising, (ii) the
potential change in the value of liabilities a person owes or anticipates
incurring or (iii) the potential change in the value of services which a person
provides, purchases or anticipates providing or purchasing; provided that,
notwithstanding the foregoing, no transactions or positions shall be classified
as bona fide hedging unless their purpose is to offset price risk incidental to
commercial cash or spot operations and such positions are established and
liquidated in an orderly manner in accordance with sound commercial practices
and unless certain statements are filed with the CFTC with respect to such
transactions or positions. The Fund intends to meet these requirements or such
other requirements as the CFTC or its staff may from time to time issue, in
order to render registration of the Fund and any of its principals and employees
as a commodity pool operator unnecessary.
Repurchase Agreements
A repurchase agreement is an instrument under which securities are purchased
from a bank or securities dealer with an agreement by the seller to repurchase
the securities at a mutually agreed date, interest rate and price. Generally,
repurchase agreements are of short duration -- usually less than a week, but on
occasion are for longer periods. The Fund will limit its investment in
repurchase agreements with a maturity of more than seven days to 10% of the
Fund's net assets. In investing in repurchase agreements, the Fund's risk is
limited to the ability of the bank or securities dealer to pay the agreed upon
amount at the maturity of the repurchase agreement. In the opinion of the Fund's
Investment Manager, such risk is not material; if the other party defaults, the
underlying security constitutes collateral for the obligation to pay -- although
the Fund may incur certain delays in obtaining direct ownership of the
collateral, plus costs in liquidating the collateral. In the event the bank or
securities dealer defaults on the repurchase agreement, the Fund's Investment
Manager believes that, barring extraordinary circumstances, the Fund will be
entitled to sell the underlying securities (if they are not consistent with the
investment objectives and policies of the Fund) or otherwise receive adequate
protection (as defined in the Federal Bankruptcy Code) for its interest in such
securities. The Fund's custodian, or a duly appointed subcustodian, will hold
the securities underlying any repurchase agreement in a segregated account or
such securities may be part of the Federal Reserve Book Entry System. The market
value of the collateral underlying the repurchase agreement will be determined
on each business day. If at any time the market value of the collateral falls
below the repurchase price of the repurchase agreement (including any accrued
interest), the Fund will promptly receive additional collateral (so the total
collateral is in an amount at least equal to the repurchase price plus accrued
interest). To the extent that proceeds from any sale upon a default were less
than the repurchase price, the Fund could suffer a loss. If the Fund owns
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underlying securities following a default on the repurchase agreement, the Fund
will be subject to the risk associated with changes in the market value of such
securities.
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[Left Side of Back Cover Page]
MIDAS FUND
-----------------------------------------------------
11 Hanover Square
New York, NY 10005
1-800-400-MIDAS 1-212-480-MIDAS
-----------------------------------------------------
Call toll-free for Fund performance, telephone
purchases, and to obtain information concern
ing your account.
1-800-400-MIDAS 1-212-480-MIDAS
-----------------------------------------------------
[Right Side of Back Cover Page]
MIDAS FUND
---------------------------------------------------------
Seeking capital appreciation and
protection against inflation and,
secondarily, current income
Electronic Funds Transfers
Automatic Investment Program
Retirement Plans: IRA, SEP-IRA,
Qualified Profit Sharing/Money
Purchase, 403(b), Keogh
---------------------------------------------------------
Minimum Initial Investment:
Regular Accounts, $500;
IRAs, $100; Automatic
Investment Program, $50
Minimum Subsequent Investments: $50
---------------------------------------------------------
Prospectus
August 28, 1995
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MIDAS FUND ACCOUNT APPLICATION
For regular accounts only. For an IRA Application, call 1-800-400-MIDAS.
Mail to: Midas Fund, Box 419789, Kansas City, MO 64141-6789.
1/ Registration (Please print)
Individual
First Name:
Middle Initial:
Last Name:
Social Security Number:
Joint Tenant
First Name:
Middle Initial:
Last Name:
Social Security Number:
Note: Registration will be Joint Tenants With Right of Survivorship,
unless otherwise specified.
Gift/Transfer to a Minor
Name of Custodian (only one): Name of Minor (only one):
State of Uniform Gifts/Transfers to Minors Act:
Custodian's State of Residence:
Minor's Social Security Number:
Minor's Date of Birth:
Corporations, Partnerships, Trusts and others
Name of Corporation, Partnership, or other Organization:
Name of individual(s) authorized to act for the Corporation, Partner-
ship, or other organization:
Tax I.D. Number:
Name of Trustee(s):
Date of Trust Instrument:
2/ Mailing Address, Telephone Number and Citizenship
Street
City
State
Zip
Daytime Telephone Number
Owner
<PAGE>
Citizen of: |_| U.S. |_| Other:
Joint Owner
Citizen of: |_| U.S. |_| Other:
3/ Amount invested ($500 minimum): Note: The $500 minimum initial
investment is waived if you elect to invest through the Midas Bank
Transfer Plan, the Midas Salary Investing Plan and/or the Midas
Government Direct Deposit Plan (see Section 4, over).
Initial Investment $
By Check - Please make your check(s) payable to Midas
Fund and enclose with this Account Application.
By Wire - Funds were wired on Date) Assigned account number *
*Please call 1-800-400-MIDAS to be assigned an account number before
making an initial investment by wire.
4/ Midas Automatic Investment Program ($100 minimum initial investment)
|_| Midas Bank Transfer Plan - Automatically purchase shares each
month by transferring the dollar amount you specify from your
regular checking account, NOW account, or bank money market
deposit account. Please attach a voided bank account check.
Dollar Amount: Day of Month: |_| 10th, |_| 15th or |_| 20th ($50 minimum)
|_| Midas Salary Investing Plan- The enrollment form will be sent
to the above address or call 1-800-400-MIDAS to have the form
sent to your place of employment.
|_| Midas Government Direct Deposit Plan - Your request will be
processed and you will receive the enrollment form.
5/ Distributions
If no box is checked, the Automatic Compounding Option will be
assigned to reinvest all dividends and distributions in your account to
increase the shares you own.
Automatic Compounding Option - |_| Dividends and distributions
reinvested in additional shares.
Payment Option: |_| Dividends in cash, distributions reinvested, or
|_| Dividends and distributions in cash.
6/ Investments and Redemptions by Telephone
Shareholders automatically enjoy the privilege of calling
1-800-400-MIDAS to purchase additional shares of the Fund or to
expedite a redemption and have the proceeds sent directly to their
address or to their bank account, unless declined by checking the box
|_|. The Midas link with your bank offers flexible access to your
money. Transfers occur only when you initiate them and may be made
through either bank wire or via electronic bank transfer through Midas
Electronic Funds Transfer. To establish this bank account link, attach
a voided check from your bank account. One common name must appear on
your Midas and bank accounts.
7/ Signature and Certification to Avoid Backup Withholding
By signing this application, I certify that: I have received and read
the prospectus for Midas Fund and I agree to the terms of the
prospectus. I have the authority and legal capacity to purchase mutual
fund shares, am of legal age and believe each investment is suitable
for me. I understand that neither the Fund nor Investor Service Center,
Inc. is a bank, and Fund shares are not backed or guaranteed by any
bank or insured by the FDIC. I ratify any instructions, including
telephone instructions, given on this account. I agree that neither the
Fund nor Investor Service Center, Inc. will be liable for any loss,
cost or expense for acting upon any instructions believed by it to be
genuine and in accordance with reasonable procedures designed to
prevent unauthorized transactions. I understand that for joint tenant
accounts, "I" refers to all account owners, and each of the account
owners agrees that any account owner has authority to act on the
account without notice to the other account owners. Investor Service
Center, Inc. in its sole discretion, and for its protection, may
require the written consent of all account owners prior to acting upon
the instructions of any account owner. I (we) understand telephone
conversations with Investor Service Center, Inc. representatives are
tape-recorded so it can compare actions taken with original
instructions should clarification be necessary and hereby consent to
such recording. The following is required by Federal tax law to avoid
backup withholding: "By signing below, I certify under penalties of
perjury that (1) the Social Security or taxpayer identification number
provided above is correct, and
(2) I am not subject to IRS backup
withholding because (a) I am exempt from backup withholding, or (b) I
have not been notified by the IRS that I am subject to backup
withholding, or (c) I have been notified by the IRS that I am no longer
subject to backup withholding." (Please cross out item 2 if it does not
apply to you.)
Signature |_| Owner |_| Trustee |_| Custodian Date
Signature of Joint Owner ( if any) Date
<PAGE>
Midas SAI: 8/23/95, 2pm
Statement of Additional Information August 28, 1995
MIDAS FUND, INC.
11 Hanover Square
New York, NY 10005
1-800-400-MIDAS
This Statement of Additional Information regarding Midas Fund, Inc. (the
"Fund") should be read in conjunction with the Fund's prospectus dated August
28, 1995. Prior to August 28, 1995, the Fund was known as Excel Midas Gold
Shares, Inc. The prospectus is available to prospective investors without charge
upon request to Investor Service Center, Inc., the Fund's Distributor, by
calling 1-800-400-MIDAS.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS................................................2
OFFICERS AND DIRECTORS.................................................3
THE INVESTMENT MANAGER.................................................4
THE SUBADVISER AND THE SUBADVISORY AGREEMENT..........................6
CALCULATION OF PERFORMANCE DATA........................................7
DISTRIBUTION OF SHARES................................................10
DETERMINATION OF NET ASSET VALUE......................................11
PURCHASE OF SHARES....................................................12
ALLOCATION OF BROKERAGE...............................................12
DISTRIBUTIONS AND TAXES...............................................14
REPORTS TO SHAREHOLDERS...............................................15
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT.....................16
AUDITORS..............................................................16
FINANCIAL STATEMENTS..................................................16
APPENDIX--DESCRIPTIONS OF BOND RATINGS................................17
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Midas SAI: 8/23/95, 2pm
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions set forth below
which, together with the fundamental investment objectives and policies of the
Fund, cannot be changed without approval by holders of a majority of the
outstanding voting securities of the Fund. As defined in the Investment Company
Act of 1940, as amended (the "1940 Act"), this means the lesser of (a) 67% of
the shares of the Fund at a meeting where more than 50% of the outstanding
shares of the Fund are present in person or by proxy or (b) more than 50% of the
outstanding shares of the Fund. These investment restrictions are set forth
below:
(1) The Fund will not invest more than 5% of its net assets (taken at
the lower of cost or value) in securities of any one company. The
Fund will also limit its investment in a single company to not
more than 10% of that company's outstanding voting securities.
(2) The Fund will not invest more than 5% of its total assets in
securities of companies, including any predecessors, less than
three years old.
(3) The Fund will not invest in another investment company except as a
part of a plan of merger, acquisition or consolidation.
(4) The Fund will not buy or sell real estate.
(5) The Fund will not invest in any commodities other than gold,
silver and platinum, and will not invest in commodities futures
contracts other than gold and silver futures contracts.
(6) The Fund will not buy on margin or sell short.
(7) The Fund will not pledge or mortgage its assets, except to the
extent that writing covered call options may be deemed to be
pledging or mortgaging assets.
(8) The Fund will not borrow money or property (for example,
securities), except that as a temporary measure for extraordinary
purposes or emergencies the Fund may borrow from banks up to 5% of
the value of its total assets.
(9) The Fund will not make cash loans. However the Fund may purchase
bonds or other debt securities sold publicly, including short-term
securities which may be acquired under agreements by the sellers
to repurchase; provided that not more than 10% of the Fund's net
assets will, at any time, be subject to repurchase agreements
which mature in more than seven days. The Fund does not consider
these debt securities and other short-term investments to be
loans.
(10) The Fund will not invest more than 10% of its total assets, in
restricted securities. Restricted securities are those the sale
of which is limited by contract or law. They are usually traded
in private, direct negotiations.
(11) The Fund will not act as an underwriter.
(12) The Fund will not buy any securities of a company if it knows that
the officers or directors of the Fund, who own 1/2 of 1% or more
of the company's securities, together own more than 5% of the
company's securities.
(13) The Fund will not invest in exploration or development programs,
such as oil or gas programs.
With respect to investment restriction (10) above, the Fund includes
securities purchased pursuant to Rule 144A under the Securities Act of 1933 in
its calculation of investments in restricted securities. With respect to
investment restriction (12), the Fund applies this restriction without
qualification to its knowledge. If a percentage limitation described above is
adhered to at the time of the investment by the Fund, a later increase or
decrease in the percentage resulting from any change in the value of the Fund's
net assets will not constitute a violation of the restriction.
2
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Midas SAI: 8/23/95, 2pm
OFFICERS AND DIRECTORS
The officers and Directors of the Fund, their respective offices and
principal occupations during the last five years are set forth below. Unless
otherwise noted, the address of each is 11 Hanover Square, New York, NY 10005.
RUSSELL E. BURKE III -- Director (since 1995). 36 East 72nd Street, New York,
New York 10021. He is President of Russell E. Burke III, Inc. Fine Art. From
1988 to 1991, he was President of Altman Burke Fine Arts, Inc. From 1983 to
1988, he was Senior Vice President of Kennedy Galleries. He is also a Director
of certain of the investment companies in the Bull & Bear funds complex (the
"Complex"). He was born August 23, 1946.
BRUCE B. HUBER, CLU -- Director (since 1995). 298 Broad Street, Red Bank, New
Jersey 07701. He is President of Huber Hogan Knotts Consulting, Inc., financial
consultants and insurance planners. From 1990 to March 1995, he was President of
Huber-Hogan Associates. From 1988 to 1990, he was Chairman of Bruce Huber
Associates. He is also a Director of other investment companies in the Complex.
He was born February 7, 1930.
JAMES E. HUNT -- Director (since 1995). One Dag Hammarskjold Plaza, New York,
New York 10017. He is a principal of Kenny, Kindler, Hunt & Howe, Inc.,
executive recruiting consultants. He is also a Director of other investment
companies in the Complex. He was born December 14, 1930.
FREDERICK A. PARKER, JR. -- Director (since 1995). 219 East 69th Street, New
York, New York 10021. He is President and Chief Executive Officer of American
Pure Water Corporation, a manufacturer of water purifying equipment. He is also
a Director of other investment companies in the Complex. He was born November
14, 1926.
JOHN B. RUSSELL -- Director (since 1995). 334 Carolina Meadows Villa, Chapel
Hill, North Carolina 27514. He was Executive Vice President and a Director of
Dan River, Inc., a diversified textile company, from 1969 until he retired in
1981. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of other investment companies in the Complex. He
was born February 9, 1923.
THOMAS B. WINMILL* -- Director (since 1995), Co-President (since 1995), Co-Chief
Executive Officer (since 1995), and General Counsel (since 1995). He is
President of Midas Management Corporation (the "Investment Manager") and the
Distributor, and Chairman of Bull & Bear Securities, Inc. ("BBSI"). He is also a
Director of certain of the investment companies in the Complex. He was
associated with the law firm of Harris, Mericle & Orr from 1984 to 1987. He is a
member of the New York State Bar. He is a brother of Mark C. Winmill. He was
born June 25, 1959.
The executive officers of Midas Fund, each of whom serves at the pleasure
of the Board of Directors, are as follows:
MARK C. WINMILL -- Co-President, Co-Chief Executive Officer, and Chief Financial
Officer (since 1995). He is Chief Financial Officer of the Investment Manager
and certain of its affiliates. He is also a Director of certain of the
investment companies in the Complex. He received his M.B.A. from the Fuqua
School of Business at Duke University in 1987. From 1983 to 1985 he was
Assistant Vice President and Director of Marketing of E.P. Wilbur & Co., Inc., a
real estate development and syndication firm and Vice President of E.P.W.
Securities, its broker/dealer subsidiary. He is the brother of Thomas B.
Winmill. He was born November 26, 1957.
THOMAS B. WINMILL -- Co-President, Co-Chief Executive Officer, and General
Counsel (see biographical information above) (since 1995).
ROBERT D. ANDERSON -- Vice Chairman (since 1995). He is Vice Chairman of the
Investment Manager and its affiliates. He is a member of the Board of Governors
of the Mutual Fund Education Alliance, and of its predecessor, the No-Load
Mutual Fund Association. He has also been a member of the District #12, District
Business Conduct and Investment Companies Committees of the National Association
of Securities Dealers, Inc. He is also a Director of certain of the investment
companies in the Complex. He was born December 7, 1929.
STEVEN A. LANDIS -- Senior Vice President (since 1995). He is Senior Vice
President of the Investment Manager and certain of its affiliates. From 1993 to
1995, he was Associate Director -- Proprietary Trading at Barclays De Zoete Wedd
Securities Inc., from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading
Company, and from 1989 to 1992 he was Vice President of Wilkinson Boyd Capital
Markets. He was born March 1, 1955.
3
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Midas SAI: 8/23/95, 2pm
BRETT B. SNEED, CFA -- Senior Vice President (since 1995). He is Senior Vice
President of the Investment Manager and certain of its affiliates. He is a
Chartered Financial Analyst, a member of the Association for Investment
Management and Research, and a member of the New York Society of Security
Analysts. From 1986 to 1988, he managed private accounts, from 1981 to 1986, he
was Vice President of Morgan Stanley Asset Management, Inc. and prior thereto
was a portfolio manager and member of the Finance and Investment Committees of
American International Group, Inc., an insurance holding company. He was born
June 11, 1941.
WILLIAM K. DEAN, CPA -- Treasurer and Chief Accounting Officer (since 1995). He
is Treasurer and Chief Accounting Officer of the Investment Manager and its
affiliates. From 1984 to 1995 he held various positions with The Dreyfus
Corporation, a mutual fund company. He is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public
Accountants. He was born September 5, 1955.
WILLIAM J. MAYNARD -- Vice President and Secretary (since 1995). He is Vice
President and Secretary of the Investment Manager and its affiliates. From 1991
to 1994 he was associated with the law firm of Skadden, Arps, Slate, Meagher &
Flom. He is a member of the New York State Bar. He was born September 13, 1964.
* Thomas B. Winmill is an "interested person" of the Fund as defined by the 1940
Act, because of his positions with the Investment Manager.
Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation
Name of Person, Compensa- Accrued as Part of Benefits Upon From Fund and Complex
Position tion From Fund Fund Expenses Retirement Paid to Directors
Russell E. Burke III $500 None None $6,000 from 4 Funds
Director
Bruce B. Huber $500 None None $10,500 from 6 Funds
Director
James E. Hunt $500 None None $10,500 from 6 Funds
Director
Frederick A. Parker $500 None None $11,000 from 7 Funds
Director
John B. Russell $500 None None $10,500 from 6 Funds
Director
Mark C. Winmill None None None None
Co-President
Thomas B. Winmill, None None None None
Director, Co-
President
Steven A. Landis None None None None
Senior Vice
President
Brett B. Sneed None None None None
Senior Vice
President
</TABLE>
Directors who are not "interested persons" of the Fund may elect to defer
receipt of fees for serving as a Director of the Fund. No officer, Director or
employee of the Fund's Investment Manager receives any compensation from the
Fund for acting as an officer, Director or employee of the Fund. As of July 11,
1995, officers and Directors of the Fund owned less than 1% of the outstanding
shares of the Fund. As of July 11, 1995, no shareholder was known by the Fund to
own of record 5% or more of the outstanding shares of the Fund.
THE INVESTMENT MANAGER
Midas Management Corporation (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including the regular furnishing of advice with respect to portfolio
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transactions. The Investment Manager also furnishes or obtains on behalf of the
Fund all services necessary for the proper conduct of the Fund's business and
administration. As compensation for its services to the Fund, the Investment
Manager is entitled to a fee, payable monthly, based upon the Fund's average
daily net assets. Under the Fund's Investment Management Agreement dated August
25, 1995, the Investment Manager receives a fee at the annual rate of:
1.00% of the first $200 million of the Fund's average daily net assets.
95% of average daily net assets over $200 million up to $400 million.
90% of average daily net assets over $400 million up to $600 million.
85% of average daily net assets over $600 million up to $800 million.
80% of average daily net assets over $800 million up to $1 billion.
75% of average daily net assets over $1 billion.
The percentage fee is calculated on the daily value of the Fund's net assets at
the close of each business day. The foregoing fees are higher than fees paid by
most other investment companies.
Under the Investment Management Agreement, the Fund assumes and shall pay
all the expenses required for the conduct of its business including, but not
limited to, (a) salaries of administrative and clerical personnel; (b) brokerage
commissions; (c) taxes and governmental fees; (d) costs of insurance and
fidelity bonds; (e) fees of the transfer agent, custodian, legal counsel and
auditors; (f) association fees; (g) costs of preparing, printing and mailing
proxy materials, reports and notices to shareholders; (h) costs of preparing,
printing and mailing the prospectus and statement of additional information and
supplements thereto; (I) payment of dividends and other distributions; (j) costs
of stock certificates; (k) costs of Board and shareholders meetings; (l) fees of
the independent directors; (m) necessary office space rental; (n) all fees and
expenses (including expenses of counsel) relating to the registration and
qualification of shares of the Fund under applicable federal and state
securities laws and maintaining such registrations and qualifications; and (o)
such non-recurring expenses as may arise, including, without limitation,
actions, suits or proceedings affecting the Fund and the legal obligation which
the Fund may have to indemnify its officers and directors with respect thereto.
If requested by the Fund's Board of Directors, the Investment Manager may
provide other services to the Fund such as, without limitation, the functions of
billing, accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and controls and other
administrative services. Any services so requested and performed will be for the
account of the Fund and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to examination by those
directors of the Fund who are not interested persons of the Investment Manager
or any affiliate thereof.
The Fund's Investment Management Agreement continues from year to year
only if a majority of the Fund's directors (including a majority of
disinterested directors) approve. The Fund's Investment Management Agreement may
be terminated by either the Fund or the Investment Manager on 60 days' written
notice to the other, and terminates automatically in the event of its
assignment.
The Investment Management Agreement provides that the Investment Manager
shall waive all or part of its fee or reimburse the Fund monthly if and to the
extent the aggregate operating expenses of the Fund exceed the most restrictive
limit imposed by any state in which shares of the Fund are qualified for sale or
such lesser amount as may be agreed to by the Fund's Board of Directors and the
Investment Manager. Currently, the most restrictive state imposed limit
applicable to the Fund is 2.5% of the first $30 million of the Fund's average
daily net assets, 2.0% of the next $70 million of its average daily net assets
and 1.5% of its average daily net assets in excess of $100 million. Certain
expenses, such as brokerage commissions, taxes, interest, distribution fees,
certain expenses attributable to investing outside the United States and
extraordinary items, are excluded from this limitation. In addition, the
Investment Manager also has agreed to be subject to the following expense
limitation for a period of two years from the effective date of the Investment
Management Agreement, which limitation is calculated as an amount not in excess
of the fee payable by the Fund if and to the extent that the aggregate operating
expenses of the Fund (excluding interest expense, Rule 12b-1 Plan of
Distribution fees, taxes and brokerage fees and commissions) are in excess of
2.0% of the first $10 million of average net assets of the Fund, plus 1.5% of
the next $20 million of average net assets, plus 1.25% of average net assets
above $30 million.
For the years ended December 31, 1992, 1993 and 1994, Excel Advisors,
Inc., the Fund's previous investment adviser, earned, before reimbursement of
certain expenses, $54,991, $72,039 and $85,126, respectively, in fees from the
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Fund. These fees were calculated pursuant to the same fee schedule under which
the Investment Manager's fee is currently calculated. For the years ended
December 31, 1992, 1993 and 1994, Excel Advisors, Inc. reimbursed $15,536, $0
and $0, respectively, to the Fund for expenses in excess of expense limitations.
The Investment Manager, a registered investment adviser, is a
wholly-owned subsidiary of Bull & Bear Group, Inc. ("Group"). The other
principal subsidiaries of Group include Investor Service Center, Inc., a
registered broker-dealer, and Bull & Bear Securities, Inc., a registered
broker-dealer providing discount brokerage services.
Group is a publicly-owned company whose securities are listed on the
Nasdaq and traded in the over-the-counter market. Bassett S. Winmill may be
deemed a controlling person of Group on the basis of his ownership of 100% of
Group's voting stock and, therefore, of the Investment Manager. The Bull & Bear
Funds, each of which is managed by the Investment Manager, had net assets in
excess of $240,000,000 as of August 4, 1995.
THE SUBADVISER AND THE SUBADVISORY AGREEMENT
The Investment Manager has entered into a subadvisory agreement with Lion
Resource Management Limited (the "Subadviser") for certain subadvisory services.
The Subadviser advises and consults with the Investment Manager regarding the
selection, clearing and safekeeping of the Fund's portfolio investments and
assists in pricing and generally monitoring such investments. The Subadviser
also provides the Investment Manager with advice as to allocating the Fund's
portfolio assets among various countries, including the United States, and among
equities, bullion, and other types of investments, including recommendations of
specific investments.
In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, pays to the Subadviser a percentage of the Investment Manager's
Net Fees. "Net Fees" are defined as the actual amounts received by the
Investment Manager as compensation less reimbursements, if any, pursuant to the
guaranty of the Investment Management Agreement and waivers of such compensation
by the Investment Manager. The amount of the percentage is determined by the
grid and accompanying definitions set forth as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis Within 50 basis More than 50
points better than BTR points of BTR basis points below
BTR
$15,000,000 30% 20% 10%
$15,000,000 and 40% 30% 20%
$50,000,000
$50,000,000 50% 40% 30%
</TABLE>
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The Subadvisory Agreement is not assignable and automatically terminates
in the event of its assignment, or in the event of the termination of the
Investment Management Agreement. The Subadvisory Agreement may also be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the Fund, by the Board of Directors or by a vote of Fund
shareholders. The Subadvisory Agreement provides that the Subadviser shall not
be liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which the
Subadvisory Agreement relates. Nothing contained in the Subadvisory Agreement,
however, shall be construed to protect the Subadviser against liability to the
Fund by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of obligations
and duties under the Subadvisory Agreement.
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that the investor's shares when
redeemed may be worth more or less than their original cost.
Average Annual Total Return
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of
the period of a hypothetical $1,000
payment made at the beginning of such
period.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The following table sets forth the average annual total return for the
Fund for the periods ended December 31, 1994, as set forth below:
PERIODS ENDED DECEMBER 31, 1994
Since inception (Jan. 8, 1986) 6.66%
Five Years 7.68%
One Year (17.27%)
Cumulative Total Return
Cumulative total return is calculated by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
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CTR = ( ERV-P )100
P
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 payment made at the beginning of such period
P = initial payment of $1,000
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The cumulative return for the Fund for the period beginning at the
inception of the Fund (January 8, 1986) and ending December 31, 1994 is 78.67%.
Effective August 28, 1995, the maximum initial sales charge of 4.5% of the
public offering price charged in connection with the sale of Fund shares was
discontinued.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 1995 -- ASSUMING
NO INITIAL SALES CHARGE
Since inception (Jan. 8, 1986) 10.49%
Five Years 14.01%
One Year 23.69%
Assuming no initial sales charge, the cumulative return for the Fund for
the period since the inception of the Fund (January 8, 1986), for the five
years, and for the one year ending June 30, 1995 is, respectively, 158.07%,
92.60% and 23.69%.
Source Materia l. From time to time, in marketing pieces and other Fund
literature, the Fund's performance may be compared to the performance of broad
groups of comparable mutual funds or unmanaged indexes of comparable securities.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning the Fund. Sources for Fund performance information may
include, but are not limited to, the following:
Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Bloomberg, a computerized market data source and portfolio analysis system.
Bond Buyer Municipal Index (20 year) Bond. An index of municipal bonds provided
by a national periodical reporting on municipal securities.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.
CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
Composite Index -- 70% Standard & Poor's 500 Composite Stock Price Index ("S&P
500") and 30% Nasdaq Industrial Index.
Composite Index -- 35% S&P 500 Index and 65% Salomon Brothers High Grade Bond
Index.
Composite Index -- 65% S&P 500 Index and 35% Salomon Brothers High Grade Bond
Index.
Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.
Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
Goldman Sachs Convertible Bond Index -- currently includes 67 bonds and 33
preferred shares. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The index
is priced monthly.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.
Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.
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Individual Investor, a newspaper that periodically reviews mutual fund
performance and other data.
Investment Advisor, a monthly publication reviewing performance of mutual funds.
Investor's Daily, a nationally distributed newspaper which regularly covers
financial news.
Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.
Lehman Brothers, Inc. "The Bond Market Report" reports on various Lehman
Brothers bond indices.
Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.
Lehman Long Term Treasury Bond -- is composed of all bonds covered by the Lehman
Treasury Bond Index with maturities of 10 years or greater.
Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.
Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley Capital International EAFE Index, is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Morningstar, Mutual Fund Values, publications of Morningstar, Inc., periodically
reviewing mutual funds industry-wide by means of various methods of analysis and
textual commentary.
Mutual Fund Forecaster, a newsletter providing a mutual fund rating service.
Nasdaq Industrial Index -- is composed of more than 3000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performance, rates funds, and discusses investment strategies for mutual fund
investors.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indexes, and
portfolio holdings.
Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
Salomon Brothers High-Grade Corporate Bond Index -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
Salomon Brothers Broad Investment-Grade Bond -- is a market-weighted index that
contains approximately 4700 individually priced investment-grade corporate bonds
rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.
Salomon Brothers Market Performance tracks the Salomon Brothers bond index.
S&P 500 -- is a well diversified list of 500 companies representing the U.S.
stock market.
Standard & Poor's 100 Composite Stock Price Index -- is a well diversified list
of 100 companies representing the U.S. stock market.
Standard & Poor's Preferred Index is an index of preferred securities.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
businesses, often featuring mutual fund performance data.
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Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York and American Stock Exchanges or the
Nasdaq over-the-counter market, accounting for over 90% of the market value of
publicly traded stocks in the U.S.
Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.
USA Today, a national newspaper that periodically reports mutual fund
performance data.
U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.
Wall Street Journal, a nationally distributed newspaper which regularly covers
financial news.
Wilshire 5000 Equity Indexes -- consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the S&P 500.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center acts as the
Distributor of the Fund's shares. Under the Distribution Agreement, the
Distributor shall use its best efforts, consistent with its other businesses, to
sell shares of the Fund. Fund shares are sold continuously. Pursuant to a Plan
of Distribution ("Plan") adopted pursuant to Rule 12b-1 under the 1940 Act, the
Fund pays the Distributor monthly a fee in the amount of one-quarter of one
percent per annum of the Fund's average daily net assets as compensation for its
distribution and service activities.
In performing distribution and service activities pursuant to the Plan,
the Distributor may spend such amounts as it deems appropriate on any activities
or expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who service shareholder
accounts; fulfillment expenses, including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and internal costs incurred by the
Distributor and allocated by the Distributor to its efforts to distribute shares
of the Fund or service shareholder accounts such as office rent and equipment,
employee salaries, employee bonuses and other overhead expenses.
Among other things, the Plan provides that (1) the Distributor will
submit to the Fund's Board of Directors at least quarterly, and the Directors
will review, reports regarding all amounts expended under the Plan and the
purposes for which such expenditures were made, (2) the Plan will continue in
effect only so long as it is approved at least annually, and any material
amendment or agreement related thereto is approved, by the Fund's Board of
Directors, including those Directors who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or any agreement related to the Plan ("Plan Directors"), acting in
person at a meeting called for that purpose, unless terminated by vote of a
majority of the Plan Directors, or by vote of a majority of the outstanding
voting securities of the Fund, (3) payments by the Fund under the Plan shall not
be materially increased without the affirmative vote of the holders of a
majority of the outstanding voting securities of the Fund and (4) while the Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund shall be committed to the discretion of the
Directors who are not interested persons of the Fund.
With the approval of the vote of a majority of the entire Board of
Directors and of the Plan Directors of the Fund, the Distributor has entered
into a related agreement with Hanover Direct Advertising Company, Inc. ("Hanover
Direct"), a wholly-owned subsidiary of Group, in an attempt to obtain cost
savings on the marketing of the Fund's shares. Hanover Direct will provide
services to the Distributor on behalf of the Fund at standard industry rates,
which includes commissions. The amount of Hanover Direct's commissions over its
cost of providing Fund marketing will be credited to the Fund's distribution
expenses and represent a saving on marketing, to the benefit of the Fund. To the
extent Hanover Direct's costs exceed such commissions, Hanover Direct will
absorb any of such costs.
It is the opinion of the Board of Directors that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
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Midas SAI: 8/23/95, 2pm
fund shrinks in size and its ability to maintain quality shareholder services
declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. The offsetting of
redemptions through sales efforts benefits shareholders by maintaining the
viability of a fund. In periods where net sales are achieved, additional
benefits may accrue relative to portfolio management and increased shareholder
servicing capability. Increased assets enable the Fund to further diversify its
portfolio, which spreads and reduces investment risk while increasing
opportunity. In addition, increased assets enable the establishment and
maintenance of a better shareholder servicing staff which can respond more
effectively and promptly to shareholder inquiries and needs. While net increases
in total assets are desirable, the primary goal of the Plan is to prevent a
decline in assets serious enough to cause disruption of portfolio management and
to impair the Fund's ability to maintain a high level of quality shareholder
services.
The Plan increases the overall expense ratio of the Fund; however, a
substantial decline in Fund assets is likely to increase the portion of the
Fund's expense ratio comprised of management fees and fixed costs (i.e., costs
other than the Plan), while a substantial increase in Fund assets would be
expected to reduce the portion of the expense ratio comprised of management fees
(reflecting a larger portion of the assets falling within fee scale-down
levels), as well as of fixed costs. Nevertheless, the net effect of the Plan is
to increase overall expenses. To the extent the Plan maintains a flow of
subscriptions to the Fund, there results an immediate and direct benefit to the
Investment Manager by maintaining or increasing its fee revenue base,
diminishing the obligation, if any, of the Investment Manager to make an expense
reimbursement to the Fund, and eliminating or reducing any contribution made by
the Investment Manager to marketing expenses. Other than as described herein, no
Director or interested person of the Fund has any direct or indirect financial
interest in the operation of the Plan or any related agreement.
The Glass-Steagall Act prohibits certain banks from engaging in the
business of underwriting, selling, or distributing securities such as shares of
a mutual fund. Although the scope of this prohibition under the Glass-Steagall
Act has not been fully defined, in the Distributor's opinion it should not
prohibit banks from being paid for administrative and accounting services under
the Plan. If, because of changes in law or regulation, or because of new
interpretations of existing law, a bank or the Fund were prevented from
continuing these arrangements, it is expected that other arrangements for these
services will be made. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Fund's portfolio securities are traded in the over the counter market
and are valued at the mean between the current bid and asked prices. Securities
for which such prices are not readily available or reliable and other assets may
be valued as determined in good faith by or under the general supervision of the
Board of Directors. Short term securities are valued either at amortized cost or
at original cost plus accrued interest, both of which approximate current value.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.
eastern time) each business day of the Fund. The following are not business days
of the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Because a
substantial portion of the Fund's net assets may be invested in gold, platinum
and silver bullion, foreign securities and/or foreign currencies, trading in
each of which is also conducted in foreign markets which are not necessarily
closed on days when the NYSE is closed, the net asset value per share may be
significantly affected on days when shareholders have no access to the Fund or
its transfer agent.
Securities owned by the Fund are valued by various methods depending on
the market or exchange on which they trade. Securities traded on the NYSE, the
American Stock Exchange and the Nasdaq are valued at the last sales price, or if
no sale has occurred, at the mean between the current bid and asked prices.
Securities traded on other exchanges are valued as nearly as possible in the
same manner. Securities traded only OTC are valued at the mean between the last
available bid and ask quotations, if available, or at their fair value as
determined in good faith by or under the general supervision of the Board of
Directors. Short term securities are valued either at amortized cost or at
original cost plus accrued interest, both of which approximate current value.
Foreign securities and bullion, if any, are valued at the price in a
principal market where they are traded, or, if last sale prices are unavailable,
at the mean between the last available bid and ask quotations. Foreign security
prices are expressed in their local currency and translated into U.S. dollars at
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current exchange rates. Any changes in the value of forward contracts due to
exchange rate fluctuations are included in the determination of the net asset
value. Foreign currency exchange rates are generally determined prior to the
close of trading on the NYSE. Occasionally, events affecting the value of
foreign securities and such exchange rates occur between the time at which they
are determined and the close of trading on the NYSE, which events will not be
reflected in a computation of the Fund's net asset value on that day. If events
materially affecting the value of such securities or exchange rates occur during
such time period, the securities will be valued at their fair value as
determined in good faith under the direction of the Fund's Board of Directors.
Price quotations generally are furnished by pricing services, which may
also use a matrix system to determine valuations. This system considers such
factors as security prices, yields, maturities, call features, ratings, and
developments relating to specific securities in arriving at valuations.
PURCHASE OF SHARES
The Fund will not issue shares for consideration other than cash. The
Fund reserves the right to reject any order, to cancel any order due to
nonpayment, to accept initial orders by telephone or telegram, and to waive the
limit on subsequent orders by telephone, with respect to any person or class of
persons. Orders to purchase shares are not binding on the Fund until they are
confirmed by the Transfer Agent. In order to permit the Fund's shareholder base
to expand, to avoid certain shareholder hardships, to correct transactional
errors, and to address similar exceptional situations, the Fund may waive or
lower the investment minimums with respect to any person or class of persons.
ALLOCATION OF BROKERAGE
The Fund seeks to obtain prompt execution of orders at the most favorable
net prices. The Fund is not currently obligated to deal with any particular
broker, dealer or group thereof. Fund transactions in debt and OTC securities
generally are with dealers acting as principals at net prices with little or no
brokerage costs. In certain circumstances, however, the Fund may engage a broker
as agent for a commission to effect transactions for such securities. Purchases
of securities from underwriters include a commission or concession paid to the
underwriter, and purchases from dealers include a spread between the bid and
asked price. While the Investment Manager generally seeks reasonably competitive
spreads or commissions, payment of the lowest spread or commission is not
necessarily consistent with obtaining the best net results. Accordingly, the
Fund will not necessarily be paying the lowest spread or commission available.
The Investment Manager directs portfolio transactions to broker/dealers
for execution on terms and at rates which it believes, in good faith, to be
reasonable in view of the overall nature and quality of services provided by a
particular broker/dealer, including brokerage and research services, sales of
Fund shares, and allocation of commissions to the Fund's Custodian. With respect
to brokerage and research services, consideration may be given in the selection
of broker/dealers to brokerage or research provided and payment may be made for
a fee higher than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research services
deemed to be of lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") or other applicable
law are met. Section 28(e) of the 1934 Act specifies that a person with
investment discretion shall not be "deemed to have acted unlawfully or to have
breached a fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest available under certain circumstances.
To obtain the benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided ... viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion." Thus, although the Investment Manager may direct
portfolio transactions without necessarily obtaining the lowest price at which
such broker/dealer, or another, may be willing to do business, the Investment
Manager seeks the best value to the Fund on each trade that circumstances in the
market place permit, including the value inherent in on-going relationships with
quality brokers.
Currently, it is not possible to determine the extent to which
commissions that reflect an element of value for brokerage or research services
might exceed commissions that would be payable for execution alone, nor
generally can the value of such services to the Fund be measured, except to the
extent such services have a readily ascertainable market value. There is no
certainty that services so purchased, or the sale of Fund shares, if any, will
be beneficial to the Fund. Such services being largely intangible, no dollar
amount can be attributed to benefits realized by the Fund or to collateral
benefits, if any, conferred on affiliated entities. These services may include
(1) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities or purchasers or sellers of securities, (2) furnishing analyses and
12
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reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (3) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody). Pursuant to arrangements with certain
broker/dealers, such broker/dealers provide and pay for various computer
hardware, software and services, market pricing information, investment
subscriptions and memberships, and other third party and internal research of
assistance to the Investment Manager in the performance of its investment
decision-making responsibilities for transactions effected by such
broker/dealers for the Fund. Commission "soft dollars" may be used only for
"brokerage and research services" provided directly or indirectly by the
broker/dealer and under no circumstances will cash payments be made by such
broker/dealers to the Investment Manager. To the extent that commission "soft
dollars" do not result in the provision of any "brokerage and research services"
by a broker/dealer to whom such commissions are paid, the commissions,
nevertheless, are the property of such broker/dealer. To the extent any such
services are utilized by the Investment Manager for other than the performance
of its investment decision-making responsibilities, the Investment Manager makes
an appropriate allocation of the cost of such services according to their use.
Bull & Bear Securities, Inc. ("BBSI"), a wholly owned subsidiary of Group
and the Investment Manager's affiliate, provides discount brokerage services to
the public as an introducing broker clearing through unaffiliated firms on a
fully disclosed basis. The Investment Manager is authorized to place Fund
brokerage through BBSI at its posted discount rates and indirectly through a
BBSI clearing firm. The Fund will not deal with BBSI in any transaction in which
BBSI acts as principal. The clearing firm will execute trades in accordance with
the fully disclosed clearing agreement between BBSI and the clearing firm. BBSI
will be financially responsible to the clearing firm for all trades of the Fund
until complete payment has been received by the Fund or the clearing firm. BBSI
will provide order entry services or order entry facilities to the Investment
Manager, arrange for execution and clearing of portfolio transactions through
executing and clearing brokers, monitor trades and settlements and perform
limited back-office functions including the maintenance of all records required
of it by the National Association of Securities Dealers, Inc. ("NASD").
In order for BBSI to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by BBSI must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. The Fund's Board of Directors has adopted procedures in conformity with
Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions paid to
BBSI are reasonable and fair. Although BBSI's posted discount rates may be lower
than those charged by full cost brokers, such rates may be higher than some
other discount brokers and certain brokers may be willing to do business at a
lower commission rate on certain trades. The Fund's Board of Directors has
determined that portfolio transactions may be executed through BBSI if, in the
judgment of the Investment Manager, the use of BBSI is likely to result in price
and execution at least as favorable as those of other qualified broker/dealers
and if, in particular transactions, BBSI charges the Fund a rate consistent with
that charged to comparable unaffiliated customers in similar transactions.
Brokerage transactions with BBSI are also subject to such fiduciary standards as
may be imposed by applicable law. The Investment Manager's fees under its
agreement with the Fund are not reduced by reason of any brokerage commissions
paid to BBSI.
The Fund is not obligated to deal with any particular broker, dealer or
group thereof. Certain broker/dealers that the Fund does business with may, from
time to time, own more than 5% of the publicly traded Class A non-voting Common
Stock of Group, the parent of the Investment Manager, and may provide clearing
services to BBSI.
The Fund's portfolio turnover rate may vary from year to year and will
not be a limiting factor when the Investment Manager deems portfolio changes
appropriate. The portfolio turnover rate is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of securities in the
portfolio during the year.
From time to time, certain brokers may be paid a fee for record keeping,
shareholder communications and other services provided by them to investors
purchasing shares of the Fund through the "no transaction fee" programs offered
by such brokers. This fee is based on the average daily value of the investments
in the Fund made by such brokers on behalf of investors participating in their
"no transaction fee" programs. The Fund's directors have further authorized the
Investment Manager to place a portion of the Fund's brokerage transactions with
any such brokers, if the Investment Manager reasonably believes that, in
effecting the Fund's transactions in portfolio securities, such broker or
brokers are able to provide the best execution of orders at the most favorable
prices. Commissions earned by such brokers from executing portfolio transactions
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on behalf of the Fund may be credited by them against the fee they charge the
Fund, on a basis which has resulted from negotiations between the Investment
Manager and such brokers.
DISTRIBUTIONS AND TAXES
If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional shares of the Fund at the
then current net asset value in lieu of the cash payment and to thereafter issue
such shareholder's distributions in additional shares of the Fund.
The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for this treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short term
capital gain and net gains from certain foreign currency transactions) and must
meet several additional requirements. Among these requirements are the
following: (1) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of securities or foreign currencies, or
other income (including gains from options, futures, or forward contracts)
derived with respect to its business of investing in securities or those
currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its
gross income each taxable year from the sale or other disposition of securities,
or any of the following, that were held for less than three months - options,
futures, or forward contracts (other than those on foreign currencies), or
foreign currencies (or options, futures, or forward contracts thereon) that are
not directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation"); and
(3) the Fund's investments must satisfy certain diversification requirements. In
any year during which the applicable provisions of the Code are satisfied, the
Fund will not be liable for Federal income taxes on net income and gains that
are distributed to its shareholders. If for any taxable year the Fund does not
qualify for treatment as a RIC, all of its taxable income will be taxed at
corporate rates.
A portion of the dividends from the Fund's investment company taxable
income (whether paid in cash or in additional Fund shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by the Fund from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
A loss on the sale of Fund shares that were held for six months or less
will be treated as a long term (rather than a short term) capital loss to the
extent the seller received any capital gain distributions attributable to those
shares.
Any dividend or other distribution will have the effect of reducing the
net asset value of the Fund's shares on the payment date by the amount thereof.
Furthermore, any such dividend or other distribution, although similar in effect
to a return of capital, will be subject to taxes. Dividends and other
distributions may also be subject to state and local taxes.
The Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year an amount equal to the
sum of (1) 98% of its ordinary income, (2) 98% of its capital gain net income
(determined on an October 31 fiscal year basis), plus (3) generally, income and
gain not distributed or subject to corporate tax in the prior calendar year. The
Fund intends to avoid imposition of this excise tax by making adequate
distributions.
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that would enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions' income taxes paid by it. Pursuant to the election, the Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by the shareholder, the shareholder's proportionate share of those taxes, (2)
treat the shareholder's share of those taxes and of any dividend paid by the
Fund that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources, and (3) either deduct the taxes
deemed paid by the shareholder in computing the shareholder's taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against the shareholder's Federal income tax. The Fund will report to its
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shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain from disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If the Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long term capital gain over net short term
capital loss), even if they are not distributed to the Fund; those amounts would
be subject to the distribution requirements described above. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would
be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
Options, Futures, and Forward Contracts. The Fund's use of hedging strategies,
such as selling (writing) and purchasing options and futures contracts and
entering into forward contracts, involves complex rules that will determine for
income tax purposes the timing of recognition and character of the gains and
losses the Fund realizes in connection therewith. Income from foreign currencies
(except certain gains therefrom that may be excluded by future regulations), and
income from transactions in options, futures, and forward contracts derived by
the Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options, futures, and forward contracts
(other than those on foreign currencies) will be subject to the Short-Short
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures, and forward contracts
on foreign currencies, also will be subject to the Short-Short Limitation if
they are held for less than three months and are not directly related to the
Fund's principal business of investing in securities (or options and futures
with respect thereto).
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of the that limitation. The
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options, futures, and forward
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
The foregoing discussion of Federal tax consequences is based on the tax
law in effect on the date of this Statement of Additional Information, which is
subject to change by legislative, judicial, or administrative action. The Fund
may be subject to state or local tax in jurisdictions in which it may be deemed
to be doing business.
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REPORTS TO SHAREHOLDERS
The Fund issues, at least semi-annually, reports to its shareholders
including a list of investments held and statements of assets and liabilities,
income and expense, and changes in net assets of the Fund. The Fund's fiscal
year ends on December 31.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, P.O. Box 2197, Boston, MA 02111 has been
retained by the Fund to act as Custodian of the Fund's investments and may
appoint one or more subcustodians. The Custodian also performs certain
accounting services for the Fund. As part of its agreement with the Fund, the
Custodian may apply credits or charges for its services to the Fund for,
respectively, positive or deficit cash balances maintained by the Fund with the
Custodian. DST Systems, Inc., P.O. Box 419789, Kansas City, Missouri 64141-6789,
is the Fund's Transfer and Dividend Disbursing Agent.
AUDITORS
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19101-1707, are the independent accountants for the Fund. Financial statements
of the Fund are audited annually.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended December 31,
1994, together with the Report of the Fund's independent accountants thereon,
appear in the Fund's Annual Report to Shareholders and are incorporated herein
by reference.
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APPENDIX--DESCRIPTIONS OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality and carry the
smallest degree of investment risk. Interest payments are protected by a large
or an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards
and, together with the Aaa group, comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities of fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the longer term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A Bonds rated A have a strong capacity to pay principal interest, although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB Bonds rated BBB are regarded as having adequate capacity to pay principal
and interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this capacity than
for bonds in the A category.
BB, B, CCC, CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
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PART C -- OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Financial statements of the Registrant are
included in the Registrant's Statement of Additional Information filed as part
of this Registration Statement.
(b) Exhibits:
1 Restated Articles of Incorporation of Midas Gold Shares & Bullion, Inc.
Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-lA of Midas Gold Shares & Bullion, Inc.
filed with the Securities and Exchange Commission on October 2, 1985.
Articles of Amendment of Midas Gold Shares & Bullion, Inc. to change name
to "Excel Midas Gold Shares, Inc." Incorporated by reference to
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A of Excel Value Fund, Inc. and Post Effective Amendment No. 10 to
the Registration Statement on Form N-1A of Excel Midas Gold Shares,
Inc. filed with the Securities and Exchange Commission on May 1, 1990.
Articles of Incorporation of Midas Fund, Inc., filed with the
Securities and Exchange Commission on August 24, 1995.
2 Restated Bylaws of Excel Midas Gold Shares, Inc. Incorporated by reference
to Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A of Excel Value Fund, Inc. and Post Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Excel Midas Gold Shares, Inc. filed
with the Securities and Exchange Commission on May 1, 1990.
Bylaws of Midas Fund, Inc., filed with the Securities and Exchange
Commission on August 24, 1995.
3 Not applicable.
4 Specimen copy of share certificate of Excel Midas Gold Shares, Inc.
Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registration Statement on Form N-lA of Midas Gold Shares & Bullion, Inc.
filed with the Securities and Exchange Commission on October 28, 1985.
Specimen copy of share certificate of Midas Fund, Inc., filed with the
Securities and Exchange Commission on August 24, 1995.
5(a) Form of Investment Advisory Agreement of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of IRI Stock Fund, Inc. and Post
Effective Amendment No. 9 to the Registration Statement on Form N-1A of
Midas Gold Shares & Bullion, Inc. filed with the Securities and Exchange
Commission on March 30, 1989.
Form of Investment Management Agreement of Midas Fund, Inc., filed with the
Securities and Exchange Commission on August 24, 1995.
5(b) Form of Subadvisory Agreement of Midas Fund, Inc., filed with the
Securities and Exchange Commission on August 24, 1995.
<PAGE>
6 Form of Distribution Agreement of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A of Excel Midas Gold Shares, Inc. filed
with the Securities and Exchange Commission on April 29, 1994.
Form of Distribution Agreement of Midas Fund, Inc., filed with the
Securities and Exchange Commission on August 24, 1995. 7 Not
applicable.
8(a) Custodian Agreement of Excel Midas Gold Shares, Inc. Incorporated by
reference to Post-Effective Amendment No. 12 to the Registration Statement
on Form N-1A of Excel Midas Gold Shares, Inc. filed with the Securities and
Exchange Commission on May 1, 1992.
Form of Custodian Agreement of Midas Fund, Inc., filed with the Securities
and Exchange Commission on August 24, 1995.
8(b) Form of Precious Metals Storage and Custodial Arrangements letter
agreement. Incorporated by reference to Post-Effective Amendment No. 12 to
the Registration Statement on Form N-1A of Excel Midas Gold Shares, Inc.
filed with the Securities and Exchange Commission on May 1, 1992.
Form of Precious Metals Storage Agreement of Midas Fund, Inc., filed with
the Securities and Exchange Commission on August 24, 1995.
8(c) Service and Agency Agreement, filed with the Securities and Exchange
Commission on August 24, 1995.
8(d) Custodial Account and IRA Disclosure Statement, filed with the Securities
and Exchange Commission on August 24, 1995.
8(e) IRA Agreement, filed with the Securities and Exchange Commission on August
24, 1995.
9(a) Form of Administration Agreement of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of IRI Stock Fund, Inc. and Post
Effective Amendment No. 9 to the Registration Statement on Form N-1A of
Midas Gold Shares & Bullion, Inc. filed with the Securities and Exchange
Commission on March 30, 1989.
9(b) Form of Accounting Services Agreement of Excel Midas Gold Shares, Inc.
Incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of IRI Stock Fund, Inc. and Post
Effective Amendment No. 9 to the Registration Statement on Form N-1A of
Midas Gold Shares & Bullion, Inc. filed with the Securities and Exchange
Commission on March 30, 1989.
9(c) Transfer Agency Agreement, filed with the Securities and Exchange
Commission on August 24, 1995.
9(d) Agency Agreement, filed with the Securities and Exchange Commission on
August 24, 1995.
9(e) Shareholder Administration Agreement, filed with the Securities and
Exchange Commission on August 24, 1995.
10(a)Opinion and Consent of Dorsey & Whitney with respect to Excel Midas Gold
Shares, Inc. Incorporated herein by reference to Pre-Effective Amendment
No. 1 to
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Midas Pro: 8/23/95, 2pm
Registration Statement on Form N-lA of Midas Gold Shares & Bullion, Inc.
filed with the Securities and Exchange Commission on October 2, 1985.
10(b)Opinion and Consent of Dorsey & Whitney with respect to Excel Midas Gold
Shares, Inc. pursuant to Section 24(e).
11 Consent of Squire & Company.
12 Not applicable.
13 Letter of Investment Intent with respect to Excel Midas Gold Shares, Inc.
Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registration Statement on Form N-lA of Midas Gold Shares & Bullion, Inc.
filed with the Securities and Exchange Commission on October 28, 1985.
14 Forms of Tax-Sheltered Retirement Plans Incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registration Statement on Form N-1A of IRI
Stock Fund, Inc. filed with the Securities and Exchange Commission on
January 6, 1982.
14(a)Standardized Profit Sharing Adoption Agreement, filed with the Securities
and Exchange Commission on August 24, 1995.
14(b)Defined Contribution Basic Plan Document, filed with the Securities and
Exchange Commission on August 24, 1995.
14(c)Standardized Money Purchase Adoption Agreement, filed with the Securities
and Exchange Commission on August 24, 1995.
14(d)Simplified Profit Sharing Adoption Agreement, filed with the Securities
and Exchange Commission on August 24, 1995.
14(e)Simplified Money Purchase Adoption Agreement, filed with the Securities
and Exchange Commission on August 24, 1995.
15 Form of Plan of Distribution of Excel Midas Gold Shares, Inc. Incorporated
by reference to Post-Effective Amendment No. 11 to the Registration
Statement on Form N-1A of IRI Stock Fund, Inc. and Post Effective Amendment
No. 9 to the Registration Statement on Form N-1A of Midas Gold Shares &
Bullion, Inc. filed with the Securities and Exchange Commission on March
30, 1989.
Form of Plan of Distribution of Midas Fund, Inc., filed with the Securities
and Exchange Commission on August 24, 1995.
16 Calculations of Total Returns of Excel Midas Gold Shares, Inc. Incorporated
by reference to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A of IRI Stock Fund, Inc. and Post-Effective Amendment
No. 8 to the Registration Statement on Form N-1A of Midas Gold Shares &
Bullion, Inc. filed with the Securities and Exchange Commission on May 2,
1988.
17. Financial Data Schedule, filed herewith.
18. Not Applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
The following table sets forth the number of holders of shares of Excel
Midas Gold Shares, Inc. as of August 21, 1995:
(1) (2)
Title of Class Number of Record Holders
Common stock, par value 1325
$.01 per share
<PAGE>
Item 27. Indemnification
Indemnification. The Registrant is incorporated under Maryland
law. Section 2-418 of the Maryland General Corporation Law requires the
Registrant to indemnify its directors, officers and employees against expenses,
including legal fees, in a successful defense of a civil or criminal proceeding.
The law also permits indemnification of directors, officers, employees and
agents unless it is proved that (a) the act or omission of the person was
material and was committed in bad faith or was the result of active or
deliberate dishonesty, (b) the person received an improper personal benefit in
money, property or services or (C) in the case of a criminal action, the person
had reasonable cause to believe that the act or omission was unlawful.
Registrant's Articles of Incorporation: (1) provide that, to the
maximum extent permitted by applicable law, a director or officer will not be
liable to the Registrant or its stockholders for monetary damages; (2) require
the Registrant to indemnify and advance expense as provided in the By-laws to
its present and past directors, officers, employees and agents, and persons who
are serving or have served at the request of the Registrant in similar
capacities for other entities in advance of final disposition of any action
against that person to the extent permitted by Maryland law and the 1940 Act;
(3) allow the corporation to purchase insurance for any present or past
director, officer, employee, or agent; and (4) require that any repeal or
modification of the amended and restated Articles of Incorporation by the
shareholders, or adoption or modification of any provision of the Articles of
Incorporation inconsistent with the indemnification provisions, be prospective
only to the extent such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of or
indemnification available to any person covered by the indemnification
provisions of the amended and restated Articles of Incorporation.
Section 11.01 of Article XI of the By-Laws sets forth the procedures by
which the Registrant will indemnify its directors, officers, employees and
agents. Section 11.02 of Article XI of the By-Laws further provides that the
Registrant may purchase and maintain insurance or other sources of reimbursement
to the extent permitted by law on behalf of any person who is or was a director
or officer of the Registrant, or is or was serving at the request of the
Registrant as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in or arising out of his or her position.
Registrant's Investment Management Agreement between the Registrant and
Midas Management Corporation (the "Investment Manager") provides that the
Investment Manager shall not be liable to the Registrant or any shareholder of
the Registrant for any error of judgment or mistake of law or for any loss
suffered by the Registrant in connection with the matters to which the
Investment Management Agreement relates. However, the Investment Manager is not
protected against any liability to the Registrant by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
Investment Management Agreement.
Section 9 of the Distribution Agreement between the Registrant and
Investor Service Center, Inc. ("Service Center") provides that the Registrant
will indemnify Service Center and its officers, directors and controlling
persons against all liabilities arising from any alleged untrue statement of
material fact in the Registration Statement or from any alleged omission to
state in the Registration Statement a material fact required to be stated in it
or necessary to make the statements in it, in light of the circumstances under
which they were made, not misleading, except insofar as liability arises from
untrue statements or omissions made in reliance upon and in conformity with
information furnished by Service Center to the Registrant for use in the
Registration Statement; and provided that this indemnity agreement shall not
protect any such persons against liabilities arising by reason of their bad
faith, gross negligence or willful misfeasance; and shall not inure to the
benefit of any such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against public policy
as expressed in the Securities Act of 1933. Section 9 of the Distribution
Agreement also provides that Service Center agrees to indemnify, defend and hold
the Registrant, its officers and Directors free and harmless of any claims
arising out of any alleged untrue statement or any alleged omission of material
fact contained in information furnished by Service Center for use in the
Registration Statement or arising out of any agreement between Service Center
and any retail dealer, or arising out of supplementary literature or advertising
used by Service Center in connection with the Distribution Agreement.
<PAGE>
The Registrant undertakes to carry out all indemnification provisions
of its Articles of Incorporation and By-Laws and the above-described contract in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to directors, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
Information on the business of the Registrant's investment
adviser is described in the section of the Statement of Additional Information
entitled "The Investment Manager" filed as part of this Registration Statement.
The directors and officers of the Investment Manager are also directors
and officers of other Funds managed by Bull & Bear Advisers, Inc., a
wholly-owned subsidiary of Bull & Bear Group, Inc. (the "Bull & Bear Funds"). In
addition, such officers are officers and directors of Bull & Bear Group, Inc.
and its other subsidiaries; Service Center, the distributor of the Registrant
and the Bull & Bear Funds and a registered broker/dealer, and Bull & Bear
Securities, Inc., a discount brokerage firm. Bull & Bear Group, Inc.'s
predecessor was organized in 1976. In 1978, it acquired control of and
subsequently merged with Investors Counsel, Inc., a registered investment
adviser organized in 1959. The principal business of both companies since their
founding has been to serve as investment manager to registered investment
companies. Bull & Bear Advisers, Inc. serves as investment manager of Bull &
Bear Dollar Reserves, Bull & Bear Global Income Fund, and Bull & Bear U.S.
Government Securities Fund, each a series of shares issued by Bull & Bear Funds
II, Inc.; Bull & Bear Municipal Income Fund, a series of shares issued by Bull &
Bear Municipal Securities, Inc.; Bull & Bear Gold Investors Ltd.; Bull & Bear
U.S. and Overseas Fund, and Bull & Bear Quality Growth Fund, each a series of
Bull & Bear Funds I, Inc.; and Bull & Bear Special Equities Fund, Inc.
Item 29. Principal Underwriters
a) In addition to the Registrant, Service Center serves as principal
underwriter of Bull & Bear Funds II, Inc., Bull & Bear Special Equities Fund,
Inc., Bull & Bear Funds I, Inc., Bull & Bear Gold Investors Ltd. and Bull & Bear
Municipal Securities, Inc.
b) Service Center serves as the Registrant's principal underwriter. The
directors and officers of Service Center, their principal business addresses,
their positions and offices with Service Center and their positions and offices
with the Registrant (if any) are set forth below.
Name and Principal Position and Offices Position and Offices
Business Address with Service Center with Registrant
Robert D. Anderson Vice Chairman and Director N/A
11 Hanover Square
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Brett B. Sneed Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Mark C. Winmill Chairman, Director and Co-President and Co-Chief
11 Hanover Square Chief Financial Officer Executive Officer
New York, NY 10005
Thomas B. Winmill President, Director, Co-President, Director,
11 Hanover Square General Counsel Co-Chief Executive Officer
New York, NY 10005
Kathleen B. Fliegauf Vice President and None
11 Hanover Square Assistant Treasurer
New York, NY 10005
William J. Maynard Vice President, Secretary, Vice President, Secretary,
11 Hanover Square Chief Compliance Officer Chief Compliance Officer
New York, NY 10005
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
William K. Dean Treasurer, Chief Treasurer, Chief Accounting
11 Hanover Square Accounting Officer Officer
New York, NY 10005
Michael J. McManus Vice President None
11 Hanover Square
New York, NY 10005
H. Matthew Kelly Vice President None
11 Hanover Square
New York, NY 10005
Item 30. Location of Accounts and Records
The minute books of Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and its Investment Manager). All other records required by Section
31(a) of the Investment Company Act of 1940 are located at Investors Bank &
Trust Company, 89 South Street, Boston, MA 02111 (the offices of Registrant's
custodian) and DST Systems, Inc., 1055 Broadway, Kansas City, MO 64105-1594 (the
offices of the Registrant's Transfer and Dividend Disbursing Agent). Copies of
certain of the records located at Investors Bank & Trust Company & DST Systems,
Inc. are kept at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and the Investment Manager).
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
<PAGE>
Midas Pro: 8/23/95, 2pm
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City, County and State of New York on this 24th day of
August, 1995.
MIDAS FUND, INC.
Thomas B. Winmill
By: Thomas B. Winmill
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Mark C. Winmill Director, Co-President and Co-Chief August 24, 1995
---------------
Mark C. Winmill Executive Officer
Thomas B. Winmill Director, Co-President and Co-Chief August 24, 1995
-----------------
Thomas B. Winmill Executive Officer
William K. Dean Treasurer, Principal August 24, 1995
---------------
William K. Dean Accounting Officer
Bruce B. Huber Director August 24, 1995
Bruce B. Huber
James E. Hunt Director August 24, 1995
James E. Hunt
Frederick A. Parker, Jr. Director August 24, 1995
------------------------
Frederick A. Parker, Jr.
John B. Russell Director August 24, 1995
John B. Russell
Russell E. Burke III Director August 24, 1995
--------------------
Russell E. Burke III
<PAGE>
EXCEL MIDAS GOLD SHARES, INC.
--------------------------------------------------------------------------------
Report for the Period Ended December 31, 1994
Following the stellar performance of 1993, 1994 proved to be a disappointing and
perplexing year for gold market investors.
The combination of a 3% fall in the gold price and unstable financial markets
caused severe weakness in many of the gold stocks. The Net Asset Value of Excel
Midas declined 17.3% before distributions for the year ended December 31, 1994,
compared with a fall of 15% in the Financial Times Gold Mines Index. The
weakness in North American share prices was compounded by widespread tax loss
selling in the fourth quarter of 1994.
For most of the year, the gold price traded between $370-$395 per ounce. Failure
to break through the upper end of the range after several attempts, resulted in
liquidation by commodity/hedge funds and other short-term investors. The barrier
to the gold price at $395 was once again largely a result of producer forward
selling-mining companies taking advantage of future prices being enhanced by
higher interest rates.
The fundamentals for the market remain sound, and at the $370-$375 level there
is solid physical support. Jewelry and industrial demand continue to exceed new
mine supply by a comfortable margin, the shortfall being made up of recycled
scrap, dishoarding and smaller amounts of Central Bank and producer sales. The
deficit in the physical market is underlined by the fact that the average price
for 1994 of $384 was 6.7% higher than the average for 1993, despite a lack of
investor interest.
Over the past year, low inflation numbers and rising interest rates have
undoubtedly been factors in keeping the gold price subdued. With industry
operating at close to capacity, commodity prices rising, and higher wage
demands, inflationary pressures may soon emerge. The Dollar has been in secular
decline for several years, a factor which is of increasing concern to foreign
holders of U.S. Dollars.
Any upturn in inflation, or Dollar weakness, could generate strong investor
buying of gold. In a thin market, already in a supply/demand deficit, the effect
of the gold price would be significant.
Most gold stocks declined in 1994, and continued to do so in January. By the end
of January, the F.T. Gold Mines Index had suffered a major correction of some
30% from its 1994 high, compared with a 6% fall in the gold price. This
illustrates the leverage of gold stocks to the gold price, the stocks having
substantially outperformed gold on the upside in 1993.
At current prices many gold stocks are offering exceptional value, based on a
gold price of $375. The F.T. Gold Mines index is presently trading at its lowest
level relative to the gold price since late 1992, just before the six year bear
market terminated.
We recommend investors take advantage of this opportunity to establish, or add
to positions in the gold sector.
Excel Advisors, Inc.
EXCEL MIDAS GOLD SHARES, INC.
PERFORMANCE GRAPH
DECEMBER 31, 1994
--------------------------------------------------------------------------------
[CHART APPEARS HERE]
* Represents average annual total return for the period, including reinvestment
of all dividend and capital gains distributions and the maximum front-end
sales charge of 4.5% currently in effect.
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment made in the Fund on January
14, 1986 (Inception Date) to a $10,000 investment made in the Standard & Poor's
500 Stock Index and the Lipper Gold Fund Index on that date. For comparative
purposes, the value of the Indices on December 31, 1985 is used as the beginning
value on January 14, 1986. All dividends and capital gain distributions are
reinvested.
Unlike the Fund, the Standard & Poor's 500 Stock Index and the Lipper Gold Fund
Index are unmanaged, fully-invested total return performance benchmarks
consisting of a broad-based basket of 500 securities and 10 mutual funds,
respectively. The indices do not take into account charges, fees and other
expenses. The Fund may invest in gold, platinum and silver bullion and mining
securities, and for defensive purposes may hold fixed income securities and
cash.
EXCEL MIDAS GOLD SHARES, INC.
<PAGE>
STATEMENT OF INVESTMENTS
DECEMBER 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Security Cost Value (b)
--------------------------------------------------------------------------------
COMMON STOCKS - 87.21%
<S> <C> <C> <C>
18,000 American Barrick Resources
Corp. $ 163,450 $ 400,500
2,408,103 All North Resources (a)(c) 326,535 171,818
500,000 Arbor Resources (a)(c) 90,580 35,675
100,000 Archangel Diamond Corp. (a) 123,771 135,565
306,000 Aurizon Mines (a) 195,841 187,765
100,000 BEMA Gold (a) 133,040 178,375
50,000 Calais Resources (a) 39,297 44,594
25,000 Cambior, Inc. 243,681 287,719
50,000 Chase Resource Corp. (a) 79,968 103,457
40,000 Crystallex (a) 76,000 99,890
70,000 Dayton Mining (a) 151,775 199,780
50,000 Diamond Fields Resources (a) 184,087 481,612
175,000 East Daggafontein Mines,
Ltd. ADR 369,443 446,250
80,000 Fairfield Minerals (a) 152,500 251,152
75,000 Gold Capital Corp. (a) 150,000 225,000
400,000 Gold Mines of Australia (a) 153,657 124,240
93,900 Golden Queen Mining (a) 100,615 120,596
300,000 Golden Shamrock (a) 144,103 230,610
150,000 Greenstone Resources, Ltd. (a) 233,519 176,591
10,000 Homestake Mining 133,571 171,250
150,000 Hycroft Resources &
Development (a) 230,230 256,860
43,000 International Curator (a) 50,955 42,953
1,250,000 Lydenburg Exploration (a) 203,665 500,000
10,000 Mallon Resources (a) 45,000 20,000
89,000 Miramar Mining Corp. (a) 76,497 381,009
50,000 Nevada Star Resources (a) 19,229 14,270
333,333 Otis J. Exploration (a)(c) 73,937 83,242
13,300 Placer Dome, Inc. 175,435 289,275
404,000 Selkirk Springs (a)(c) 250,018 149,892
100,000 Silverado Mines (a)(c) 105,000 73,000
100,000 South American Gold &
Copper (a)(c) 148,039 126,290
<PAGE>
262,500 Venoro Gold (a)(c) 180,766 140,470
---------- ----------
Total common stocks 4,804,204 6,149,700
---------- ----------
WARRANTS - 0.13%
100,000 Gold Mines of Australia (a) 7,642 9,318
---------- ----------
--------------------------------------------------------------------------------
Principal Market
Amount Security Cost Value
-------------------------------------------------------------------------------
BONDS - 0.97%
$ 10,440 GNMA 106170 12% / 2014 $ 11,330 $ 11,797
49,985 GNMA 132077 12% / 2015 57,928 56,483
---------- ----------
Total bonds 69,258 68,280
---------- ----------
Total investments $4,881,104 6,227,298
==========
Excess of cash and
other assets over
liabilities - 11.69% 824,452
----------
Net assets - 100% $7,051,750
==========
</TABLE>
(a) Non-income producing.
(b) See Note 1 of notes to financial statements.
(c) Restricted security (see note 3).
At December 31, 1994, aggregate cost for federal income tax purposes is
$4,881,104 and net unrealized appreciation is as follows:
Gross unrealized appreciation $1,883,814
Gross unrealized depreciation 537,620
----------
Net unrealized appreciation $1,346,194
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
EXCEL MIDAS GOLD SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
------
Investments in securities, as detailed in the
accompanying schedule, at market value -
identified cost $4,881,104............................... $ 6,227,298
Cash........................................................ 502,716
Receivables:
Dividends................................................ 16,975
Interest................................................. 1,220
Securities sold.......................................... 315,504
-----------
Total assets.................................... 7,063,713
-----------
LIABILITIES
-----------
Payables:
Accounts payable......................................... 6,292
Asset management fee..................................... 5,671
-----------
Total liabilities............................... 11,963
-----------
NET ASSETS - (based on 2,126,114 shares of
capital stock outstanding - authorized
100,000,000 shares)......................................... $ 7,051,750
===========
COMPUTATION OF OFFERING PRICE:
Net asset value and redemption price per share
($7,051,750 divided by 2,126,114 shares)................. $3.32
===========
Offering price per share (100/95.50 of $3.32)............... $3.48
===========
At December 31, 1994, net assets consisted of:
Paid-in capital............................................. $ 8,190,325
Accumulated net realized loss on
investments.............................................. (2,484,769)
Net unrealized appreciation of investments.................. 1,346,194
-----------
Net Assets............................................... $ 7,051,750
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------
<S> <C>
INVESTMENT REVENUE
------------------
Dividends...................................... $ 55,435
Interest....................................... 20,560
-----------
Total investment revenue.................... 75,995
EXPENSES
--------
Investment advisory fees (Note 3)............. $ 85,126
Distribution fees............................. 21,282
Transfer agent................................ 20,065
Shareholder services.......................... 16,671
Accounting.................................... 13,750
Legal......................................... 7,394
Auditing...................................... 6,245
Registration costs............................ 4,755
Custodian fees................................ 5,000
Fidelity bond................................. 1,410
Directors fees................................ 500
Other......................................... 854
----------
Total expenses............................. 183,052
Less reimbursed expenses (Note 2).......... 0
----------
Net expenses............................... 183,052
-----------
Net investment loss........................ (107,057)
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
-------------------------------------------
Net realized gain from
security transactions...................... 240,195
Unrealized depreciation of
investments................................ (1,688,875)
----------
Net realized and unrealized loss
on investments........................... (1,448,680)
<PAGE>
-----------
Net decrease in net assets resulting
from operations................................. $(1,555,737)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
EXCEL MIDAS GOLD SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
OPERATIONS
----------
Net investment loss.................................................................... $ (107,057) $ (20,457)
Net realized income from security transactions......................................... 240,195
1,006,872
Unrealized appreciation (depreciation) of investments.................................. (1,688,875)
3,695,580
----------- -----------
Net increase (decrease) in assets resulting from operations......................... (1,555,737)
4,681,995
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------
From net realized gain on investments, $0.117 and $0.518 per share, respectively.......
(240,230) (1,007,493)
----------- -----------
Net decrease in assets due to distributions......................................... (240,230)
(1,007,493)
----------- -----------
CAPITAL STOCK SOLD AND REPURCHASED
----------------------------------
Proceeds from sale of 70,754 shares and 430,339 shares, respectively.................. 275,500
1,746,540
Proceeds from sale of 73,084 and 236,398 shares issued, respectively,
as a result of reinvested dividends................................................. 233,137 976,323
<PAGE>
Cost to repurchase 507,398 shares and 278,367 shares, respectively..................... (2,018,011)
(983,331)
----------- -----------
Net decrease of 363,560 shares and net increase of 388,370 shares, respectively.....
(1,509,374) 1,739,532
----------- -----------
Total increase (decrease) in net assets............................................. (3,305,341)
5,414,034
NET ASSETS
----------
Beginning of period.................................................................... 10,357,091 4,943,057
----------- -----------
End of period (includes no undistributed investment income)............................ $ 7,051,750
$10,357,091
=========== ===========
</TABLE>
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1994
--------------------------------------------------------------------------------
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
Excel Midas Gold Shares, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The objectives of the Fund are primarily capital appreciation and protection
against inflation and, secondarily, current income. The Fund commenced
operations in January 1986.
Security and Gold and Silver Bullion Valuation:
Investments in securities traded on major exchanges are valued at the last
quoted sales price on their primary exchange as of the close of the New York
Stock Exchange; securities traded in the over-the-counter market and listed
securities which have not been traded on a certain day are valued at the average
between the last bid and asked price; short-term investments purchased with
maturity dates greater than 60 days are priced at market until the sixtieth day
prior to maturity, at which time the difference between the valuation at that
date and maturity value is amortized on a straight-line basis to maturity.
Investments maturing in less than 60 days are stated at cost plus accrued
interest, which approximates market value. Gold and silver bullion is valued at
the Commodities Option Market Exchange (COMEX) closing price.
Security Transactions and Related Investment Income:
<PAGE>
Security transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized security gains and losses are determined using the
identified cost method.
Income Taxes:
No provision has been made for income taxes since it is the policy of the
Fund to distribute all taxable net income and qualify as a "regulated investment
company" under the Internal Revenue Code.
Cash Deposits:
At December 31, 1994, the carrying amount of the Fund's cash deposits is
$502,716. The bank balances are $551,775 of which $141,207 is covered by federal
depository insurance.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1994
(CONTINUED)
--------------------------------------------------------------------------------
NOTE 2 -- PAYMENTS TO RELATED PARTIES
--------------------------------------------------------------------------------
The following were paid to the Fund advisor or its affiliates for the year
ended December 31, 1994:
<TABLE>
<S> <C>
Investment advisory fees................... $85,126
Transfer agency fees....................... 13,793
Accounting fees............................ 12,000
Distribution fees.......................... 21,282
Commissions:
Sales of stock (paid by purchaser).... 7,600
Portfolio transactions................ --
</TABLE>
The investment advisory and management agreements provide that the advisor
be paid a fee of 1% per annum of the average daily net assets of the Fund.
However, if the Fund's expenses, exclusive of taxes, interest, brokerage fees
and commissions, exceed 2% of the average daily net assets (up to $10 million),
plus 1.5% of the next $20 million, plus 1.25% of net assets over $30 million,
then the Fund advisor will reimburse the Fund the excess amount not to exceed
the advisory fee paid. For the year ended December 31, 1994, the advisor did not
reimburse the Fund for any advisory fees.
<PAGE>
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plan"). Pursuant to the Plan, the Fund
pays the Distributor an amount up to one-quarter of one percent per annum of the
Fund's average daily net assets as compensation for distribution and service
activities. The fee is intended to cover personal services provided to
shareholders in the Fund and maintenance of shareholder accounts and all other
activities and expenses primarily intended to result in the sale of the Fund's
shares.
NOTE 3 -- INVESTMENTS
--------------------------------------------------------------------------------
During the year ended December 31, 1994, purchases and sales of securities
other than short-term securities, aggregated $4,229,943 and $4,798,825,
respectively.
On December 31, 1994, the Fund held restricted securities which are subject
to restrictions on resale. Investments in restricted securities are valued at
fair value as determined by the Board of Directors by considering quality,
dividend rate, and marketability of the securities compared to similar issues.
Dates of acquisition and cost of restricted securities are as follows:
<TABLE>
<CAPTION>
Date of
Shares Acquisition Cost Value
------ ----------- ---------- --------
<C> <S> <C> <C> <C>
2,408,103 All North Resources 2/11/94
to 12/01/94 $ 326,535 $171,818
500,000 Arbor Resources 4/05/94 90,580 35,675
333,333 Otis J. Exploration 10/17/94 73,937 83,242
404,000 Selkirk Springs 5/04/94 250,018 149,892
100,000 Silverado MInes 7/08/93 105,000 73,000
100,000 South American
Gold & Copper 11/07/94 148,039 126,290
262,500 Venoro Gold 5/04/94
8/16/94 180,766 140,470
Total $1,174,875 $780,387
========== ========
</TABLE>
At December 31, 1994, the total restricted securities represented 11.07% of
net assets.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of year................................ $ 4.16 $ 2.35 $ 2.55 $ 2.59
$ 3.12
------ ------- ------ ------ ------
Income from investment operations:
Net investment income (loss)................................... (0.05) (0.01) 0.01 0.03
--
Net realized and unrealized gain (loss) on securities.......... (0.67) 2.34 (0.19)
(0.04) (0.53)
------ ------- ------ ------ ------
Total from investment operations............................ (0.72) 2.33 (0.18) (0.01)
(0.53)
------ ------- ------ ------ ------
Less distributions:
Dividends from net investment income........................... -- -- (0.01) (0.03)
--
Distributions from capital gains............................... (0.12) (0.52) (0.01) --
--
------ ------- ------ ------ ------
Total distributions......................................... (0.12) (0.52) (0.02) (0.03) --
Net asset value, end of year..................................... $ 3.32 $ 4.16 $ 2.35 $ 2.55
$ 2.59
====== ======= ====== ======
======
TOTAL RETURN*..................................................... (17.27)% 99.24% (7.16)%
(.20)% (16.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's)............................. $7,052 $10,357 $4,943 $6,202
$7,571
Ratio of expenses to average net assets........................ 2.15% 2.18% 2.25%
2.25% 2.25%
Ratio of net investment income (loss) to average net assets.... (1.26)% (0.28)% 0.56%
1.10% 0.06%
Portfolio turnover............................................. 52.62% 63.44% 72.23% 77.26%
56.46%
</TABLE>
<PAGE>
--------------------
* Calculated without sales charge.
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Excel Midas Gold Shares, Inc.
We have audited the accompanying statement of assets and liabilities of Excel
Midas Gold Shares, Inc., including the statement of investments as of December
31, 1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and financial highlights for the four years then ended. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The financial statements
of Excel Midas Gold Shares, Inc., as of December 31, 1990, which include
financial highlights for the year in the period then ended, was audited by other
auditors whose report dated February 6, 1991, expressed an unqualified opinion
on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Excel
Midas Gold Shares, Inc., as of December 31, 1994, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
four years then ended in conformity with generally accepted accounting
principles.
<PAGE>
Squire & Company
February 10, 1995
Poway, California
--------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1994
------------------------------------------------------------
EXCEL MIDAS GOLD
SHARES, INC.
------------------------------------------------------------
--------------------------------------------------------------------------------
INVESTMENT ADVISOR
EXCEL ADVISORS, INC.
16955 Via Del Campo
San Diego, CA 92127
DISTRIBUTOR
WARNER BECK
INCORPORATED
16955 Via Del Campo
San Diego, CA 92127
SHAREHOLDER
SERVICING AGENT
EXCEL ADVISORS, INC.
16955 Via Del Campo
San Diego, CA 92127
AUDITORS
SQUIRE & CO.
14458 Crestwood Ave.
Poway, CA 92064
LEGAL COUNSEL
MICHAEL RADMER, ESQ.
DORSEY & WHITNEY
2200 First Bank Place East
Minneapolis, Minnesota
55402
<PAGE>
BOARD OF DIRECTORS
JOHN P. MULDER, ESQ.
Attorney At Law
OFFICERS
GARY B. SABIN
President and Chief
Executive Officer
RICHARD B. MUIR
Executive Vice President
and Secretary
EXCEL MIDAS GOLD SHARES, INC.
16955 Via Del Campo, Suite 120
San Diego, CA 92127
(619) 485-9400, EXT. 131
**A prospectus may be obtained by contacting a Financial Consultant at Warner
Beck, Inc. The prospectus containing more complete information should be read
carefully before making an investment in Excel Midas Gold Shares, Inc.
<PAGE>
ARTICLES OF INCORPORATION
OF
MIDAS FUND, INC.
FIRST: (1) The name and address of the incorporator of the Corporation is
as follows:
Daniel E. Burton
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036
(2) Said incorporator is over eighteen years of age.
(3) Said incorporator is forming a corporation under the general laws
of the State of Maryland.
SECOND: The name of the Corporation is:
MIDAS FUND, INC.
THIRD:
(1) The Corporation is formed for the following purpose or purposes:
(a) To conduct, operate and carry on the business of an
open-end management investment company registered as such with
the Securities and Exchange Commission pursuant to the Investment
Company Act of 1940, as amended; and
(b) To exercise and enjoy all powers, rights and privileges
granted to and conferred upon corporations by the Maryland
General Corporation Law, now or hereafter in force.
(2) The foregoing clauses shall be construed as powers as well as
objects and purposes.
FOURTH: The address of the principal office of the Corporation within the
State of Maryland is 11 East Chase Street, Baltimore, Maryland 21202, and the
resident agent of the Corporation in the State of Maryland at this address is
Prentice-Hall Corporation System.
FIFTH: (1) The total number of shares of capital stock which the
Corporation has authority to issue is one billion (1,000,000,000) ($.01) par
value per share ("Shares"), having an aggregate par value of $10,000,000.
The Board of Directors of the Corporation shall have full power and
authority to create and establish and to classify or to reclassify, as the case
may be, any Shares of the Corporation in separate and distinct series ("Series")
and classes of Series ("Classes"). The Shares of said Series or Classes of stock
shall have such preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption as shall be
fixed and determined from time to time by the Board of Directors. The
establishment of any Series or Class shall be effective upon the adoption of a
resolution by the Board of Directors setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Series
or Class. At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated, the Directors may abolish
that Series or Class and the establishment and designation thereof.
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The Board of Directors is hereby expressly granted authority to
increase or decrease the number of Shares of any Series or Class, but the number
of Shares of any Series or Class shall not be decreased by the Board of
Directors below the number of Shares thereof then outstanding, and, from time to
time to designate or redesignate the name of any Class or Series whether or not
Shares of such Class or Series are outstanding. The Corporation may hold as
treasury shares, reissue for such consideration and on such terms as the Board
of Directors may determine, or cancel, at their discretion from time to time,
any Shares reacquired by the Corporation. No holder of any of the Shares shall
be entitled as of right to subscribe for, purchase, or otherwise acquire any
Shares of the Corporation which the Corporation proposes to issue or reissue.
The Corporation shall have authority to issue any additional Shares
hereafter authorized by resolution of the Board of Directors and any Shares
redeemed or repurchased by the Corporation. All Shares of any Series or Class
when properly issued in accordance with these Articles of Incorporation shall be
fully paid and nonassessable.
(2) The Board of Directors is hereby authorized to issue and sell from time
to time Shares of the Corporation for cash or securities or other property as
the Board of Directors may deem advisable in the manner and to the extent now or
hereafter permitted by the laws of the State of Maryland; provided, however,
that the consideration per share (exclusive of any selling commission) to be
received by the Corporation upon the issuance or sale of any Shares of its
capital stock shall not be less than the par value per share and shall not be
less than the net asset value per share of such capital stock determined as
hereinafter provided. No such Shares, whether now or hereafter authorized, shall
be required to be first offered to the then existing stockholders and no
stockholder shall have any preemptive right to purchase or subscribe to any
unissued shares of the Corporation's capital stock or for any additional shares
whether now or hereafter authorized.
(3) At all meetings of stockholders, each holder of Shares shall be
entitled to one vote for each Share standing in the holder's name on the books
of the Corporation on the date fixed in accordance with the By-Laws for
determination of stockholders entitled to vote thereat; provided, however, that
when required by the Investment Company Act of 1940 or rules thereunder or when
the Board of Directors has determined that the matter affects only the interest
of one Series or Class, matters may be submitted to a vote of the holders of
Shares of a particular Series or Class, and each holder of Shares thereof shall
be entitled to votes equal to the Shares of the Series or Class standing in the
holder's name on the books of the Corporation. The presence in person or by
proxy of the holders of one-third (1/3) of the Shares outstanding and entitled
to vote shall constitute a quorum at any meeting of the stockholders except
where a matter is to be voted on by a Series or Class, one-third of the Shares
of that Series or Class outstanding and entitled to vote shall constitute a
quorum for the transaction of business by that Series or Class.
(4) Each holder of Shares shall be entitled at such times as may be
permitted by the Corporation to require the Corporation to redeem any or all of
the holder's Shares at a redemption price per share equal to the net asset value
per share less such charges as are determined by the Board of Directors, at such
time as the Board of Directors shall have prescribed by resolution. The Board of
Directors may specify conditions, prices, places and manner and form of payment
of redemption, and may specify requirements for the proper form or forms of
requests for redemption. The Board of Directors may postpone payment of the
redemption price and may suspend the right of the holders of Shares to require
- 2 -
<PAGE>
the Corporation to redeem Shares during any period or at any time when and to
the extent permissible under the Investment Company Act of 1940.
(5) The Board of Directors may cause the Corporation to redeem at current
net asset value all Shares owned or held by any one stockholder having an
aggregate current net asset value of any amount. Such redemptions shall be
effected in accordance with such procedures as the Board of Directors may adopt.
Upon redemption of Shares pursuant to this Section, the Corporation shall
promptly cause payment of the full redemption price to be made to the holder of
Shares so redeemed.
(6) Dividends and distributions on Shares may be declared, calculated and
paid with such frequency and in such form, manner and amount as the Board of
Directors may from time to time determine.
(7) Net asset value, as used herein, shall be determined on such days and
at such times and by such methods as the Board of Directors shall determine,
subject to the Investment Company Act of 1940 and the applicable rules and
regulations promulgated thereunder. Such determination may be made on a
Series-by-Series basis or made or adjusted on a Class-by-Class basis, as
appropriate.
SIXTH: Notwithstanding any provision of law requiring a greater proportion
than a majority of the votes of all Shares of the Corporation to take or
authorize any action, any action (including amendment of these Articles of
Incorporation) may be taken or authorized by the Corporation upon the
affirmative vote of a majority of the Shares entitled to vote thereon.
SEVENTH: (1) To the maximum extent permitted by applicable law (including
Maryland law and the Investment Company Act of 1940) as currently in effect or
as may hereafter be amended:
(a) No director or officer of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages; and
(b) The Corporation shall indemnify and advance expenses as provided
in the By-Laws to its present and past directors, officers, employees and
agents, and persons who are serving or have served at the request of the
Corporation as a director, officer, employee or agent in similar capacities
for other entities.
(2) The Corporation may 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 or her and incurred
by him or her in any such capacity or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability.
(3) Any repeal or modification of this Article SEVENTH, by the stockholders
of the Corporation, or adoption or modification of any other provision of the
Articles of Incorporation or By-Laws inconsistent with this Section, shall be
prospective only, to the extent that such repeal or modification would, if
applied retrospectively, adversely affect any limitation on the liability of any
director or officer of the Corporation or indemnification available to any
person covered by these provisions with respect to any act or omission which
occurred prior to such repeal, modification or adoption.
EIGHTH: (1) All corporate powers and authority of the Corporation shall
be vested in and exercised by the Board of Directors except as otherwise
provided by statute, these Articles, or the By-Laws of the Corporation. The
Corporation shall have at least three directors; provided that if there is no
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stock outstanding, the number of directors may be less than three but not less
than one. The number of directors shall never be less than the number prescribed
by the General Corporation Law of the State of Maryland.
(2) Thomas B. Winmill shall act as sole director of the Corporation
until the first annual meeting or until his successor is duly chosen and
qualified.
(3) Subject to the provisions of these Articles of Incorporation and
the provisions of the Investment Company Act of 1940, any director, officer
or employee, individually, or any partnership of which any director,
officer or employee may be a member, or any corporation or association of
which any director, officer or employee of this Corporation may be an
officer, director, trustee, employee or stockholder may be a party to or
may be pecuniarily interested in any contract or transaction of the
Corporation, and in the absence of fraud, no contract or other transaction
shall be thereby affected or invalidated, provided that the facts shall be
disclosed or shall have been known to the Board of Directors or a majority
thereof and any director of the Corporation who is so interested or who is
also a director, officer, trustee, employee or stockholder of such
corporation or association or a member of such partnership which is so
interested may be counted in determining the existence of a quorum at any
meeting of the Directors of the Corporation which shall authorize any such
contract or transaction and may vote thereat on any such contract or
transaction with like force and effect as if he were not such director,
officer, trustee, employee or stockholder of such corporation or
association so interested or not a member of a partnership so interested,
or so interested individually.
IN WITNESS WHEREOF, the undersigned has adopted and signed these
Articles of Incorporation on this 1st day of June, 1995 and hereby acknowledges
the same to be his act and that to the best of his knowledge, information and
belief, all matters and facts stated herein are true in all material respects
and that he is making this statement under the penalties of perjury.
Daniel E. Burton
4
<PAGE>
BY-LAWS
OF
MIDAS FUND, INC.
A MARYLAND CORPORATION
JUNE 8, 1995
<PAGE>
BY-LAWS
TABLE OF CONTENTS
ARTICLE I - NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL.............. 1
Section 1.01. Name............................................... 1
Section 1.02. Principal Offices.................................. 1
Section 1.03. Seal............................................... 1
ARTICLE II - STOCKHOLDERS.................................................. 1
Section 2.01. Annual Meetings.................................... 1
Section 2.02. Special Meetings................................... 1
Section 2.03. Notice of Meetings................................. 1
Section 2.04. Quorum and Adjournment of Meetings................. 1
Section 2.05. Voting and Inspectors.............................. 1
Section 2.06. Validity of Proxies................................ 2
Section 2.07. Stock Ledger and List of Stockholders.............. 2
Section 2.08. Action Without Meeting............................. 2
ARTICLE III - BOARD OF DIRECTORS........................................... 2
Section 3.01. General Powers..................................... 2
Section 3.02. Power to Issue and Sell Stock...................... 2
Section 3.03. Power to Declare Dividends......................... 2
Section 3.04. Number and Term of Directors....................... 3
Section 3.05. Vacancies and Newly Created Directorships.......... 3
Section 3.06. Removal............................................ 3
Section 3.07. Regular Meetings................................... 3
Section 3.08. Special Meetings................................... 3
Section 3.09. Waiver of Notice................................... 3
Section 3.10. Quorum and Voting.................................. 3
Section 3.11. Action Without a Meeting........................... 4
Section 3.12. Compensation of Directors.......................... 4
ARTICLE IV - COMMITTEES.................................................... 4
Section 4.01. Organization....................................... 4
Section 4.02. Powers of the Executive Committee.................. 4
Section 4.03. Powers of Other Committees of the Board of Directors 4
Section 4.04. Proceedings and Quorum.............................. 4
Section 4.05. Other Committees.................................... 4
ARTICLE V - OFFICERS.........................................................4
Section 5.01. Officers.............................................4
Section 5.02. Election, Tenure and Qualifications..................4
Section 5.03. Vacancies and Newly Created Offices..................4
Section 5.04. Removal and Resignation..............................5
Section 5.05. Chairman of the Board................................5
Section 5.06. Vice Chairman of the Board...........................5
Section 5.07. President, Co-President..............................5
Section 5.08. Vice President.......................................5
Section 5.09. Treasurer and Assistant Treasurers...................5
Section 5.10. Secretary and Assistant Secretaries..................5
Section 5.11. Subordinate Officers.................................5
Section 5.12. Remuneration.........................................5
Section 5.13. Surety Bonds.........................................6
ARTICLE VI - EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES..................6
Section 6.01. General..............................................6
Section 6.02. Checks, Notes, Drafts, Etc...........................6
Section 6.03. Voting of Securities.................................6
ARTICLE VII - CAPITAL STOCK..................................................6
Section 7.01. Certificates of Stock................................6
Section 7.02. Transfer of Shares...................................6
Section 7.03. Transfer Agents and Registrars.......................6
Section 7.04. Fixing of Record Date................................7
Section 7.05. Lost, Stolen or Destroyed Certificates...............7
ARTICLE VIII - CONFLICT OF INTEREST TRANSACTIONS.............................7
Section 8.01. Validity of Contract or Transactions.................7
Section 8.02. Dealings.............................................7
ARTICLE IX - FISCAL YEAR AND ACCOUNTANT......................................7
Section 9.01. Fiscal Year..........................................7
Section 9.02. Accountant...........................................7
ARTICLE X - CUSTODY OF SECURITIES............................................8
Section 10.01. Employment of a Custodian...........................8
Section 10.02. Termination of Custodian Agreement..................8
Section 10.03. Provisions of Custodian Contract....................8
Section 10.04. Other Arrangements..................................8
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ARTICLE XI - INDEMNIFICATION AND INSURANCE.................................. 8
Section 11.01. Indemnification of Officers, Directors, Employees and Agents 8
Section 11.02. Insurance of Officers, Directors, Employees and Agents...... 9
Section 11.03. Non-exclusivity............................................. 9
Section 11.04. Amendment................................................... 9
ARTICLE XII - AMENDMENTS......................................................9
Section 12.01. General..................................................... 9
Section 12.02. By Stockholders Only........................................ 9
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<PAGE>
BY-LAWS
OF
MIDAS FUND,INC.
(A MARYLAND CORPORATION)
ARTICLE I
NAME OF CORPORATION, LOCATION OF
OFFICES AND SEAL
Section 1.01. Name. The name of the Corporation is Midas Fund, Inc.
Section 1.02. Principal Offices. The principal office of the Corporation in the
State of Maryland shall be located in Baltimore, Maryland. The Corporation may,
in addition, establish and maintain such other offices and places of business as
the board of directors may, from time to time, determine.
Section 1.03. Seal. The corporate seal of the Corporation shall consist of two
(2) concentric circles, between which shall be the name of the Corporation, and
in the center shall be inscribed the year of its incorporation, and the words
"Corporate Seal." The form of the seal shall be subject to alteration by the
board of directors and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced. Any officer or director
of the Corporation shall have authority to affix the corporate seal of the
Corporation to any document requiring the same.
ARTICLE II
STOCKHOLDERS
Section 2.01. Annual Meetings. There shall be no stockholders' meetings for the
election of directors and the transaction of other proper business except as
required by law or as hereinafter provided.
Section 2.02. Special Meetings. Special meetings of stockholders may be called
at any time by the chairman of the board or the president or a co-president and
shall be held at such time and place as may be stated in the notice of the
meeting.
Unless otherwise required by law, 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 10 percent 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 the secretary
shall determine and specify to such stockholders. No special meeting need be
called upon the request of stockholders 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, unless requested by the
holders of a majority of all shares entitled to be voted at such meeting.
Section 2.03. Notice of Meetings. The secretary shall cause notice of the place,
date and hour and, in the case of a special meeting or as otherwise required by
law, the purpose or purposes for which the meeting is called, to be served
personally or to be mailed, postage prepaid, not less than 10 nor more than 90
days before the date of the meeting, to each stockholder entitled to vote at
such meeting at his address as it appears on the records of the Corporation at
the time of such mailing. Notice shall be deemed to be given when deposited in
the United States mail addressed to the stockholders as aforesaid.
Notice of any stockholders' meeting need not be given to any stockholder who
shall sign a written waiver of such notice whether before or after the time of
such meeting, which waiver shall be filed with the records of such meeting, or
to any stockholder who is present at such meeting in person or by proxy. Notice
of adjournment of a stockholders' meeting to another time or place need not be
given if such time and place are announced at the meeting.
Irregularities in the notice of any meeting to, or the nonreceipt of any such
notice by, any of the stockholders shall not invalidate any action otherwise
properly taken by or at any such meeting.
Section 2.04. Quorum and Adjournment of Meetings. The presence at any
stockholders' meeting, in person or by proxy, of stockholders entitled to cast
one-third of all votes entitled to be cast thereat shall be necessary and
sufficient to constitute a quorum for the transaction of business, provided that
with respect to any matter to be voted upon separately by any Series (as defined
in the Articles of Incorporation) or class of shares, a quorum shall consist of
the holders of one-third of the shares of that Series or class outstanding and
entitled to vote on the matter. In the absence of a quorum, the stockholders
present in person or by proxy or, if no stockholder entitled to vote is present
in person or by proxy, any officer present entitled to preside or act as
secretary of such meeting may adjourn the meeting without determining the date
of the new meeting or from time to time without further notice to a date not
more than 120 days after the original record date. Any business that might have
been transacted at the meeting originally called may be transacted at any such
adjourned meeting at which a quorum is present.
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Section 2.05. Voting and Inspectors. At every stockholders' meeting, each
stockholder shall be entitled to one vote for each share and a fractional vote
for each fraction of a share of stock of the Corporation validly issued and
outstanding and standing in his name on the books of the Corporation on the
record date fixed in accordance with Section 7.04 hereof, either in person or by
proxy appointed by instrument in writing subscribed by such stockholder or his
duly authorized attorney, except that no shares held by the Corporation shall be
entitled to a vote; provided, however, that (a) as to any matter with respect to
which a separate vote of any series is required by the Investment Company Act of
1940, as amended, or by the Maryland General Corporation Law, such requirement
as to a separate vote by that series shall apply; (b) in the event that the
separate vote requirements referred to in (a) above apply with respect to one or
more series, then, subject to (c) below, the shares of all other such one or
more series shall vote as a single series; and (c) as to any matter which
affects the interest of only a particular series, only the holders of shares of
the one or more affected series shall be entitled to vote.
If no record date has been fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the later of the close of business on the day on which notice of the meeting
is mailed or the 30th day before the meeting, or, if notice is waived by all
stockholders, at the close of business on the 11th day preceding the day on
which the meeting is held.
Except as otherwise specifically provided in the Articles of Incorporation or
these By-laws or as required by provisions of the Investment Company Act of
1940, as amended, all matters shall be decided by a vote of the majority of the
votes validly cast at a meeting at which a quorum is present. The vote upon any
question shall be by ballot whenever requested by any person entitled to vote,
but, unless such a request is made, voting may be conducted in any way approved
by the meeting.
At any meeting at which there is an election of directors, the chairman of the
meeting may appoint two inspectors of election who shall first subscribe an oath
or affirmation to execute faithfully the duties of inspectors at such election
with strict impartiality and according to the best of their ability, and shall,
after the election, make a certificate of the result of the vote taken. No
candidate for the office of director shall be appointed as an inspector.
Section 2.06. Validity of Proxies. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been signed by the
stockholder or by his duly authorized attorney. Unless a proxy provides
otherwise, it shall not be valid more than 11 months after its date. All proxies
shall be delivered to the secretary of the Corporation or to the person acting
as secretary of the meeting before being voted, who shall decide all questions
concerning qualification of voters, the validity of proxies, and the acceptance
or rejection of votes. If inspectors of election have been appointed by the
chairman of the meeting, such inspectors shall decide all such questions. A
proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Corporation receives from any one of them a specific written notice to the
contrary and a copy of the instrument or order which so provides. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed valid
unless challenged at or prior to its exercise.
Section 2.07. Stock Ledger and List of Stockholders. It shall be the duty of the
secretary or assistant secretary of the Corporation to cause an original or
duplicate stock ledger containing the names and addresses of all the
stockholders and the number of shares held by them, respectively, to be
maintained at the office of the Corporation's transfer agent. Such stock ledger
may be in written form or any other form capable of being converted into written
form within a reasonable time for visual inspection. Any one or more persons,
each of whom has been a stockholder of record of the Corporation for more than
six months next preceding such request, who owns in the aggregate five percent
or more of the outstanding capital stock of the Corporation, may submit (unless
the Corporation at the time of the request maintains a duplicate stock ledger at
its principal office in Maryland) a written request to any officer of the
Corporation or its resident agent in Maryland for a list of the stockholders of
the Corporation. Within 20 days after such a request, there shall be prepared
and filed at the Corporation's principal office in Maryland a list containing
the names and addresses of all stockholders of the Corporation and the number of
shares of each class held by each stockholder, certified as correct by an
officer of the Corporation, by its stock transfer agent, or by its registrar.
Section 2.08. Action Without Meeting. Any action required or permitted to be
taken by stockholders at a meeting of stockholders may be taken without a
meeting if (a) all stockholders entitled to vote on the matter consent to the
action in writing, (b) all stockholders entitled to notice of the meeting but
not entitled to vote at it sign a written waiver of any right to dissent, and
(c) the consents and waivers are filed with the records of the meetings of
stockholders. Such consent shall be treated for all purposes as a vote at the
meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. General Powers. Except as otherwise provided by operation of law,
by the Articles of Incorporation, or by these By-laws, the property, business
and affairs of the Corporation shall be managed under the direction of and all
the powers of the Corporation shall be exercised by or under authority of its
board of directors.
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Section 3.02. Power to Issue and Sell Stock. The board of directors may from
time to time issue and sell or cause to be issued and sold any of the
Corporation's authorized shares to such persons and for such consideration as
the board of directors shall deem advisable, subject to the provisions of the
Articles of Incorporation.
Section 3.03. Power to Declare Dividends. The board of directors, from time to
time as they may deem advisable, may declare and pay dividends in stock, cash or
other property of the Corporation, out of any source available for dividends, to
the stockholders according to their respective rights and interests in
accordance with the provisions of the Articles of Incorporation. The board of
directors may prescribe from time to time that dividends declared may be payable
at the election of any of the stockholders (exercisable before or after the
declaration of the dividend), either in cash or in shares of the Corporation,
provided that the sum of the cash dividend actually paid to any stockholder and
the asset value of the shares received (determined as of such time as the board
of directors shall have prescribed, pursuant to the Articles of Incorporation,
with respect to shares sold on the date of such election) shall not exceed the
full amount of cash to which the stockholder would be entitled if he elected to
receive only cash. The board of directors shall cause to be accompanied by a
written statement any dividend payment wholly or partly from any source other
than:
(a) the Corporation's accumulated undistributed net income (determined
in accordance with good accounting practice and the rules and
regulations of the Securities and Exchange Commission then in effect)
and not including profits or losses realized upon the sale of
securities or other properties; or
(b) the Corporation's net income so determined for the current or
preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation, and shall be in such form as the Securities and
Exchange Commission may prescribe.
Section 3.04. Number and Term of Directors. Except for the initial board of
directors, the board of directors shall consist of not fewer than three nor more
than fifteen directors, as specified by a resolution of a majority of the entire
board of directors and at least one member of the board of directors shall be a
person who is not an "interested person" of the Corporation, as that term is
defined in the Investment Company Act of 1940, as amended. All other directors
may be interested persons of the Corporation if the requirements of Section
10(d) of the Investment Company Act of 1940, as amended, are met by the
Corporation and its investment manager. Each director shall hold office until
his successor is elected and qualified or until his earlier death, resignation
or removal.
All acts done at any meeting of the directors or by any person acting as a
director, so long as his successor shall not have been duly elected or
appointed, shall, notwithstanding that it be afterwards discovered that there
was some defect in the election of the directors or of such person acting as a
director or that they or any of them were disqualified, be as valid as if the
directors or such other person, as the case may be, had been duly elected and
were or was qualified to be directors or a director of the Corporation.
Directors need not be stockholders of the Corporation.
Section 3.05. Vacancies and Newly Created Directorships. If any vacancies shall
occur in the board of directors by reason of death, resignation, removal or
otherwise, or if the authorized number of directors shall be increased, the
directors then in office shall continue to act, and such vacancies (if not
previously filled by the stockholders) may be filled by a majority of the
directors then in office, although less than a quorum, except that a newly
created directorship may be filled only by a majority vote of the entire board
of directors; provided, however, that immediately after filling such vacancy, at
least two-thirds (2/3) of the directors then holding office shall have been
elected to such office by the stockholders of the Corporation. In the event that
at any time, other than the time preceding the first annual stockholders'
meeting, less than a majority of the directors of the Corporation holding office
at that time were elected by the stockholders, a meeting of the stockholders
shall be held promptly and in any event within 60 days for the purpose of
electing directors to fill any existing vacancies in the board of directors,
unless the Securities and Exchange Commission shall by order extend such period.
Section 3.06. Removal. At any stockholders' meeting duly called, provided a
quorum is present, the stockholders may remove any director from office (either
with or without cause) by the affirmative vote of a majority of all votes
represented at the meeting, and at the same meeting a duly qualified successor
or successors may be elected to fill any resulting vacancies by a plurality of
the votes validly cast.
Section 3.07. Regular Meetings. The meeting of the board of directors for
choosing officers and transacting other proper business, and all other meetings,
shall be held at such time and place, within or outside the state of Maryland,
as the board may determine and as provided by resolution. Except as otherwise
provided in the Investment Company Act of 1940, as amended, notice of such
meetings need not be given, following the annual meeting of stockholders, if
any, provided that notice of any change in the time or place of such meetings
shall be sent promptly to each director not present at the meeting at which such
change was made, in the manner provided for notice of special meetings. Except
as otherwise provided under the Investment Company Act of 1940, as amended,
members of the board of directors or any committee designated thereby may
participate in a meeting of such board or committee by means of a conference
telephone or similar communications equipment that allows all persons
participating in the meeting to hear each other at the same time; and
participation by such means shall constitute presence in person at a meeting.
Section 3.08. Special Meetings. Special meetings of the board of directors shall
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be held whenever called by the chairman of the board or the president or a
co-president (or, in the absence or disability of the chairman of the board or
the president or a co-president, by any officer or director, as they so
designate) at the time and place (within or outside of the State of Maryland)
specified in the respective notice or waivers of notice of such meetings. At
least three days before the day on which a special meeting is to be held, notice
of special meetings, stating the time and place, shall be (a) mailed to each
director at his residence or regular place of business or (b) delivered to him
personally or transmitted to him by telegraph, telefax, telex, cable or
wireless.
Section 3.09. Waiver of Notice. No notice of any meeting need be given to any
director who is present at the meeting or who waives notice of such meeting in
writing (which waiver shall be filed with the records of such meeting), either
before or after the time of the meeting.
Section 3.10. Quorum and Voting. At all meetings of the board of directors, the
presence of one-half of the number of directors then in office shall constitute
a quorum for the transaction of business, provided that there shall be present
at least two directors. In the absence of a quorum, a majority of the directors
present may adjourn the meeting, from time to time, until a quorum shall be
present. The action of a majority of the directors present at a meeting at which
a quorum is present shall be the action of the board of directors, unless
concurrence of a greater proportion is required for such action by law, by the
Articles of Incorporation or by these By-laws.
Section 3.11. Action Without a Meeting. Except as otherwise provided in the
Investment Company Act of 1940, as amended, 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 or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the board or
committee.
Section 3.12. Compensation of Directors. Directors may receive such compensation
for their services as may from time to time be determined by resolution of the
board of directors.
ARTICLE IV
COMMITTEES
Section 4.01. Organization. By resolution adopted by the board of directors, the
board may designate one or more committees of the board of directors, including
an Executive Committee, each consisting of at least two directors. Each member
of a committee shall be a director and shall hold committee membership at the
pleasure of the board. The chairman of the board, if any, shall be a member of
the Executive Committee. The board of directors shall have the power at any time
to change the members of such committees and to fill vacancies in the
committees.
Section 4.02. Powers of the Executive Committee. Unless otherwise provided by
resolution of the board of directors, when the board of directors is not in
session the Executive Committee shall have and may exercise all powers of the
board of directors in the management of the business and affairs of the
Corporation that may lawfully be exercised by an Executive Committee except the
power to declare a dividend or distribution on stock, authorize the issuance of
stock, recommend to stockholders any action requiring stockholders' approval,
amend these By-laws, approve any merger or share exchange which does not require
stockholder approval or approve or terminate any contract with an "investment
adviser" or "principal underwriter," as those terms are defined in the
Investment Company Act of 1940, as amended, or to take any other action required
by the Investment Company Act of 1940, as amended, to be taken by the board of
directors. Notwithstanding the above, such Executive Committee may make such
dividend calculations and payments as are consistent with applicable law,
including Maryland corporate law.
Section 4.03. Powers of Other Committees of the Board of Directors. To the
extent provided by resolution of the board, other committees of the board of
directors shall have and may exercise any of the powers that may lawfully be
granted to the Executive Committee.
Section 4.04. Proceedings and Quorum. In the absence of an appropriate
resolution of the board of directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that a quorum shall not be less than two
directors. In the event any member of any committee is absent from any meeting,
the members thereof present at the meeting, whether or not they constitute a
quorum, may appoint a member of the board of directors to act in the place of
such absent member.
Section 4.05. Other Committees. The board of directors may appoint other
committees, each consisting of one or more persons, who need not be directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the board of directors, but shall not
exercise any power which may lawfully be exercised only by the board of
directors or a committee thereof.
ARTICLE V
OFFICERS
Section 5.01. Officers. The officers of the Corporation shall be a president or
co-presidents, a secretary, and a treasurer, and may include one or more vice
presidents (including executive and senior vice presidents), assistant
secretaries or assistant treasurers, and such other officers as may be appointed
in accordance with the provisions of Section 5.11 hereof. The board of directors
may, but shall not be required to, elect a chairman and vice chairman of the
board.
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Section 5.02. Election, Tenure and Qualifications. The officers of the
Corporation (except those appointed pursuant to Section 5.11 hereof) shall be
elected by the board of directors at its first meeting or such subsequent
meetings as shall be held prior to its first annual meeting, and thereafter at
regular board meetings, as required by applicable law. If any officers are not
elected at any annual meeting, such officers may be elected at any subsequent
meetings of the board. Except as otherwise provided in this Article V, each
officer elected by the board of directors shall hold office until his or her
successor shall have been elected and qualified. Any person may hold one or more
offices of the Corporation except that no one person may serve concurrently as
both the president or a co-president and vice president. A person who holds more
than one office in the Corporation may not act in more than one capacity to
execute, acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer. The chairman of the board
shall be chosen from among the directors of the Corporation and may hold such
office only so long as he continues to be a director. No other officer need be a
director.
Section 5.03. Vacancies and Newly Created Offices. If any vacancy shall occur in
any office by reason of death, resignation, removal, disqualification or other
cause, or if any new office shall be created, such vacancies or newly created
offices may be filled by the chairman of the board at any meeting or, in the
case of any office created pursuant to Section 5.11 hereof, by any officer upon
whom such power shall have been conferred by the board of directors. Section
5.04. Removal and Resignation. At any meeting called for such purpose, the
Executive Committee may remove any officer from office (either with or without
cause) by the affirmative vote, given at the meeting, of a majority of the
members of the Committee. Any officer may resign from office at any time by
delivering a written resignation to the board of directors, the president or a
co-president, the secretary, or any assistant secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 5.05. Chairman of the Board. The chairman of the board, if there be such
an officer, shall be the senior officer of the Corporation, shall preside at all
stockholders' meetings and at all meetings of the board of directors and shall
be ex officio a member of all committees of the board of directors. He shall
have such other powers and perform such other duties as may be assigned to him
from time to time by the board of directors.
Section 5.06. Vice Chairman of the Board. The board of directors may from time
to time elect a vice chairman who shall have such powers and perform such duties
as from time to time may be assigned to him by the board of directors, chairman
of the board or the president or a co-president. At the request of, or in the
absence or in the event of the disability of the chairman of the board, the vice
chairman may perform all the duties of the chairman of the board or the
president or a co-president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon such respective officers.
Section 5.07. President, Co-President. The president or co-presidents shall be
the chief executive officer or co-chief executive officers, as the case may be,
of the Corporation and, in the absence of the chairman of the board or vice
chairman or if no chairman of the board or vice chairman has been chosen, shall
preside at all stockholders' meetings and at all meetings of the board of
directors and shall in general exercise the powers and perform the duties of the
chairman of the board. Subject to the supervision of the board of directors, the
president or the co-presidents shall have general charge of the business,
affairs and property of the Corporation and general supervision over its
officers, employees and agents. Except as the board of directors may otherwise
order, the president or a co-president may sign in the name and on behalf of the
Corporation all deeds, bonds, contracts, or agreements. The president or a
co-president shall exercise such other powers and perform such other duties as
from time to time may be assigned by the board of directors.
Section 5.08. Vice President. The board of directors may from time to time elect
one or more vice presidents (including executive and senior vice presidents) who
shall have such powers and perform such duties as from time to time may be
assigned to them by the board of directors or the president or a co-president.
At the request of, or in the absence or in the event of the disability of, the
president or both co-presidents, the vice president (or, if there are two or
more vice presidents, then the senior of the vice presidents present and able to
act) may perform all the duties of the president or co-presidents and, when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president or co-presidents.
Section 5.09. Treasurer and Assistant Treasurers. The treasurer shall be the
chief accounting officer of the Corporation and shall have general charge of the
finances and books of account of the Corporation. The treasurer shall render to
the board of directors, whenever directed by the board, an account of the
financial condition of the Corporation and of all transactions as treasurer; and
as soon as possible after the close of each financial year he shall make and
submit to the board of directors a like report for such financial year. The
treasurer shall cause to be prepared annually a full and complete statement of
the affairs of the Corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year, which shall be submitted
at the annual meeting of stockholders (when, and if, such meeting is held) and
filed within 20 days thereafter at the principal office of the Corporation in
the state of Maryland, except that for any year when an annual meeting of
stockholders is not held, such statement of affairs shall be filed at the
Corporation's principal office within 120 days after the end of the fiscal year.
The treasurer shall perform all acts incidental to the office of treasurer,
subject to the control of the board of directors.
Any assistant treasurer may perform such duties of the treasurer as the
treasurer or the board of directors may assign, and, in the absence of the
treasurer, may perform all the duties of the treasurer.
Section 5.10. Secretary and Assistant Secretaries. The secretary shall attend to
the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the stockholders and directors in books to be
kept for that purpose. The secretary shall keep in safe custody the seal of the
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Corporation, and shall have responsibility for the records of the Corporation,
including the stock books and such other books and papers as the board of
directors may direct and such books, reports, certificates and other documents
required by law to be kept, all of which shall at all reasonable times be open
to inspection by any director. The secretary shall perform such other duties
which appertain to this office or as may be required by the board of directors.
Any assistant secretary may perform such duties of the secretary as the
secretary or the board of directors may assign, and, in the absence of the
secretary, may perform all the duties of the secretary.
Section 5.11. Subordinate Officers. The chairman of the board from time to time
may appoint such other officers or agents as he may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the board of directors may determine. The chairman of the
board from time to time may delegate to one or more officers or agents the power
to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any officer or agent
appointed in accordance with the provisions of this Section 5.11 may be removed,
either with or without cause, by any officer upon whom such power of removal
shall have been conferred by the board of directors.
Section 5.12. Remuneration. The salaries or other compensation of the officers
of the Corporation shall be fixed from time to time by resolution of the board
of directors, except that the board of directors may by resolution delegate to
any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 5.11 hereof.
Section 5.13. Surety Bonds. The board of directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder) to the Corporation in such sum and with such surety or sureties as
the board of directors may determine, conditioned upon the faithful performance
of his or her duties to the Corporation, including responsibility for negligence
and for the accounting of any of the Corporation's property, funds or securities
that may come into his hands.
ARTICLE VI
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 6.01. General. Subject to the provisions of Sections 5.07, 6.02, and
7.03 hereof, all deeds, documents, transfers, contracts, agreements and other
instruments requiring execution by the Corporation shall be signed by the
president or a co-president, a vice president (including executive and senior
vice presidents), chairman or vice chairman and by the treasurer or secretary or
an assistant treasurer or an assistant secretary, or as the board of directors
may otherwise, from time to time, authorize. Any such authorization may be
general or confined to specific instances.
Section 6.02. Checks, Notes, Drafts, Etc. So long as the Corporation shall
employ a custodian to keep custody of the cash and securities of the
Corporation, all checks and drafts for the payment of money by the Corporation
may be signed in the name of the Corporation by the custodian. Except as
otherwise authorized by the board of directors, all requisitions or orders for
the assignment of securities standing in the name of the custodian or its
nominee, or for the execution of powers to transfer the same, shall be signed in
the name of the Corporation by any two of the following: the president or a
co-president, vice president (including executive and senior vice presidents),
treasurer or an assistant treasurer, provided that no one person may sign in the
capacity of two such officers. Promissory notes, checks or drafts payable to the
Corporation may be endorsed only to the order of the custodian or its nominee
and only by any two of the following: the treasurer, the president or a
co-president, a vice president (including executive and senior vice presidents)
or by such other person or persons as shall be authorized by the board of
directors, provided that no one person may sign in the capacity of two such
officers.
Section 6.03. Voting of Securities. Unless otherwise ordered by the board of
directors, the president or a co-president, or any vice president (including
executive and senior vice presidents) shall have full power and authority on
behalf of the Corporation to attend and to act and to vote, or in the name of
the Corporation to execute proxies to vote, at any meeting of stockholders of
any company in which the Corporation may hold stock. At any such meeting such
officer shall possess and may exercise (in person or by proxy) any and all
rights, powers and privileges incident to the ownership of such stock. The board
of directors may by resolution from time to time confer like powers upon any
other person or persons in accordance with the laws of the State of Maryland.
ARTICLE VII
CAPITAL STOCK
Section 7.01. Certificates of Stock. The interest of each stockholder of the
Corporation may be, but shall not be required to be, evidenced by certificates
for shares of stock in such form not inconsistent with the Articles of
Incorporation as the board of directors may from time to time authorize. No
certificate shall be valid unless it is signed in the name of the Corporation by
a president or a co-president or a vice president and countersigned by the
secretary or an assistant secretary or the treasurer or an assistant treasurer
of the Corporation and sealed with the seal of the Corporation, or bears the
facsimile signatures of such officers and a facsimile of such seal. In case any
officer who shall have signed any such certificate, or whose facsimile signature
has been placed thereon, shall cease to be such an officer (because of death,
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resignation or otherwise) before such certificate is issued, such certificate
may be issued and delivered by the Corporation with the same effect as if he
were such officer at the date of issue.
The number of each certificate issued, the name and address of the person owning
the shares represented thereby, the number of such shares and the date of
issuance shall be entered upon the stock ledger of the Corporation at the time
of issuance.
Every certificate exchanged, surrendered for redemption or otherwise returned to
the Corporation shall be marked "canceled" with the date of cancellation.
Section 7.02. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder of record thereof (in
person or by his duly authorized attorney or legal representative) (a) if a
certificate or certificates have been issued, upon surrender duly endorsed or
accompanied by proper instruments of assignment and transfer, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require, or (b) as otherwise prescribed by the board of directors.
Except as otherwise provided in the Articles of Incorporation, the shares of
stock of the Corporation may be freely transferred, subject to the charging of
customary transfer fees, and the board of directors may, from time to time,
adopt rules and regulations with reference to the method of transfer of the
shares of stock of the Corporation. The Corporation shall be entitled to treat
the holder of record of any share of stock as the absolute owner thereof for all
purposes, and accordingly shall not be bound to recognize any legal, equitable
or other claim or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law or the statutes of the State of Maryland.
Section 7.03. Transfer Agents and Registrars. The board of directors may from
time to time appoint or remove transfer agents or registrars of transfers for
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 7.04. Fixing of Record Date. The board of directors may fix in advance a
date as a record date for the determination of the stockholders entitled to
notice of or to vote at any stockholders' meeting or any adjournment thereof, or
to express consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, provided that
(a) such record date shall be within 90 days prior to the date on which the
particular action requiring such determination will be taken, except that 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; (b) the transfer books shall not be closed
for a period longer than 20 days; and (c) in the case of a meeting of
stockholders, the record date shall be at least 10 days before the date of the
meeting.
Section 7.05. Lost, Stolen or Destroyed Certificates. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the board of directors or any officer authorized by the board may, in
its discretion, require the owner of the lost, stolen or destroyed certificate
(or his legal representative) to give the Corporation a bond or other indemnity,
in such form and in such amount as the board or any such officer may direct and
with such surety or sureties as may be satisfactory to the board or any such
officer, sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VIII
CONFLICT OF INTEREST TRANSACTIONS
Section 8.01. Validity of Contract or Transactions. In the event that any
officer or director of the Corporation shall have any interest, direct or
indirect, in any other firm, association or corporation as officer, employee,
director or stockholder, no transaction or contract made by the Corporation with
any such other firm, association or corporation shall be valid unless such
interest shall have been disclosed or made known to all of the directors or to a
majority of the directors and such transaction or contract shall have been
approved by a majority of a quorum of directors, which majority shall consist of
directors not having any such interest or a majority of the directors in office,
including directors having such an interest.
Section 8.02. Dealings. No officer, director or employee of the Corporation
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, except that:
(a) Such prohibition shall not prevent officers, directors or employees
of the Corporation from having a financial interest in the Corporation,
or the sponsor, or a distributor of the shares of the Corporation, or
the investment manager or counsel of the Corporation;
(b) Such prohibition shall not prevent the purchase of securities for
the portfolio of the Corporation or the sale of securities owned by the
Corporation through a securities broker, one or more of whose partners,
officers or directors is an officer, director or employee of the
Corporation, provided such transactions are handled in the capacity of
broker, only, and provided they are performed in accordance with
applicable law;
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(c) Such prohibition shall not prevent the employment of legal counsel,
registrar, transfer agent, dividend disbursing agent, or custodian or
trustee having a partner, officer or director who is an officer,
director or employee of the Corporation, provided only customary fees
are charged for services rendered for the benefit of the Corporation;
(d) Such prohibition shall not prevent the purchase for the portfolio
of the Corporation of securities issued by an issuer having an officer,
director or security holder who is an officer, director or employee of
the Corporation or of the manager or investment counsel of the
Corporation, unless at the time of such purchase one or more of such
officers, directors or employees owns beneficially more than one-half
of one per cent (1/2%) of the shares or securities, or both, of such
issuer and such officers, directors and employees owning more than
one-half of one per cent (1/2%) of such shares or securities together
own beneficially more than five per cent (5%) of such shares or
securities.
ARTICLE IX
FISCAL YEAR AND ACCOUNTANT
Section 9.01. Fiscal Year. The fiscal year of the Corporation shall, unless
otherwise ordered by the board of directors, be twelve calendar months ending on
the 31st day of December.
Section 9.02. Accountant. The Corporation shall employ an independent public
accountant or a firm of independent public accountants as its accountant to
examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The accountant's certificates and reports
shall be addressed both to the board of directors and to the stockholders. The
employment of the accountant shall be conditioned upon the right of the
Corporation to terminate the employment forthwith without any penalty by vote of
a majority of the outstanding voting securities at any stockholders' meeting
called for that purpose.
A majority of the members of the board of directors who are not "interested
persons" (as defined in the Investment Company Act of 1940, as amended) of the
Corporation shall select the accountant at any meeting held within 90 days
before or after the beginning of the fiscal year of the Corporation or before
the annual stockholders' meeting (if any) in that year. The selection shall be
submitted for ratification or rejection at the next succeeding annual
stockholders' meeting, if any, when and if such meeting is held. If the
selection is rejected at that meeting, the accountant shall be selected by
majority vote of the Corporation's outstanding voting securities, either at the
meeting at which the rejection occurred or at a subsequent meeting of
stockholders called for the purpose of selecting an accountant.
Any vacancy occurring between annual meetings, if any, due to the death or
resignation of the accountant may be filled by the vote of a majority of the
members of the board of directors who are not interested persons.
ARTICLE X
CUSTODY OF SECURITIES
Section 10.01. Employment of a Custodian. Unless otherwise required by law or
the Articles of Incorporation, all securities and cash owned by the Corporation
from time to time shall be deposited with and held by a custodian or
subcustodian qualified to act as such in accordance with the requirements of the
Investment Company Act of 1940, as amended.
Section 10.02. Termination of Custodian Agreement. Upon termination of the
agreement for services with the custodian or inability of the custodian to
continue to serve, the board of directors shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has the
required qualifications and is willing to serve, the board of directors shall
call as promptly as possible a special meeting of the stockholders to determine
whether the Corporation shall function without a custodian or shall be
liquidated. If so directed by resolution of the board of directors or by vote of
the holders of a majority of the outstanding shares of stock of the Corporation,
the custodian shall deliver and pay over all property of the Corporation held by
it as specified in such vote.
Section 10.03. Provisions of Custodian Contract. The board of directors shall
cause to be delivered to the custodian all securities owned by the Corporation
or to which it may become entitled, and shall order the same to be delivered by
the custodian only in completion of a sale, exchange, transfer, pledge, or other
disposition thereof, all as the board of directors may generally or from time to
time require to approve or to a successor custodian; and the board of directors
shall cause all funds owned by the Corporation or to which it may become
entitled to be paid to the custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in payment of
expenses, including management compensation, and liabilities of the Corporation,
including distributions to shareholders, or to a successor custodian.
Section 10.04. Other Arrangements. The Corporation may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.
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ARTICLE XI
INDEMNIFICATION AND INSURANCE
Section 11.01. Indemnification of Officers, Directors, Employees and Agents. In
accordance with applicable law, including the Investment Company Act of 1940, as
amended, and Maryland Corporate law, the Corporation shall indemnify each 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 ("Proceeding"), by reason of the fact that he or
she is or was a director, officer, employee, or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee, partner, trustee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against all reasonable expenses (including
attorneys' fees) actually incurred, and judgments, fines, penalties and amounts
paid in settlement in connection with such Proceeding to the maximum extent
permitted by law, now existing or hereafter adopted. Notwithstanding the
foregoing, the following provisions shall apply with respect to indemnification
of the Corporation's directors, officers, and investment manager (as defined in
the Investment Company Act of 1940, as amended):
(a) Whether or not there is an adjudication of liability in such
Proceeding, the Corporation shall not indemnify any such person for any
liability arising by reason of such person's willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved
in the conduct of his or her office or under any contract or agreement
with the Corporation ("disabling conduct").
(b) The Corporation shall not indemnify any such person unless:
(1) the court or other body before which the Proceeding was
brought (a) dismisses the Proceeding for insufficiency of
evidence of any disabling conduct, or (b) reaches a final
decision on the merits that such person was not liable by
reason of disabling conduct; or
(2) absent such a decision, a reasonable determination is
made, based upon a review of the facts, by (a) the vote of a
majority of a quorum of the directors of the Corporation who
are neither interested persons of the Corporation as defined
in the Investment Company Act of 1940, as amended, nor parties
to the Proceeding, or (b) if such quorum is not obtainable, or
even if obtainable, if a majority of a quorum of directors
described above so directs, based upon a written opinion by
independent legal counsel, that such person was not liable by
reason of disabling conduct.
(c) Reasonable expenses (including attorneys' fees) incurred in
defending a Proceeding involving any such person will be paid by the
Corporation in advance of the final disposition thereof upon an
undertaking by such person to repay such expenses unless it is
ultimately determined that he or she is entitled to indemnification,
if:
(1) such person shall provide adequate security for his or her
undertaking;
(2) the Corporation shall be insured against losses arising by reason
of such advance; or
(3) a majority of a quorum of the directors of the Corporation who
are neither interested persons of the Corporation as defined in
the Investment Company Act of 1940, as amended, nor parties to
the Proceeding, or independent legal counsel in a written
opinion, shall determine, based on a review of readily available
facts, that there is reason to believe that such person will be
found to be entitled to indemnification.
Section 11.02. Insurance of Officers, Directors, Employees and Agents. The
Corporation may purchase and maintain insurance or other sources of
reimbursement to the extent permitted by law on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
partner, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her and
incurred by him or her in or arising out of his position.
Section 11.03. Non-exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article XI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Articles of Incorporation,
these By-Laws, agreement, vote of stockholders or directors, or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office.
Section 11.04. Amendment. No amendment, alteration or repeal of this Article or
the adoption, alteration or amendment of any other provisions to the Articles of
Incorporation or By-laws inconsistent with this Article shall adversely affect
any right or protection of any person under this Article with respect to any act
or failure to act which occurred prior to such amendment, alteration, repeal or
adoption.
ARTICLE XII
AMENDMENTS
Section 12.01. General. Except as provided in Section 12.02 of this Article XII
and subject to the provisions concerning stockholder voting in Article II
hereof, all By-laws of the Corporation, whether adopted by the board of
directors or the stockholders, shall be subject to amendment, alteration or
repeal, and new By-laws may be made by the affirmative vote of either: (a) the
holders of record of a majority of the outstanding shares of stock of the
9
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Corporation entitled to vote, at any meeting, the notice or waiver of notice of
which shall have specified or summarized the proposed amendment, alteration,
repeal or new By-law; or (b) a majority of directors, at any meeting the notice
or waiver of notice of which shall have specified or summarized the proposed
amendment, alteration, repeal or new By-law.
Section 12.02. By Stockholders Only. No amendment of any section of these
By-laws shall be made except by the stockholders of the Corporation if the
By-laws provide that such section may not be amended, altered or repealed except
by the stockholders. From and after the issuance of any shares of the capital
stock of the Corporation no amendment, alteration or repeal of this Article XII
shall be made except by the stockholders of the Corporation.
<PAGE>
NUMBER SHARES
MIDAS FUND, INC.
INCORPORATED UNDER THE LAWS OF MARYLAND
THIS CERTIFIES THAT ACCOUNT NUMBER
CUSIP NUMBER
59562C 10 9
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CAPITAL STOCK, PAR VALUE $0.01
PER SHARE OF MIDAS FUND, INC. Herein called the "Corporation", transferable on
the books of the Corporation by the holder hereof in person or by duly
authorized attorney upon the surrender of this certificate properly endorsed.
The Corporation will furnish to any shareholder upon request and without charge
a full statement of the designations, relative rights, preferences and
limitations of the shares of each series and class authorized to be issued. This
certificate is not valid unless countersigned by the Transfer Agent. Witness the
facsimile seal of the Corporation and the facsimile signatures of its duly
authorized officers.
Dated:
COUNTERSIGNED:
CO-PRESIDENT TREASURER
COUNTERSIGNED:
DST SYSTEMS, INC.
(KANSAS CITY, MISSOURI) TRANSFER AGENT
BY:
AUTHORIZED SIGNATURE
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
<PAGE>
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. SIGNATURE(S)
MUST BY DULY GUARANTEED BY A COMMERCIAL BANK, TRUST COMPANY, SAVINGS AND LOAN
ASSOCIATION, FEDERAL SAVINGS BANK, MEMBER FIRM OF A NATIONAL SECURITIES EXCHANGE
OR OTHER ELIGIBLE FINANCIAL INSTITUTION.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations: TEN COM - as tenants in common UNIF
GIFT MIN ACT - Custodian TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship under Uniform Gifts to
Minors Act and not as tenants in common (State) Additional abbreviations may
also be used though not in the above list. For value received, do hereby sell,
assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP
CODE, OF ASSIGNEE) Shares of capital stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint Attorney to
transfer the said shares on the books of the within-named Corporation with full
power of substitution in the premises.
Dated,
Owner
Signature of Co-Owner, if any
IMPORTANT BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH NOTICE PRINTED ABOVE
Signature(s) guaranteed by:
10
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1995, by and between MIDAS FUND, INC. a
Maryland corporation (the "Fund") and MIDAS MANAGEMENT CORPORATION, a Delaware
corporation (the "Investment Manager").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and proposes to offer for public sale shares of common stock that may be issued
as distinct series ("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Fund desires to retain the Investment Manager to furnish
certain investment advisory and portfolio management services to the Fund and
any Series thereof, and the Investment Manager desires to furnish such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the assets of the Fund and any Series thereof,
including the regular furnishing of advice with respect to the Fund's or its
Series' portfolio transactions subject at all times to the control and final
direction of the Fund's Board of Directors, for the period and on the terms set
forth in this Agreement. The Investment Manager hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth, for the compensation herein provided. The
Investment Manager shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way, or otherwise be deemed an
agent of the Fund.
2. The Fund (or each Series) assumes and shall pay all the expenses (or
such Series' proportionate share of such expenses) required for the conduct of
its business including, but not limited to, (a) salaries of administrative and
clerical personnel; (b) brokerage commissions; (c) taxes and governmental fees;
(d) costs of insurance and fidelity bonds; (e) fees of the transfer agent,
custodian, legal counsel and auditors; (f) association fees; (g) costs of
preparing, printing and mailing proxy materials, reports and notices to
shareholders; (h) costs of preparing, printing and mailing the prospectus and
statement of additional information and supplements thereto; (i) payment of
dividends and other distributions; (j) costs of stock certificates; (k) costs of
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Board and shareholders meetings; (l) fees of the independent directors; (m)
necessary office space rental; (n) all fees and expenses (including expenses of
counsel) relating to the registration and qualification of shares of the Fund
(or its Series) under applicable federal and state securities laws and
maintaining such registrations and qualifications; and (o) such non-recurring
expenses as may arise, including, without limitation, actions, suits or
proceedings affecting the Fund (or its Series) and the legal obligation which
the Fund (or its Series) may have to indemnify its officers and directors with
respect thereto.
3. The Investment Manager may, but shall not be obligated to, pay or
provide for the payment of expenses which are primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including, without limitation, payments for: advertising, direct mail
and promotional expenses; compensation to and expenses, including overhead and
telephone and other communication expenses, of the Investment Manager and its
affiliates, the Fund, and selected dealers and their affiliates who engage in or
support the distribution of shares or who service shareholder accounts;
fulfillment expenses including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and, internal costs incurred by the Invest
ment Manager and its affiliates and allocated to efforts to distribute shares of
the Fund such as office rent and equipment, employee salaries, employee bonuses
and other overhead expenses. Such payments may be for the Investment Manager's
own account or may be made on behalf of the Fund pursuant to a written agreement
relating to a plan of distribution adopted pursuant to Rule 12b-1 under the 1940
Act.
4. If requested by the Fund's Board of Directors, the Investment
Manager may provide other services to the Fund (or its Series) such as, without
limitation, the functions of billing, accounting, certain shareholder
communications and services, administering state and Federal registrations,
filings and controls and other administrative services. Any services so
requested and performed will be for the account of the Fund (or its Series) and
the costs of the Investment Manager in rendering such services shall be
reimbursed by the Fund, subject to examination by those directors of the Fund
who are not interested persons of the Investment Manager or any affiliate
thereof.
5. The services of the Investment Manager are not to be deemed
exclusive, and the Investment Manager shall be free to render similar services
to others in addition to the Fund so long as its services hereunder are not
impaired thereby.
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<PAGE>
6. The Investment Manager shall create and maintain all necessary books
and records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from time to time,
pertaining to the investment management services performed by it hereunder and
not otherwise created and maintained by another party pursuant to a written
contract with the Fund. Where applicable, such records shall be maintained by
the Investment Manager for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Fund which are in
the possession of the Investment Manager shall be the property of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Investment Manager's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Investment Manager to the Fund or the Fund's authorized
representatives.
7. (a) As compensation for its services, with respect to the Fund (or
its Series) the Investment Manager will be paid by the Fund a fee payable
monthly and computed at the annual rate of 1% of the first $200 million of
average daily net assets of the Fund (or its Series), .95% of such net assets
over $200 million up to $400 million, .90% of such net assets over $400 million
up to $600 million, .85% of such net assets over $600 million up to $800
million, .80% of such net assets over $800 million up to $1 billion, and .75% of
such net assets over $1 billion. The aggregate net assets for each day shall be
computed by subtracting the liabilities of the Fund (or its Series) from the
value of its assets, such amount to be computed as of the calculation of the net
asset value per share on each business day.
(b) For the services provided and the expenses assumed pursuant to
this Agreement with respect to any Series hereafter established, the Investment
Manager will be paid by the Fund from the assets of such Series a fee in an
amount to be agreed upon in a written fee agreement ("Fee Agreement") executed
by the Fund on behalf of such Series and the Investment Manager. The Fee
Agreements shall provide that they are subject to all terms and conditions of
this Agreement.
8. The Investment Manager shall direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be reasonable in view of the overall nature and quality of services
provided by a particular bro ker/dealer, including brokerage and research
services and sales of Fund shares and shares of other investment companies or
series thereof for which the Investment Manager or an affiliate thereof serves
as investment adviser. The Investment Manager may also allocate portfolio
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<PAGE>
transactions to broker/dealers that remit a portion of their commissions as a
credit against Fund expenses. With respect to brokerage and research services,
the Investment Manager may consider in the selection of broker/dealers brokerage
or research provided and payment may be made of a fee higher than that charged
by another broker/dealer which does not furnish brokerage or research services
or which furnishes brokerage or research services deemed to be of lesser value,
so long as the criteria of Section 28(e) of the Securities Exchange Act of 1934,
as amended, or other applicable law are met. Although the Invest ment Manager
may direct portfolio transactions without necessarily obtaining the lowest price
at which such broker/dealer, or another, may be willing to do business, the
Investment Manager shall seek the best value for the Fund (or its Series) on
each trade that circumstances in the market place permit, including the value
inherent in on-going relationships with quality brokers. To the extent any such
brokerage or research services may be deemed to be additional compensation to
the Investment Manager from the Fund, it is authorized by this Agreement. The
Investment Manager may place Fund brokerage through an affiliate of the
Investment Manager, provided that: the Fund not deal with such affiliate in any
transaction in which such affiliate acts as principal; the commissions, fees or
other remuneration received by such affiliate be reasonable and fair compared to
the commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time; and such
brokerage be undertaken in compliance with applicable law. The Investment
Manager's fees under this Agreement shall not be reduced by reason of any
commissions, fees or other remuneration received by such affiliate from the
Fund.
9. The Investment Manager shall waive all or part of its fee or
reimburse the Fund (or its Series) monthly if and to the extent the aggregate
operating expenses of the Fund (or its Series) exceed the most restrictive limit
imposed by any state in which shares of the Fund are qualified for sale or such
lesser amount as may be agreed to by the Fund's Board of Directors and the
Investment Manager. In calculating the limit of operating expenses, all expenses
excludable under state regulation or otherwise shall be excluded. If this
Agreement is in effect for less than all of a fiscal year, any such limit will
be applied proportionately.
10. Subject to and in accordance with the Articles of Incorporation and
By-laws of the Fund and of the Investment Manager, it is understood that
directors, officers, agents and shareholders of the Fund are or may be
interested in the Fund as directors, officers, shareholders or otherwise, that
the Investment Manager is or may be interested in the Fund as a shareholder or
otherwise and that the effect and nature of any such interests shall be governed
by law and by the provisions, if any, of said Articles of Incorporation or
By-laws.
- 4 -
<PAGE>
11. This Agreement shall become effective upon the date hereinabove
written and, unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (a) by the Board of Directors of the Fund or by the holders of
a majority of the outstanding voting securities of the Fund as defined in the
1940 Act (or with respect to any given Series by the holders of a majority of
the outstanding voting securities of such Series as defined in the 1940 Act) and
(b) by a vote of a majority of the Directors of the Fund who are not parties to
this Agreement, or interested persons of any such party. This Agreement may be
terminated without penalty at any time either by vote of the Board of Directors
of the Fund or by vote of the holders of a majority of the outstanding voting
securities of the Fund (or with respect to any given Series by the holders of a
majority of the outstanding voting securities of such Series) on 60 days'
written notice to the Investment Manager, or by the Investment Manager on 60
days' written notice to the Fund. Termination of this Agreement with respect to
any given Series shall in no way affect the continued validity of this Agreement
or the performance thereunder with respect to any other Series. This Agreement
shall immediately terminate in the event of its assignment.
12. The Investment Manager shall not be liable to the Fund or any
Series or any shareholder of the Fund for any error of judgment or mistake of
law or for any loss suffered by the Fund or any Series or the Fund's
shareholders in connection with the matters to which this Agreement relates, but
nothing herein contained shall be construed to protect the Investment Manager
against any liability to the Fund or any Series or the Fund's shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties or by reason of its reckless disregard of obligations and duties
under this Agreement.
13. As used in this Agreement, the terms "interested person,"
"assignment," and "majority of the outstanding voting securities" shall have the
meanings provided therefor in the 1940 Act, and the rules and regulations
thereunder.
14. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held or
made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
15. This Agreement shall be construed in accordance with and
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<PAGE>
governed by the laws of the State of New York, provided, however, that nothing
herein shall be construed in a manner inconsistent with the 1940 Act or any rule
or regulation promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MIDAS FUND, INC.
By:____________________________
MIDAS MANAGEMENT CORPORATION
By:____________________________
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<PAGE>
SUBADVISORY AGREEMENT
AGREEMENT made this 15th day of May, 1995, by and between MIDAS
MANAGEMENT CORPORATION, a Delaware corporation (the "Investment Manager") and
LION RESOURCE MANAGEMENT LIMITED, an English corporation (the "Subadviser").
WHEREAS the Investment Manager intends to enter into an investment
management agreement (the "Management Agreement") with MIDAS FUND, INC. (the
"Fund") pursuant to which the Investment Manager will furnish the Fund with
investment management and other services; and
WHEREAS the Management Agreement provides that the Investment Manager
may, at its own expense, contract for research and other services as it deems
necessary or desirable to fulfill such obligations; and
WHEREAS, the Subadviser is registered under the Investment
Advisers Act of 1940; and
WHEREAS, the Investment Manager desires to retain the Subadviser to
provide subadvisory and research services in connection with the Fund and the
Subadviser is willing to provide such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Investment Manager will manage the investment and reinvestment of the
assets of Fund including the regular furnishing of advice with respect to the
Fund's portfolio transactions subject at all times to the control and final
direction of the Board of Directors of the Fund, for the period and on the terms
set forth in its Management Agreement with the Fund. The Investment Manager
retains responsibility for selecting brokers, monitoring trade executions,
communicating instructions to the Fund's custodian and other Fund agents, and
all other functions pertaining to the management of the Fund.
2. The Subadviser will make itself available to advise and consult with the
Investment Manager regarding the selection, clearing, and safekeeping of the
Fund's portfolio investments and assist in pricing and generally monitoring such
investments. The Subadviser will provide the Investment Manager with advice as
to allocation of the Fund's portfolio assets among (1) various countries,
including the United States and (2) equities, bullion, and/or other types of
investments, and within each such allocation of country and/or type of
investment, recommendations of specific investments. The Subadviser agrees to
permit the use of its name and the names of its personnel and other information
about the Subadviser in the marketing and other literature in connection with
the Fund.
3. In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, shall pay to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are hereby defined as the actual amounts received
by the Investment Manager as compensation pursuant to paragraph 7(a) of the
Management Agreement less reimbursements, if any, pursuant to the guaranty set
1
<PAGE>
forth in paragraph 9 of the Management Agreement and waivers of such
compensation by the Investment Manager. The amount of the percentage and the
timing of the payment shall be determined by the schedule and accompanying
definitions set forth in Appendix A hereto.
4. The Subadviser will pay all expenses incurred by it in connection with
this Subadvisory Agreement.
5. The services of the Subadviser hereunder are not to be deemed exclusive, and
the Subadviser shall be free to render similar services to others in addition to
the Investment Manager and the Fund so long as its services hereunder are not
impaired thereby. The Subadviser shall not render, however, similar services to
any U.S. registered investment company either directly or indirectly as an
adviser, subadviser, or otherwise, other than to the Fund and other investment
companies for which the Investment Manager or its affiliates provide investment
management services. The Subadviser may render similar services to certain
private specialist portfolios, as determined by the Investment Manager and the
Subadviser from time to time.
6. This Subadvisory Agreement shall become effective upon approval by the
directors and shareholders of the Fund as required by the Investment Company Act
of 1940 (the "1940 Act"). Thereafter, if not terminated, this Subadvisory
Agreement shall continue from year to year if approved annually by (a) the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act and (b) by a vote of a
majority of the Directors of the Fund who are not parties to the Subadvisory
Agreement, or interested persons of any such party. This Subadvisory Agreement
may be terminated without penalty at any time either by vote of the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Investment
Manager and the Subadviser, or by the Investment Manager or the Subadviser on 60
days' written notice to the Fund. In the event of termination upon notice as
herein described, the Investment Manager and the Subadviser agree that, subject
to the provisions of the 1940 Act, no party hereto will be entitled to or seek
indemnification or compensation from the other party for expenses incurred in
connection with marketing efforts performed during the term of this Agreement.
This Subadvisory Agreement shall immediately terminate in the event of its
assignment or upon the termination of the Management Agreement.
7. The Subadviser shall not be liable to the Fund or any shareholder of the Fund
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Subadvisory Agreement relates, but
nothing herein contained shall be construed to protect the Subadviser against
any liability to the Fund by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Subadvisory Agreement.
8. Subject to and in accordance with the Articles of Incorporation and Bylaws of
the Fund, the Investment Manager, and the Subadviser, it is understood that
directors, officers, agents and shareholders of the Fund, the Investment
Manager, or Subadviser are or may be interested in the Fund, the Investment
Manager, or the Subadviser as directors, officers, shareholders or otherwise,
that the Investment Manager or the Subadviser is or may be interested in the
2
<PAGE>
Fund or the Investment Manager or the Subadviser as a shareholder or otherwise
and that the effect and nature of any such interests shall be governed by law
and by the provisions, if any, of said Articles of Incorporation or Bylaws.
9. All notices hereunder shall be in writing and shall be delivered in person or
sent by facsimile transmission that is confirmed by regular, registered, or
certified mail to the following address for the respective parties:
MIDAS MANAGEMENT CORPORATION
11 Hanover Square
New York, NY 10005
Fax: (212) 785-0400
LION RESOURCE MANAGEMENT LIMITED
7 - 8 Kendrick Mews
London, U.K. SW7 3HG
Fax 01-144-71-591-0535
Notice shall be deemed given, five days after depositing in a post office,
postage prepaid and if sent by facsimile transmission five days after
confirmation has been mailed.
10. As used in this Subadvisory Agreement, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meaning provided therefor in the 1940 Act, as from time to time
amended.
IN WITNESS WHEREOF, the parties hereto have executed this Subadvisory
Agreement on the day and year first above written.
MIDAS MANAGEMENT CORPORATION
By:
LION RESOURCE MANAGEMENT LIMITED
By:
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<PAGE>
APPENDIX A
MIDAS FUND, INC.
Subadvisory Fee
As a percent of Net Fees
The Investment Manager shall pay to the Subadviser within 30 days of
each Performance Determination Date, as defined in paragraph A below, a
percentage of the Net Fees, as defined in paragraph 3 of this Subadvisory
Agreement, earned since the later of the effective date of this Subadvisory
Agreement or the prior Performance Determination Date, as defined in paragraph A
below. The amount of the percentage shall be determined by reference to the grid
set forth below.
RELATIVE PERFORMANCEa
TOTAL NET ASSETSb More than 50 Within 50 More than 50
basis points basis points basis points
better than BTR of BTR below BTR
$15,000,000 30% 20% 10%
15,000,000 and 40% 30% 20%
$50,000,000
$50,000,000 50% 40% 30%
A. "Relative Performance" shall be determined from comparing the total return
performance of the Fund and the total return performance of the "Benchmark
Performance" of the objective category of "precious metals" funds ("BTR") as
determined by Morningstar, Inc., or, if unavailable, other similar service
acceptable to the parties and the Fund. The Relative Performance shall be
determined as of the last calendar day of each month ("Performance Determination
Date") and shall measure the Relative Performance for the most recent 12 month
period ("Measurement Period"), except that for the first 12 months of this
Subadvisory Agreement, Relative Performance shall be based upon annualized
returns, the first three Performance Determination Dates shall be the next three
calendar quarter ends after the effective date of this Subadvisory Agreement,
and the Measurement Periods shall be the most recent three months and the fourth
Performance Determination Date shall be the next calendar quarter end and the
Measurement Period shall be the most recent twelve months.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
4
<PAGE>
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING between MIDAS MANAGEMENT CORPORATION,
a Delaware corporation (the "Investment Manager") and LION RESOURCE MANAGEMENT
LIMITED, an English corporation (the "Subadviser") is dated this 15th day of
May, 1995.
WHEREAS, the Investment Manager has retained the Subadviser to provide
subadvisory and research services in connection with Midas Fund, Inc. (the
"Fund") pursuant to the terms of a Subadvisory Agreement dated May 15, 1995 (the
"Agreement");
WHEREAS, pursuant to paragraph 5 of the Agreement, the Subadviser may
render similar services to certain private specialist portfolios, as determined
by the Investment Manager and the Subadviser from time to time;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. Subject to its applicable fiduciary duties, the Subadviser shall
encourage investors seeking the Subadviser's subadvisory and research
services to invest in the Fund and its affiliates.
2. The Investment Manager and the Subadviser have determined at this time
that permitted private specialist portfolios are those having net
assets in excess of the greater of $5,000,000 or 10% of the Fund's
total net assets.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding on the day and year first above written.
MIDAS MANAGEMENT CORPORATION
By:
LION RESOURCE MANAGEMENT LIMITED
By:
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<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made as of __________________, 1995, between MIDAS FUND, INC.
("Fund"), a corporation organized and existing under the laws of the State of
Maryland, and Investor Service Center, Inc. ("Distributor"), a corporation
organized and existing under the laws of the State of Delaware.
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS the Fund desires to retain the Distributor as principal
distributor in connection with the offering and sale of the shares of common
stock ("Shares") and of such other series as may hereafter be designated
("Series") by the Fund's Board of Directors ("Board"); and
WHEREAS the Distributor is willing to act as principal distributor for
each such Series on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Distributor as
its exclusive agent to be the principal distributor to sell and to
arrange for the sale of the Shares on the terms and for the period
set forth in this Agreement. The Distributor hereby accepts such
appointment and agrees to act hereunder.
2. Services and Duties of the Distributor.
(a) The Distributor agrees to sell the Shares on a best
efforts basis from time to time during the term of this Agreement as agent for
the Fund and upon the terms described in the Registration Statement. As used in
this Agreement, the term "Registration Statement" shall mean the currently
effective registration statement of the Fund, and any supplements thereto, under
the Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
(b) Upon the later of the date of this Agreement or the
initial offering of the Shares to the public by a Series, the Distributor will
hold itself available to receive purchase orders, satisfactory to the
Distributor for Shares of that Series and will accept such orders on behalf of
the Fund as of the time of receipt of such orders and promptly transmit such
orders as are accepted to
<PAGE>
the Fund's transfer agent. Purchase orders shall be deemed effective at the time
and in the manner set forth in the Regis tration Statement.
(c) The Distributor in its discretion may enter into
agreements to sell Shares to such registered and qualified retail dealers, as it
may select. In making agreements with such dealers, the Distributor shall act
only as principal and not as agent for the Fund.
(d) The offering price of the Shares of each Series shall be
the net asset value per Share as next determined by the Fund following receipt
of an order at the Distributor's principal office. The Fund shall promptly
furnish the Distributor with a statement of each computation of net asset value.
(e) The Distributor shall not be obligated to sell any
certain number of Shares.
(f) The Distributor shall provide ongoing shareholder
services, which include responding to shareholder inquiries, providing
shareholders with information on their investments in the Series and any other
services now or hereafter deemed to be appropriate subjects for the payments of
"service fees" under Section 26(d) of the National Association of Securities
Dealers, Inc. ("NASD") Rules of Fair Practice (collectively, "service
activities").
(g) The Distributor shall have the right to use any lists of
shareholders of the Fund or any other lists of investors which it obtains in
connection with its provision of services under this Agreement; provided,
however, that the Distributor shall not sell or knowingly provide such lists of
shareholders to any unaffiliated person unless reasonable payment is made to the
Fund.
3. Authorization to Enter into Dealer Agreements and to Delegate Duties
as Distributor. With respect to any or all Series, the Distributor may enter
into a dealer agreement with respect to sales of the Shares or the provision of
service activities with any registered and qualified dealer. In a separate
contract or as part of any such dealer agreement, the Distributor also may
delegate to another registered and qualified dealer ("sub-distributor") any or
all of its duties specified in this Agreement, provided that such separate
contract or dealer agreement imposes on the sub-distributor bound thereby all
applicable duties and conditions to which the Distributor is subject under this
Agreement, and further provided that such separate contract meets all
requirements of the 1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by the Distributor
hereunder are not to be deemed exclusive and the Distributor shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Distributor, who may also be a
director, officer or employee of the Fund, to engage in any other business or to
<PAGE>
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar or a dissimilar nature.
5. Compensation for Distribution and Service Activities.
(a) As compensation for its distribution and service
activities under this Agreement with respect to each Series and its
shareholders, the Distributor shall receive from the Fund a fee (or fees) at the
rate and under the terms and conditions of the Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act ("Plan") adopted by the Fund with respect to the
Series, as such Plan is amended from time to time, and subject to any further
limitations on such fee as the Board may impose.
(b) The Distributor may reallow any or all of the fees
it is paid to such dealers as the Distributor may from time to time
determine.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw
offering Shares of any or all Series by written notice to the
Distributor at its principal office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Shares to be issued unless so requested by
shareholders. If such request is transmitted by the Distributor, the Fund will
cause certificates evidencing Shares to be issued in such names and
denominations as the Distributor shall from time to time direct.
(c) The Fund shall keep the Distributor fully informed of its
affairs and shall make available to the Distributor copies of all information,
financial statements, and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including,
without limitation, certified copies of any financial statements prepared for
the Fund by its independent public accountant and such reasonable number of
copies of the most current prospectus, statement of additional information,
and annual and interim reports of any Series as the Distributor may request, and
the Fund shall cooperate fully in the efforts of the Distributor to sell and
arrange for the sale of the Shares of the Series and in the performance of the
Distributor's duties under this Agreement.
(d) The Fund shall take, from time to time, all necessary
action, including payment of the related filing fee, as may be necessary to
register Shares of each Series under the 1933 Act to the end that there will be
available for sale such number of Shares as the Distributor may be expected to
sell. The Fund agrees to file, from time to time, such amendments, reports, and
other documents as may be necessary in order that there will be no untrue
<PAGE>
statement of a material fact in the Registration Statement, nor any omission of
a material fact which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of Shares of each Series for
sale under the securities laws of such states or other jurisdictions as the
Distributor and the Fund may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the qualification of the Fund as a
broker or dealer in such jurisdictions; provided that the Fund shall not be
required to amend its Articles of Incorporation or By-Laws to comply with the
laws of any jurisdiction, to maintain an office in any jurisdiction, to change
the terms of the offering of the Shares in any jurisdic tion from the terms set
forth in its Registration Statement, to qualify as a foreign corporation in any
jurisdiction, or to consent to service of process in any jurisdiction other than
with respect to claims arising out of the offering of the Shares. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the Securities and Exchange Commission and state and
other regulatory bodies, and shall assume expenses related to communications
with shareholders of each Series, including (i) fees and disbursements of its
counsel and independent public accountant; (ii) the preparation, filing and
printing of registration statements and/or prospectuses or statements of
additional information required under the federal securities laws; (iii) the
preparation and mailing of annual and interim reports, prospectuses, statements
of additional information and proxy materials to shareholders; and (iv) the
qualifications of Shares for sale and of the Fund as a broker or dealer under
the securities laws of such jurisdictions as shall be selected by the Fund and
the Distributor pursuant to Paragraph 6(e) hereof, and the costs and
expenses payable to each such jurisdiction for continuing qualification therein.
8. Expenses of the Distributor. Distributor shall bear all costs and
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other materials used by the Distributor in connection with the
sale of Shares under this Agreement, including the additional cost of printing
copies of prospectuses, statements of additional information, and annual and
interim shareholder reports other than copies thereof required for distribution
to existing shareholders or for filing with any Federal or state securities
authorities; (ii) any expenses of advertising incurred by the Distributor in
connection with such offering; (iii) the expenses of registration or
qualification of the Distributor as a broker or dealer under federal or state
laws and the expenses of continuing such registration or qualification; and (iv)
all compensation paid to the Distributor's employees and others for selling
<PAGE>
Shares, and all expenses of the Distributor, its employees and others who engage
in or support the sale of Shares as may be incurred in connection with their
sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Distributor, its officers and directors, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements therein not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement; provided,
however, that this indemnity agreement shall not inure to the benefit of any
person who is also an officer or director of the Fund or who controls the Fund
within the meaning of Section 15 of the 1933 Act, unless a court of competent
jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed in
the 1933 Act; and further provided, that in no event shall anything contained
herein be so construed as to protect the Distributor against any liability to
the Fund or to the shareholders of any Series to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations under this Agreement. The Fund shall not be liable
to the Distributor under this indemnity agreement with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other such person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Fund of any claim shall not relieve the Fund from any liability which
it may have to the Distributor or any person against whom such action is brought
otherwise than on account of this indemnity agreement. The Fund shall be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any claims subject to this
indemnity agreement. If the Fund elects to assume the defense of any such claim,
the defense shall be conducted by counsel chosen by the Fund and satisfactory to
indemnified defendants in the suit whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the indemnified defendants shall bear the fees and expenses
<PAGE>
of any additional counsel retained by them. If the Fund does not elect to assume
the defense of a suit, it will reimburse the indemnified defendants for the
reasonable fees and expenses of any counsel retained by the indemnified
defendants. The Fund agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of any of its Shares.
(b) The Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates (including any loss arising out
of the receipt by the Distributor of inadequate consideration in connection with
an order to purchase Shares whether in the form of fraudulent check, draft or
wire; a check returned for insufficient funds; or any other inadequate
consideration (hereinafter "Check Loss")), except a loss resulting from the
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement; provided, however, that the Fund shall not be
liable for Check Loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Distributor.
<PAGE>
(c) The Distributor agrees to indemnify, defend, and hold the
Fund, its officers and directors and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its directors or
officers, or any such controlling person may incur under the 1933 Act or under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
the Distributor to the Fund for use in the Registration Statement, arising out
of or based upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration Statement
necessary to make such information not misleading, or arising out of any
agreement between the Distributor and any retail dealer, or arising out of any
supplemental sales literature or advertising used by the Distributor in
connection with its duties under this Agreement. The Distributor shall be
entitled to participate, at its own expense, in the defense or, if it so elects,
to assume the defense of any suit brought to enforce the claim, but if the
Distributor elects to assume the defense, the defense shall be conducted by
counsel chosen by the Distributor and satisfactory to the indemnified defendants
whose approval shall not be unreasonably withheld. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
<PAGE>
defendants in the suit shall bear the fees and expenses of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the indemnified defendants in the suit
for the reasonable fees and expenses of any counsel retained by them.
10. Services Provided to the Fund by Employees of the Distributor. Any
person, even though also an officer, director, employee or agent of the
Distributor who may be or become an officer, director, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting for solely the
Fund and not as an officer, director, employee or agent or one under the control
or direction of the Distributor even though paid by the Distributor.
11. Duration and Termination.
(a) This Agreement shall become effective upon the date
hereabove written, provided that, with respect to any Series, this Agreement
shall not take effect unless such action has first been approved by vote of a
majority of the Board and by vote of a majority of those directors of the Fund
who are not interested persons of the Fund, and have no direct or indirect
financial interest in the operation of the Plan relating to the Series or in any
agreements related thereto (all such directors collectively being referred to
herein as the "Independent Directors"), cast in person at a meeting called for
the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this
Agreement shall continue in effect for one year from the above written date.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Independent Directors, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or with respect to any given
Series by vote of a majority of the outstanding voting securities of such
Series.
(c) Notwithstanding the foregoing, with respect to any Series,
this Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Board, by vote of a majority of the Independent
Directors or by vote of a majority of the outstanding voting securities of the
Shares of such Series on sixty days' written notice to the Distributor or by the
Distributor at any time, without the payment of any penalty, on sixty days'
written notice to the Fund or such Series. This Agreement will automatically
terminate in the event of its assignment.
(d) Termination of this Agreement with respect to any given
Series shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series.
<PAGE>
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient upon receipt in
writing at the other party's principal offices.
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
ATTEST: MIDAS FUND, INC.
By:
ATTEST: INVESTOR SERVICE CENTER, INC.
By:
<PAGE>
CUSTODIAN AGREEMENT
Between
Midas Fund, Inc.
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
1. Bank Appointed Custodian..................................................4
2. Definitions...............................................................4
2.1 Authorized Person.......................................................4
2.2 Security................................................................4
2.3 Portfolio Security......................................................5
2.4 Officers' Certificate...................................................5
2.5 Book-Entry System.......................................................5
2.6 Depository..............................................................5
2.7 Proper Instructions.....................................................5
3. Separate Accounts.........................................................6
4. Certification as to Authorized Persons....................................6
5. Custody of Cash...........................................................6
5.1 Purchase of Securities..................................................6
5.3 Distributions and Expenses of Fund......................................7
5.4 Payment in Respect of Securities........................................7
5.5 Repayment of Loans......................................................7
5.6 Repayment of Cash.......................................................7
5.8 Other Authorized Payments...............................................7
5.9 Termination.............................................................8
6. Securities................................................................8
6.1 Segregation and Registration............................................8
6.2 Voting and Proxies......................................................8
6.3 Book-Entry System.......................................................8
6.4 Use of a Depository....................................................10
6.5 Use of Book-Entry System for Commercial Paper..........................11
6.6 Use of Immobilization Programs.........................................12
6.7 Eurodollar CDs.........................................................12
6.8 Options and Futures Transactions.......................................12
6.9 Segregated Account.....................................................13
6.10 Interest Bearing Call or Time Deposits................................14
6.11 Transfer of Securities................................................15
7. Redemptions..............................................................16
8. Merger. Dissolution. etc. of Fund........................................17
9. Actions of Bank Without Prior Authorization..............................17
10. Collections and Defaults................................................18
<PAGE>
11. Maintenance of Records and Accounting Services...........................18
12. Fund Evaluation..........................................................18
13. Concerning the Bank......................................................19
13.1 Performance of Duties and Standard of Care.............................19
13.2 Agents and Subcustodians with Respect to Property of the Fund
Held in the United States...................................................20
13.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States................................................21
(a) Appointment of Foreign Sub-Custodians..........................21
(b) Foreign Securities Depositories................................21
(c) Segregation of Securities......................................21
(d) Agreements with Foreign Banking Institutions...................21
(e) Access of Independent Accountants of the Fund..................22
(f) Reports by Bank................................................22
(g) Transactions in Foreign Custody Account........................22
(h) Liability of Selected Foreign Sub-Custodians...................23
(i) Liability of Bank..............................................23
(j) Monitoring Responsibilities....................................23
(k) Tax Law........................................................24
13.4 Insurance..............................................................24
13.5. Fees and Expenses of Bank.............................................24
13.6 Advances by Bank.......................................................24
14. Termination..............................................................25
15. Confidentiality..........................................................25
16. Notices..................................................................26
17. Amendments...............................................................26
18. Parties..................................................................26
19. Governing Law............................................................26
20. Counterparts.............................................................26
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this day of August, 1995, between Midas Fund,
Inc., a corporation (the "Fund") and INVESTORS BANK & TRUST COMPANY (the
"Bank").
WHEREAS, the Fund is an open-end management investment company, and the
Bank has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940 (the "1940 Act") to act as custodian of the
portfolio securities and cash of the Fund; and
WHEREAS, the Fund and the Bank now desire to enter into this Custodian Agreement
hereby referred to herein as the "Agreement";
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of the Fund's portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board of Directors or the Board of
Trustees ("the Board"), and set forth in a certificate as required by Section 4
hereof.
2.2 Security. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without
4
<PAGE>
limitation, any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.3 Portfolio Security. Portfolio Security will mean any security owned
by the Fund.
2.4 Officers' Certificate. Officers' Certificate will mean, unless other-
wise indicated, any request, direction, instruction, or certification in writing
signed by any two Authorized Persons of the Fund.
2.5 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.6 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), 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 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.7 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person as shall have
been designated in an Officers' Certificate, such instructions to be given in
such form and manner as the Bank and the Fund shall agree upon from time to
time, and (ii) instructions (which may be continuing instructions) regarding
other matters signed or initialed by such two or more persons from time to time
designated in an Officers' Certificate as having been authorized by the Board.
Oral instructions will be considered Proper Instructions if the Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be promptly
5
<PAGE>
confirmed in writing. The Bank shall act upon and comply with any subsequent
Proper Instruction which modifies a prior instruction and the sole obligation of
the Bank with respect to any follow-up or confirmatory instruction shall be to
make reasonable efforts to detect any 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 such discrepancy or error,
and to the extent such action requires the Bank to act the Fund shall give the
Bank specific Proper Instructions as to the action required. Upon receipt of an
Officers' Certificate as to the authorization by the Board accompanied by a
detailed description of procedures approved by the Fund, Proper Instructions may
include communication effected directly between electro-mechanical or electronic
devices provided that the Board and the Bank are satisfied that such procedures
afford adequate safeguards for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or portfolio, the
Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon).
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund, will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Section 13.2 hereof, including borrowed funds, delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Upon receipt by the Bank of Proper Instructions (which
may be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of common stock of the Fund, notification from
the Fund's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Fund, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Fund,
6
<PAGE>
against contemporaneous receipt of such securities by the Bank or, against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper) of
purchase of the securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such payment is
made.
5.2 Redemptions. In such amount as may be necessary for the repurchase or
redemption of common shares of the Fund offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account of
the Fund of dividends or other distributions to shareholders as may from time to
time be declared by the Board, interest, taxes, management or supervisory fees,
distribution fees, fees of the Bank for its services hereunder and reimbursement
of the expenses and liabilities of the Bank as provided hereunder, fees of any
transfer agent, fees for legal, accounting, and auditing services, or other
operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund, but, in
the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Fund
deals or for their failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
7
<PAGE>
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: upon the termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed
pursuant to Section 13.2 hereof, the Bank as custodian, will receive and hold
pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for
the account of the Fund. All such Portfolio Securities will be held or disposed
of by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officers' Certificate), in the name of a
registered nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute and
deliver all such certificates in connection therewith as may be required by
such laws or regulations or under the laws of any state. The Fund will from
time to time furnish to the Bank appropriate instruments to enable it to hold
or deliver in proper form for transfer, or to register in the name of its
registered nominee, any Portfolio Securities which may from time to time be
registered inthe name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with respect to such Securities, such proxies to
be executed by the registered holder of such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.
6.3 Book-Entry System. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
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in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities which are included with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for the
account of the Fund or shall pay cash collateral against the return of Portfolio
Securities loaned by the Fund upon (i) receipt of advice from the Book-Entry
System that such Securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Bank (or its agent) to reflect such
payment and transfer for the account of the Fund. The Bank (or its agent) shall
transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of securities loaned by the Fund has been transferred to the Account; and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the Fund. Copies
of all advices from the Book-Entry System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by the
Bank and shall be provided to the Fund at its request. The Bank shall send the
Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any transfers
to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System. The Bank will provide the Fund and cause any such agent to
provide, at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, including Securities
deposited in the Book-Entry System, relating to the services provided by the
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Bank or such agent under the Agreement;
(e) The Bank shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the Book-Entry System by reason of any negligence,
willful misfeasance or bad faith of the Bank or any of its agents or of any of
its or their employees or from any reckless disregard by the Bank or any such
agent of its duty to use its best efforts to enforce such rights as it may have
against the Book-Entry System; at the election of the Fund, it shall be
entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a
consequence of any such loss or damage if and to the extent that the Fund has
not been made whole for any loss or damage;
6.4 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Fund all income and other payments thereon and to take
all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of
any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Bank shall pay cash collateral from the account of the Fund against the
return of Portfolio Securities loaned bythe Fund only upon delivery of the
Securities to or for the account of the Fund; and upon any sale of Portfolio
Securities, delivery of the Securities will be made only against payment thereof
or, in the event Portfolio Securities are loaned, delivery of Securities will be
made only against receipt of the initial cash collateral to or for the account
of the Fund; and
(d) The Bank shall be subject to the same liability and duty to the
Fund and its shareholders with respect to all securities of the Fund, and all
cash, stock dividends, rights and items of like nature to which the Fund is
entitled, held or received by a central securities system as agent for the Bank,
pursuant to the foregoing authorization, as if the same were held or received by
the Bank at its own offices. In this connection, with respect to the use of the
Depository by the Bank but without limiting the foregoing duty or liability, the
Bank, without cost to the Fund, shall ensure that:
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(i) The Depository obtains replacement of any certificated Portfolio
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon its
request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately to
the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank confirmation
of any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties hereunder
as may be necessary for the Fund to comply with the recordkeeping requirements
of Section 31 (a) of the 1940 Act and Rule 3 l(a) thereunder; and
(v) Such Depository delivers to the Bank and the Fund all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-entry Paper
System, the Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by the Fund in an
account of the Bank that includes only assets held by it for customers;
(b) the records of the Bank with respect to the Fund's purchase of
Book-entry Paper through the Bank will identify, by book-entry, Commercial Paper
belonging to the Fund which is included in the Book-entry Paper System and shall
at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) the Bank shall pay for Book-Entry Paper purchased for the account
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of the Fund upon contemporaneous (i) receipt of advice from the Issuer that such
sale of Book-Entry Paper has been effected, and (ii) the making of an entry on
the records of the Bank to reflect such payment and transfer for the account of
the Fund;
(d) the Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper System as the
Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has received
a certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of the 1940 Act, and (ii) for each year
following such approval the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval, the Bank shall enter into such immobilization
program with such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Securities are identified on the books of the Bank as belonging to the Fund
and that the books of the Bank identify the European Branch holding such
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.7, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund, and shall have no liability to the Fund or its shareholders with
respect to the actions, inactions, whether negligent or otherwise of such
European Branch in connection with such Eurodollar CDs, except for any loss or
damage to the Fund resulting from the Bank's own negligence, willful misfeasance
or bad faith in the performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. Upon receipt of Proper Instructions the Bank shall take action
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as to put options ("puts") and call options ("calls") purchased or sold
(written) by the Fund regarding escrow or other arrangements (i) in accordance
with the provisions of any agreement entered into between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that the Fund has deposited or is maintaining
adequate margin, if required, with any broker in connection with any option, nor
shall the Bank be under duty or obligation to present such option to the broker
for exercise unless it receives Proper Instructions from the Fund. The Bank
shall have no responsibility for the legality of any put or call purchased or
sold on behalf of the Fund, the propriety of any such purchase or sale, or the
adequacy of any collateral delivered to a broker in connection with an option or
deposited to or withdrawn from a Segregated Account (as defined in subsection
6.9 below). The Bank specifically, but not by way of limitation, shall not be
under any duty or obligation to: (i) periodically check or notify the Fund that
the amount of such collateral held by a broker or held in a Segregated Account
is sufficient to protect such broker of the Fund against any loss; (ii) effect
the return of any collateral delivered to a broker; or (iii) advise the Fund
that any option it holds, has or is about to expire. Such duties or obligations
shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. Upon receipt of Proper Instructions, the Bank shall take action
as to puts, calls and futures contracts ("Futures") purchased or sold by the
Fund in accordance with the provisions of any agreement among the Fund, the Bank
and a Futures Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with transactions by the
Fund.
2. The responsibilities and liabilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(2) of this Section 6.8 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions cash and/or Portfolio Securities:
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(a) in accordance with the provisions of any agreement among the Fund,
the Bank and a broker-dealer registered under the Exchange Act and a member of
the NASD or any Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange or the Commodity
Futures Trading Commission or any registered Contract Market, or of any similar
organizations regarding escrow or other arrangements in connection with
transactions by the Fund;
(b) for the purpose of segregating cash or securities in connection
with options purchased or written by the Fund or commodity futures purchased or
written by the Fund,
(c) for the deposit of liquid assets, such as cash, U.S. Government
securities or other high grade debt obligations, having a market value (marked
to market on a daily basis) at all times equal to not less than the aggregate
purchase price due on the settlement dates of all the Fund's then outstanding
forward commitment or "when-issued" agreements relating to the purchase of
Portfolio Securities and all the Fund's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the Fund has
agreed to sell on a forward commitment basis, and; .
(e) for other proper corporate purposes, but only n the case of this
clause (f), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board, or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such Segregated Account and declaring
such purposes to be proper corporate purposes.
(f) Segregated accounts established and maintained hereunder shall
comply with the procedures required by Investment Company Act, including Release
No. 10666, or any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of Segregated Accounts by registered
investment companies;
(g) Assets may be withdrawn from the Segregated Account pursuant to
Proper Instructions only
(i) in accordance with the provisions of any agreements
referenced in (a) or (b) above;
(ii) for sale or delivery to meet the Fund's obligations under
outstanding firm commitment or when-issued agreements for the purchase
of Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
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<PAGE>
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment
or when-issued agreements for the purchase of portfolio securities or
reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those
in the Segregated Account; or
(v) for delivery upon settlement of a forward commitment agreement
for the sale of Portfolio Securities.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
Instructions requesting such transfer, exchange or delivery stating that it is
for a purpose permitted under the terms of this Section 6.11, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full, or,
against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale of the Portfolio Securities received by the Bank
before such payment is made, as confirmed in the Proper Instructions received by
the Bank before such payment is made;
(b) in exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided
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however that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Security at
least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their terms into
other securities;
(d) for the purpose of redeeming in kind shares of the Fund upon
authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for presentation to
the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio Securities held
by the Bank in order to collateralize loans made to the Fund by any bank,
including the Bank; provided, however, that such Portfolio Securities will be
released only upon payment to the Bank for the account of the Fund of the moneys
borrowed, except that in cases where additional collateral is required to secure
a borrowing already made, and such fact is made to appear in the Proper
Instructions, further Portfolio Securities may be released for that purpose
without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering portfolio securities lent by the
Fund to a bank or broker dealer, but only against receipt in accordance with
street delivery custom as set forth in Proper Instructions and subject to as may
be otherwise provided herein, of adequate collateral as agreed upon from time to
time by the Fund and the Bank, and upon receipt of payment in connection with
any repurchase agreement relating to such portfolio securities entered into by
the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
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the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such portfolio
securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b), (c),
(e), (f), (g), (h) and (i) securities or cash receivable in exchange therefor
shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of its
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles and By-laws of the Fund, from assets
available for said purpose.
8. Merger. Dissolution. etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company where
the Fund is not the surviving entity, the sale by the Fund of all, or
substantially all, of its assets to another investment company, or the
liquidation or dissolution of the Fund and distribution of its assets, the Bank
will deliver the Portfolio Securities held by it under this Agreement and
disburse cash only upon the order of the Fund set forth in an Officers'
Certificate, accompanied by a certified copy of a resolution of the Board
authorizing any of the foregoing transactions. Upon completion of such delivery
and disbursement and the payment of the fees, disbursements and expenses of the
Bank, this Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the Fund
and hold for the account of the Fund all income, dividends, interest and other
payments or distribution of cash with respect to the Portfolio Securities held
thereunder;
9.2 Present for payment all coupons and other income items held by it
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for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal. In addition, the Bank will send the Fund a written report once each
month showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously been
reported.
11. Maintenance of Records and Accounting Services. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act and will furnish the Fund daily
with a statement of condition of the Fund. The Bank will furnish to the Fund at
the end of every month, and at the close of each quarter of the Fund's fiscal
year, a list of the Portfolio Securities and the aggregate amount of cash held
by it for the Fund. The books and records of the Bank pertaining to its actions
under this Agreement and reports by the Bank or its independent accountants
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concerning its accounting system, procedures for safeguarding securities and
internal accounting controls will be open to inspection and audit at reasonable
times by officers of or auditors employed by the Fund and will be preserved by
the Bank in the manner and in accordance with the applicable rules and
regulations under the 1940 Act.
The Bank shall keep the books of account and render statements or copies from
time to time as reasonably requested by the Treasurer or any executive officer
of the Fund.
The Bank shall assist generally in the preparation of reports to shareholders
and others, audits of accounts, and other ministerial matters of like nature.
12. Fund Evaluation. The Bank shall compute and, unless otherwise directed by
the Board, determine as of the close of business on the New York Stock Exchange
on each day on which said Exchange is open for unrestricted trading and as of
such other hours, if any, as may be authorized by the Board the net asset value
and the public offering price of a share of capital stock of the Fund, such
determination to be made in accordance with the provisions of the Articles and
By-laws of the Fund and Prospectus and Statement of Additional Information
relating to the Fund, as they may from time to time be amended, and any
applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination.
The Bank shall use reasonable care in computing the net asset value
hereunder, and the Bank shall be liable and shall hold the fund harmless for any
losses to the Fund occasioned by the Bank's own negligence in the performance of
its duties under this paragraph, provided however that the Bank may rely in good
faith upon information furnished to it by any Authorized Person in respect of
(i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board of Directors or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance or
for any good faith reliance on any source pursuant to (iii) above, provided the
Bank has timely supplied the Fund with such variance reports as are specifically
set forth on Schedule B annexed hereto.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care.
In performing its duties hereunder and any other duties listed on any
Schedule hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Fund, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in conformity
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with such advice. Except as otherwise expressly provided in Section 12, in the
performance of its duties hereunder, the Bank will be protected and not be
liable, and will be indemnified and held harmless for any action taken or
omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its negligence, willful misfeasance or bad faith in the performance
of its duties or reckless disregard of its obligations and duties hereunder.
The Bank will be under no duty or obligation to inquire into and will not be
liable for:
(a) the validity of the issue of any Portfolio Securities purchased by
or for the Fund, the legality of the purchases thereof or the propriety of
the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for the
Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the Fund
or the sufficiency of the amount to be received therefor except to the
extent provided in Section 12;
(d) the legality of the repurchase of any common shares of the Fund or
the propriety of the amount to be paid therefor except to the extent
provided in Section 12;
(e) the legality of the declaration of any dividend by the Fund or
the legality of the distribution of any Portfolio Securities as payment in
kind of such dividend; and
(f) any property or moneys of the Fund unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event shall
the Bank be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, the
unavailability of energy sources and other similar happenings or events except
as results from the Bank's own gross negligence; or
20
<PAGE>
(b) for special, punitive or consequential damages arising from the
provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
13.2 Agents and Subcustodians with Respect to Property of the Fund Held in
the United States. The Bank may employ agents in the performance of its duties
hereunder and shall be responsible for the acts and omissions of such agents as
if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ Subcustodians,
provided that any such subcustodian meets at least the minimum qualifications
required by Section 17(f)(1) of the 1940 Act to act as a custodian of the Fund's
assets with respect to property of the Fund held in the United States. The Bank
shall have no liability to the Fund or any other person by reason of any act or
omission of any such subcustodian and the Fund shall indemnify the Bank and hold
it harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any such subcustodian. Upon
request of the Bank, the Fund shall assume the entire defense of any action,
suit, or claim subject to the foregoing indemnity. The Fund shall pay all fees
and expenses of any subcustodian.
13.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby authorizes
and instructs the Bank to employ as sub-custodians for the Fund's Portfolio
Securities and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on the
Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Trustees, the Bank and the Fund may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Fund may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Bank and the Fund, assets of the Fund shall be maintained
in foreign securities depositories only through arrangements implemented by the
foreign banking institutions serving as Selected Foreign Sub-Custodians pursuant
to the terms hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in subparagraph (d) hereof.
Notwithstanding the foregoing, except as may otherwise be agreed upon in writing
by the Bank and the Fund, the Fund authorizes the deposit in Euroclear, the
securities clearance and depository facilities operated by Morgan Guaranty Trust
Company of New York in Brussels, Belgium, of Foreign Portfolio Securities
21
<PAGE>
eligible for deposit therein and to utilize such securities depository in
connection with settlements of purchases and sales of securities and deliveries
and returns of securities, until notified to the contrary pursuant to
subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its books as
belonging to the Fund the Foreign Portfolio Securities held by each Selected
Foreign Sub-Custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account, Foreign Portfolio
Securities and other assets of the Fund, and, in the event that such institution
deposits Foreign Portfolio Securities in a foreign securities depository, that
it shall identify on its books as belonging to the Bank the securities so
deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as belonging to Bank;
(d) officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent public
accountants for the Fund, will be given access to the books and records of the
foreign banking institution relating to its actions under its agreement with the
Bank; and (e) assets of the Fund held by the Selected Foreign Sub-Custodian will
be subject only to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon request of the
Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and other
assets of the Fund held by Selected Foreign Sub-Custodians, including but not
limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with respect
22
<PAGE>
to the assets of the Fund held by a Selected Foreign Sub-Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable Foreign Sub-Custodian Agreement. If
at any time any Foreign Portfolio Securities shall be registered in the name of
the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold any
such nominee harmless from any liability by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering 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.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euroclear, is subject to the Terms and
Conditions Governing the Euroclear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
23
<PAGE>
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euroclear in connection with the Fund's securities and
other assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually to the
Fund, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-Custodians
to ensure compliance with the requirements of Rule 17f-5 of the Act. In
addition, the Bank will promptly inform the Fund in the event that the Bank is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Fund held by a Foreign Sub-Custodian.
(k) Tax Law. The Bank shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Bank as custodian of the
Fund by the tax laws of any jurisdiction, and it shall be the responsibility of
the Fund to notify the Bank of the obligations imposed on the Fund or the Bank
as the custodian of the Fund by the tax law of any non-U.S. jurisdiction,
including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of jurisdictions for which the Fund has provided such
information.
13.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property and will maintain insurance in accordance
with industry practice but it need not maintain any special insurance for the
benefit of the Fund.
13.5. Fees and Expenses of Bank. The Fund will pay or reimburse the Bank
from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
24
<PAGE>
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable out of pocket expenses incurred in
conjunction with termination of this Agreement by the Fund.
13.6 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any Proper Authorization for such payments by the Fund. Should such a
payment or payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other reason)
this Agreement deems any such overdraft or related indebtedness, a loan made by
the Bank to the Fund payable on demand and bearing interest at the current rate
charged by the Bank for such loans unless the Fund shall provide the Bank with
agreed upon compensating balances. The Fund agrees that the Bank shall have a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in its sole discretion, at
any time to charge any overdraft or indebtedness, together with interest due
thereon against any balance of account standing to the credit of the Fund on the
Bank's books.
14. Termination.
14.1 This Agreement may be terminated at any time without penalty upon
sixty days written notice delivered by either party to the other by means of
registered mail, and upon the expiration of such sixty days this Agreement will
terminate; provided, however, that the effective date of such termination may
be postponed to a date not more than ninety days from the date of delivery of
such notice (i) by the Bank in order to prepare for the transfer by the Bank of
all of the assets of the Fund held hereunder, and (ii) by the Fund in order to
give the Fund an opportunity to make suitable arrangements for a successor
custodian. At any time after the termination of this Agreement, the Fund will,
at its request, have access to the records of the Bank relating to the
performance of its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
25
<PAGE>
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (14.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of a
governmental agency. The parties further agree that a breach of this provision
would irreparably damage the other party and accordingly agree that each of
them is entitled, without bond or other security, to an injunction or
injunctions to prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
Midas Fund, Inc.
11 Hanover Square
New York, New York 10005
Attn: President
26
<PAGE>
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Henry Joyce
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by the Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts. 20. Counterparts.
his 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.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
Midas Fund, Inc.
By:_____________________________
Name:
Title:
ATTEST:
-----------------------------
Investors Bank & Trust Company
By:_____________________________
Name:
Title:
ATTEST:
-----------------------------
DATE: _______________________
28
<PAGE>
<TABLE>
<CAPTION>
Foreign Subcustodian Network
Securities Depository /
Country Subcustodian Clearing Agency
<S> <C> <C>
Argentina Citibank, N. A., Buenos Aires Caja de Valores
Citibank New York Agreement November 15, 1990
Australia National Australia Bank Limited Austraclear
Agreement December 1990 CHESS
RITS
Austria Euroclear / Creditanstalt Bankverein OEKB
Euroclear Agreement May 1, 1990
Bangladesh Standard Chartered Bank, Dhaka None
Standard Chartered Regional Agreement July 23, 1992
Belgium Euroclear / General de Banque CIK
Euroclear Agreement May 1, 1990 Banque Nationale
de Belge
Botswana Barclays Bank PLC/Barclays Bank of Botswana Ltd. None
Barclays Regional Agreement November 21, 1994
Brazil Banco de Boston, Sao Paulo BOVESPA
Agreement BVRJ
Canada Euroclear / Royal Bank of Canada CDS
Euroclear Agreement May 1, 1990
Canada Royal Trust Corporation of Canada CDS
Agreement October 22,1991
China Standard Chartered Bank, Shanghai SSCCRC
Standard Chartered Regional Agreement July 23, 1992
China Standard Chartered Bank, Shenzhen Shenzen Central
Standard Chartered Regional Agreement July 23, 1992 Registrars Co.
Colombia Cititrust Colombia S. A. Sociedad Fiduciaria, Bogota None
Citibank New York Agreement November 15, 1990
Czech Republic Chase Manhattan, N. A. / Ceskoslovenska Obchodni Banka SCP
Chase New York Agreement March 1, 1994
Denmark Euroclear / Den Danske Bank Vardipapercentralen
Euroclear Agreement May 1, 1990
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Egypt Chase Manhattan, N. A. / National Bank of Egypt None
Chase New York Agreement March 1, 1994
Finland Euroclear / Kansallis-Osake-Pankki Central Share Registry
Euroclear Agreement May 1, 1990 Helsinki Money Market
France Euroclear / Morgan Guaranty Paris, Societe Generale Sicovam
Euroclear Agreement May 1, 1990 Banque de France
Germany Euroclear / Deutsche Bank A. G. Kassenverein
Euroclear Agreement May 1, 1990
Ghana Barclays Bank PLC / Barclays Bank of Ghana Ltd. None
Barclays Regional Agreement November 21,1994
Greece Citibank, N. A., Athens CSD
Citibank New York Agreement November 15, 1990
Hong Kong Standard Chartered Bank, Hong Kong CCASS
Standard Chartered Regional Agreement July 23, 1992
Hungary Citibank, Rt., Budapest Keler
Citibank New York Agreement November 15, 1990
Indonesia Standard Chartered Bank, Jakarta PT Klering Dep Efek
Standard Charterd Regional Agreement July 23, 1992
Ireland Bank of Ireland Securities Services Gilts Settlement Of fice
Agreement February 22, 1995
Israel Chase Manhattan, N.A. / Bank Leumi le-Israel The Stock Exchange
Chase New York Agreement March 1, 1994 Clearing House Ltd.
Italy Citibank, N. A., Milan Monte Titoli
Citibank New York Agreement November 15, 1990 Banca d'Italia
Italy Euroclear / Credito Italiano Banca d'Italia
EuroclearAgreementMay 1, 1990
Japan Standard Chartered Bank, Tokyo JASDEC
Standard Chartered Regional Agreement July 23, 1992 Bank of Japan
Jordan Citibank, N. A., Amman None
Citibank New York Agreement November 15,1990
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Korea Standard Chartered Bank, Seoul KSD
Standard Chartered Regional Agreement July 23, 1992
Luxembourg Euroclear / Banque et Caisse d'Epargne de l'Etat None
Euroclear Agreement May 1, 1990
Malaysia Standard Chartered Bank Malaysia Berhad, Kuala Lumpur MCD
Standard Chartered Regional Agreement July 23, 1992
Mauritius Chase Manhattan, N. A. / Hongkong Shanghai Banking Corp. None
Chase New York Agreement March 1, 1994
Mexico Bancomer, S. A. S. D. Indeval
Agreement October 7,1994 Banco de Mexico
Morocco Chase Manhattan, N. A. / Banque Commercial du Maroc None
Chase New York Agreement March 1, 1994
Netherlands Euroclear / ABN Amro Bank NECIGEF
Euroclear Agreement May 1, 1990 De Nederlandsche Bank
New Zealand National Australia Bank Austraclear
AgreementDecember, 1990
Norway Euroclear I Christiania Bank VPS
Euroclear Agreement May 1, 1990
Pakistan Standard Chartered Bank, Karachi None
Standard Chartered Regional Agreement July 23, 1992
Peru Citibank, N. A., Lima CAVAL
Citibank New York Agreement November 15, 1990
Philippines Standard Chartered Bank, Manila None
Standard Chartered Regional Agreement July 23, 1992
Poland Citibank (Poland), S.A., Warsaw National Depository of
Citibank New York Agreement November 15, 1990 Securities
Portugal Citibank Portugal S. A., Lisbon Central de Valores
Citibank New York Agreement November 15,1990 Mobiliarios
Portugal Euroclear / Banco Comercial Portugues Central de Valores
Euroclear Agreement May 1,1990 Mobiliarios
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Singapore Standard Chartered Bank, Singapore CDS
Standard Chartered Regional Agreement July 23, 1992
South Africa Chase Manhattan N. A. / Standard Bank of South Africa None
Chase New York Agreement March 1, 1994
Spain Euroclear I Banco Santander SCLV
Euroclear Agreement May 1, 1990 Banco de Espana
Sri Lanka Standard Chartered Bank, Colombo Central Depository
Standard Chartered Regional Agreement July 23,1992 System
Sweden Euroclear I Skandinaviska Enskilda Banken Vardepapperscentralen
Euroclear Agreement May 1, 1990
Switzerland Citibank (Switzerland), Zurich SEGA
Citibank New York Agreement November 15, 1990
Switzerland Euroclear I Credit Suisse SEGA
EuroclearAgreementMay 1, 1990
Taiwan Standard Chartered Bank, Taipei Taiwan Securities
Standard Chartered Regional Agreement July 23, 1992 Depository
Thailand Standard Chartered Bank, Bangkok SDC
Standard Chartered Regional Agreement July 23,1992
Turkey Chase Manhattan N. A., Istanbul IMKB
Chase New York Agreement March 1, 1994
Transnational Investors Bank & Trust Company Euroclear
United Kingdom Barclays Bank PLC CGO
Barclays Bank Regionl Agreement November 21,1994 CMO
Venezuela Citibank, N. A., Caracas None
Citibank New York Agreement November 15, 1990
Zambia Barclays Bank PLC None
Barclays Bank Regional Agreement November 21, 1994
Zimbabwe Barclays Bank PLC None
Barclays Bank Regional Agreement November 21,1994
</TABLE>
32
<PAGE>
PRECIOUS METALS STORAGE AGREEMENT
This Agreement dated as of the 20th day of June, 1995, between Wilmington
Trust Company, a Delaware Corporation, having its principal office at Rodney
Square North, Wilmington, Delaware 19890 ("Wilmington Trust"), and Midas Fund,
Inc. a Maryland corporation, having its principal office at 11 Hanover Square,
New York, NY 10005 ("Fund"), with respect to Wilmington Trust's accepting,
holding as custodian, storing, transferring, and delivering precious metals
owned by the Fund.
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management company: and
WHEREAS, Wilmington Trust desires to serve as custodian for the Fund; and
WHEREAS, Wilmington Trust has aggregate capital, surplus, and undivided
profits in excess of Two Million Dollars ($2,000,000) and has its functions and
physical facilities supervised by the Federal Deposit Insurance Corporation and
the Delaware State Bank Commissioner and is ready and willing to serve pursuant
to the terms of this Agreement; and
WHEREAS, the Fund is authorized to invest in precious metals and,
therefore, wishes to enter into this Agreement in order that it may provide
storage for said precious metals at Wilmington Trust.
NOW, THEREFORE, in consideration of the mutual agreements herein made, Fund
and Wilmington Trust agree as follows:
1. Definitions. The term "proper instructions" shall mean a request or
direction by a tested telex, or written (including, without limitation,
facsimile transmission) request, direction, instruction or certification
signed or initialed by or on behalf of the Fund by at least two Authorized
Persons (as hereinafter defined).
1
<PAGE>
2. Names, Titles and Signatures of Authorized Signers. An officer of Fund will
certify to Wilmington Trust the names, titles and signatures of those
persons authorized to sign in accordance with Sec. 1 hereof ("Authorized
Persons"), and on a timely basis, of any changes which thereafter may
occur.
3. Delivery to Bank. Wilmington Trust will receive shipments said to contain
precious metals for the Fund's account and will store such shipments in
safekeeping for the Fund in the State of Delaware.
4. Accounts. All such shipments said to contain precious metals delivered to
Wilmington Trust will be held and stored by Wilmington Trust and shall be
credited (in accordance with instructions of Fund), to the Fund's account
and maintained in reasonably detailed books of account. Wilmington Trust
shall open and maintain a separate bank account(s) in the name of the Fund,
subject only to draft or order by Wilmington Trust acting pursuant to the
terms of this Agreement, and shall hold in such account(s), subject to the
provisions hereof, all cash received by it for the account of the Fund.
5. Holding of Precious Metals. Wilmington Trust shall hold all precious metals
received by it for the account of the Fund, pursuant to the provisions of
Section 17(f) of the Investment Company Act of 1940 and the regulations
hereof. All such precious metals are to be held or disposed of by
Wilmington Trust for, and subject at all times to the proper instructions
of, Fund, pursuant to the terms of this Agreement. Wilmington Trust shall
have no power or authority to assign, hypothecate, pledge or otherwise
dispose of any such precious metals, except pursuant to the proper
instructions of Fund.
6. Instructions-Purchase. Upon receipt of proper instructions from Fund,
Wilmington Trust is hereby authorized to pay for bullion purchased for the
account of the Fund only upon receipt of bullion by Wilmington Trust for
the account of the Fund.
7. Instructions-Sales. Upon receipt of proper instructions from Fund,
Wilmington Trust is authorized to make delivery of bullion which has been
sold for the account of the Fund, but only against receipt of cash proceeds
2
<PAGE>
by Wilmington Trust for the account of the Fund.
8. Reports by Custodian Wilmington Trust shall each business day furnish the
Fund and Company with a statement summarizing all transactions and entries
for the account of the Fund for the preceding business day provided
activity occurred within the Fund's account such day. At the end of every
month Wilmington Trust shall furnish the Fund with an account statement
which summarizes account activity during the month and provides details of
account inventory as of the close of the last business day of the month,
which shall include bar size, quantity, brand name, serial number,
fineness, gross weight in troy ounces, fine weight and fine troy weight
contained in the Fund's bullion inventory. Wilmington Trust shall furnish
such other reports as may be mutually agreed upon from time-to time.
9. Disclaimer. Wilmington Trust will not ascertain nor be responsible nor
liable for the authenticity or correctness of the markings on, or the
weight, contents or fineness of precious metals held in safekeeping for the
Fund.
10. Insurance. Wilmington Trust agrees to maintain adequate insurance coverage
on the precious metals stored. This insurance consists of a Bankers Blanket
Bond Form 24 followed by all-risk property policies which shall provide
that the loss thereunder shall be payable to the Fund. Wilmington Trust
will provide certificates of insurance to the Fund evidencing such
insurance after receipt of a written request to provide such certificates.
11. Force Majeure. Wilmington Trust shall not be liable for any failure to
transfer or re-deliver or physically deliver precious metals as provided in
instructions to it pursuant to this Agreement during any period in which
Wilmington Trust is prevented from doing so as the direct and proximate
result of war (whether an actual declaration thereof is made or not),
sabotage, insurrection, riot, act of civil disobedience, act of public
enemy, act of any government or any agency or subdivision thereof, judicial
action, labor dispute, explosion, storm, technical failure, fire or flood,
3
<PAGE>
provided, however, that nothing contained herein shall impair the
obligation which Wilmington Trust shall have to substitute insurance
proceeds therefor unless such proceeds are not payable by the appropriate
insurance carriers by reason of an exclusion contained in applicable
policies.
12. Fees. Exhibit A hereto sets forth Wilmington Trust's current fees and
charges for its services hereunder. Fees may be changed upon not less than
ninety (90) day's notice to Fund.
13. Liability. (a) The physical safekeeping and the settlement of purchase
and sale transactions are the responsibility of Wilmington
Trust, and Fund shall have the right to bring directly against
Wilmington Trust any claim for failure of Wilmington Trust to
perform its obligations hereunder.
(b) Wilmington Trust shall not be liable for any action
taken in good faith upon either any proper instructions herein
described or a certified copy of any resolution of the Board of
Directors of Fund, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly
executed.
(c) So long as and to the extent that it is in the exercise
of reasonable care, Wilmington Trust shall not be responsible for
the title, validity or genuineness of any property or evidence or
title thereto received by it or delivered by it pursuant to this
Agreement and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument from Fund
reasonably believed by it to be genuine and to be signed by the
proper party or parties. Wilmington Trust shall be entitled to
rely on and may act upon advice of non-in-house counsel (who may
be counsel for Wilmington Trust Company or counsel for Fund) on
all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Wilmington
Trust shall be liable only for its own negligent or bad faith
performance of this Agreement, its own negligent or bad faith
acts or failures to act. Fund shall indemnify Wilmington Trust
and hold it harmless from and against all claims, liabilities,
and expenses (including reasonable attorney's fees) which
Wilmington Trust may suffer or incur on account of being
Custodian hereunder except such claims, liabilities and expenses
arising from Wilmington Trust's own negligence or bad faith.
4
<PAGE>
If Fund requires Wilmington Trust to take any action, which action involves
the payment of money or which action may, in the opinion of Wilmington Trust,
result in Wilmington Trust being liable for the payment of money or incurring
liability of some other form, Fund, as a prerequisite to requiring Wilmington
Trust to take such action, shall provide indemnity to Wilmington Trust in an
amount and form satisfactory to it.
14. Records. Wilmington Trust hereby acknowledges that all of the records,
except the records retained on magnetic tape, it shall prepare and maintain
pursuant to this Agreement, shall be the property of the Fund and that upon
proper instructions of Fund, it shall:
(a) Deliver said records to Fund or a successor custodian, as
appropriate;
(b) Provide the auditors or other representative, agent or employee of
the Fund with a copy of such records without charge; and provide the Fund
or successor custodian with a reasonable number of reports and copies of
such records at a mutually agreed upon charge appropriate to the
circumstances;
(c) Permit the auditors or any representative, agent or employee of
the Fund to inspect or copy during Wilmington Trust's normal business hours
any such records, and;
(d) Provide the Fund and its auditors with copies of the Third Party
audit report by Wilmington Trust's auditors regarding internal control
matters relevant to Wilmington Trust's duties hereunder.
(e) As may be requested from time to time by the Fund, Wilmington
Trust shall create and maintain all records relating to its activities and
obligations under this Agreement in such manner as will reasonably assist
the Fund in meeting the Fund's obligations under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, applicable federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the
Fund. Wilmington Trust shall take all reasonable action to allow the Fund
to obtain from year to year favorable opinions from the Fund's independent
accountants with respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1A, as the Fund may from time to time
request, and the Fund's Form N- SAR or other annual or semi-annual reports
to the Securities and Exchange commission and with respect to any other
requirements of the Commission.
15. Appointment of Agents.
5
<PAGE>
(a) Wilmington Trust shall have the authority, in its discretion, to
appoint an agent or agents to do and perform any acts or things for and on
behalf of Wilmington Trust, pursuant at all times to its instructions, as
Wilmington Trust is permitted to do under this Agreement.
(b) Any agent or agents appointed to have physical custody of precious
metals held under this Agreement or any part thereof must be a bank or
banks, as that term is defined in Section 2(a) (5) of the 1940 Act, having
an aggregate, surplus and undivided profits of not less than Two Million
Dollars ($2,000,000) (or such greater sum as may then be required by
applicable laws.) (c) The delegation of any responsibilities or activities
by Wilmington Trust to any agent or agents shall not relieve Wilmington
Trust from any liability which would exist if there were no such
delegation.
16. Assignment and Termination.
(a) This Agreement may not be assigned by Fund or Wilmington Trust
without written consent of the other party.
(b) Either Wilmington Trust or Fund may terminate this Agreement
without payment of any penalty, at any time upon ninety (90) days written
notice thereof delivered by the one to the other, and upon the expiration
of said ninety (90) days, this Agreement shall terminate; provided,
however, that this Agreement shall continue thereafter for such period as
may be necessary for the complete divestiture of all assets held hereunder.
In the event of such termination, Wilmington Trust will immediately upon
the receipt or transmittal of such notice, as the case may be, commence and
prosecute diligently to completion the transfer of all precious metals to
its successor when appointed by Fund. Fund shall select such successor
custodian within sixty (60) days after the giving of such notice of
termination, and the obligation of Wilmington Trust to deliver and transfer
over said assets directly to such successor custodian shall commence as
soon as such successor is appointed, and all fees due Wilmington Trust are
paid by Fund and shall continue until completed, as aforesaid. At any time
after termination hereof Fund may have access to the records of the
administration of this custodianship whenever the same may be necessary.
6
<PAGE>
(c) If, after termination of the services of Wilmington Trust, no
successor custodian has been appointed within the period above provided,
Wilmington Trust may deliver the precious metals owned by the Fund to a
bank or trust company of its own selection having an aggregate capital,
surplus and undivided profits of not less than Two Million Dollars
($2,000,000) (or such greater sum as may then be required by the laws and
regulations governing the conduct by the Fund of its business as an
investment company) and having its functions and physical facilities
supervised by federal or state authority, to be held as the property of the
Fund under the terms similar to those on which they were held by Wilmington
Trust, whereupon such bank or trust company so selected by Wilmington Trust
shall become the successor custodian with the same effect as though
selected by Fund.
17. This Agreement shall be governed by the laws of the State of Delaware. Fund
agrees that jurisdiction and venue for any action arising under this
Agreement shall be exclusively with the State and Federal courts located in
Delaware. This Agreement shall not be amended, except pursuant to a writing
signed by both parties hereto.
19. Notice.
(a) Account statements and bills sent from Wilmington Trust to Fund
shall be sent as follows:
Midas Fund, Inc.
Attn: Treasurer
11 Hanover Street
New York, NY 10005
7
<PAGE>
(b) All notices sent by Fund to Wilmington Trust shall be sent as
follows:
Wilmington Trust Company
Precious Metals Services Division
c/o Michael B. Clark, Vice President
Rodney Square North
1100 North Market Street
Wilmington, DE 1989
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set forth at the beginning of this Agreement.
WILMINGTON TRUST COMPANY MIDAS FUND, INC.
By:......................................... By:...............................
(signature) (signature)
Name:....................................... Name:.............................
Title:...................................... Title:............................
Date:....................................... Date:.............................
8
<PAGE>
SERVICE AND AGENCY AGREEMENT
This Service and Agency Agreement (the "Agreement") is among Investors
Bank & Trust Company (hereinafter referred to as "Investors Bank & Trust
Company") and Midas Fund, Inc. (hereinafter referred to as "Midas Fund"), and is
effective as of ____________, 1995. As of its effective date, this Agreement
supersedes any prior agreement relating to the subject matter hereof.
Article 1: Recitals
1.1 Midas Fund has developed certain materials that may be used by an
individual to establish an individual retirement custodial account ("IRA").
These Midas Fund materials use the provisions of IRS Form 5305-A, Individual
Retirement Custodial Account, provisions developed by Midas Fund in Article VIII
of Form 5305-A, an IRA disclosure statement and related forms and materials (and
such materials are hereinafter collectively called the "IRA Materials"), and the
provisions of IRS Form 5305-SEP, Simplified Employee Pension - Individual
Retirement Accounts Contribution Agreement, and related informational or other
materials (and such materials are hereafter referred to collectively as the "SEP
Materials." In addition, Midas Fund has developed or contracted for certain
materials that may be used by an individual to establish a 403(b)(7) custodial
account (the "403(b) Account Materials") and master or prototype qualified plan
materials that may be used by an Employer to establish a tax-qualified profit
sharing or money purchase pension plan (the "Prototype Plan Materials"). The IRA
Materials, the SEP Materials, the 403(b) Account Materials, and the Prototype
Plan Materials are hereinafter referred to collectively as the "Materials".
Contributions to an IRA, 403(b) Account or Employer Plan established using the
IRA Materials, the 403(b) Account Materials or the Prototype Plan Materials (as
the case may be) may be invested in shares of open-end regulated investment
companies in the Midas Fund Funds Group ("Shares").
1.2 Midas Fund desires to have Investors Bank & Trust Company serve as
Custodian of IRAs or 403(b) Accounts established using the IRA Materials or the
403(b) Account Materials, and to serve as Trustee of Employer Plans established
using the Prototype Plan Materials. Investors Bank & Trust Company is willing to
serve as such Custodian or Trustee in accordance with the terms and conditions
of this Agreement. For purposes of this Agreement, in its capacity as Custodian
or Trustee of a Customer Arrangement hereunder, Investors Bank & Trust Company
will be referred to as the "Custodian" (even though with respect to Employer
Plans, Investors Bank & Trust Company is serving as Trustee).
1.3 Investors Bank & Trust represents to Midas Fund that it is and, as
long as any Customer Arrangements established hereunder are in effect, will be a
<PAGE>
"bank" as defined in Section 408(n)(1) of the Internal Revenue Code of 1986, as
amended.
Article 2: Definitions
As used in this Agreement, the following terms have the following
meanings:
2.1 "Customer" means an individual or business maintaining a Customer
IRA, Customer 403(b) Account, or Employer Plan.
2.2 "Customer Arrangement" means a Customer IRA, a Customer 403(b)
Account, or an Employer Plan.
2.3 "Customer IRA" means the individual retirement custodial account,
as hereafter adopted by an individual using the IRA Materials.
2.4 "Customer 403(b) Account" means the 403(b)(7) custodial account, as
hereafter adopted by an individual using the 403(b) Account Materials.
2.5 "Employer" means an entity (whether incorporated or not) that has
established an Employer SEP or an Employer Plan.
2.6 "Employer Plan" means a tax-qualified prototype profit sharing or
money purchase pension plan as hereafter established by an Employer using the
Prototype Plan Materials.
2.7 "Employer SEP" means a simplified employee pension plan, as
hereafter established by an Employer using the SEP Materials.
Article 3: IRA Materials
3.1 Midas Fund will be responsible for preparing and maintaining all
of the Materials. Midas Fund will be responsible for the legal and tax effect of
such Materials, and will take all steps necessary to ensure that all the
Materials contain such terms and conditions and meet such other requirements as
are necessary to comply with all provisions of the Internal Revenue Code and any
other laws applicable to individual retirement accounts, simplified employee
pension plans, 403(b)(7) custodial accounts or tax-qualified profit sharing or
money purchase pension plans, in order to achieve tax deferral for Customers who
establish or employees or owner-employees who participate in a Customer
Arrangement and to achieve tax deductibility for the Employer for any
contributions to any such Customer Arrangement (within applicable limitations).
This responsibility will include (without limitation) timely amending the
Materials and causing amended Materials to be distributed to and if necessary
signed by Customers and/or Employers. All costs and expense of the preparation
and maintenance of the Materials will be borne by Midas Fund.
<PAGE>
Midas Fund may contract for or arrange with a vendor selected with
reasonable care by Midas Fund for the provision of any or all the Materials,
provided that, as between Midas Fund and Investors Bank & Trust Company, Midas
Fund will be responsible for all the Materials as provided in the preceding
paragraph and for all other purposes of this Agreement.
The Materials (and all explanatory, advertising, marketing or other
Materials used in connection with any Customer Arrangement) will provide that
Investors Bank & Trust Company as Custodian of any Customer Arrangement will
have no investment responsibilities and no fiduciary or other responsibility or
liability for the selection of investments for any Customer Arrangement, and
will not serve as the "plan administrator" (as defined in the Employee
Retirement Income Security Act of 1974, as amended) of any Customer Arrangement.
Article 4: Employment of Investors Bank & Trust Company as
Custodian
4.1 Investors Bank & Trust Company agrees to serve as Custodian of any
Customer Arrangement hereafter established by a Customer using the Materials. As
such Custodian, Investors Bank & Trust Company will be designated as the owner
of the Shares purchased for each Customer Arrangement on the records of Midas
Fund. Midas Fund represents and warrants to Investors Bank & Trust Company that
the Shares will meet all applicable legal requirements, including registration
in accordance with the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, in order to be legal investments for Customer
Arrangements.
4.2 Records of the Custodian's ownership of Shares will be maintained
by Midas Fund in the name of Investors Bank & Trust Company as Custodian (or its
nominee) and no physical shares will be issued.
4.3 Investors Bank & Trust Company and Midas Fund acknowledge and agree
that:
(a) Under the Materials, Investors Bank & Trust Company
as Custodian has no investment responsibility for the
selection of Shares for any Customer Arrangement and Investors Bank &
Trust Company will have no liability for any investments made for a
Customer Arrangement.
(b) Investors Bank & Trust Company will not serve as "plan
administrator" (as defined in the Employee Retirement Income Security
Act of 1974, as amended) of any Customer Arrangement whatsoever, or in
any other administrative capacity or other capacity except as Custodian
thereof.
(c) Midas Fund agrees that, in any written, oral, or
electronic communications from Midas Fund to any prospective or actual
<PAGE>
Customer or Employer, it will not state or represent that Investors
Bank & Trust Company has any investment discretion or other power
concerning investments of any Customer Arrangement, or that Investors
Bank & Trust Company will serve as plan administrator or have any
administrative or other responsibility for the administration or
operation of any Customer Arrangement.
4.4 (a) Investors Bank & Trust Company hereby delegates to Midas Fund all
record keeping and other duties of the Custodian as are specified in any of the
Materials or as may be necessary or convenient to administer and maintain any
Customer Arrangement. With respect to any Customer Arrangement, such duties
include, without implied limitation, receiving and maintaining copies of the
signed Materials and other documentation necessary to reflect the establishment
of and activity in each Customer Arrangement, processing all contributions to a
Customer Arrangement (including rollover or direct rollover contributions),
properly investing all such contributions in Shares in accordance with the
Customer's instructions, processing investment transfers among Shares in
accordance with the Customer's instructions, processing distributions and
rollovers or transfers from the Customer Arrangement, providing periodic
Customer Arrangement account statements (including a year-end statement),
performing all required government reporting in a timely manner in accordance
with applicable requirements, including timely filing Form 5498 and Form 1099R
(where applicable) with the Customer and the Internal Revenue Service,
performing income tax withholding, where applicable, timely providing a Schedule
P to each Employer with an Employer Plan to be filed with the Annual Report of
the Employer Plan to the Internal Revenue Service, and responding to all
Customer and other inquiries concerning a Customer Arrangement. With respect to
Employer SEPs and Employer Plans, such duties may include, without implied
limitation, receiving Employer SEP or Employer Plan contributions and properly
allocating such contributions to participants' accounts or (in the case of an
Employer SEP) individual retirement accounts operating in connection with such
Employer SEP or Employer Plan, and responding to all Employer and other
inquiries concerning an Employer SEP or Employer Plan. Midas Fund will perform
all such duties, and will do so with the same degree of care that Investors Bank
& Trust Company would be required to exercise if it were performing such duties
itself.
(b) Midas Fund may delegate any of its duties under the
preceding subsection (a) to a third party service provider or service bureau
(which may include an affiliate of Midas Fund or the transfer agent or
distributor of the Shares) selected by Midas Fund with reasonable care.
Notwithstanding any such delegation, Midas Fund will remain responsible to
Investors Bank & Trust Company for the complete and proper performance of Midas
Fund's duties under the preceding subsection (a).
<PAGE>
4.5 Midas Fund will upon reasonable advance notice make available
access to its facilities and access to or copies of such records to Investors
Bank & Trust Company as Investors Bank & Trust Company may request in order that
Investors Bank & Trust Company may determine that Midas Fund is properly
performing its duties and obligations hereunder or as may be necessary to comply
with bank regulatory or other legal requirements to which Investors Bank & Trust
Company is subject; Investors Bank & Trust Company's right of access under this
sentence will include access to any service provider or service bureau
performing any of Midas Fund's duties and obligations under this Agreement on
behalf of Midas Fund.
Article 5: Reviews of Materials
5.1 Midas Fund will submit to Investors Bank & Trust Company and await
its advance approval of all Materials and of any other materials concerning
Investors Bank & Trust Company or the duties of the Custodian which will be used
by Midas Fund in marketing the Materials to prospective or actual Customers or
Employers or in communicating with Customers or Employers. Investors Bank &
Trust Company will not unreasonably withhold its approval of any such materials.
5.2 Any approvals by Investors Bank & Trust Company under Section 5.1
will constitute Investors Bank & Trust Company's acquiescence to the use of such
materials and not its approval of their contents or their effect. Midas Fund
will assume full responsibility to Investors Bank & Trust Company and to all
other interested persons (including Customers and Employers) for such contents
and such effect.
Article 6: Applications and Correspondence
6.1 Investors Bank & Trust Company will sign all applications to
establish a Customer Arrangement or other documents related to Customer
Arrangements which Midas Fund submits to Investors Bank & Trust Company for its
signature. However, Investors Bank & Trust Company may in writing authorize
Midas Fund or Midas Fund's designee to execute Investors Bank & Trust Company's
name to one or more specific documents or categories of documents (and such
authorization may be a blanket or standing authorization until revoked by
Investors Bank & Trust Company). In no event will Midas Fund sign Investors Bank
& Trust Company's name on any application or other document without Investors
Bank & Trust Company's prior written approval.
6.2 Upon receipt, Investors Bank & Trust Company will promptly forward
or refer all written and oral inquiries from Customers, Employers and/or other
parties to Midas Fund. Midas Fund will appropriately handle all inquiries
directed to the Custodian.
Article 7: Returns and Reports
<PAGE>
7.1 Midas Fund will timely prepare and file all returns, reports and
statements relating to Customer Arrangements required by the Code and
regulations thereunder or any other applicable federal or state law, or as
agreed to in the relevant Materials relating to a Customer Arrangement.
Article 8: Fees and Expenses
8.1 In consideration for Investors Bank & Trust Company's service as
Custodian hereunder, Midas Fund will pay Investors Bank & Trust Company such
compensation as is specified in attached Schedule A. In addition, Investors Bank
& Trust Company will be entitled to be reimbursed by Midas Fund for Investors
Bank & Trust Company's reasonable expenses (including fees of legal counsel or
other advisors) incurred in performing any services under this Agreement other
than serving as Custodian of a Customer Arrangement (such as, by way of an
example of a reimbursable expense and not by way of limitation, fees of legal
counsel to review the Materials) or any services requested by Midas Fund.
8.2 Investors Bank & Trust Company will receive reimbursement for any
expenses it incurs in connection with serving as Custodian of any Customer
Arrangement to the extent provided for under the relevant Materials and as
Custodian will have the right to charge such expenses directly to a Customer
Arrangement (or an account thereunder) as provided for under the relevant
Materials. To the extent that Investors Bank & Trust Company does not collect
the entire amount of any such expense
<PAGE>
from the Customer Arrangement involved, Midas Fund will pay such shortfall to
Investors Bank & Trust Company.
Article 9: Indemnification of Investors Bank & Trust Company
9.1 Midas Fund and its successors and assigns will at all times jointly
and severally indemnify and hold Investors Bank & Trust Company and its
successors and assigns harmless from any and all liability, claims, actions,
loss, costs or expense (including (a) reasonable fees for counsel, (b) taxes,
penalties, expenses or fees, and (c) any liability imposed directly or
indirectly as a consequence of limiting investment options available under any
Customer Arrangement to the Shares), hereinafter referred to as "Losses", which
Investors Bank & Trust Company incurs in any manner arising directly or
indirectly from or out of or in connection with the performance or non-
performance by Midas Fund of Midas Fund's duties and obligations under this
Agreement or applicable law, or arising directly or indirectly from, out of or
in connection with Investors Bank & Trust Company's being named Custodian of any
Customer Arrangement under this Agreement or under any of the Materials.
The indemnification of Investors Bank & Trust Company (and its
successors and assigns) provided for in the preceding paragraph will include
indemnification for any Losses arising directly or indirectly from or out of or
<PAGE>
in connection with the performance or non-performance by either any third-party
service provider or service bureau to whom Midas Fund has delegated any of its
duties under Section 4.4(b) or any provider or vendor with whom Midas Fund has
contracted for the provision of any of the Materials under Section 3.1.
9.2 No Losses which might be subject to the indemnification provision
in Section 9.1 will be confessed, settled or compromised by Investors Bank &
Trust Company until Investors Bank & Trust Company gives Midas Fund at least ten
business days' written notice of the material facts as then known to Investors
Bank & Trust Company, and Midas Fund will have the right, upon written demand
given to Investors Bank & Trust Company within ten business days after the date
of such notice from Investors Bank & Trust Company, to confess or defend against
such Losses at its expense.
Article 10: Resignation or Removal of Custodian
10.1 If at any time hereafter, Midas Fund chooses to discontinue performing
any of its duties and obligations described in or contemplated by this
Agreement, either of a general nature or in respect to any or all Customer
Arrangements, it will give Investors Bank & Trust Company at least 90 days'
written notice prior to such discontinuance. Investors Bank & Trust Company may
thereupon resign as Custodian in respect to any or all Customer Arrangements in
accordance with the provisions of the relevant Materials. If within 30 days
after Investors Bank & Trust Company receives such a notice from Midas Fund, or
if any other time prior to receipt of any such notice from Midas Fund, Investors
Bank & Trust Company chooses to resign as Custodian of any or all Customer
Arrangements, Midas Fund will promptly distribute the notice of Investors Bank &
Trust Company's resignation to such persons and in such manner as are called for
under the applicable provisions of the relevant Materials and in form and
content satisfactory to Investors Bank & Trust Company. Midas Fund will continue
to perform such duties and obligations in respect to such Customer Arrangements
at least until Investors Bank & Trust Company's resignation takes effect and the
assets have been transferred to its successor custodian or trustee or have been
distributed.
Article 11: Miscellaneous
11.1 No party to this Agreement will be liable to any other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder
(provided that this Section 11.1 is not intended to and will not be construed to
reduce or terminate in any way Midas Fund's indemnification obligation under
Section 9.1).
11.2 This Agreement will become effective as of the date stated above
<PAGE>
and will continue in full force while Investors Bank & Trust Company serves as
Custodian of any Customer Arrangements, and will terminate when Investors Bank &
Trust Company no longer serves as Custodian of any such Customer Arrangement;
provided, however, that the indemnification provisions of Article 9 will
continue to apply after termination of this Agreement with respect to any act or
omission which is alleged to have occurred while this Agreement was in effect.
11.3 This Agreement may be amended from time to time by mutual written
agreement of the parties. Any such amendment must be in writing and signed by
both parties. Schedules appended hereto may be amended by written agreement
between the parties without re-execution of this Agreement.
11.4 Midas Fund represents and warrants to Investors Bank & Trust Company
that it has power under its Articles of Incorporation and by-laws (or
equivalent) to enter into and perform its obligations under this Agreement, and
has duly executed this Agreement so as to constitute its valid and binding
obligation.
11.5 Notices delivered or mailed postage prepaid to:
Midas Fund at
11 Hanover Square
New York, NY 10005
Attn: Thomas B. Winmill, Co-President
Investors Bank & Trust Company at
P.O. Box 1537 - ADM27
Boston, MA 02205
Attn: Henry N. Joyce, Managing Director
or to such other addresses Midas Fund or Investors Bank & Trust Company may
hereafter specify to the other in writing.
11.6 This Agreement will be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts. Midas Fund hereby submits to the jurisdiction of the courts
located in the Commonwealth of Massachusetts, including any appellate court
thereof or the federal district court located therein with respect to any
litigation involving this Agreement.
11.7 Unless otherwise required by law, each party agrees to maintain in
confidence any confidential or proprietary information of any other party and
not to disclose any such information without the consent of the party owning
such information.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf by its duly authorized officer and to be duly
attested.
ATTEST:
MIDAS FUND, INC.
By:
Authorized Signer
INVESTORS BANK & TRUST COMPANY
By:
Authorized Signer
<PAGE>
SCHEDULE A
In consideration for Investors Bank & Trust Company's service as
Custodian, Midas Fund will pay Investors Bank & Trust Company the per account or
per participant amount shown below per calendar year or any portion thereof that
Investors Bank & Trust Company is serving as Custodian of one or more Customer
Arrangements:
Customer IRAs (including SEP - IRAs):
$1.00 Per Customer IRA
Customer 403(b) Accounts:
$1.00 per Customer 403(b) Account
Employer Plans
$10.00 Per Participant in the Employer Plan
SELF-DIRECTED
INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
DISCLOSURE STATEMENT
SELF-DIRECTED INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT DISCLOSURE STATEMENT
If you do not receive this statement at least seven days before you establish
your Individual Retirement Account, you have the right to revoke your account
within seven days after it is established and to receive a return of the entire
amount of your investment in the account. If this right to revoke applies to you
and if you should desire to exercise your right to revoke your Individual
Retirement Custodial Account, you should mail or deliver a written notice of
revocation to the Service Company, the name and address of which appear on the
Application and Adoption Agreement. Mailed notice will be deemed given on the
date it is postmarked (or, if sent by certified or registered mail, on the date
of certification or registration by the post office.) The Service Company has
the right under the Custodial Account Agreement to hold your initial
contribution uninvested until the period when you may revoke your account has
expired.
1. ELIGIBILITY
You are eligible to set up an IRA if you are younger than age 70 1/2 and if,
at any time during the year, you are an employee or are self-employed and
receive compensation or earned income that is includible in your gross income.
Additionally, regardless of your age, you may also transfer funds from
another IRA or certain qualified plan distributions to a "Rollover" IRA, which
is described in paragraph 9 of this statement.
2. LIMIT ON ANNUAL CONTRIBUTIONS
(a) You can make annual contributions to an individual IRA of up to $2,000,
or 100% of your compensation or earned income, whichever is less.
(b) If you and your spouse both work and have compensation that is includible
in your gross income, each of you can annually contribute to a separate IRA up
to the lesser of $2,000 or 100% of compensation or earned income.
(c) If your spouse earns no income from employment, or elects to be treated
as earning no income (this can be advantageous if your spouse has $250 or less
in earned income), and is under age 70 1/2, you can establish a "spousal IRA"
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with two separate accounts if you file a joint Federal tax return. The aggregate
annual amount you can contribute to both IRAs each year cannot exceed the lesser
of $2,250 or 100% of your earned income or compensation. This amount is divided
between the two spousal IRA accounts as you direct, but not more than $2,000 may
be contributed to one account each year.
(d) If you are a divorced spouse, all taxable alimony received by you under a
decree of divorce or separate maintenance will be treated as compensation for
purposes of the IRA contribution limit and the rules for contributing to a
regular IRA will apply. Accordingly, you can make annual contributions of up to
the lesser of $2,000, or 100% of compensation or earned income (including
taxable alimony).
3. DEDUCTIBILITY OF CONTRIBUTIONS
(a) You may deduct the full amount of your IRA contribution up to the annual
maximum limit if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified 401(k), profit sharing or retirement plans
maintained by your employer, Simplified Employee Pension plans, tax-sheltered
annuity plans, and certain governmental plans) for any part of such year. If you
are married and you and your spouse file a joint return, or you live together
with your spouse at anytime during the year, you will be deemed to be an active
participant in an employer-sponsored retirement plan if either you or your
spouse is an active participant in such a plan.
You are (or your spouse is) an "active participant" for a year if at any time
during the year you are covered by any employer plan under which contributions
are made to your account (including a required or voluntary employee
contribution by you) or under which you are eligible to earn pension benefit
credits. You are considered an active participant even if you are not vested
under the plan. Your Form W-2 for the year should indicate your participation
status. You should consult your own tax or financial advisor if you should have
any further questions.
Even if you are an active participant in such a plan, you may deduct the
full amount of your IRA contribution up to the annual maximum limit if you have
adjusted gross income equal to or below a specified level ($40,000 for married
taxpayers filing joint returns and $25,000 for single taxpayers). If you are
single and an active participant in an employer-sponsored retirement plan, the
amount of your IRA contribution which is deductible will be phased out on the
basis of adjusted gross income between $25,000 and $35,000. If you are married
and you and your spouse file a joint return, if either you or your spouse is an
active participant in an employer-sponsored retirement plan, the amount of your
IRA contribution which is deductible will be phased out on the basis of your
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combined adjusted gross income between $40,000 and $50,000. If you are married
and file a separate return, the deduction for IRA contributions phases out with
adjusted gross income between $0 and $10,000.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
adjusted gross income in excess of the phase out amount ($25,000 for single
taxpayers, $40,000 for married taxpayers who file joint returns and $0 for
married taxpayers who file separate returns). However, if you contribute to a
spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next highest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your adjusted gross income is within the phase-out range and
your reduced deduction limit is more than $0 but less than $200, you are
permitted to deduct up to $200 of your IRA contributions.
If your adjusted gross income exceeds the applicable level specified above
and you are an active participant in an employer-sponsored retirement plan (or
your spouse is an active participant in such a plan if you are married), then
you may not deduct any portion of your IRA contribution.
(b) Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a
non-tax-deductible contribution. Of course, the combined total of deductible and
non-deductible contributions must not exceed your annual maximum contribution
limit amount. Any earnings on all your IRA contributions (deductible and
nondeductible) accumulate tax-free until you withdraw them.
4. CONTRIBUTIONS WHICH CAN NEVER BE DEDUCTED
You may not make any contribution (other than a rollover contribution) to
your IRA with respect to the tax year in which you reach age 70 1/2 or any
subsequent year. However, you may continue to make contributions to your
spouse's spousal IRA and deduct the deductible portion of such payments until
the year in which your spouse reaches age 70 1/2.
You may not deduct any portion of IRA contributions allocable to the cost of
life insurance. For this reason, life insurance is not offered as an investment
for your IRA.
5. ANNUAL CONTRIBUTIONS
Contributions to your IRA for a tax year must be made in cash on or before
the due date (not including extensions) for your Federal income tax return for
that tax year (April 15 for most individuals). If you intend to report
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contributions made between January 1 and April 15 as contributions for your
prior tax year, you should notify us in writing that such contributions have
been made on account of such prior tax year. Otherwise, the Custodian will
assume the payment is for the current tax year.
6. EXCESS CONTRIBUTIONS
If you contribute to your IRA more than the maximum contribution limit
allowed any year, the excess contribution could be subject to a 6% nondeductible
excise tax. The excess is taxed in the year the excess contribution is made and
each year that the excess remains in your IRA at the end of the year. (Remember,
the excess contribution excise tax is based on contributions above the maximum
contribution limit, not the maximum deduction limit.)
If, by accident, you should contribute more than the maximum amount allowed,
you can eliminate the excess contribution as follows:
(a) You can avoid the 6% excise tax by withdrawing the excess contribution
and the net earnings attributable to it before the due date (including any
extensions) for filing your Federal income tax return for the year the excess
occurred. Upon removing an excess contribution in this manner, the net earnings
attributable to it are includible in your income for the tax year in which the
excess contribution was made, and you may also have to pay an additional 10%
premature distribution tax on the amount of such net earnings (see paragraph
7(a)). However, the excess contribution itself will not be included in your
taxable income and will not be subject to the 10% premature distribution tax.
(b) If you elect not to withdraw an excess contribution, you can eliminate
the excess by contributing less than the maximum amount allowed to your IRA in a
later year. This is known as a "make-up" contribution and is allowed only to the
extent that you under-contribute in the later year. Further, to the extent that
you have not contributed your full deductible amount for that later year, the
amount of the excess so eliminated may be deductible as a "make-up" deduction,
depending on your active participant status and adjusted gross income for the
year. The 6% excise tax will, however, be imposed in the year you make the
excess contribution and each subsequent year until eliminated.
(c) If you do not withdraw an excess contribution on or before the due date
for filing your Federal income tax return and your contribution did not exceed
$2,250, you can withdraw the excess at any time as long as you have not deducted
it on your Federal tax return. The amount of the excess which you withdraw will
not be included in your gross income and will not be subject to regular Federal
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income tax. However, the 6% excise tax will be imposed for the year in which you
make the excess contribution and each subsequent year, until the year of
withdrawal.
(d) If you do not withdraw an excess contribution on or before the due date
for filing your Federal income tax return and your contribution exceeded $2,250,
you must include in your gross income any excess amount which you withdraw even
if you have not deducted it on your Federal income tax return. You may also have
to pay a 10% premature distribution tax on the amount you withdraw (See
paragraph 7 (a)). Additionally, the 6% excise tax will be imposed for the year
in which you make the excess contribution and each subsequent year, until the
year of withdrawal.
7. PAYMENTS FROM YOUR IRA DURING YOUR LIFE
(a) You can make withdrawals from your IRA at any time. However, if you
withdraw any of the funds in your IRA before age 59 1/2, the amount includible
in your gross income is subject to a 10% non-deductible premature distribution
tax unless:
(i) the withdrawal is made because of your death or permanent disability;
(ii) the withdrawal is an exempt withdrawal of an excess contribution; or
(iii) the withdrawal is rolled over into another qualified plan or IRA.
You are considered "disabled" for purposes of clause (i) if you are unable to
engage in any substantial gainful activity because of a physical or mental
impairment which can be expected to result in death or to be of long-lasting or
indefinite duration.
You can also withdraw funds held in your IRA without any tax penalty before
you reach age 59 1/2 if you choose to receive systematic payments in
substantially equal amounts over a period that does not exceed your life
expectancy or the life expectancy of you and your designated beneficiary. You
should be aware, however, that the 10% premature distribution tax will be
applied retroactively (with interest) to all systematic payments if you change
to a method of distribution that does not qualify for the exception either
before you attain age 59 1/2 or during the first five years of the
distributions.
The 10% premature distribution tax discussed above does not apply to the
portion of your IRA distribution which is not includible in your gross income.
(b) When you reach age 70 1/2, you must elect to receive distributions in
either (a) systematic payments (monthly, quarterly or annually), or (b) one lump
sum distribution of all the funds held in your IRA. The law requires that you
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begin to receive distributions from your IRA no later than the April 1 following
the year in which you reach age 70 1/2 (the "Required Distribution Date"). If
you elect systematic payments, there is a minimum amount which you must withdraw
by the Required Distribution Date and by each December 31 thereafter. This could
result in two minimum distributions in one calendar year. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) may be
recalculated each year. If you established a spousal IRA, the minimum required
annual distribution from the spousal IRA is determined using the life expectancy
of your spouse.
You should consult your own tax or financial advisor with regard to the
calculation of the amount of your minimum distribution each year because it is
your responsibility to make sure that this requirement is met. The Custodian is
not required to advise you in this matter and will only make distributions to
you from your IRA in accordance with your specific instructions.
You may receive installment payments larger than the minimum amount. However,
if the amount distributed during a taxable year is less than the minimum amount
required to be distributed, the Internal Revenue Service may impose a tax equal
to 50% of the deficiency, unless it is satisfied that the deficiency was due to
reasonable error and that responsible steps are being taken to remedy the
deficiency.
8. PAYMENTS FROM YOUR IRA AFTER YOUR DEATH
If you die before all the funds held in your IRA have been distributed, the
remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by such beneficiary.
The Custodian will make distributions to your beneficiary in accordance with his
or her specific instructions. Your beneficiary should be aware that he or she is
subject to minimum distribution rules and it is his or her responsibility to
make sure that the rules are met. Under the post-death minimum distribution
rules, if you die after your Required Distribution Date, the funds remaining in
your IRA must continue to be distributed to your designated beneficiary at least
as rapidly as under the method of distribution in effect prior to your death. If
you die prior to your Required Distribution Date, all the funds in your IRA must
be completely distributed to your designated beneficiary by December 31 of the
year containing the fifth anniversary of your death unless your designated
beneficiary elects, no later than December 31 of the year following the year of
your death, to receive funds from your IRA over a fixed period that is no longer
than his or her life expectancy. If your beneficiary is your surviving spouse,
distribution of funds from your IRA can be made to him or her over a fixed
period that is no longer than his or her life expectancy and commencing at any
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date prior to December 31 of the year in which you would have attained age 70
1/2. In all instances, your spousal beneficiary may also elect to rollover the
funds in your IRA into his or her own account or treat your IRA as his or her
own by making contributions to it. In this case, he or she is not required to
make withdrawals from the IRA until April 1 following the year in which he or
she reaches age 70 1/2.
The designation of a beneficiary to receive funds from your IRA at your death
is not considered a transfer subject to Federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your Federal gross
estate.
Be sure to keep your designation of beneficiary up-to-date as your personal
or financial circumstances change. You may file a new designation of beneficiary
form at any time with the Custodian. If no designation of beneficiary is in
effect at your death, or if all designated beneficiaries have predeceased you,
the balance in your account will be paid to your estate.
9. TAX-FREE ROLLOVERS
(a) Under certain circumstances, you can receive a distribution from an IRA,
or from a qualified plan, or a tax-sheltered annuity or other arrangement under
Section 403(b) of the Code, and transfer the amount received to another IRA
without including the distribution in your income for federal income tax
purposes. Such a "tax-free rollover" must be completed within 60 days after you
receive the distribution. A transfer from a qualified plan or 403(b) arrangement
directly to an IRA is a way to avoid the required 20% income tax withholding
requirements. Starting in 1993, most distributions from qualified plans or
403(b) accounts are subject to 20% withholding unless transferred directly to
another plan or 403(b) or to an IRA (this is called a "direct rollover").
There are complex, specific rules for each kind of transfer, so you should
consult your tax advisor or the IRS if you have questions about the rules.
Rollover contributions are not subject to the limits on annual contributions
to an IRA. However, all amounts in your IRA, including rollover contributions,
are subject to the rules discussed above concerning the time and method of
withdrawal.
(b) IRA-to-IRA Rollover. If you have an IRA, you can withdraw all or part of
the amount in that account and transfer all or part of the amount withdrawn to
another IRA. The amount transferred will not be subject to federal income tax
(or the 10% premature withdrawal penalty) if you complete the transfer within 60
days after the withdrawal. After an IRA-to-IRA tax-free rollover, you must wait
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at least a year before making another IRA-to-IRA rollover.
(c) Direct Transfer. As an alternative to a rollover, arrangements may be
made for a direct transfer from one IRA custodian or trustee to another. The
one-year waiting period does not apply to direct transfers from one IRA
custodian or trustee to another.
(d) Rollovers from Qualified Plan or 403(b) Arrangement to IRA. Most
distributions from a qualified plan or 403(b) arrangement are now eligible for
rollover to an IRA. The main exceptions are:
* payments over the lifetime or life expectancy of the participant
(or participant and a designated beneficiary),
* installment payments for a period of 10 years or more,
* required distributions starting at age 70 1/2, and
* payments that are a return of after-tax amounts previously
contributed by the individual.
If you will receive an eligible distribution from a qualified plan or 403(b)
or a distribution upon termination of such a plan, you can defer paying taxes by
requesting the plan administrator or 403(b) sponsor to transfer the distribution
amount (except amounts previously contributed by you) directly to an IRA in a
direct rollover. Or, you may receive the distribution and roll it over to an IRA
within 60 days after you receive the distribution. However, unless you elect a
direct rollover of your distribution, the person making payment MUST WITHHOLD
20% OF YOUR DISTRIBUTION for federal income taxes. Your plan or 403(b) sponsor
will provide you with a notice concerning direct rollovers, regular 60-day
rollovers and withholding taxes before you receive your distribution.
If you have a regular IRA, you should establish a separate IRA to receive
any rollover contribution from a qualified plan. You can later transfer the
separate rollover IRA into a different employer plan if you desire and the plan
permits such transfers.
(e) Rollovers by A Surviving Spouse. If a surviving spouse receives a
distribution from a qualified plan or 403(b) because of the employee-spouse's
death, the surviving spouse may be able to defer income taxes by having all or a
part of the distribution (other than employee contributions to the plan)
transferred directly to an IRA.
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(f) Rollovers or transfers cannot include any amount you are required to
receive for the year from the qualified plan or IRA.
(g) Please note that: (i) the IRA you set up to receive "rollover" amounts
should be separate from an IRA you set up to receive annual contributions; (ii)
rollover amounts you receive may not be deposited in your spouse's IRA or
deducted on your Federal income tax return; (iii) if you establish a "Rollover"
IRA during the year in which you reach age 70 1/2, you must be receiving
distributions from such IRA no later than April 1 of such following year; (iv)
if you establish a "Rollover" IRA after the year in which you reach age 70 1/2,
you must begin receiving distributions from such IRA immediately; and (v) strict
limitations apply to rollovers, and a variety of tax and financial planning
issues should be considered in determining whether to make a rollover
contribution. You should consult your own tax or financial advisor regarding
these matters.
10. FEDERAL TAX RETURNS
(a) Deductible and non-deductible IRA contributions are reported on IRS Form
1040 or Form 1040A. You may choose to file your Federal income tax return before
it is due (without extensions) and report your IRA contributions before they are
made. You must, however, make the contributions by the due date (without
extensions) of such return. To the extent your contribution is deductible, you
can claim a deduction on your tax return. To the extent your contribution is not
deductible, you must designate it on Form 8606. There is a $100 penalty each
time you overstate the amount of your non-deductible contributions unless you
can prove that the overstatement was due to reasonable cause. You will also be
required to give additional information on Form 8606 in years you make a
withdrawal from your IRA. If you fail to file a required Form 8606, there is a
$50 penalty for each such failure unless you can prove the failure was due to
reasonable cause.
(Special Note: This Disclosure Statement discusses the effect and
requirements of the Federal tax laws. For Massachusetts tax purposes,
contributions to an IRA are not deductible, but interest earned each year is
currently not taxable until distributed. If you are a resident of another state,
you should check with your tax advisor with regard to the applicable tax laws of
your state.)
(b) IRS Form 5329 is required as an attachment to Form 1040 (or separately
if you do not file a Form 1040) for any year the contribution limits in
paragraph 2 are exceeded, a premature distribution (as described in paragraph
7(a)) takes place, less than the required minimum amount (as described in
paragraph 7(b)) is distributed, or a prohibited transaction (as described in
paragraph 11(e)) takes place.
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11. TAX CONSEQUENCES
(a) Income on your IRA account is not taxed as it is earned, but only when it
is distributed to you.
(b) Amounts paid to you from your IRA are taxable as ordinary income, except
that you recover your nondeductible IRA contributions tax free. The special tax
rules which permit recipients of certain lump sum distributions from other
tax-qualified retirement plans to get certain tax advantages (such as capital
gains treatment and five or ten-year averaging) do not apply to distributions
from IRAs.
(c) If you withdraw an amount from any IRA during a taxable year and you have
previously made non-deductible IRA contributions, then part of the amount
withdrawn is excludible from ordinary income and not subject to taxation. The
amount excludible for the taxable year is determined by multiplying the amount
withdrawn by a fraction, the numerator of which is your aggregate non-deductible
IRA contributions remaining in all your IRAs and the denominator of which is the
aggregate balance of all your IRAs at the end of the year plus the amount
withdrawn during the year. For example, in 1992 an individual withdraws $1,000
from an IRA to which both deductible and non-deductible contributions were made.
At the end of 1992, the account balance of all his IRAs is $4,000 of which
$2,500 is non-deductible contributions. The amount excludible from income is
$500 ($2,500/$5,000 x $1,000). It should also be pointed out that in the event
you receive a distribution from your IRA within the last 60 days of the calendar
year, if you do not roll this amount into another IRA by December 31 but you do
so after December 31 and before the 60th day after the distribution, this amount
must be added to the denominator of the fraction discussed above.
(d) In general, if you receive distributions from your IRAs, Section 403
annuities and custodial accounts, and qualified plans which, in the aggregate,
exceed $150,000 in any calendar year, you may be subject to a 15% penalty tax on
the amount in excess of $150,000. If the total amount of your benefits payable
from such plans at your death exceeds a certain permissible level, a similar 15%
estate tax is imposed on the amount in excess of the permissible level. Special
rules apply in certain circumstances and you should consult your tax adviser if
you have any questions regarding this tax.
(e) If you engage in a so-called "prohibited transaction" as defined in the
Internal Revenue Code, your IRA will be disqualified and the entire balance in
your IRA will be taxed as ordinary income during the year in which such
transaction occurs. You may also have to pay the 10% penalty tax on premature
distributions. A "prohibited transaction" includes:
(i) the sale, exchange, or leasing of any property between your IRA
account and you;
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(ii) the lending of money or other extension of credit between your IRA
account and you;
(iii) the furnishing of goods, services, or facilities between your IRA
account and you; or
(iv) the transfer of assets of your IRA account for your use or for your
benefit.
(f) If you pledge all or part of your IRA as security for a loan, or invest
your IRA in "collectibles" such as art, antiques, coins (other than certain
United States gold and silver coins or coins issued by a state government) or
gems, the amount so pledged or invested is considered by the Internal Revenue
Service to have been distributed to you and will be taxed as ordinary income
during the year in which you make such pledge or investment. You may also have
to pay the 10% premature distribution tax.
(g) Amounts withdrawn from your IRA are subject to withholding of Federal
income tax unless you direct no withholding. Form W-4P provides a space to elect
against withholding, and contains additional information on withholding. To make
a withdrawal or to establish a program of installment withdrawals, simply
complete the Withdrawal Form and the W-4P Form and send both forms to the
Service Company which invests your funds.
(h) Be sure to start withdrawals no later than the required starting date to
avoid penalties for insufficient withdrawals. Also, remember that the minimum
amount required to be withdrawn may change from year to year because of earnings
or changes in the value of your account or because you recalculated your life
expectancy. Therefore, if you have established a program of installment
withdrawals, you should submit a new Withdrawal Form each year if you need (or
want) to adjust the amount of each installment.
(i) If tax, or estate or financial planning considerations affect the
timing of your IRA withdrawals, be sure to consult a qualified professional.
12. CUSTODIAN
The Custodian of your IRA is Investors Bank & Trust Company. The Custodian,
through the Service Company, will invest your contributions and earnings in
accordance with your instructions in any of the investment vehicles permitted
under the Individual Retirement Custodian Account Agreement. You will receive
periodic reports describing each transaction in your account, and proxies on
securities will be sent to you to vote as you wish. Since the investment of your
account is at your discretion and return of the permissible investment vehicles
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is generally not guaranteed, growth in the value of your account cannot be
projected.
For information concerning the custodial charges and service charges which
will be assessed against your account by Investors Bank & Trust Company, or by
the Service Company, be sure to read the schedule of charges attached to this
Statement. Custodial and service charges may be changed or adjusted on thirty
days' notice to you. In addition, you will incur normal brokerage commissions on
the purchases and sales of securities. Before making any decision whatsoever to
establish an IRA, you should carefully review all applicable commissions with
your Service Company representative.
13. ADDITIONAL INFORMATION
(a) Your IRA will help build your retirement income. Your IRA funds are
non-forfeitable. They are always yours, and will be invested according to your
agreement with the Custodian. Your IRA will be clearly identified as your
property and will not be commingled with property of any other depositor.
(b) The form of this Individual Retirement Custodial Account uses the precise
language of Form 5305-A, currently provided by the Internal Revenue Service, and
has therefore been approved as a form to use as a qualified Individual
Retirement Account. The IRS approval of the form does not represent a
determination as to the merits of the account. It simply means that the form of
the printed IRA document satisfies the requirements of the IRS. However, if you
adopt and maintain your IRA within the stated guidelines, you may assume that
you are properly meeting all requirements for a bona fide individual retirement
plan under Federal income tax law.
(c) Further information concerning your IRA can be obtained from any district
office of the Internal Revenue Service.
(d) You should consult with your tax or financial advisor to determine
whether this Individual Retirement Custodial Account is the right investment
for you, since we cannot offer legal or tax advice.
Schedule of Charges
1. Investors Bank & Trust Company:
2. Service Company:
AGREEMENT FOR
SELF-DIRECTED
INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
Form 5305-A
(Rev. October, 1992)
SELF-DIRECTED INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
The Depositor whose name appears on the Application is establishing an
individual retirement account (under section 408(a) of the Internal Revenue
Code) to provide for his or her retirement and for the support of his or her
beneficiaries after death.
The Custodian, Investors Bank & Trust Company, has through its agent,
given the Depositor the disclosure statement required under the Income Tax
Regulations under section 408(i) of the Code.
The Depositor has made a cash deposit with the Custodian as indicated on
the Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
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the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins
and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with section 408(a)(6) and Proposed Regulations section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
section 1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be or
begin to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2). By
that date, the Depositor may elect, in a manner acceptable to the Custodian,
to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the Depositor's life expectancy.
<PAGE>
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the
election of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over
the life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following
the year of the Depositor's death. If, however, the
beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of
the year in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun
on the Depositor's required beginning date, even though payments
may actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions
may be accepted in the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the custodial
account as of the close of business on December 31 of the preceding year by
the life expectancy of the Depositor (or the joint life and last survivor
expectancy of the Depositor and the Depositor's designated beneficiary, or
the life expectancy of the designated beneficiary, whichever applies). In
the case of distributions under paragraph 3, determine the initial life
expectancy (or joint life and last survivor expectancy) using the attained
ages of the Depositor and designated beneficiary as of their birthdays in the
year the Depositor reaches age 70 1/2. In the case of distribution in
<PAGE>
accordance with paragraph 4(b)(ii), determine life expectancy using the
attained age of the designated beneficiary as of the beneficiary's birthday
in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Except as otherwise permitted in Paragraph 5(a) below, all contributions
made under this Agreement shall be deposited in the form of cash. All such
contributions shall be credited to a Custodial Account for the account of the
Depositor. Any contribution so made with respect to a tax year of the
Depositor shall be made prior to the due date of the Depositor's tax return
(not including extensions). Unless otherwise indicated in writing by the
Depositor, contributions shall be credited to the tax year in which they are
received by the Custodian. Subject to the limitations set forth in the
Application, all funds in the Custodial Account (including contributions,
<PAGE>
dividends, interest, proceeds from the sale or other disposition of
investments and any other cash receipts) shall be invested and reinvested in:
(a) any marketable securities obtainable through the service company
which is designated by the Depositor on the Application (the
"Service Company") either "over the counter" or on a recognized
exchange (excluding securities issued by the Custodian or the
Service Company);
(b) any interest-bearing deposits in any bank (including the
Custodian, the Service Company if it is a bank, or any bank
affiliated with the Service Company) approved by the Custodian;
(c) any shares of open-end regulated investment companies designated
by the Service Company; and
(d) any other investment, but only if, in the sole judgment of the
Custodian, such investment will not impose upon it an
administrative burden greater than that normally incident to
investments described in (a) above (such judgment by the
Custodian not to be construed in any respect as a judgment
concerning the prudence or advisability of such an investment).
Such investments shall be made in such specific securities and other
investments, in such proportions and in such amounts as the Depositor may
direct from time to time by notice to the Service Company (in such form as
may be acceptable to the Service Company). However, the Custodian or the
Service Company may establish minimum amounts for any type of investment.
The Service Company shall be responsible for the execution of such orders.
The Custodian shall maintain or cause to be maintained adequate records thereof
(provided that the Custodian may retain the Service Company as its agent or
recordkeeper to maintain adequate records of transactions on behalf of the
Custodian). However, if any such orders are not received as required or, if
received, are unclear or incomplete in the opinion of the Service Company,
all or a portion of the assets of the Custodial Account may be held uninvested
without liability for loss of income or appreciation, and without liability for
interest, pending receipt of complete orders or
clarification; or such assets may be invested in an interest-bearing account
described in (b) above or in a money-market type open-end investment company
designated by the Service Company.
2. Any brokerage account maintained in connection herewith shall be in the
name of the Custodian for the benefit of the Depositor. All assets of the
Custodial Account shall be registered in the name of the Custodian or of a
<PAGE>
suitable nominee (and the same nominee may be used with respect to assets of
other investors whether or not held under agreements similar to this one or in
any capacity whatsoever); provided, however, that the Custodian may hold any
security in bearer form or by or through the Service Company, or by or through
a central clearing corporation maintained by institutions active in the
national securities markets; provided further, however, that (a) the books
and records of the Custodian (or the Service Company acting as the agent or
recordkeeper for the Custodian) shall show that all such investments are part
of the Custodial Account; (b) each Custodial Account shall be separate and
distinct; (c) a separate account thereof shall be maintained by the party
having actual custody of such assets; and (d) the assets thereof shall be held
in individual or bulk segregation in such party's vaults or in depositories
approved by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
3. Neither the Custodian, the Service Company nor any other party providing
services to the Custodial Account assumes any responsibility for rendering
advice with respect to the investment or reinvestment of the Depositor's
Custodial Account and shall not be liable for any loss which results from
Depositor's exercise of control over his or her Custodial Account. Depositor
shall have and exercise exclusive responsibility for and
control over the investment of the assets of his or her Custodial Account in
accordance with the terms of this Agreement, and neither the Custodian, the
Service Company nor any other such party shall have any duty to question his
or her directions in that regard or to advise him or her regarding purchase,
retention, or sale of such assets.
4. The Depositor shall have the right by written notice to the Custodian to
designate (or to change) one or more beneficiaries to receive any amount
remaining in the Custodial Account in the event of his or her death prior to
the complete distribution of all assets in the Custodial Account. Any such
designation (or change of designation) of beneficiary may be on a form
provided by the Custodian or the Service Company or on a written instrument
acceptable to the Custodian, signed by the Depositor and filed with the
Custodian. Any designation or change of designation shall be effective upon
receipt by the Custodian. Any change of designation received by the
Custodian will revoke all prior designations previously filed with the
Custodian. If no such designation is in effect on the Depositor's death, or
if all designated beneficiaries have predeceased the Depositor, the
Depositor's estate shall be deemed to be the beneficiary.
5. (a) The Custodian shall have the right to receive rollover
contributions as described in Article I of this Agreement and
amounts transferred from another individual retirement account or
individual retirement annuity. Any property so transferred to it
in a form other than cash shall be held by the Custodian in
<PAGE>
accordance with the provisions of paragraph 1 of this Article
VIII. The Custodian reserves the right to refuse to accept any
property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor, shall
transfer the assets held under this Agreement (reduced by (i) any
amounts referred to in paragraph 7 of this Article VIII and (ii) any
amounts required to be distributed during the calendar year of
transfer to the Depositor under Section 408(a)(6) or 408(b)(3) of
the Code) to a successor individual retirement account or
individual retirement annuity for the Depositor's benefit.
(c) Any amounts received or transferred by the Custodian under this
paragraph 5 shall be accomplished by such instructions, records and
other documents as the Custodian deems necessary.
6. The Depositor hereby delegates to the Custodian the power to amend at any
time and from time to time the terms and provisions of this Agreement
and hereby consents to all such amendments, provided that an amendment
is not contrary to any applicable provision of the Internal Revenue Code,
the regulations thereunder, or any other applicable law, regulation or
ruling. Any such amendments shall be effective when the notice of such
amendments is mailed to the address of the Depositor indicated by the
Custodian's records.
7. Any income taxes or other taxes of any kind whatsoever which may be
levied or assessed upon or in respect of the assets of the Custodial Account,
or the income arising therefrom, any transfer taxes incurred, any expenses
incurred by the Custodian in the performance of its duties including fees for
legal services rendered to the Custodian, and the Custodian's and the Service
Company's compensation as set forth in the Disclosure Statement, may be paid
by the Depositor and, unless and until so paid within such time period as the
Custodian may establish, shall be paid from the assets of the Custodial
Account. The Custodian and the Service Company shall be empowered to take
any action necessary to effectuate the provisions of this paragraph and shall
have no liability to the Depositor therefor. The Custodian and the Service
Company shall each have the right to change or adjust its fees and
compensation upon 30 days' notice to the Depositor, and may reduce or waive
fees with respect to any class or group of Depositors.
8. Amounts in the Custodial Account and the benefits provided hereunder
shall not be subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind, and any attempt to cause such benefits to be
so subjected shall not be recognized, except to such extent as may be required
by law.
<PAGE>
9. Any pledging of assets in the Custodial Account by the Depositor as a
security for a loan, or any loan or other extension of credit from the
Custodial Account to the Depositor, shall be prohibited.
10. In taking or refraining from taking any action or determining any
factor or question which may arise under this Custodial Agreement, the
Custodian may rely upon any statement by the Depositor or the Service Company
with respect thereto. The Depositor hereby agrees that the Custodian will not
be liable for any loss or expense resulting from taking or not taking such
action or determination taken in reliance on any such statement.
11. The Custodian may resign at any time upon 90 days' written notice to
the Depositor and may be removed by the Depositor at any time upon 90 days'
written notice to the Custodian. Upon the resignation or removal of the
Custodian, a successor Custodian shall be appointed by the Depositor within
90 days of such resignation or removal and, in the absence of such
appointment, the Custodian may designate a successor unless this Agreement is
sooner terminated. Any successor Custodian shall be a bank (as defined in
section 408(n) of the Code) or another person found qualified to act as
custodian under an individual retirement account plan by the Secretary of
Treasury or his delegate. The appointment of a successor custodian shall be
effective upon receipt by the Custodian of such successor's written
acceptance which shall be submitted to the Custodian and to the Depositor.
As soon as reasonably practical after the effective date of the successor
custodian's appointment, the Custodian shall transfer and deliver to the
successor custodian applicable account records and assets of the Custodial
Account (reduced by any unpaid amounts referred to in paragraph 7 of this
Article VIII). The successor custodian shall be subject to the provisions of
this Agreement (or any successor thereto) on the effective date of its
appointment.
12. The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor, make distributions out of the Cus-
todial Account to the Depositor in the manner and amounts as may be specified
in such instructions. Notwithstanding the provision of Article IV above, the
Custodian assumes (and shall have) no responsibility to make any distribution
to the Depositor (or the Depositor's beneficiary if the Depositor is deceased)
unless and until such written instructions specify the occasion for such
distribution, the elected manner of distribution, and any other information
that may be required. If the Depositor (or, following the Depositor's death,
the beneficiary) does not direct the Custodian to make distributions from the
Custodial Account by the time that such distributions are required to begin
in accordance with the preceding Articles, the Custodian and the Service
Company may assume that the Depositor (or the beneficiary) is meeting the
minimum distribution requirements from another individual retirement
arrangement maintained by the Depositor and the Custodian and the Service
<PAGE>
Company shall be fully protected in so doing.
Prior to making any distribution from the Custodial Account, the Custodian
shall be furnished with any and all applications, certificates, tax waivers,
signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by the Custodian, but
the Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if not
satisfied such instructions are genuine, and assumes no duty of further
inquiry. Upon receipt of proper written instructions as required above, the
Custodian shall cause the assets of the Custodial Account to be distributed, as
specified in such written order.
13. Distribution of the assets of the Custodial Account shall (subject to
the first paragraph of paragraph 12 of this Article VIII) be made in accordance
with the provisions of Article IV as the Depositor (or Depositor's
beneficiary if the Depositor is deceased) shall elect by written instructions
to the Custodian; subject, however, to the provisions of Sections 401(a)(9),
408(a)(6) and 408(b)(3) of the Code, the regulations promulgated thereunder,
and the following:
(i) No distribution from the Custodial Account shall be made in the
form of an annuity contract.
(ii) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election
of the Depositor. The recalculation of life expectancy of the
surviving spouse shall only be made at the written election of
the surviving spouse. By establishing the Custodial Account,
the Depositor (for himself and his surviving spouse, if any)
elects not to recalculate life expectancies unless the
Depositor (or surviving spouse) specifically elects the
recalculation of life expectancies approach in accordance with
the following sentence. Any such election may be made in such
form as the Depositor (or the surviving spouse) provides for
(including instructions to such effect to the Custodian, or the
calculation of minimum distribution amounts in accordance with a
method that provides for recalculation of life expectancy and
instructions to the Custodian to make distributions in
accordance with such method).
(iii) If the Depositor dies before his/her entire interest in the
Custodial Account has been distributed, and if the designated
beneficiary of the Depositor is the Depositor's surviving
spouse, the spouse may treat the Custodial Account as the
spouse's own individual retirement arrangement. This election
<PAGE>
will be deemed to have been made if the surviving spouse makes
a regular IRA contribution to the Custodial Account, makes a
rollover to or from the Custodial Account, or fails to receive
a payment from the Custodial Account within the appropriate
time period applicable to the deceased Depositor under Section
401(a)(9)(B) of the Code.
(iv) If the Depositor's designated beneficiary is not his/her spouse,
then distributions to the Depositor and his/her beneficiary,
commencing with the Depositor's required beginning date, shall
comply with the minimum distribution incidental benefit
requirement.
14. If the Depositor is disabled, as that term is defined in Section 72(m)
of the Code, he or she may give notice to the Custodian of such disability and
request that up to the balance of the Custodial Account be distributed. The
Custodian, within a reasonable time after submission of satisfactory proof of
such disability, shall order the distribution of the balance of the Custodial
Account to the Depositor or such portion as the Depositor requested.
15. This Agreement shall terminate coincident with the complete
distribution of the assets of the Custodial Account, and the Custodian shall
have no further duties or responsibilities with respect to the Custodial Account
after its termination.
16. The Depositor hereby agrees to indemnify and hold harmless the
Custodian from and against any and all claims, loss, damages, costs or
expenses (including reasonable attorneys' fees) which the Custodian may incur
or pay out by reason of any alleged or actual act, or failure to act, on the
part of the Depositor, the Service Company, or any other person. The
preceding sentence will survive the termination of the Agreement.
17. Any notice herein required or permitted to be given to the Custodian
shall be sufficiently given if mailed to the Custodian by first class mail,
care of Investors Bank & Trust Company, P.O. Box 1537, L07FPS, Boston, MA
02205-1537, or to such other address as the Custodian shall provide the
Depositor from time to time in writing, stating that such other address shall
be used for purposes of this Agreement. Any notice herein required or
permitted to be given to the Depositor shall be sufficiently given if mailed to
the Depositor at the Depositor's address appearing on the Application, or at
such other address as the Depositor shall have provided the Custodian from
time to time in writing, which writing shall state that such other address is
to be used for purposes of this Agreement.
<PAGE>
18. The Custodian and the Service Company shall keep or cause to be kept
adequate records of the transactions they are required to perform hereunder.
In addition to the reports required by paragraph 2 of Article V, the
Custodian or the Service Company shall cause to be mailed to the Depositor in
respect of each tax year an account of all transactions affecting the
Custodial Account during such year and a statement showing the Custodial
Account as of the end of such year. If, within 60 days after such mailing, the
Depositor has not given the Custodian or the Service Company written notice
of any exception or objection thereto, the annual accounting shall be deemed
to have been approved, and in such case, or upon the written approval of the
Depositor, the Custodian and the Service Company shall be released, relieved
and discharged with respect to all matters and statements set forth in such
accounting as though the account had been settled by judgment or decree of a
court of competent jurisdiction.
19. The Service Company shall deliver, or cause to be executed and
delivered, to the Depositor all notices, prospectuses, financial statements,
proxies and proxy soliciting materials relating to securities or other
investments credited to the Custodial Account. No shares of stock shall be
voted, and no other action shall be taken pursuant to such documents except
upon receipt of adequate written instructions from the Depositor.
20. The Custodian and the Service Company shall be agents for the
Depositor to perform the duties conferred on each of them, respectively
hereunder, as directed by the Depositor. The parties do not intend to
confer any fiduciary duties on the Custodian or the Service Company, and none
shall be implied. Neither shall be liable (nor assumes any responsibility
for) the collection of contributions, the deductibility of any contribution or
the propriety of any contributions under this Agreement, the selection of any
investments for the Custodial Account, or the purpose or propriety of any
distribution ordered in accordance with Article IV or paragraphs 12, 13, or
14 of this Article VIII, which matters are the sole responsibility of the
Depositor or the Depositor's beneficiary, as the case may be.
21. The Custodian and the Service Company shall each be responsible solely
for performance of those duties expressly assigned to it in this Agreement;
neither assumes any responsibility as to duties assigned to anyone else
hereunder or by operation of law.
22. This Agreement, which incorporates the Application as a part hereof,
shall be governed by and construed, administered and enforced according to
the laws of the Commonwealth of Massachusetts.
23. Notwithstanding anything in the foregoing to the contrary, any
provision which is inconsistent with section 219 and 408 of the Code shall be
disregarded and the regulations promulgated under said sections of the Code
<PAGE>
shall be incorporated by reference and this Agreement shall be administered in
accordance with said regulations.
24. The Depositor may revoke the Custodial Account established under this
Agreement by written notice to the Custodian received by the Custodian within 7
calendar days after the Depositor establishes the Custodial Account. Upon
revocation, the amount of the Depositor's initial deposit or contribution will
be returned to him, without adjustment for interest, earnings, investment
fluctuations or fees or expenses. The Custodian or the Service Company may
retain the Depositor's initial contribution for a period of up to 10 days after
the receipt thereof, without investing such amount in accordance with the
Depositor's instructions, and may invest such amount after the expiration of
such period if the Depositor has not revoked the Custodial Account.
25. The Depositor acknowledges that he or she has received and read the
Disclosure Statement relating to the Custodial Account.
26. Articles I through VII of this Agreement are in the form promulgated
by the Internal Revenue Service as Form 5305-A. It is anticipated that, if
and when the Internal Revenue Service promulgates changes to Form
5305-A, the Custodian will adopt such changes as an amendment to this
Agreement. Pending the adoption of any amendment necessary or desirable to
conform this Agreement to the requirements of any amendment to the Internal
Revenue Code or regulations or rulings thereunder, the Custodian and the
Service Company may operate the Depositor's Custodial Account in accordance
with such requirements to the extent that the Custodian and/or the Service
Company deem necessary to preserve the tax benefits of the Custodial Account.
* * *
Purpose. This model custodial account may be used by an individual who wishes
to adopt an individual retirement account under section 408(a). When fully
executed by the Depositor and the Custodian not later than the time
prescribed by law for filing the federal income tax return for the Depositor's
tax year (not including any extensions thereof), an individual will have an
individual retirement account (IRA) custodial account which meets the
requirements of section 408(a). This account must be created in the United
States for the exclusive benefit of the Depositor or his/her beneficiaries.
Definitions. Custodian - The Custodian must be a bank or savings and loan
association, as defined in section 408(n), or other person who has the
approval of the Internal Revenue Service to act as custodian. The Custodian
in this plan is Investors Bank & Trust Company.
Depositor - The Depositor is the person who establishes the custodial
account.
<PAGE>
IRA FOR NON-WORKING SPOUSE
Contributions to an IRA custodial account for a non-working spouse must be
made to a separate IRA custodial account established by the non-working spouse.
This form may be used to establish the IRA custodial account for the non-
working spouse.
An employee's social security number will serve as the identification number
of his or her individual retirement account. An employer identification
number is only required for each individual retirement account that needs to
file an unrelated business income tax return. An employer identification
number is also required for a common fund created for individual retirement
accounts.
For more information, get a copy of the required disclosure statement from
your Custodian or get Publication 590, Individual Retirement Arrangements
(IRAs).
SPECIFIC INSTRUCTIONS
ARTICLE IV. Distributions made under this Article may be made in a single sum,
periodic payments, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to make sure the
requirements of section 408(a)(6) have been met.
ARTICLE VIII. This Article and any that follow it may incorporate additional
provisions that are agreed upon by the Depositor and Custodian to complete
the agreement. These may include for example: definitions, investment
powers, voting rights, exculpatory provisions, amendment and termination,
removal of Custodian, Custodian's fees, State law requirements, beginning
date of distributions, prohibited transactions with the Depositor, etc. Use
additional pages if necessary and attach them to this form.
TRANSFER AGENCY AGREEMENT
This Agreement made as of the _____ of ____________, 1995 between Midas
Fund, Inc., a Maryland corporation ("Fund"), having its principal office and
place of business at 11 Hanover Square, New York, New York 10005 and DST
Systems, Inc., ("DST") a Delaware corporation having its principal office and
place of business at 1055 Broadway, Kansas City, Missouri 64105-1594
(hereinafter referred to as the "Transfer Agent").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "APPROVED INSTITUTION" shall mean an entity so named in a
Certificate. From time to time the Fund may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. THE "BOARD OF DIRECTORS" shall mean the Board of Directors
of the Fund.
3. "CERTIFICATE" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
1
<PAGE>
4. "CUSTODIAN" shall mean the financial institution appointed
as custodian under the terms and conditions of the Custody Agreement
between the financial institution and the Fund, or its successor(s).
5. "FUND BUSINESS DAY" shall be deemed to be each day on
which the New York Stock Exchange, Inc. is open for trading.
6. "OFFICER" shall be deemed to be the Fund's President, any Vice
President of the Fund, the Fund's Secretary, the Fund's Treasurer, the Fund's
Controller, any Assistant Controller of the Fund, any Assistant Treasurer of the
Fund and any Assistant Secretary of the Fund, and any other person 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 named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time, and any person reasonably believed by the Transfer Agent to
be such a person.
7. "OUT-OF-POCKET EXPENSES" means amounts reasonably
necessary and actually incurred by Transfer Agent in the provision of Transfer
Agent services or pursuant to this Agreement for the following purposes: postage
(and first class mail insurance in connection with mailing share certificates),
envelopes, check forms, continuous forms, forms for reports and statements,
stationery, and other similar items, telephone and telegraph charges incurred in
answering inquiries from dealers or shareholders, microfilm used to record
2
<PAGE>
transactions in shareholder accounts and computer tapes used for permanent
storage of records and cost of insertion of materials in mailing envelopes by
outside firms. Transfer Agent may, at its option, arrange to have various
service providers submit invoices directly to the Fund for payment of
out-of-pocket expenses reimbursable hereunder; and such other expenses paid or
incurred by Transfer Agent at the request of the Fund. Any charges associated
with special or exception processing shall also be considered Out-of-Pocket
Expenses.
8. "PROSPECTUS" shall mean the most recent Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
becomes effective, including the Statement of Additional Information,
incorporated by reference therein.
9. "SHARES" shall mean all or any part of each class or series of the
shares of common stock of the Fund or Portfolio listed in the Certificate as to
which the Transfer Agent acts as transfer agent hereunder, as may be amended
from time to time, which are authorized and/or issued by the Fund.
10. "TRANSFER AGENT" shall mean DST Systems, Inc., ("DST"),
as transfer agent and dividend disbursing agent under the terms and
conditions of this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
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during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
3. In connection with such appointment, the Fund upon the request of
the Transfer Agent, shall deliver the following documents to the Transfer Agent:
(i) A copy of the Articles of Incorporation of the Fund
and all amendments thereto certified by the Secretary of the Fund;
(ii) A copy of the By-Laws of the Fund certified by the
Secretary of the Fund;
(iii) A copy of a resolution of the Board of Directors of the
Fund certified by the Secretary of the Fund appointing the Transfer Agent and
authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Fund
specifying: the number of authorized Shares, the number of such authorized
Shares issued, the number of such authorized Shares issued and currently
outstanding; the names and specimen signatures of the Officers of the Fund; and
the name and address of the legal counsel for the Fund;
(v) Specimen Share certificate for each or series class of
Shares in the form approved by the Board of Directors of the Fund (and in a
format compatible with the Transfer Agent's system), together with a Certificate
signed by the Secretary of the Fund as to such approval;
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(vi) Copies of the Fund's Registration Statement, as amended
to date, and the most recently filed Post-Effective Amendment thereto, filed by
the Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(vii) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents
on or before the effective date of any increase or decrease in the total number
of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles of
Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the Fund and the status of
such Shares under the Securities Act of 1933, as amended, and any other
applicable federal law or regulation (i.e., if subject to registration, that
they have been registered and that the Registration Statement has become
effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective, or, if exempt, the
specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
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Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of the Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
(d) An opinion of counsel for the Fund with respect to
the validity of the Shares in the new form and the status of such Shares under
the Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor.)
2. The Fund at its expense shall furnish the Transfer Agent with a
sufficient supply of blank Share certificates in the new form and from time to
time will replenish such supply upon the request of the Transfer Agent. Such
blank Share certificates shall be compatible with the Transfer Agent's system
and shall be properly signed by facsimile or otherwise by Officers of the Fund
authorized by law or by the By-Laws to sign Share certificates and, if required
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shall bear the corporate Seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent by the Fund pursuant to this section 2.
ARTICLE V
ISSUANCE,
REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received
a copy of the Fund's Prospectus, which Prospectus describes how sales and
redemption of shares of the Fund shall be made, and the Transfer Agent agrees to
accept purchase orders and redemption requests with respect to Fund shares on
each Fund Business Day in accordance with such Prospectus. The Fund agrees to
provide the Transfer Agent with sufficient advance notice to enable the Transfer
Agent to effect any changes in the procedures set forth in the Prospectus
regarding such purchase and redemption procedure; provided, however, that in no
event will such advance notice be less than 30 days.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape or electronic data transmission
consistent in all respects with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any Approved Institution. The Transfer Agent shall
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not be liable for any losses or damages to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
2. On each Fund Business Day the Transfer Agent shall, as of
the time at which the Fund computes the net asset value of the Fund, issue to
and redeem from the accounts specified in a purchase order, redemption request,
or computer tape or electronic data transmission, which in accordance with the
Prospectus is effective on such Fund Business Day, the appropriate number of
full and fractional Shares based on the net asset value per Share of such Fund
specified in an advice received on such Fund Business Day from the Fund.
Notwithstanding the foregoing, if a redemption specified in a computer tape or
electronic data transmission is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part and shall within
twenty-four hours orally advise the Approved Institution which supplied such
tape of the discrepancy.
3. In connection with a reinvestment of a dividend or distribution of
Shares of the Fund, the Transfer Agent shall as of each Fund Business Day, as
specified in a Certificate or resolution described in paragraph 1 of succeeding
Article VI, issue Shares of the Fund based on the net asset value per Share of
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such Fund specified in an advice received from the Fund on such Fund Business
Day.
4. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day, pursuant to preceding paragraph 2
of this Article; the total number of Shares of the Fund redeemed from
Shareholders by the Transfer Agent on such day; the total number of Shares of
the Fund, if any, sold on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of the Fund issued and outstanding.
5. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the Prospectus.
If the Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, the Transfer Agent will countersign, issue and mail to such
shareholder at the address set forth in the records of the Transfer Agent a
Share certificate for any full Share requested.
6. As of each Fund Business Day the Transfer Agent shall furnish the
Fund with an advice setting forth the number and dollar amount of Shares to be
redeemed on such Fund Business Day in accordance with paragraph 2 of this
Article.
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7. Upon receipt of a proper redemption request and moneys paid to it by
the Custodian in connection with a redemption of Shares, the Transfer Agent
shall cancel the redeemed Shares and after making appropriate deduction for any
withholding of taxes required of it by applicable law (a) in the case of a
redemption of Shares pursuant to a redemption described in preceding paragraph
1(a) of this Article, make payment in accordance with the Fund's redemption and
payment procedures described in the Prospectus, and (b) in the case of a
redemption of Shares pursuant to a computer tape or electronic data transmission
described in preceding paragraph 1(b) of this Article, make payment by directing
a federal funds wire order to the account previously designated by the Approved
Institution specified in said computer tape or electronic data transmission.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
9. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
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10. The Transfer Agent shall accept a computer tape or electronic data
transmission consistent with the Transfer Agent's record format, as amended from
time to time, which is reasonably believed by the Transfer Agent to be furnished
by or on behalf of any Approved Institution and is represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and shall effect the transfers
specified in said computer tape or electronic data transmission. The Transfer
Agent shall not be liable for any losses to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
11.(a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be transferred or
redeemed upon presentation to the Transfer Agent of Share certificates or
instructions properly endorsed for transfer or redemption, accompanied by such
documents as the Transfer Agent deems necessary to evidence the authority of the
person making such transfer or redemption, and bearing satisfactory evidence of
the payment of stock transfer taxes. In the case of small estates where no
administration is contemplated, the Transfer Agent may, when furnished with an
appropriate surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent where the current market
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value of the Shares being transferred does not exceed such amount as may from
time to time be prescribed by various states. The Transfer Agent reserves the
right to refuse to transfer or redeem Shares until it is satisfied that the
endorsement on the stock certificate or instructions is valid and genuine, and
for that purpose it will require, unless otherwise instructed by an authorized
officer of the Fund, a guarantee of signature by an "Eligible Guarantor
Institution" as that term is defined by SEC Rule 17Ad-15 under the Securities
Exchange Act of 1934. The Transfer Agent also reserves the right to refuse to
transfer or redeem Shares until it is satisfied that the requested transfer or
redemption is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or redemptions which the Transfer
Agent, in its judgement, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Fund shall indemnify the Transfer Agent for any act done or omitted by it in
good faith in reliance upon such laws. In no event will the Fund indemnify the
Transfer Agent for any act done by it as a result of willful misfeasance, bad
faith, negligence or reckless disregard of its duties.
(b) Notwithstanding the foregoing or any other provision
contained in this Agreement to the contrary, the Transfer Agent
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shall be fully protected by the Fund in not requiring any instruments,
documents, assurances, endorsements or guarantees, including, without
limitation, any signature guarantees, in connection with a redemption, or
transfer, of Shares whenever the Transfer Agent reasonably believes that
requiring the same would be inconsistent with the transfer and redemption
procedures as described in the Prospectus.
12. Notwithstanding any provision contained in this agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 13 of this Article
or any redemption of any Shares pursuant to a computer tape or electronic data
transmission described in this Agreement, any documents, including, without
limitation, any documents of the kind described in sub-paragraph (a) of
paragraph 13 of this Article, to evidence the authority of the person requesting
the transfer or redemption and/or the payment of any stock transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Article.
13. (a) As used in this Agreement, the terms "computer tape or
electronic data transmission" and "computer tape believed by the Transfer Agent
to be furnished by an Approved Institution", shall include any tapes generated
by the Transfer Agent to reflect information believed by the Transfer Agent to
have been input by an Approved Institution, via a remote terminal or other
similar link,
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into a data processing, storage, or collection system, or similar system (the
"System"), located on the Transfer Agent's premises. For purposes of paragraph 1
of this Article, such a computer tape or electronic data transmission shall be
deemed to have been furnished at such times as are agreed upon from time to time
by the Transfer Agent and Fund only if the information reflected thereon was
input to the System at such times as are agreed upon in writing from time to
time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into a System.
(c) The Transfer Agent reserves the right to approve, in advance, any
Approved Institution, such approval not to be unreasonably withheld. The
Transfer Agent also reserves the right to terminate any and all automated data
communications, at its discretion, upon a reasonable attempt to notify the Fund
when in the reasonable opinion of the Transfer Agent continuation of such
communications would jeopardize the accuracy and/or integrity of the Fund's
records on the System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or any
Assistant Secretary, either (i) setting forth the date of the declaration of a
dividend or distribution, the date of accrual or payment, as the case may be,
thereof, the record date as of which Shareholders entitled to payment, or
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accrual, as the case may be, shall be determined, the amount per Share of such
dividend or distribution, the payment date on which all previously accrued and
unpaid dividends are to be paid, and the total amount, if any, payable to the
Transfer Agent on such payment date, or (ii) authorizing the declaration of
dividends and distributions on a daily or other periodic basis and authorizing
the Transfer Agent to rely on a Certificate setting forth the information
described in subsection (i) of this paragraph.
2. Upon the mail date specified in such Certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of the Transfer Agent
on behalf of the Fund an amount of cash, if any, sufficient for the Transfer
Agent to make the payment, as of the mail date, specified in such Certificate or
resolution, as the case may be, to the Shareholders who were of record on the
record date. The Transfer Agent will, upon receipt of any such cash, make
payment of such cash dividends or distributions to the shareholders of record as
of the record date by: (i) mailing a check, payable to the registered
shareholder, to the address of record or dividend mailing address, or (ii)
wiring such amounts to the accounts previously designated by an Approved
Institution, as the case may be. The Transfer Agent shall not be liable for any
improper payments made in good faith and without negligence, in accordance with
a Certificate or resolution described in the preceding paragraph. If the
Transfer Agent shall not receive from the Custodian sufficient cash to make
payments of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the
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Transfer Agent shall, upon notifying the Fund, withhold payment to all
shareholders of record as of the record date until sufficient cash is provided
to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Fund agrees to pay the Transfer Agent for any and all costs,
both direct and out-of-pocket expenses, incurred in such corrective work as
necessary to remedy such error.
4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividend and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
ARTICLE VII
CONCERNING THE FUND
1. The Fund represents to the Transfer Agent that:
(a) It is a corporation duly organized and existing under
the laws of the State of Maryland.
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(b) It is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is an investment company registered under the
Investment Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of 1933,
as amended, with respect to the Shares is effective. The Fund shall notify the
Transfer Agent if such registration statement or any state securities
registrations have been terminated or a stop order has been entered with respect
to the Shares.
2. Each copy of the Articles of Incorporation of the Fund and
copies of all amendments thereto shall be certified by the Secretary of State
(or other appropriate official) of the state of organization, and if such
Articles of Incorporation and/or amendments are required by law also to be filed
with a county or other officer or official body, a certificate of such filing
shall be filed with a certified copy submitted to the Transfer Agent. Each copy
of the By-Laws and copies of all amendments thereto, and copies of resolutions
of the Board of Directors of the Fund, shall be certified by the Secretary of
the Fund.
3. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share Certificates,
notifications or requests, together with a specimen signature of each new
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Officer. In the event any Officer 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 issuance of such Share certificates, the
Transfer Agent may issue such Share certificates of the Fund notwithstanding
such death, resignation or removal, and the Fund shall promptly deliver to the
Transfer Agent such approval, adoption or ratification as may be required by
law.
4. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until a reasonable time, not to exceed
ten (10) business days, after it is actually received by the Transfer Agent.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Fund
that:
(a) It is a corporation duly organized and existing under
the laws of the State of Delaware.
(b) It is empowered under applicable law and by its
Charter and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is duly registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended.
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2. The Transfer Agent shall not be liable and shall be indemnified in
acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or made
by an Officer of the Fund or person designated by the Fund and shall not be held
to have any notice of any change of authority of any person until receipt of
written notice thereof from the Fund or such person. It shall also be protected
in processing Share certificates which bear the proper countersignature of the
Transfer Agent and which it reasonably believes to bear the proper manual or
facsimile signature of the Officers of the Fund.
3. The Transfer Agent upon reasonable notice to the Fund may
establish such additional procedures, rules and regulations governing the
transfer or registration of Share certificates as it may deem advisable and
consistent with such rules and regulations generally adopted by mutual fund
transfer agents.
4. The Transfer Agent shall keep such records as are specified in
Schedule II hereto in the form and manner, and for such period, as it may deem
advisable and is agreeable to the Fund but not inconsistent with the rules and
regulations of appropriate government authorities, in particular Rules 31a-2 and
31a-3 under the Investment Company Act of 1940, as amended. The Transfer Agent
acknowledges that such records are the property of the Fund. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, documents
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accumulated in the execution of its duties as such Transfer Agent, as the
Transfer Agent may deem expedient, other than those which the Transfer Agent is
itself required to maintain pursuant to applicable laws and regulations. The
Fund shall assume all responsibility for any failure thereafter to produce any
record, paper, cancelled Share certificate, or other document so returned, if
and when required. The records specified in Schedule II hereto maintained by the
Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Fund pursuant to the foregoing provisions of this paragraph 4,
shall be considered to be the property of the Fund, shall be made available upon
request for inspection by the officers, employees, auditors of the Fund, or such
staff of applicable regulatory agencies as the Fund may designate, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its bad faith,
negligence, willful misfeasance, gross negligence or reckless disregard of its
duties under this agreement.
6 (a) The Fund shall indemnify and exonerate, save and hold harmless
the Transfer Agent from and against any and all claims (whether with or without
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basis in fact or law), demands, expenses (including reasonable attorney's fees)
and liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may be asserted against the Transfer Agent by any person by
reason of or as a result of any action taken or omitted to be taken by any prior
transfer agent of the Fund or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence or willful
misconduct or in reliance upon (i) any provision of this Agreement; (ii) the
Prospectus; (iii) any instruction or order including, without limitation, any
computer tape or electronic data transmission reasonably believed by the
Transfer Agent to have been received from an Approved Institution; (iv) any
instrument, order or Share certificate reasonably believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized Officer of
the Fund; (v) any Certificate or other instructions of an Officer; or (vi) any
opinion of legal counsel for the Fund or the Transfer Agent. The Fund shall
indemnify and exonerate, save and hold the Transfer Agent harmless from and
against any and all claims (whether with or without basis in fact or law),
demands, expenses (including reasonable attorney's fees) and liabilities of any
and every nature which the Transfer Agent may sustain or incur or which may be
asserted against the Transfer Agent by any person by reason of or as a result of
any action taken or omitted to be taken by the Transfer Agent in good faith and
without negligence in connection with its appointment or in reliance upon any
law, act, regulation or any interpretation of the same even though such law, act
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or regulation may thereafter have been altered, changed, amended or repealed.
(b) The Transfer Agent shall not settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to paragraph 6(a)
above (each, an "Indemnifiable Claim") without the express written consent of an
Officer of the Fund. The Transfer Agent shall notify the Fund within 15 days of
receipt of notification of an Indemnifiable Claim, provided that the failure by
the Transfer Agent to furnish such notification shall not impair its right to
seek indemnification from the Fund unless the Fund is unable to adequately
defend the Indemnifiable Claim as a result of such failure, or if as a result of
the Transfer Agent's failure to provide the Fund with timely notice of the
institution of litigation a judgment by default is entered. The Fund shall have
the right to defend any Indemnifiable Claim at its own expense, provided that
such defense shall be conducted by counsel selected by the Fund. The Transfer
Agent may join in such defense at its own expense, but to the extent that it
shall so desire the Fund shall direct such defense. The Fund shall not settle
any Indemnifiable Claim without the express written consent of the Transfer
Agent if the Transfer Agent determines that such settlement would have an
adverse effect on the Transfer Agent beyond the scope of this Agreement. In the
event the Transfer Agent does not provide its written consent, each of the Fund
and the Transfer Agent shall be responsible for their own defense at their own
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cost and expense, and such claim shall not be deemed an Indemnifiable Claim
hereunder. If the Fund shall fail or refuse to defend an Indemnifiable Claim,
the Transfer Agent may provide its own defense at the cost and expense of the
Fund. Anything in this Agreement to the contrary notwithstanding, the Fund shall
not indemnify the Transfer Agent against any liability or expense arising out of
the Transfer Agent's willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
The Transfer Agent shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as a result of the Transfer Agent's
lack of good faith, negligence or willful misconduct.
7. The Transfer Agent shall not be liable to the Fund with respect to
any redemption draft on which the signature of the drawer is forged and which
the Fund's Custodian or Cash Management Bank has advised the Transfer Agent to
honor the redemption. Provided that the Transfer Agent inspects redemption
drafts with reasonable care to verify the drawer's signature against signatures
on file, the Transfer Agent shall not be liable for any material alteration or
absence or forgery of any endorsement.
8. There shall be excluded from the consideration of whether the
Transfer Agent has been negligent or has breached this Agreement, any period of
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time, and only such period of time, during which the Transfer Agent's
performance is materially affected, by reason of circumstances beyond its
control and not reasonably foreseeable in that the Transfer Agent could not
reasonable have made back-up or alternative arrangements (collectively,
"Causes"), including, without limitation (except as provided below), mechanical
breakdowns of equipment (including any alternative power supply and operating
systems software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, strikes, lockouts, work stoppages
or other similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may set
forth in writing any action proposed to be taken or omitted by the Transfer
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken. The Transfer Agent shall
not be liable for any action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein unless,
prior to taking or omitting any such action, the Transfer Agent has received
written instructions in response to such application specifying the action to be
taken or omitted. The Transfer Agent may consult counsel of the Fund, or if
acceptable to the Fund, its own counsel, at the expense of the Fund and shall be
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fully protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Fund or its own counsel.
10. The Transfer Agent may issue new Share certificates in
place of certificates represented to have been lost, stolen, or destroyed upon
receiving written instructions from the shareholder accompanied by proof of an
indemnity or surety bond issued by a recognized insurance institution specified
by the Fund or the Transfer Agent. If the Transfer Agent receives written
notification from the shareholder or broker dealer that the certificate issued
was never received, and such notification is made within 30 days of the date of
issuance, the Transfer Agent may reissue the certificate without requiring a
surety bond. The Transfer Agent may also reissue certificates which are
represented as lost, stolen, or destroyed without requiring a surety bond
provided that the notification is in writing and accompanied by an
indemnification signed on behalf of a member firm of the New York Stock Exchange
and signed by an officer of said firm with the signature guaranteed.
Notwithstanding the foregoing, the Transfer Agent will reissue a certificate
upon written authorization from an Officer of the Fund.
11. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund promptly and to secure instructions from an Officer as to such inspection.
The Transfer Agent reserves the right, however, to exhibit the shareholder
records to any person whenever it receives an opinion from its counsel that
26
<PAGE>
there is a reasonable likelihood that the Transfer Agent will be held liable for
the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure the Transfer Agent shall
promptly notify the Fund that such disclosure has been made or is to be made.
12. At the request of an Officer of the Fund the Transfer
Agent will address and mail such appropriate notices to shareholders as the Fund
may direct.
13. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation
to inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer of Shares, or of a redemption
of any Shares, the propriety of the amount to be paid therefor, or the authority
of the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by
the Fund, or the legality of the issue of any Shares in payment of
any stock dividend; or
(d) The legality of any recapitalization or readjustment
of Shares.
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<PAGE>
14. The Transfer Agent shall be entitled to receive and the
Fund hereby agrees to pay to the Transfer Agent for its performance hereunder,
including its performance of the duties and functions set forth in Schedule I
hereto, (i) its reasonable out-of-pocket expenses (including reasonable legal
expenses and attorney's fees) incurred in connection with its performance
hereunder and (ii) such compensation as may be agreed upon in writing from time
to time by the Transfer Agent and the Fund.
15. The Transfer Agent 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 Transfer Agent.
16. Purchase and Prices of Services.
(a) The Fund will compensate the Transfer Agent for, and
Transfer Agent will provide, beginning on the execution date of this Agreement
and continuing until the termination of this Agreement as provided hereinafter,
the Services set forth in Schedule I.
(b) The current unit prices for the Services are set forth in
Schedule III (the "Schedule III Fee Schedule"). Once in each calendar year,
after the third anniversary of the date hereof, the Transfer Agent may elect to
raise the Schedule III Fees upon ninety (90) days prior notice to the Fund.
Notwithstanding the annual right to raise the Schedule III Fees, the Transfer
Agent may increase prices due to changes in legal or regulatory requirements
28
<PAGE>
subject to the approval of the Fund, which approval shall not be unreasonably
withheld.
17. Billing and Payment.
(a) The Transfer Agent shall bill the Fund as follows: (i)
monthly in arrears for Accounts maintained and Out-of-Pocket Expenses; and (ii)
monthly in advance for estimated postage expenses to be incurred by the Transfer
Agent for the following month. Documentation to support reconciliation of actual
postage expense charges will be provided to the Fund monthly. The Transfer Agent
may from time to time request the Fund to make additional advances when
appropriate.
(b) The Fund shall pay the Transfer Agent in immediately
available funds at United Missouri Bank in Kansas City, Missouri within thirty
(30) days of the date of the bill and receipt of supporting documents. Any
amounts due under this Agreement which are not paid within said thirty (30) day
period shall bear interest at the rate of one and one-half percent (1 1/2%) per
month from such date until paid in full.
ARTICLE IX
TERMINATION
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
receipt 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 or any Assistant Secretary, electing to terminate
29
<PAGE>
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by the Transfer Agent, the Fund shall on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Fund shall upon the date specified
in the notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the Transfer
Agent shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the Fund, shall deliver the records
of the Fund on electromagnetic media to the Fund or its successor transfer
agent. The Fund shall be responsible to the Transfer Agent for the reasonable
costs and expenses associated with the preparation and delivery of such media.
ARTICLE X
MISCELLANEOUS
1. The Fund agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
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<PAGE>
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto, which consent shall not be unreasonably withheld.
2. 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 first
above written, or at such other place as the Fund 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 Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to the Secretary at 1055
Broadway, Kansas City, Missouri 64105-1594 with a copy to the President at 1055
Broadway, Kansas City, Missouri 64105-1594 or at such other place as the
Transfer Agent 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 formality of this Agreement.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not be
assignable by either party without the written consent of the other party,
except that the Transfer Agent may assign this Agreement to a corporate
affiliate with advance written notice to and consent by the Fund, which consent
shall not be unreasonably withheld.
6. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
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<PAGE>
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.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
9. (a) The Transfer Agent will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Fund. Any such inquiries or errors which
cannot be expediently resolved by the Transfer Agent will be referred to the
Fund.
(b) The Transfer Agent shall only be responsible for the
safekeeping and maintenance of transfer agency records, cancelled certificates
and correspondence of the Fund created or produced prior to the time of
conversion which are under its control and acknowledged in a writing to the Fund
to be in its possession. Any expenses or liabilities incurred by the Transfer
Agent as a result of shareholder inquiries, regulatory compliance or audits
related to such records and not caused as a result of Transfer Agent's bad
faith, willful malfeasance or negligence shall be the responsibility of the Fund
as provided in Article VIII herein.
10. The Transfer Agent shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
periodic backup or computer files and data with respect to the Fund and
emergency use of electronic data processing equipment. In the event of equipment
32
<PAGE>
failures the Transfer Agent shall at no additional expense to the Fund, take all
reasonable steps to minimize service interruptions, the Transfer Agent shall
have no liability with respect to the loss of data or service interruptions
caused by equipment failures, provided such loss or interruption is not caused
by the negligence of the Transfer Agent and provided further that the Transfer
Agent has complied with the provisions of this Paragraph.
11. The Transfer Agent agrees on its own behalf and that of its
employees to make reasonable efforts to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment advisor and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld, and may not be withheld where Transfer Agent may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
12. The Transfer Agent shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, the Transfer Agent or other insured party
33
<PAGE>
which would otherwise be a covered claim in the absence of any provision of this
Agreement.
13. The Transfer Agent represents and warrants that, to the best of its
knowledge, the various procedures and systems which the Transfer Agent has
implemented with regard to the safeguarding from loss or damage attributable to
fire, theft or any other cause (including provision for twenty-four hours a day
restricted access) of the Fund's blank checks, certificates, records and other
data and the Transfer Agent's equipment, facilities and other property used in
the performance of its obligations hereunder are adequate, and that it will make
such changes therein from time to time as in its judgment are required for the
secure performance of its obligations hereunder. The Transfer Agent shall review
such systems and procedures on a periodic basis and the Fund shall have access
to review these systems and procedures.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate officer, thereunto duly
authorized and their respective corporate seals to be hereunto affixed, as the
day and year first above written.
DST SYSTEMS, INC. MIDAS FUND, INC.
By: __________________________ By: _______________________
(Signature) (Signature)
-------------------------- -----------------------
(Name) (Name)
-------------------------- -----------------------
(Title) (Title)
34
<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Fund and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Certificate Issuance, Wire Order Trades, Dividends, Dividend Statements, Dealer
Statements.
DAILY ACTIVITY
Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Uncertificated Shares
Balance of Certificated Shares
Certificate number, number of shares, issuance date of each certificate
outstanding and cancellation date for each certificate date for each
certificate no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash)
Type of account code
Establishment date indicating the date an account was opened,
carrying forward pre-conversion data as available
Original establishment date for accounts opened by exchange
W-9 withholding status and periodic reporting
State of residence code
Social Security or taxpayer identification number, and
indication of certification
Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time-to-time
35
<PAGE>
Indication as to whether phone transactions can be accepted for
this account. Beneficial owner code, i.e. male, female, joint
tenant, etc.
An alternate or "secondary" account number issued by a dealer
(or bank, etc.) to a customer for use, inquiry and transaction
input by "remote accessors"
FUNCTIONS
Answer investor and dealer telephone and/or written inquiries, except
those concerning Fund policy, or requests for investment advice which
will be referred to the Fund, or those which the Fund chooses to answer
Deposit Fund share certificates into accounts upon receipt of
instructions from the investor or other authorized person, if issued
Examine and process transfers of shares insuring that all transfer
requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e.
Dividend Codes, etc.
Microfilm source documents for transactions, such as account
applications and correspondence
Perform backup withholding for those accounts which federal
government regulations indicate is necessary
Perform withholdings on liquidations, if applicable, for
employee benefit plans. Prepare and mail 5498s and 1099R's
Solicit missing taxpayer identification numbers
Provide remote access inquiry to Fund records via Fund supplied
hardware (Fund responsible for connection line and monthly fee)
REPORTS PROVIDED
Daily Journals Reflecting all shares and
dollar activity for the
previous day
Blue Sky Report Supply information monthly
for Fund's preparation of
Blue Sky Reporting
36
<PAGE>
N-SAR Report Supply monthly correspondence,
redemption and liquidation
information for use in fund's
N-SAR Report
Additionally, monthly average daily balance reports will be provided at
the Fund's request to the Fund at no charge. Prepare and mail copies of
summary statements to dealers and investment advisers
Generate and mail confirmation statements for financial
transactions
DIVIDEND ACTIVITY
Reinvest or pay in cash including reinvesting in other funds within the
fund group serviced by the Transfer Agent as described in each Fund
Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
Prepare and mail confirmation statements to dealers daily
Prepare and mail copies of statements to dealers, same
frequency as investor statements
ANNUAL MEETINGS
Assist Fund in obtaining a qualified service to: address and mail
proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to
37
<PAGE>
Governmental authorities: Forms 1099R, 1099DIV, 1099B, 1042
and 1042S
Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent)
38
<PAGE>
SCHEDULE II
RECORDS MAINTAINED BY TRANSFER AGENT
- Account applications
- Cancelled certificates plus stock powers and supporting
documents
- Checks including check registers, reconciliation records,
any adjustment records and tax withholding documentation
- Indemnity bonds for replacement of lost or missing stock
certificates and checks
- Liquidation, redemption, withdrawal and transfer requests
including stock powers, signature guarantees and any
supporting documentation
39
<PAGE>
AGENCY AGREEMENT
This Agency Agreement is made as of _____________, 1995 by and between
Midas Fund, Inc., a Maryland corporation, having its principal office and place
of business at 11 Hanover Square, New York, New York 10005 (hereinafter referred
to as "Midas Fund"), and DST Systems, Inc., a Delaware corporation, having its
principal office and place of business at 1055 Broadway, Kansas City, Missouri
64105-1594 (hereinafter referred to as the "Agent").
WHEREAS, Agent is the transfer agent of certain affiliated mutual funds
("Funds"), which Funds are listed on the attached Exhibit A; and
WHEREAS, Midas Fund is the sponsor of certain Individual
Retirement Accounts (the "Accounts") in the Funds; and
WHEREAS, Midas Fund wishes to retain the Agent to perform certain
recordkeeping and other duties which have been delegated to Midas Fund by
Investors Bank & Trust Company ("IBT") as Custodian for the Accounts pursuant to
the Service and Agency Agreement ("SAA") attached hereto as Exhibit B and the
Agent wishes to perform such duties.
NOW, THEREFORE, Midas Fund and the Agent agree as follows:
1. Midas Fund hereby retains and employs the Agent to perform
the duties described herein. The Agent accepts such employment and
agrees to perform such duties.
2. The Agent shall, in fulfilling its duties hereunder, act in good
faith, with due diligence, and without negligence. The Agent shall perform its
duties in accordance with the copy of the Individual Retirement Account
Custodial Agreement which is attached hereto and made a part hereof ("Custodial
Agreement") and present and future requirements of Section 408(a) of the
Internal Revenue Code and any rule or regulation issued in interpretation of
Section 408(a) and applicable law ("IRS Requirements").
3. The duties of the Agent will include the following:
(a) Receiving all Accounts which are in existence,
opening new Accounts and receiving cash contributions for
Accounts;
(b) Making distributions from Accounts as well as withholding
tax in accordance with the provisions of the Custodial
Agreement and IRS Requirements.
(c) Preparing and delivering all returns, reports, proxies,
valuations, and accounting in accordance with IRS Requirements and as
reasonably required by Midas Fund or by IBT.
1
<PAGE>
(d) Maintaining all records for the Accounts in
accordance with IRS Requirements and as reasonably required by
Midas Fund or by IBT; and
(e) assuming all duties and obligations of Midas Fund
as set forth in Article 4.4(a) of the SAA.
4. Agent agrees to permit Midas Fund and IBT to conduct review
procedures as either may deem necessary to monitor the activities of the Agent
under this Agreement. The Agent also agrees to perform or have performed such
audit review procedures of those activities as Midas Fund and IBT may reasonably
request at the expense of Midas Fund.
5. No provision of this Agreement shall modify or supersede
any provision of the Transfer Agency Agreements executed by the
Agent and Midas Fund.
6. Midas Fund agrees to indemnify and exonerate, save and hold Agent
harmless from and against any and all claims (whether with or without basis in
fact or law), demands, expenses (including reasonable attorneys' fees) and
liabilities of any nature which Agent may sustain or incur unless such claims,
demands, expenses, and liabilities are caused as a result of Agent's bad faith,
willful misconduct, negligence or failure to perform its duties hereunder in
accordance with the standards set forth herein.
7. This Agreement may be terminated at any time by mutual consent of
the parties hereto or upon thirty (30) days' written notice by either party.
Further, this Agreement may be immediately terminated by either party in the
event the Midas Fund appoints a successor Custodian as provided in the Custodial
Agreement. Upon termination, Agent shall transfer the records of the Accounts as
directed by Midas Fund at Midas Fund's expense.
8. For its services hereunder, Agent shall be entitled to
receive 75% of all annual maintenance (fiduciary) fees collected
from the accounts.
9. No modification or amendment of this Agreement shall be
valid or binding on the parties unless made in writing and signed on behalf of
each of the parties by their respective duly authorized officers or
representatives.
10. Notices shall be communicated by fax and first class mail, or by
such other means as the parties may agree, to the persons and addresses
specified below or to such other persons and addresses as the parties may
specify in writing.
2
<PAGE>
If to Midas Fund: Midas Fund, Inc.
11 Hanover Square
New York, NY 10005
with copy to: Midas Management Corporation
11 Hanover Square
New York, NY 10005
Attn: Legal Department
If to Agent: DST Systems, Inc.
1055 Broadway
Kansas City, Missouri 64105-1594
Attn: Thomas A. McCullough
with copy to: DST Systems, Inc.
Legal Department
1055 Broadway
Kansas City, Missouri 64105-1594
11. This Agreement shall be governed by the laws of the State
of Missouri.
12. This Agreement may be executed in any number of counterparts, and
by the parties hereto on separate counterparts, each of which when so executed
shall be deemed an original and all of which when taken together shall
constitute one and the same agreement.
Executed by the parties on the date(s) set forth below.
MIDAS FUND, INC.
"Midas Fund"
By: ___________________________
Thomas B. Winmill
Its: Co-President
Date:
DST SYSTEMS, INC.
"Agent"
By: ______________________________
Its: Senior Vice President
Date:
3
<PAGE>
EXHIBIT A - Dated ___________, 1995
Bull & Bear Dollar Reserves
Bull & Bear Global Income Fund
Bull & Bear Gold Investors Ltd.
Bull & Bear Municipal Income Fund
Bull & Bear Quality Growth Fund
Bull & Bear Special Equities Fund, Inc.
Bull & Bear U.S. and Overseas Fund
Bull & Bear U.S. Government Securities Fund
Midas Fund, Inc.
4
<PAGE>
SHAREHOLDER ADMINISTRATION AGREEMENT
AGREEMENT made as of ______________, 1995 between Midas Fund, Inc., a
Maryland corporation ("Fund"), and Investor Service
Center, Inc. ("ISC"), a Delaware corporation.
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund desires to retain ISC to provide certain shareholder
services for the Fund and each Series of shares now existing or as hereinafter
may be established; and
WHEREAS, as a convenience to the Fund and its shareholders ISC is
willing to furnish such services at cost and without a view to profit thereby;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ISC as agent to perform the
services for the period and on the terms set forth in this Agreement. ISC
accepts such appointment and agrees to furnish the services herein set forth, in
return for the reimbursement specified in paragraph 3 of this Agreement. ISC
agrees to comply with all relevant provisions of the 1940 Act and the Securities
Exchange Act of 1934, as amended ("1934 Act"), and applicable rules and
regulations thereunder in performing such services.
2. Services and Duties of ISC. ISC shall be responsible for the
following services relating to shareholders of the Fund ("Shareholders"): (a)
assisting the transfer agent in receiving and responding to written and
telephone Shareholder inquiries concerning their accounts; (b) processing
Shareholder telephone requests for transfers, purchases, redemptions, changes of
address and similar matters; (c) assisting as necessary in proxy solicitation;
(d) providing a service center for coordinating, researching and answering
general inquiries, as well as those required by legal process, regarding
Shareholder account data; and (e) administering and correcting Fund records as
authorized by the Board of Direc tors of the Fund.
1
<PAGE>
3. Reimbursement. For the performance of its obligations hereunder, the
Fund will reimburse ISC the actual costs incurred with respect thereto,
including, without limitation, the following costs and all other expenses
related to the performance of ISC's obligations hereunder: (a) benefits, payroll
taxes, and search costs of ISC personnel; (b) telephone; (c) rent; (d)
equipment, including telephone PBX, answering machine, call distributor,
conversation recording machine and maintenance thereon; (e) blue sky
registration and filing for ISC and its registered representatives; (f) travel
and meals; (g) mail, postage, and overnight delivery services; (h) allocated E&O
and fidelity bond insurance; (i) publications, memberships, and subscriptions;
(j) office supplies; (k) printing; (l) Shareholder service related training
courses; and (m) corporate audit and franchise taxes. Such costs and expenses
shall be allocated among the Fund and the other Bull & Bear Funds based on the
relative number of open Shareholder accounts and other factors deemed
appropriate by the Board of Directors of the Fund.
4. Cooperation with Accountants. ISC shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
unqualified opinion, including but not limited to the opinion included in the
Fund's semi-annual reports on Form N-SAR.
5. Equipment Failures. In the event of failures beyond
ISC's control, ISC shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
6. Responsibility of ISC. ISC shall be under no duty to take any action
on behalf of the Fund or any Series except as specifically set forth herein or
as may be specifically agreed to by ISC in writing. In the performance of its
duties hereunder, ISC shall be obligated to exercise care and diligence, but
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of ISC or reckless
disregard by ISC of its duties under this Agreement. Without limiting the
generality of the foregoing or of any other provision of this Agreement, in
connection with its duties under this Agreement, ISC shall not be liable for
delays or errors occurring by reason of circumstances beyond ISC's control,
including acts of civil or military authorities, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure
2
<PAGE>
of the mails, transportation, communication or power supply.
7. Indemnification. The Fund agrees to indemnify and hold harmless ISC
and its agents from all taxes, charges, expenses, assessments, claims and
liabilities including (without limitation) liabilities arising under the
Securities Act of 1933, as amended, the 1934 Act and any state and foreign
securities and blue sky laws and regulations, all as or to be amended from time
to time, and expenses, including (without limitation) attorneys' fees and
disbursements arising directly or indirectly from any action or matter which ISC
takes or does or omits to take or do.
8. Duration and Termination. This Agreement shall continue until
terminated by the Fund with respect to any or all Series thereof, or by ISC.
Termination of this Agreement with respect to any given Series shall in no way
affect the continued validity of this Agreement or the performance thereunder
with respect to any other Series.
9. Amendments. This Agreement or any part thereof may be
changed or waived only by an instrument in writing signed by the
party against which enforcement of such change or waiver is
sought.
10. Miscellaneous. This Agreement embodies the entire contract and
understanding between the parties hereto. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions thereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first above written.
ATTEST: MIDAS FUND, INC.
By:
Secretary Co-President
ATTEST: INVESTOR SERVICE CENTER, INC.
Secretary By: President
3
<PAGE>
August 23, 1995
Excel Midas Gold Shares, Inc.
16955 Via Del Campo
San Diego, CA 92127
Re: Post Effective Amendment No. 17
Ladies and Gentlemen:
We have acted as counsel to Excel Midas Gold Shares, Inc., a Minnesota
corporation (the "Fund"), in connection with the Fund's Registration Statement
on Form N-1A (File No. 2-98229). We understand that the Fund is about to file
Post Effective Amendment No. 17 to its Registration Statement for the purpose of
registering additional shares of capital stock of the Fund under the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended. In
that connection, we have examined such documents and reviewed such questions of
law as we have considered necessary and appropriate for the purpose of this
opinion. Based thereon, we advise you that, in our opinion, the shares of common
stock, $.01 par value per share, to be registered pursuant to Section 24(e)(1)
as reflected in Post Effective Amendment No. 17, when sold in accordance with
the Fund's Articles of Incorporation and Bylaws and upon the terms and in the
manner set forth in the Registration Statement of the Fund referred to above,
will be validly issued, fully paid, and nonassessable.
We hereby consent to this opinion accompanying Post Effective Amendment
No. 17 which you are about to file with the Securities and Exchange Commission.
Very truly yours,
Dorsey & Whitney P.L.L.P.
<PAGE>
Consent of Independent Accountants
We consent to the inclusion in this the Post-Effective Amendment Number 17 to
the Form N1-A of Excel Midas Gold Shares, Inc., of our report dated February 10,
1995, on our audit of the statement of assets and liabilities of Excel Midas
Gold Shares, Inc., including the statement of investments as of December 31,
1994, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and financial highlights for the four years then ended.
Squire & Co.
Poway, California
August 7, 1995
<PAGE>
Standardized Profit Sharing Plan
ADOPTION AGREEMENT
_____________________________________________________________________________
SECTION 1. EMPLOYER INFORMATION
Name of Employer:______________________________________________________
Address_______________________________________________________________
City: _______________________State:______________________ Zip: _____________
Telephone: _________________ Federal Tax Identification Number______________
Income Tax Year End __________________________
Type of Business (Check only one) [ ] Sole Proprietorship
[ ] Partnership [ ] Corporation [ ] Other (Specify)_______________
Nature of Business
(Describe)_______________________________________________
Plan Sequence No. __________ (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________ Date Business Established ____________
Date of Birth________________________ Marital Status_______________________
Home Address _______________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this Plan is ________, 19 .
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was initially
effective on _____________. The Effective Date of this amendment
and restatement is ________________. NOTE: The effective date
is usually the first day of the Plan Year in which this Adoption
Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing _______ (enter 0, 1 or 2) Years of Eligibility Service.
NOTE: If more than 1 year is selected, the immediate 100% vesting
schedule of Section 5, Option C will automatically apply. If left
blank, the Years of Eligibility Service required will be deemed to be 0.
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age ____________ (no more than 21). NOTE: If left blank, it
will be deemed there is no age requirement for eligibility.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan, and except those
Employees who are non-resident aliens pursuant to Section 410(b)
(3)(C) of the Code and who received no earned income from the
Employer which constitutes income from sources within the United
States.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
Part A. Contribution Formula
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
Part B. Allocation Formula: (Check Option 1 or 2)
Option 1: [ ] Pro Rata Formula. Employer Contributions and Forfeitures
shall be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula: Employer Contributions and Forfeitures
shall be allocated as follows (Start with Step 3 if this Plan
is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that each qualifying Participant's Compensation for the
Plan Year in excess of the integration level bears to all
qualifying Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that the sum of each qualifying Participant's total
Compensation and Compensation in excess of the
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of the
profit sharing maximum disparity rate as described in
Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro
rata to qualifying Participants in the manner described
in Section 4, Part B, Option 1.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $______ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
_____________________________________________________________________
YEARS OF VESTING SERVICE
Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if Chosen)
___________________________________________________________________________
VESTED PERCENTAGE
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
_____________________________________________________________________
_________
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____ (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ________ Hours of Service (no more than 1,000) shall be required
to constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B. ________ Hours of Service (no more than 500) must be exceeded to
avoid a Break in Vesting Service or a Break in Eligibility
Service.
NOTE: The number of hours in Part A must be greater than the
number of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not
checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to
Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be permitted to make
withdrawals during service pursuant to Section 6.01(A)(3) of the
Plan? [ ] Yes [ ] No
NOTE: If the Plan is being adopted to amend and replace a Prior Plan
which permitted in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be permitted only on account of
hardship. [ ]
SECTION 9. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
Option 1: [ ] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to _____ (at least 50% but no more
than 100%) of the amount paid to the Participant prior to his or
her death.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of
the Code, which provides post-retirement medical benefits allocated
to separate accounts for key employees as defined in Section 419A(d)
(3) of the Code or an individual medical account, as defined in
Section 415(1)(2) of the Code) in addition to this Plan (other than a
paired standardized profit sharing plan using Basic Plan Document No.
03) may not rely on the opinion letter issued by the National Office
of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Code. If the Employer who adopts
or maintains multiple plans wishes to obtain reliance that the
Employer's plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of
Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer_____________________________Date
Signed_______________
Type
Name________________________________________________________________
____
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers,
or [ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization
__________________________________________________
Signature_____________________________________________________________
____
Type
Name________________________________________________________________
Option B. [ ] Individual Trustee(s)
Signature _____________________________
Signature_________________________
Type Name _____________________________ Type
Name_________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor
Address_______________________________________________________________
___
Telephone
Number_________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan
If you maintain or ever maintained another qualified plan (other than a
paired standardized money purchase pension plan using Basic Plan Document
No. 03) in which any Participant in this Plan is (or was) a Participant
or could become a Participant, you must complete this section. You must
also complete this section if you maintain a welfare benefit fund, as
defined in Section 419(e) of the Code, or an individual medical account,
as defined in Section 415(l)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in this Plan.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.) ________________
____________________________________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude Employer
discretion. (Complete)____________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
_______________________________________
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 03
_______________________________________________________________________________
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purpose of this Plan, have the meanings set forth
below unless the context indicates that other meanings are intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it adopts
the Plan and Trust and thereby agrees to be bound by all terms and
conditions of the Plan and Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
1.03 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation Period during which an Employee fails to
complete more than 500 Hours of Service (or such lesser number of
Hours of Service specified in the Adoption Agreement for this
purpose).
1.04 BREAK IN VESTING SERVICE
Means a Plan Year during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.05 CODE
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.06 COMPENSATION
For Plan Years beginning on or after January 1, 1989, the following
definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined in Section
3.05(E)(2) of the Plan. For any Self-Employed Individual covered under the
Plan, Compensation will mean Earned Income. Compensation shall include only
that Compensation which is actually paid to the Participant during the
applicable period. Except as provided elsewhere in this Plan, the applicable
period shall be the Plan Year unless the Employer has selected another
period in the Adoption Agreement.
Unless otherwise indicated in the Adoption Agreement, Compensation shall
<PAGE>
include any amount which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross income of the
Employee under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual Compensation of each
Participant taken into account under the Plan for any year shall not exceed
$200,000. This limitation shall be adjusted by the Secretary at the same
time and in the same manner as under Section 415(d) of the Code, except that
the dollar increase in effect on January 1 of any calendar year is effective
for years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1, 1990. If a Plan determines
Compensation on a period of time that contains fewer than 12 calendar
months, then the annual Compensation limit is an amount equal to the annual
Compensation limit for the calendar year in which the compensation period
begins multiplied by the ratio obtained by dividing the number of full
months in the period by 12.
<PAGE>
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except
in applying such rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the year.
If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining the portion
of Compensation up to the integration level if this Plan provides for
permitted disparity), the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation.
If Compensation for any prior Plan Year is taken into account in determining
an Employee's contributions or benefits for the current year, the
Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for
years beginning before January 1, 1990, the applicable annual Compensation
limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where an Employee
enters the Plan (and thus becomes a Participant) on an Entry Date other than
the Entry Date in a Plan Year, his Compensation will include any such
earnings paid to him during the whole of such Plan Year.
Where this Plan is being adopted as an amendment and restatement to bring a
Prior Plan into compliance with the Tax Reform Act of 1986, such Prior
Plan's definition of Compensation shall apply for Plan Years beginning
before January 1, 1989.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual Compensation limit. The OBRA '93 annual Compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual Compensation
limit will be multiplied by a fraction, the numerator of which is the number
of months in the determination period, and the denominator of which is 12.
<PAGE>
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual Compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual Compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of
the first Plan Year beginning on or after January 1, 1994 the OBRA '93
annual Compensation limit is $150,000.
<PAGE>
1.07 CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian or
any duly appointed successor as provided in Section 5.09.
1.08 DISABILITY
Means the inability to engage in any substantial, gainful activity by
reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months.
The permanence and degree of such impairment shall be supported by
medical evidence.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to
the extent deductible under Section 404 of the Code.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to
the extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction allowed
to the Employer by Section 164(f) of the Code for taxable years
beginning after December 31, 1989.
<PAGE>
1.10 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, where a separate date is stated in the Plan as of
which a particular Plan provision becomes effective, such date will
control with respect to that provision.
1.11 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the 12
consecutive month period commencing with the date such Employee first
performs an Hour of Service (employment commencement date). His
subsequent Eligibility Computation Periods shall be the 12 consecutive
month periods commencing on the anniversaries of his employment
commencement date; provided, however, if pursuant to the Adoption
Agreement, an Employee is required to complete one or less Years of
Eligibility Service to become a Participant, then his subsequent
Eligibility Computation Periods shall be the Plan Years commencing
with the Plan Year beginning during his initial Eligibility
Computation Period.
1.12 EMPLOYEE
Means any person employed by an Employer maintaining the Plan or of
any other employer required to be aggregated with such Employer under
Sections 414(b), (c), (m) or (o) or the Code.
The term Employee shall also include any Leased Employee deemed to be
an Employee of any Employer described in the previous paragraph as
provided in Section 414(n) or (o) of the Code.
1.13 EMPLOYER
Means any corporation, partnership, sole-proprietorship or other
entity named in the Adoption Agreement and any successor who by
merger, consolidation, purchase or otherwise assumes the obligations
of the Plan. A partnership is considered to be the Employer of each of
the partners and a sole-proprietorship is considered to be the
Employer of a sole proprietor.
1.14 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as determined
under this Plan.
1.15 ENTRY DATES
Means the first day of the Plan Year and the first day of the seventh
month of the Plan Year, unless the Employer has specified more
frequent dates in the Adoption Agreement.
<PAGE>
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended
from time-to-time.
1.17 FORFEITURE
Means that portion of a Participant's Individual Account as derived
from Employer Contributions which he or she is not entitled to receive
(i.e., the nonvested portion).
1.18 FUND
Means the Plan assets held by the Trustee for the Participants'
exclusive benefit.
1.19 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly compensated
active employees and highly compensated former employees.
A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year and
who, during the look-back year: (a) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) received Compensation from the Employer in excess of
$50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a
member of the top-paid group for such year; or (c) was an officer of
the Employer and received Compensation during such year that is
greater than 50% of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also
includes: (a) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the 100 Employees who
received the most Compensation from the Employer during the
determination year; and (b) Employees who are 5% owners at any time
during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 12 month period immediately preceding the
determination year.
A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
<PAGE>
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5% owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most
<PAGE>
Highly Compensated Employees ranked on the basis of Compensation paid
by the Employer during such year, then the family member and the 5%
owner or top 10 Highly Compensated Employee shall be aggregated. In
such case, the family member and 5% owner or top 10 Highly Compensated
Employee shall be treated as a single Employee receiving Compensation
and Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the family member and 5%
owner or top 10 Highly Compensated Employee. For purposes of this
Section, family member includes the spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of such
lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated
as officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
there-under.
1.20 HOURS OF SERVICE - Means
A. Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours will
be credited to the Employee for the computation period in which
the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave
of absence. No more than 501 Hours of Service will be credited
under this paragraph for any single continuous period (whether or
not such period occurs in a single computation period). Hours under
this paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which is
incorporated herein by this reference;
<PAGE>
and
C. Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service will not be credited both under paragraph (A) or
paragraph (B), as the case may be, and under this paragraph (C).
These hours will be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement, or
payment is made.
D. Solely for purposes of determining whether a Break in Eligibility
Service or a Break in Vesting Service has occurred in a computation
period (the computation period for purposes of determining whether
a Break in Vesting Service has occurred is the Plan Year), an
individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such
absence, or in any case in which such hours cannot be determined, 8
Hours of Service per day of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity reasons
means an absence (1) by reason of the pregnancy of the individual,
(2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or
(4) for purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of Service
credited under this paragraph shall be credited (1) in the
Eligibility Computation Period or Plan Year in which the absence
begins if the crediting is necessary to prevent a Break in
Eligibility Service or a Break in Vesting Service in the applicable
period, or (2) in all other cases, in the following Eligibility
Computation Period or Plan Year.
E. Hours of Service will be credited for employment with other members
of an affiliated service group (under Section 414(m) of the Code),
a controlled group of corporations (under Section 414(b) of the
Code), or a group of trades or businesses under common control
(under Section 414(c) of the Code) of which the adopting Employer
is a member, and any other entity required to be aggregated with
the Employer pursuant to Section 414(o) of the Code and the
regulations thereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Code
<PAGE>
Sections 414(n) or 414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service
for the Employer.
G. The above method for determining Hours of Service may be altered
as specified in the Adoption Agreement.
1.21 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.22 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section 5.05.
1.23 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under Section
10.08.
1.24 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient) who
pursuant to an agreement between the recipient and any other person
("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with
Section 414(n)(6) of the Code) on a substantially full time basis for
a period of at least one year, and such services are of a type
historically performed by Employees in the business field of the
recipient Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the recipient
if: (1) such employee is covered by a money purchase pension plan
providing: (a) a nonintegrated employer contribution rate of at least
10% of compensation, as defined in Section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Section
125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code,
(b) immediate participation, and (c) full and immediate vesting; and
(2) Leased Employees do not constitute more than 20% of the
recipient's nonhighly compensated work force.
1.25 NORMAL RETIREMENT AGE
<PAGE>
Means the age specified in the Adoption Agreement. However, if the
Employer enforces a mandatory retirement age which is less than the
Normal Retirement Age, such mandatory age is deemed to be the Normal
Retirement Age. If no age is specified in the Adoption Agreement, the
Normal Retirement Age shall be age 59 1/2.
1.26 OWNER - EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner
owning more than 10% of either the capital or profits interest of the
partnership.
1.27 PARTICIPANT
Means any Employee or former Employee of the Employer who has met the
Plan's eligibility requirements, has entered the Plan and who is or
may become eligible to receive a benefit of any type from this Plan or
whose Beneficiary may be eligible to receive any such benefit.
1.28 PLAN
Means the prototype defined contribution plan adopted by the Employer.
The Plan consists of this Basic Plan Document plus the corresponding
Adoption Agreement as completed and signed by the Employer.
1.29 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.30 PLAN YEAR
Means the 12 consecutive month period which coincides with the
Employer's tax year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
1.31 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this Plan
document as indicated in the Adoption Agreement.
1.32 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement. Such entity must
meet the definition of a sponsoring organization set forth in Section
3.07 of Revenue Procedure 89-13.
1.33 SELF-EMPLOYED INDIVIDUAL
Means an individual who has Earned Income for the taxable year from
the trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the
<PAGE>
trade or business had no net profits for the taxable year.
1.34 SEPARATE FUND
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that Participant. The
assets which comprise a Participant's Separate Fund are those assets
earmarked for him and those assets subject to the Participant's
individual direction pursuant to Section 5.14.
1.35 TAXABLE WAGE BASE
Means, with respect to any taxable year, the maximum amount of
earnings which may be considered wages for such year under Section
3121(a)(1) of the Code.
1.36 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall occur
whenever his status as an Employee of such Employer ceases for any
reason other than his death. An Employee who does not return to work
for the Employer on or before the expiration of an authorized leave of
absence from such Employer shall be deemed to have incurred a
Termination of Employment when such leave ends.
1.37 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to
be such pursuant to Section 10.08.
1.38 TRUSTEE
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the event
the financial organization named as Trustee does not have full trust
powers.
1.39 VALUATION DATE
Means the last day of the Plan Year and each other date designated by
the Plan Administrator which is selected in a uniform and
non-discriminatory manner when the assets of the Fund are valued at
their then fair market value.
1.40 VESTED
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or his
Beneficiary to that part of an immediate or deferred benefit under the
Plan which arises from a Participant's Years of Vesting Service.
<PAGE>
1.41 YEAR OF ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation period during which an Employee completes at
least 1,000 Hours of Service (or such lesser number of Hours of
Service specified in the Adoption Agreement for this purpose).
1.42 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose).
In the case of a Participant who has 5 or more consecutive Breaks in
Vesting Service, all Years of Vesting Service after such Breaks in
Vesting Service will be disregarded for the purpose of determining the
Vested portion of his Individual Account derived from Employer
Contributions that accrued before such breaks. Such Participant's
prebreak service will count in vesting the postbreak Individual
Account derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his
Individual Account derived from Employer Contributions at the
time of his Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in
Vesting Service is less than his number of Years of Vesting
Service before such breaks.
Separate subaccounts will be maintained for the Participant's
<PAGE>
prebreak and postbreak portions of his Individual Account derived from
Employer Contributions. Both subaccounts will share in the gains and
losses of the Fund.
Years of Vesting Service shall not include any period of time excluded
from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for each
of the Plan Years (the old and new Plan Years) which overlap as a
result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
<PAGE>
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who belong to a
class of Employees which is excluded from participation as indicated
in the Adoption Agreement, shall be eligible to participate in this
Plan upon the satisfaction of the age and Years of Eligibility Service
requirements specified in the Adoption Agreementment.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a Participant in
said Prior Plan before the Effective Date shall continue to be a
Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if he has met the eligibility requirements of
Section 2.01 as of such date. After the Effective Date, each
Employee shall become a Participant on the first Entry Date
following the date the Employee satisfies the eligibility
requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish him
with the application form, enrollment forms or other documents
which are required of Participants. The eligible Employee shall
execute such forms or documents and make available such information
as may be required in the administration of the Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, but has not incurred a Break in Eligibility Service, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Employee incurs a Break in Eligibility
Service, his eligibility to participate shall be determined by Section
2.04.
An Employee who is not a member of the eligible class of Employees
will become a Participant immediately upon becoming a member of the
eligible class provided such Employee has satisfied the age and Years
of Eligibility Service requirements. If such Employee has not
satisfied the age and Years of Eligibility Service requirements as of
the date he becomes a member of the eligible class, he shall become a
Participant on the first Entry Date following the date he satisfies
said requirements.
<PAGE>
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. Employee Not Participant Before Break - If an Employee incurs a
Break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be taken
into account.
B. Nonvested Participants - In the case of a Participant who does not
have a Vested interest in his Individual Account derived from
Employer Contributions, Years of Eligibility Service before a
period of consecutive Breaks in Eligibility Service will not be
taken into account for eligibility purposes if the number of
consecutive Breaks in Eligibility Service in such period equals or
exceeds the greater of 5 or the aggregate number of Years of
Eligibility Service before such break. Such aggregate number of
Years of Eligibility Service will not include any Years of
Eligibility Service disregarded under the preceding sentence by
reason of prior breaks.
If a Participant's Years of Eligibility Service are disregarded
pursuant to the preceding paragraph, such Participant will be
treated as a new Employee for eligibility purposes. If a
Par-ticipant's Years of Eligibility Service may not be disregarded
pursuant to the preceding paragraph, such Participant shall
continue to participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
C. Vested Participants - A Participant who has sustained a Break in
Eligibility Service and who had a Vested interest in all or a
portion of his Individual Account derived from Employer
Contributions shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of each
Employee to be a Participant. This determination shall be conclusive
and binding upon all persons except as otherwise provided herein or by
law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the fact that a
common law Employee has become a Participant shall give to that common
law Employee any right to continued employment; nor shall
<PAGE>
either fact limit the right of the Employer to discharge or to deal
otherwise with a common law Employee without regard to the effect such
treatment may have upon the Employee's rights under the Plan.
SECTION THREE CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. Obligation to Contribute - The Employer shall make contributions to
the Plan in accordance with the contribution formula specified in
the Adoption Agreement. If this Plan is a profit sharing plan, the
Employer shall, in its sole discretion, make contributions without
regard to current or accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer Profit
Sharing Contribution -
1. General - The Employer Contribution for any Plan Year will be
allocated or contributed to the Individual Accounts of
qualifying Participants in accordance with the allocation or
contribution formula specified in the Adoption Agreement. The
Employer Contribution for any Plan Year will be allocated to
each Participant's Individual Account as of the last day of that
Plan Year.
<PAGE>
Any Employer Contribution for a Plan Year must satisfy Section
401(a)(4) and the regulations thereunder for such Plan Year.
2. Qualifying Participants - A Participant is a qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if (1) he was a Participant on at
least one day during the Plan Year, (2) if this Plan is a
nonstandardized plan, he completes a Year of Vesting Service
during the Plan Year and (3) where the Employer has selected the
"last day requirement" in the Adoption Agreement, he is an
Employee of the Employer on the last day of Plan Year (except
that this last requirement (3) shall not apply if the
Participant has died during the Plan Year or incurred a
Termination of Employment during the Plan Year after having
reached his Normal Retirement Age or having incurred a
Disability). Notwithstanding anything in this paragraph to the
contrary, a Participant will not be a qualifying Participant for
a Plan Year if he incurs a Termination of Employment during such
Plan Year with not more than 500 Hours of Service if he is not
an Employee on the last day of the Plan Year. The determination
of whether a Participant
<PAGE>
is entitled to share in the Employer Contribution shall be made
as of the last day of each Plan Year.
3. Special Rules for Integrated Plans - If the Employer has
selected the integrated contribution or allocation formula in
the Adoption Agreement, then the maximum disparity rate shall be
determined in accordance with the following table.
MAXIMUM DISPARITY RATE
Top-Heavy Nontop-Heavy
Integration Level Money Purchase Profit Sharing Profit Sharing
---------------------------------------------------------------------
----------
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more
than X* 5.7% 2.7% 5.7%
More than X* of TWB but
not more than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but
not more than TWB 5.4% 2.4% 5.4%
* X means the greater of $10, 000 or 20% of TWB.
C. Allocation of Forfeitures - Forfeitures for a Plan Year which arise
as a result of the application of Section 6.01(D) shall be allo-
cated as follows:
1. Profit Sharing Plan - If this is a profit sharing plan,
Forfeitures shall be allocated in the manner provided in Section
3.01 (B) (for Employer Contributions) to the Individual Accounts
of Participants who are entitled to share in the Employer
Contribution for such Plan Year.
2. Money Purchase Pension and Target Benefit Plan - If this Plan is
a money purchase plan or a target benefit plan, Forfeitures shall
be applied towards the reduction of Employer Contributions to the
Plan. However, if the Employer has indicated in the Adoption
Agreement that Forfeitures shall be allocated to the Individual
Accounts of Participants, then Forfeitures shall be allocated in
the manner provided in Section 3.01(B) (for
<PAGE>
Employer Contributions) to the Individual Accounts of
Participants who are entitled to share in the Employer
Contributions for such Plan Year.
D. Timing of Employer Profit Sharing Contribution - The Employer
Contribution for each Plan Year shall be delivered to the Trustee
(or Custodian, if applicable) not later than the due date for filing
the Employer's income tax return for its fiscal year in which the
Plan Year ends, including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans - The contribution and
allocation provisions of this Section 3.01(E) shall apply for any
Plan Year with respect to which this Plan is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below, the Employer
Contributions and Forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of 3% of such Participant's Compensation or (in the case
where the Employer has no defined benefit plan which designates
this Plan to satisfy Section 401 of the Code) the largest
percentage of Employer Contributions and Forfeitures, as a
percentage of the first $200,000 (increased by any cost of living
adjustment made by the Secretary of Treasury or his delegate) of
the Key Employee's Compensation, allocated on behalf of any Key
Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum
allocation shall be made even though under other Plan provisions,
the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation for the
year because of (a) the Participant's failure to complete 1,000
Hours of Service (or any equivalent provided in the Plan), or (b)
the Participant's failure to make mandatory Employee
Contributions to the Plan, or (c) Compensation less than a stated
amount.
2. For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 1.06 of the Plan.
3. The provision in (1) above shall not apply to any Participant
who was not employed by the Employer on the last day of the Plan
Year.
4. The provision in (1) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in the adop-
<PAGE>
tion agreement that the minimum allocation or benefit requirement
applicable to Top-Heavy Plans will be met in the other plan or
plans.
5. The minimum allocation required under this Section 3.01(E) and
Section 3.01(F)(1) (to the extent required to be nonforfeitable
under Code Section 416(b)) may not be forfeited under Code
Section 411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans - The Employer maintains
paired plans if the Employer has adopted both a standardized profit
sharing plan and a standardized money purchase pension plan using
this Basic Plan Document.
<PAGE>
1. Minimum Allocation - The mandatory minimum allocation provision
of Section 3.01(E) shall not apply to any Participant if the
Employer maintains paired plans. Rather, for each Plan Year, the
Employer will provide a minimum contribution equal to 3% of
Compensation for each non-Key Employee who is entitled to a
minimum contribution. Such minimum contribution will only be made
to one of the Plans. If an Employee is a Participant in only one
of the Plans, the minimum contribution shall be made to that
Plan. If the Employee is a Participant in both Plans, the minimum
contribution shall be made to the money purchase plan.
2. Only One Plan Can Be Integrated - If the Employer maintains
paired plans, only one of the Plans may provide for the disparity
in contributions which is permitted under Section 401(l) of the
Code. In the event that both Adoption Agreements provide for such
integration, only the money purchase pension plan shall be deemed
to be integrated.
G. Return of the Employer Contribution to the Employer Under Special
Circumstances - Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one year of
the contribution.
In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Code, any
contributions made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied., but only if the
application for qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the
Plan is adopted, or such later date as the Secretary of the Treasury
may
<PAGE>
prescribe.
In the event that a contribution made by the Employer under this
Plan is conditioned on deductibility and is not deductible under
Code Section 404, the contribution, to the extent of the amount
disallowed, must be returned to the Employer within one year after
the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a target benefit plan
and, if in any Plan Year, any Employee who should be included as
a Participant is erroneously omitted and discovery of such
omission is not made until after a contribution by the Employer
for the year has been made and allocated, the Employer shall make
a subsequent contribution with respect to the omitted Employee in
the amount which the Employer would have contributed with respect
to that Employee had he not been omitted.
2. If the Plan is a profit sharing plan, and if in any Plan Year,
any Employee who should be included as a Participant is
erroneously omitted and discovery of such omission is not made
until after the Employer Contribution has been made and
allocated, then the Plan Administrator must re-do the allocation
(if a correction can be made) and inform the Employee.
Alternatively, the Employer may choose to contribute for the
omitted Employee the amount which the Employer would have
contributed for him.
3.02 EMPLOYEE CONTRIBUTIONS
This Plan will not accept nondeductible employee contributions and
matching contributions for Plan Years beginning after the Plan Year in
which this Plan is adopted by the Employer. Employee contributions for
Plan Years, beginning after December 31, 1986, together with any
matching contributions as defined in Section 401(m) of the Code, will
be limited so as to meet the nondiscrimination test of Section 401(m)
of the Code.
A separate account will be maintained by the Plan Administrator for the
nondeductible employee contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator withdraw the lesser of the portion of his Individual
Account attributable to his nondeductible employee contributions or the
amount he contributed as nondeductible employee contributions.
<PAGE>
Employee contributions and earnings thereon will be nonforfeitable at
all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of employee contributions.
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning after
December 31, 1986. Contributions made prior to that date will be
maintained in a separate account which will be nonforfeitable at all
times. The account will share in the gains and losses of the Fund in
the same manner as described in Section 4.03 of the Plan. No part of
the deductible employee contribution account will be used to purchase
life insurance. Subject to Section 6.05, joint and survivor annuity
requirements (if applicable), the Participant may withdraw any part of
the deductible employee contribution account by making a written
application to the Plan Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, an Employee may contribute a rollover contribution to the Plan;
provided that such Employee submits a written certification,
satisfactory to the Trustee (or Custodian), that the contribution
qualifies as a rollover contribution.
A separate account shall be maintained by the Plan Administrator for
each Employee's rollover contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
For purposes of this Section 3.03, "rollover contribution" means a
contribution described in Sections 402(a)(5), 403(a)(4) or 408(d)(3) of
the Code or in any other provision which may be added to the Code which
may authorize rollovers to the Plan.
3.04 TRANSFER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, the Trustee (or Custodian, if applicable) may receive any
amounts transferred to it from the trustee or custodian of another plan
qualified under Code Section 401(a).
A separate account shall be maintained by the Plan Administrator for
each Employee's transfer contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
<PAGE>
subject to the Plan's provisions governing distributions.
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer
or a welfare benefit fund, as defined in Section 419(e) of the Code
maintained by the Employer, or an individual medical account, as
defined in Section 415(l)(2) of the Code, maintained by the
Employer, which provides an annual addition as defined in Section
3.08(E)(1), the following rules shall apply:
<PAGE>
1. The amount of annual additions which may be credited to the
Par-ticipant's Individual Account for any limitation year will
not exceed the lesser of the maximum permissible amount or any
other limitation contained in this Plan. If the Employer
Contribution that would otherwise be contributed or allocated to
the Partici-pant's Individual Account would cause the annual
additions for the limitation year to exceed the maximum
permissible amount, the amount contributed or allocated will be
reduced so that the annual additions for the limitation year
will equal the maximum permissible amount.
2. Prior to determining the Participant's actual compensation for
the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a
reasonable estimation of the Participant's Compensation for the
limitation year, uniformly determined for all participants
similarly situated.
3. As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
4. If pursuant to Section 3.08(A)(3) or as a result of the
allocation of Forfeitures there is an excess amount, the excess
will be disposed of as follows:
a. Any nondeductible voluntary employee contributions, to the
extent they would reduce the excess amount, will be returned
to the Participant;
b. If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the limitation year, the excess amount in the
<PAGE>
Participant's Individual Account will be used to reduce
Employer Contributions (including any allocation of
Forfeitures) for such Participant in the next limitation
year, and each succeeding limitation year if necessary.
c. If after the application of paragraph (b) an excess amount
still exists, and the Participant is not covered by the Plan
at the end of a limitation year, the excess amount will be
held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer Contri-
butions (including allocation of any Forfeitures) for all
remaining Participants in the next limitation year, and each
succeeding limitation year if necessary;
d. If a suspense account is in existence at any time during a
limitation year pursuant to this Section, it will not par-
ticipate in the allocation of the Fund's investment gains
and losses. If a suspense account is in existence at any
time during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to Par-
ticipants' Individual Accounts before any Employer Contribu-
tions or any Employee contributions may be made to the Plan
for that limitation year. Excess amounts may not be distri-
buted to Participants or former Participants.
B. If, in addition to this Plan, the Participant is covered under
another qualified master or prototype defined contribution plan
maintained by the Employer, a welfare benefit fund, as defined in
Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(l)(2) of the
Code, maintained by the Employer, which provides an annual addition
as defined in Section 3.05(E)(1), during any limitation year, the
following rules apply:
1. The annual additions which may be credited to a Participant's
Individual Account under this Plan for any such limitation year
will not exceed the maximum permissible amount reduced by the
annual additions credited to a Participant's Individual Account
under the other plans and welfare benefit funds for the same
limitation year. If the annual additions with respect to the
Participant under other defined contribution plans and welfare
benefit funds maintained by the employer are less than the maximum
permissible amount and the Employer Contribution that would
otherwise be contributed or allocated to the Participant's
Individual Account under this Plan would cause the annual
additions for the limitation year to exceed this limitation, the
amount contributed
<PAGE>
or allocated will be reduced so that the annual additions under
all such plans and funds for the limitation year will equal the
maximum permissible amount. If the annual additions with respect
to the Participant under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater
than the maximum permissible amount, no amount will be contributed
or allocated to the Participant's Individual Account under this
Plan for the limitation year.
2. Prior to determining the Participant's actual compensation for the
limitation year, the Employer may determine the maximum
permissible amount for a Participant in the manner described in
Section 3.05(A)(2).
3. As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the limitation
year will be determined on the basis of the Participant's actual
compensation for the limitation year.
4. If, pursuant to Section 3.05(B)(3) or as a result of the
allocation of Forfeitures a Participant's annual additions under
this Plan and such other plans would result in an excess amount
for a limitation year, the excess amount will be deemed to consist
of the annual additions last allocated, except that annual
additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been allocated first
regardless of the actual allocation date.
5. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the excess amount attributed to this Plan
will be the product of,
a. the total excess amount allocated as of such date, times
b. the ration of (i) the annual additions allocated to the Parti-
cipant for the limitation year as of such date under this Plan
to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under this
and all the other qualified prototype defined contribution
plans.
6. Any excess amount attributed to this Plan will be disposed in the
manner described in Section 3.05(A)(4).
C. If the Participant is covered under another qualified defined contri-
bution plan maintained by the Employer which is not a master or pro-
<PAGE>
totype plan, annual additions which may be credited to the
Partici-pant's Individual Account under this Plan for any limitation
year will be limited in accordance with Sections 3.05(B)(1) through
3.08(B)(6) as though the other plan were a master or prototype plan
unless the Employer provides other limitations in the Section of the
Adoption Agreement titled "Limitation on Allocation - More Than One
Plan."
<PAGE>
D. If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum
of the Participant's defined benefit plan fraction and defined
contribution plan fraction will not exceed 1.0 in any limitation
year. The annual additions which may be credited to the Participant's
Individual Account under this Plan for any limitation year will be
limited in accordance with the Section of the Adoption Agreement
titled "Limitation on Allocation - More Than One Plan."
E. The following terms shall have the following meanings when used in
this Section 3.05:
1. Annual additions: The sum of the following amounts credited to a
Participant's Individual Account for the limitation year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the
Employer are treated as annual additions to a defined contri-
bution plan. Also amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after
such date, which are attributable to post-retirement medical
benefits, allocated to the separate account of a key employee,
as defined in Section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e) of the Code, main-
tained by the Employer are treated as annual additions to a
defined contribution plan.
For this purpose, any excess amount applied under Section
3.05(A)(4) or 3.05(B)(6) in the limitation year to reduce
Employer Contributions will be considered annual additions for
<PAGE>
such limitation year.
2. Compensation: As elected by the Employer in the Adoption Agreem-
ent (and if no election is made, Section 3401(a) wages will be
deemed to have been selected), Compensation shall mean all of a
Participant's:
a. Section 3121 wages. Wages as defined in Section 3121(a) of
the Code, for purposes of calculating Social Security taxes,
but determined without regard to the wage base limitation in
Section 3121(a)(1), the special rules in Section 3121(v), any
rules that limit covered employment based on the type or loca-
tion of an Employee's Employer, and any rules that limit the
remuneration included in wages based on familial relationship
or based on the nature or location of the employment or the
services performed (such as the exceptions to the definition
of employment in Section 3121(b)(1) through (2)).
b. Section 3401(a) wages. Wages as defined in Section 3401(a) of
the Code, for the purposes of income tax withholding at the
source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed (such as
the exception for agricultural labor in Section 3401(a)(2)).
c. 415 safe-harbor compensation. Wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for per-
sonal services actually rendered in the course of employment
with the Employer maintaining the Plan to the extent that the
amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for ser-
vices on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits, reimburse-
ments, and expense allowances), and excluding the following:
1. Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for
the taxable year in which contributed, or employer
contributions under a simplified employee pension plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
2. Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
<PAGE>
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
3. Amounts realized from the sale, exchange or other disposit-
ion of stock acquired under a qualified stock option; and
4. Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross
income of the Employee).
For any Self-Employed Individual, Compensation will mean
Earned Income. For limitation years beginning after
Decem-ber 31, 1991, for purposes of applying the
limitations of this Section 3.05, compensation for a
limitation year is the compensation actually paid or
includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a
Participant in a defined contribution plan who is
permanently and totally disabled (as defined in Section
22(e)(3) of the Code) is the compensation such Participant
would have received for the limitation year if the
Participant had been paid at the rate of compensation paid
immediately before becoming permanently and totally
disabled; such imputed compensation for the disabled
participant may be taken into account only if the
Participant is not a Highly Compensated Employee (as
defined in Section 414(q) of the Code) and contributions
made on behalf of such Participant are nonforfeitable when
made.
3. Defined benefit fraction: A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under all
the defined benefit plans (whether or not terminated) maintained
by the Employer, and the denominator of which is the lesser of
125% of the dollar limitation determined for the limitation year
under Section 415(b) and (d) of the Code or 140% of the highest
average compensation, including any adjustments under Section
415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first limitation year beginning after
<PAGE>
December 31, 1986, in one or more defined benefit plans maintained
by the employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125% of the sum
of the annual benefits under such plans which the participant had
accrued as of the close of the last limitation year beginning
before January 1, 1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Section 415 of the Code
for all limitation years beginning before January 1, 1987.
4. Defined contribution dollar limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code as in effect for the limitation
year.
5. Defined contribution fraction: A fraction, the numerator of which
is the sum of the annual additions to the Participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior limitation years (including the annual additions
attributable to the Participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Section
419(e) of the Code, and individual medical accounts, as defined in
Section 415(l)(2) of the Code, maintained by the Employer), and
the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of service
with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount
in any limitation year is the lesser of 125% of the dollar
limitation determined under Section 415(b) and (d) of the Code in
effect under Section 415(c)(1)(A) of the Code or 35% of the
Participant's compensation for such year.
If the Employee was a participant as of the end of the first day
of the first limitation year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the
defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
<PAGE>
calculated using the fractions as they would be computed as of the
end of the last limitation year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Section 415 limitation
applicable to the first limitation year beginning on or after
January 1, 1987.
The annual addition for any limitation year beginning before
Jan-uary 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
6. Employer: For purposes of this Section 3.05, Employer shall mean
the Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of
the Code as modified by Section 415(h)), all commonly controlled
trades or businesses (as defined in Section 414(c) as modified by
Section 415(h)) or affiliated service groups (as defined in
Section 414(m)) of which the adopting Employer is a part, and any
other entity required to be aggregated with the Employer pursuant
to regulations under Section 414(o) of the Code.
7. Excess amount: The excess of the Participant's annual additions
for the limitation year over the maximum permissible amount.
8. Highest average compensation: The average compensation for the
three consecutive years of service with the Employer that produces
the highest average.
9. Limitation year: A calendar year, or the 12-consecutive month
period elected by the Employer in the Section of the Adoption
Agreement titled "Limitation on Allocation - More Than One Plan."
All qualified plans maintained by the Employer must use the same
limitation year. If the limitation year is amended to a different
12-consecutive month period, the new limitation year must begin on
a date within the limitation year in which the amendment is made.
10. Master or prototype plan: A plan the form of which is the subject
of a favorable notification letter from the Internal Revenue
Service.
11. Maximum permissible amount: The maximum annual addition that may
be contributed or allocated to a Participant's Individual Account
under the Plan for any limitation year shall not exceed the lesser
of:
<PAGE>
a. the defined contribution dollar limitation, or
b. 25% of the Participant's compensation for the limitation year.
The compensation limitation referred to in (b) shall not apply to
any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is
otherwise treated as an annual addition under Section 415(l)(1) or
419A(d)(2) of the Code.
If a short limitation year is created because of an amendment
changing the limitation year to a different 12-consecutive month
period, the maximum permissible amount will not exceed the defined
contribution dollar limitation multiplied by the following
fraction:
Number of months in the short limitation year / 12
12. Projected annual benefit: The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit
is expressed in a form other than a straight life annuity or
qualified joint and survivor annuity) to which the Participant
would be entitled under the terms of the Plan assuming:
a. the Participant will continue employment until normal retire-
ment age under the Plan (or current age, if later), and
b. the Participant's compensation for the current limitation year
and all other relevant factors used to determine benefits
under the Plan will remain constant for all future limitation
years.
<PAGE>
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an Individual
Account in the name of each Participant to reflect the total
value of his interest in the Fund. Each Individual Account
established hereunder shall consist of such subaccounts as may be
needed for each Participant including:
1. a subaccount to reflect Employer Contributions and Forfeitures
allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover contributions;
<PAGE>
3. a subaccount to reflect a Participant's transfer contributions;
4. a subaccount to reflect a Participant's nondeductible employee
contributions; and
5. a subaccount to reflect a Participant's deductible employee
contributions.
B. The Plan Administrator may establish additional accounts as it may
deem necessary for the proper administration of the Plan, including,
but not limited to, a suspense account for Forfeitures as required
pursuant to Section 6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's Individual
Account are invested in a Separate Fund for the Participant, then
the value of that portion of such Participant's Individual Account
at any relevant time equals the sum of the fair market values of
the assets in such Separate Fund, less any applicable charges or
penalties.
B. The fair market value of the remainder of each Individual Account
is determined in the following manner:
1. First, the portion of the Individual Account invested in each
Investment Fund as of the previous Valuation Date is
determined. Each such portion is reduced by any withdrawal made
from the applicable Investment Fund to or for the benefit of a
Participant or his Beneficiary, further reduced by any amounts
forfeited by the Participant pursuant to Section 6.01(D) and
further reduced by any transfer to another Investment Fund
since the previous Valuation Date and is increased by any
amount transferred from another Investment Fund since the
previous Valuation Date. The resulting amounts are the net
Individual Account portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions invested in each
Investment Fund are adjusted upwards or downwards, pro rata
(i.e., ratio of each net Individual Account portion to the sum
of all net Individual Account portions) so that the sum of all
the net Individual Account portions invested in an Investment
Fund will equal the then fair market value of the Investment
<PAGE>
Fund. Notwithstanding the previous sentence, for the first Plan
Year only, the net Individual Account portions shall be the sum
of all contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are
allocated in accordance with the appropriate allocation
provisions of Section 3. For purposes of Section 4,
contributions made by the Employer for any Plan Year but after
that Plan Year will be considered to have been made on the last
day of that Plan Year regardless of when paid to the Trustee
(or Custodian, if applicable).
Amounts contributed between Valuation Dates will not be
credited with investment gains or losses until the next
following Valuation Date.
4. Finally, the portions of the Individual Account invested in
each Investment Fund (determined in accordance with (1), (2)
and (3) above) are added together.
4.04 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a lump sum,
the Plan Administrator may place that Participant's account balance
into a segregated Investment Fund for the purpose of maintaining the
necessary liquidity to provide benefit installments on a periodic
basis.
4.05 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the Plan
Administrator shall furnish a statement to each Participant
indicating the Individual Account balances of such Participant as of
the last Valuation Date in such Plan Year.
4.06 MODIFICATION OF METHOD FOR VALUING INDIVIDUAL ACCOUNTS If necessary
or appropriate, the Plan Administrator may establish different or
additional procedures (which shall be uniform and non-discriminatory)
for determining the fair market value of the Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
<PAGE>
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund which shall
consist of the assets of the Plan held by the Trustee (or Custodian,
if applicable) pursuant to this Section 5. Assets within the Fund may
be pooled on behalf of all Participants, earmarked on behalf of each
Participant or be a combination of pooled and earmarked. To the
extent that assets are earmarked for a particular Participant, they
will be held in a Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual direction
of investments by Participants), the Employer, not the Trustee (or
<PAGE>
Custodian, if applicable), shall have exclusive management and
control over the investment of the Fund into any permitted
investment. Notwithstanding the preceding sentence, a Trustee with
full trust powers (under applicable law) may make an agreement with
the Employer whereby the Trustee will manage the investment of all or
a portion of the Fund. Any such agreement shall be in writing and set
forth such matters as the Trustee deems necessary or desirable.
5.03 FINANCIAL ORGANIZATION CUSTODIAN OR TRUSTEE WITHOUT FULL
TRUST POWERS
This Section 5.03 applies where a financial organization has
indicated in the Adoption Agreement that it will serve, with respect
to this Plan, as Custodian or as Trustee without full trust powers
(under applicable law). Hereinafter, a financial organization Trustee
without full trust powers (under applicable law) shall be referred to
as a Custodian.
A. Permissible Investments - The assets of the Plan shall be invested
only in those investments which are available through the
Custodian in the ordinary course of business which the Custodian
may legally hold in a qualified plan and which the Custodian
chooses to make available to Employers for qualified plan
investments.
B. Responsibilities of the Custodian - The responsibilities of the
Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest
the Fund without distinction between principal and interest;
<PAGE>
provided, however, that nothing in this Plan shall require the
Custodian to maintain physical custody of stock certificates
(or other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, with-
drawals and other information the Custodian deems relevant with
respect to the Plan;
3. To make disbursements from the Fund to Participants or Benefic-
iaries upon the proper authorization of the Plan Administrator;
and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Custodian as
of the end of each Plan Year.
C. Powers of the Custodian - Except as otherwise provided in this Plan,
the Custodian shall have the power to take any action with respect to
the Fund which it deems necessary or advisable to discharge its
responsibilities under this Plan including, but not limited to, the
following powers:
1. To invest all or a portion of the Fund (including idle cash
balances) in time deposits, savings accounts, money market
accounts or similar investments bearing a reasonable rate of
interest in the Custodian's own savings department or the savings
department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to pay any assessment or charges in connection
therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other property;
3. To hold securities or other property of the Fund in its own name,
in the name of its nominee or in bearer form; and
4. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers herein
<PAGE>
granted.
5.04 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND
INDIVIDUAL
TRUSTEE
This Section 5.04 applies where a financial organization has
indicated in the Adoption Agreement that it will serve as Trustee
with full trust powers. This Section also applies where one or more
individuals are named in the Adoption Agreement to serve as
Trustee(s).
A. Permissible Investments - The Trustee may invest the assets of the
Plan in property of any character, real or personal, including,
but not limited to the following: stocks, including shares of
open-end investment companies (mutual funds); bonds; notes;
debentures; options; limited partnership interests; mortgages;
real estate or any interests therein; unit investment trusts;
Treasury Bills, and other U.S. Government obligations; common
trust funds, combined investment trusts, collective trust funds or
commingled funds maintained by a bank or similar financial
organization (whether or not the Trustee hereunder); savings
accounts, time deposits or money market accounts of a bank or
similar financial organization (whether or not the Trustee
hereunder); annuity contracts; life insurance policies; or in such
other investments as is deemed proper without regard to
investments authorized by statute or rule of law governing the
investment of trust funds but with regard to ERISA and this Plan.
Notwithstanding the preceding sentence, the Prototype Sponsor may,
as a condition of making the Plan available to the Employer for
adoption, limit the types of property in which the Trustee (other
than a financial organization Trustee with full trust powers), is
permitted to invest.
B. Responsibilities of the Trustee - The responsibilities of the Trustee
shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest the
Fund without distinction between physical and interest; provided,
however, that nothing in this Plan shall require the Trustee to
maintain physical custody of stock certificates (or other indicia
of ownership) representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, with-
drawals and other information the Trustee deems relevant with re-
<PAGE>
spect to the Plan;
3. To make disbursements from the Fund to Participants or Beneficiar-
ies upon the proper authorization of the Plan Administrator; and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Trustee as of the
end of each Plan Year.
C. Powers of the Trustee - Except as otherwise provided in this Plan,
the Trustee shall have the power to take any action with respect to
the Fund which it deems necessary or advisable to discharge its
responsibilities under this Plan including, but not limited to, the
following powers:
<PAGE>
1. To hold any securities or other property of the Fund in its own
name, in the name of its nominee or in bearer form;
2. To purchase or subscribe for securities issued, or real property
owned, by the Employer or any trade or business under common
control with the Employer but only if the prudent investment and
diversification requirements of ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise dispose of any
securities or other property held by the Trustee, by private
contract or at public auction. No person dealing with the Trustee
shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency, or propriety of any such
sale or other disposition, with or without advertisement;
4. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks,
bonds, securities or other property;
5. To invest any part or all of the Fund (including idle cash
balances) in certificates of deposit, demand or time deposits,
savings accounts, money market accounts or similar investments of
the Trustee (if the Trustee is a bank or similar financial
organiza-
<PAGE>
tion), the Prototype Sponsor or any affiliate of such Trustee or
Prototype Sponsor, which bear a reasonable rate of interest;
6. To provide sweep services without the receipt by the Trustee of
additional compensation or other consideration (other than
reimbursement of direct expenses properly and actually incurred in
the performance of such services);
7. To hold in the form of cash for distribution or investment such
portion of the Fund as, at any time and from time-to-time, the
Trustee shall deem prudent and deposit such cash in interest
bearing or noninterest bearing accounts.;
8. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers herein
granted;
9. To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend
suits or legal or administrative proceedings, and to represent the
Plan in all suits and legal and administrative proceedings;
10. To employ suitable agents and counsel, to contract with agents to
perform administrative and recordkeeping duties and to pay their
reasonable expenses, fees and compensation, and such agent or
counsel may or may not be agent or counsel for the Employer;
11. To cause any part or all of the Fund, without limitation as to
amount, to be commingled with the funds of other trusts (including
trusts for qualified employee benefit plans) by causing such money
to be invested as a part of any pooled, common, collective or
commingled trust fund heretofore or hereafter created by any
trustee (if the Trustee is a bank), by the Prototype Sponsor, by
any affiliate bank of such a Trustee or by such a Trustee or the
Prototype Sponsor, or by such an affiliate in participation with
others; the instrument or instruments establishing such trust fund
or funds, as amended, being made part of this Plan and trust so
long as any portion of the Fund shall be invested through the
medium thereof.
12. Generally to do all such acts, execute all such instruments,
initiate such proceedings, and exercise all such rights and
privileges with relation to property constituting the Fund as if
the Trustee were the absolute owner thereof.
<PAGE>
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian) from time-to-time
to divide and redivide the Fund into one or more Investment Funds.
Such Investment Funds may include, but not be limited to, Investment
Funds representing the assets under the control of an investment
manager pursuant to Section 5.12 and Investment Funds representing
investment options available for individual direction by Participants
pursuant to Section 5.14. Upon each division or redivision, the
Employer may specify the part of the Fund to be allocated to each
such Investment Fund and the terms and conditions, if any, under
which the assets in such Investment Fund shall be invested.
5.06 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such
reasonable compensation as may be agreed upon by the Trustee (or
Custodian) and the Employer. The Trustee (or Custodian) shall be
entitled to reimbursement by the Employer for all proper expenses
incurred in carrying out his duties under this Plan, including
reasonable legal, accounting and actuarial expenses. If not paid by
the Employer, such compensation and expenses may be charged against
the Fund.
All taxes of any kind that may be levied or assessed under existing
or future laws upon, or in respect of, the Fund or the income thereof
shall be paid from the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee (or Custodian, if applicable)
and Plan Administrator the information which each party deems
necessary for the administration of the Plan including, but not
limited to, changes in a Participant's status, eligibility, mailing
addresses and other such data as may be required. The Trustee (or
Custodian) and Plan Administrator shall be entitled to act on such
information as is supplied them and shall have no duty or
responsibility to further verify or question such information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding federal
income taxes from distributions from the Plan, unless the Participant
(or Beneficiary, where applicable) elects not to have such taxes
withheld. However, the Trustee (or Custodian) shall act as agent for
the Plan Administrator to withhold such taxes and to make the
appropriate distribution reports, subject to the Plan Administrator's
obligation to furnish all the necessary information to so withhold to
the Trustee (or Custodian).
<PAGE>
5.09 RESIGNATION OR REMOVAL OF TRUSTEE (OR CUSTODIAN) The Trustee (or
Custodian, if applicable) may resign at any time by giving 30 days
advance written notice to the Employer. The resignation shall become
effective 30 days after receipt of such notice unless a shorter
period is agreed upon.
The Employer may remove any Trustee (or Custodian) at any time by
giving written notice to such Trustee (or Custodian) and such removal
shall be effective 30 days after receipt of such notice unless a
shorter period is agreed upon. The Employer shall have the power to
appoint a successor Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed Trustee
(or Custodian) is the sole Trustee (or Custodian), he shall transfer
all of the assets of the Fund then held by him as expeditiously as
possible to the successor Trustee (or Custodian) after paying or
reserving such reasonable amount as he shall deem necessary to
provide for the expense in the settlement of the accounts and the
amount of any compensation due him and any sums chargeable against
the Fund for which he may be liable. If the Funds as reserved are not
sufficient for such purpose, then he shall be entitled to
reimbursement from the successor Trustee (or Custodian) out of the
assets in the successor Trustee's (or Custodian's) hands under this
Plan. If the amount reserved shall be in excess of the amount
actually needed, the former Trustee (or Custodian) shall return such
excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or Custodian)
shall thereupon succeed to all of the powers and responsibilities
given to the Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the Employer
within 30 days of its receipt, the accounting shall be deemed to have
been approved and the resigning or removed Trustee (or Custodian)
<PAGE>
shall be released and discharged as to all matters set forth in the
accounting. Where a financial organization is serving as Trustee (or
Custodian) and it is merged with or bought by another organization
(or comes under the control of any federal or state agency), that
organization shall serve as the successor Trustee (or Custodian) of
this Plan, but only if it is the type of organization that can so
serve under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
custodian pursuant to Section 1.401-12(n) of the Income Tax
Regulations, the Employer will appoint a successor Trustee (or
Custodian) upon notification by the Commissioner of Internal Revenue
that such substitution is required because the Trustee (or Custodian)
has failed to comply with the requirements of Section 1.401-12(n) or
is not keeping such records or making such returns or rendering such
statements as are required by forms or regulations.
5.10 DEGREE OF CARE
Limitations of Liability - The Trustee (or Custodian) shall not be
liable for any losses incurred by the Fund by any lawful direction to
invest communicated by the Employer, Plan Administrator or any
Participant or Beneficiary. The Trustee (or Custodian) shall be under
no liability for distributions made or other action taken or not
taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee (or Custodian) shall have no
duty or responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a Participant
or remain a Participant hereunder, the amount of benefit to which a
Participant or Beneficiary shall be entitled to receive hereunder,
whether a distribution to Participant or Beneficiary is appropriate
under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities under the
Plan are vested in the Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE (OR
CUSTODIAN)
Notwithstanding any other provision herein, and except as may be
otherwise provided by ERISA, the Employer shall indemnify and hold
harmless the Trustee (or Custodian, if applicable) and the Prototype
Sponsor, their officers, directors, employees, agents, their heirs,
executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges,
or expenses (including legal expenses) at any time arising out of or
incurred in connection with any action taken by such parties in the
performance of their duties with respect to this Plan, unless there
has been a final adjudication of gross negligence or willful
misconduct in the performance of such duties.
Further, except as may be otherwise provided by ERISA, the Employer
will indemnify the Trustee (or custodian) and Prototype Sponsor from
any liability, claim or expense (including legal expense) which the
Trustee (or Custodian) and Prototype Sponsor shall incur by reason of
or which results, in whole or in part, from the Trustee's (or Custo-
<PAGE>
dian's) or Prototype Sponsor's reliance on the facts and other
directions and elections the Employer communicates or fails to
communicate.
5.12 INVESTMENT MANAGERS
A. Definition of Investment Manager - The Employer may appoint one or
more investment managers to make investment decisions with respect
to all or a portion of the Fund. The investment manager shall be
any firm or individual registered as an investment adviser under
the Investment Advisers Act of 1940, a bank as defined in said Act
or an insurance company qualified under the laws of more than one
state to perform services consisting of the management,
acquisition or disposition of any assets of the Plan.
B. Investment Manager's Authority - A separate Investment Fund shall
be established representing the assets of the Fund invested at the
direction of the investment manager. The investment manager so
appointed shall direct the Trustee (or Custodian, if applicable )
with respect to the investment of such Investment Fund. The
investments which may be acquired at the direction of the
investment manager are those described in Section 5.03(A) (for
Custodians) or Section 5.04(A) (for Trustees).
C. Written Agreement - The appointment of any investment manager
shall be by written agreement between the Employer and the
investment manager and a copy of such agreement (and any
modification or termination thereof) must be given to the Trustee
(or Custodian).
The agreement shall set forth, among other matters, the effective
date of the investment manager's appointment and an
acknowledgement by the investment manager that it is a fiduciary
of the Plan under ERISA.
D. Concerning the Trustee (or Custodian) - Written notice of each
appointment of an investment manager shall be given to the Trustee
(or Custodian) in advance of the effective date of such
appointment. Such notice shall specify which portion of the Fund
will constitute the Investment Fund subject to the investment
manager's direction. The Trustee (or Custodian) shall comply with
the investment direction given to it by the investment manager and
will not be liable for any loss which may result by reason of any
action (or inaction) it takes at the direction of the investment
manager.
<PAGE>
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a Participant,
the aggregate premium for certain life insurance for each
Participant must be less than a certain percentage of the
aggregate Employer Contributions and Forfeitures allocated to a
Partici-pant's Individual Account at any particular time as
follows:
1. Ordinary Life Insurance - For purposes of these incidental
insurance provisions, ordinary life insurance contracts are
contracts with both nondecreasing death benefits and
nonincreasing premiums. If such contracts are purchased, less
than 50% of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual Account
will be used to pay the premiums attributable to them.
2. Term and Universal Life Insurance - No more than 25% of the
aggregate Employer Contributions and Forfeitures allocated to
any Participant's Individual Account will be used to pay the
premiums on term life insurance contracts, universal life
insurance contracts, and all other life insurance contracts
which are not ordinary life.
3. Combination - The sum of 50% of the ordinary life insurance
premiums and all other life insurance premiums will not exceed
25% of the aggregate Employer Contributions and Forfeitures
allocated to any Participant's Individual Account.
B. Any dividends or credits earned on insurance contracts for a Partici-
pant shall be allocated to such Participant's Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's life will
be converted to cash or an annuity or distributed to the Participant
upon commencement of benefits.
D. The Trustee (or Custodian, if applicable) shall apply for and will be
the owner of any insurance contract(s) purchased under the terms of
this Plan. The insurance contract(s) must provide that proceeds will
be payable to the Trustee (or Custodian), however, the Trustee (or
Custodian) shall be required to pay over all proceeds of the
contract(s) to the Participant's designated Beneficiary in accordance
with the distribution provisions of this Plan. A Participant's spouse
will be the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made in accordance
with Section 6.05. Under no circumstances shall the Fund retain any
<PAGE>
part of the proceeds. In the event of any conflict between the terms
of this Plan and the terms of any insurance contract purchased
hereunder, the Plan provisions shall control.
E. The Plan Administrator may direct the Trustee (or Custodian) to sell
and distribute insurance or annuity contracts to a Participant (or
other party as may be permitted) in accordance with applicable law or
regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable)
regarding the investment of part or all of his Individual Account. To
the extent so directed, the Employer, Plan Administrator, Trustee (or
Custodian) and all other fiduciaries are relieved of their fiduciary
responsibility under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be
established in the name of each Participant who directs the
investment of part or all of his Individual Account. Each Separate
Fund shall be charged or credited (as appropriate) with the earnings,
gains, losses or expenses attributable to such Separate Fund. No
fiduciary shall be liable for any loss which results from a
Participant's individual direction. The assets subject to individual
direction shall not be invested in collectibles as that term is
defined in Section 408(m) of the Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as it deems
necessary or advisable including, but not limited to, rules
describing (1) which portions of Participant's Individual Account can
be individually directed; (2) the frequency of investment changes;
(3) the forms and procedures for making investment changes; and (4)
the effect of a Participant's failure to make a valid direction.
Subject to the approval of the Prototype Sponsor, the Plan
Administrator may, in a uniform and nondiscriminatory manner, limit
the available investments for Participants' individual direction to
certain specified investment options (including, but not limited to,
certain mutual funds, investment contracts, deposit accounts and
group trusts). The Plan Administrator may permit, in a uniform and
nondiscriminatory manner, a Beneficiary of a deceased Participant to
individually direct in accordance with this Section.
<PAGE>
SECTION SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. When Distributable
1. Entitlement to Distribution - The Vested portion of a
Partici-pant's Individual Account shall be distributable to the
Participant upon the occurrence of any of the following events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement Age;
c. the Participant's Disability;
d. the termination of the Plan;
2. Written Request: When Distributed - A Participant entitled to
distribution who wishes to receive a distribution must submit a
written request to the Plan Administrator. Such request shall be
made upon a form provided by the Plan Administrator. Upon a valid
request, the Plan Administrator shall direct the Trustee (or
Custodian, if applicable) to commence distribution no later than
90 days following the later of:
a. the close of the Plan Year within which the event occurs which
entitles the Participant to distribution; or
b. the close of the Plan Year in which the request is received.
3. Special Rules for Withdrawals During Service - If this is a profit
sharing plan and the Adoption Agreement so provides, a Participant
who is not otherwise entitled to a distribution under Section 6.01
<PAGE>
(A)(1) may elect to receive a distribution of all or part of the
Vested portion of his Individual Account, subject to the
requirements of Section 6.05 and further subject to the following
limits:
a. Participant for 5 or more years. An Employee who has been a
Participant in the Plan for 5 or more years may withdraw up to
his entire Vested portion of his Individual Account.
b. Participant for less than 5 years. An Employee who has been a
Participant in the Plan for less than 5 years may withdraw
only the amount which has been in his Vested Individual
Account attributable to Employer Contributions for at least 2
<PAGE>
full Plan Years.
However, if the distribution is on account of hardship, the
Participant may withdraw up to his entire Vested portion of
his Individual Account. For purposes of the preceding
sentence, hardship is defined as an immediate and heavy
financial need of the Participant where such Participant lacks
other available resources. The following are the only
financial needs considered immediate and heavy: expenses
incurred or necessary for medical care, described in Section
213(d) of the Code, of the Employee, the Employee's spouse or
dependents; the purchase (excluding mortgage payments) of a
principal residence for the Employee; payment of tuition and
related educational fees for the next 12 months of
post-secondary education for the Employee, the Employee's
spouse, children or dependents; or the need to prevent the
eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
1) The employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under
all plan maintained by the Employer;
2) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution)
4. Commencement of Benefits - Notwithstanding any other
provision, unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th day
after the latest of the close of the Plan Year in which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the Par-
ticipant commenced participation in the Plan; or
c. the Participant incurs a Termination of Employment.
B. Determining the Vested Portion - In determining the Vested portion of
<PAGE>
a Participant's Individual Account, the following rules apply:
1. Employer Contributions and Forfeitures - The Vested portion of
a Participant's Individual Account derived from Employer
Contributions and Forfeitures is determined by applying the
vesting schedule selected in the Adoption Agreement (or the
vesting schedule described in Section 6.01(C) if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions - A Participant is fully
Vested in his rollover contributions and transfer
contributions.
3. Fully Vested Under Certain Circumstances - A Participant is
fully Vested in his Individual Account if any of the following
occurs:
a. the Participant reaches Normal Retirement Age;
b. the Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated; or
e. there exists a complete discontinuance of contributions
under the Plan.
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date, his Vested
percentage shall not be less than it would have been under
such Prior Plan as computed on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans - The following vesting
provisions apply for any Plan Year in which this Plan is a Top-Heavy
Plan.
Notwithstanding the other provisions of this Section 6.01 or the
vesting schedule selected in the Adoption Agreement (unless those
provisions or that schedule provide for more rapid vesting), a
Participant's Vested portion of his Individual Account attributable
to Employer Contributions and Forfeitures shall be determined in
accordance with the following minimum vesting schedule:
Years of Vesting Service Vested Percentage
1 0
2 20
3 40
4 60
5 80
6 100
<PAGE>
This minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code, except those attributable
to employee contributions including benefits accrued before the
effective date of Section 416 of the Code and benefits accrued
before the Plan became a Top-Heavy Plan. Further, no decrease in a
Participant's Vested percentage may occur in the event the Plan's
status as a Top-Heavy Plan changes for any Plan Year. However, this
Section 6.01(C) does not apply to the Individual Account of any
Employee who does not have an Hour of Service after the Plan has
initially become a Top-Heavy Plan and such Employee's Individual
Account attributable to Employer Contributions and Forfeitures will
be determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance with
the above restrictions, the vesting schedule as selected in the
Adoption Agreement will govern. If the vesting schedule under the
Plan shifts in or out of top-heavy status, such shift is an
amendment to the vesting schedule and the election in Section 9.04
applies.
D. Break in Vesting Service and Forfeitures - If a Participant incurs a
Termination of Employment, any portion of his Individual Account
which is not Vested shall be held in a suspense account. Such
suspense account shall share in any increase or decrease in the fair
market value of the assets of the Fund in accordance with Section 4
of the Plan. The disposition of such suspense account shall be as
follows:
1. No Breaks in Vesting Service - If a Participant neither receives
nor is deemed to receive a distribution pursuant to Section 6.01
(D)(2) or (3) and the Participant returns to the service of the
Employer before incurring 5 consecutive Breaks in Vesting Service,
there shall be no Forfeiture and the amount in such suspense
account shall be recredited to such Participant's Individual
Account.
2. Cash-out of Certain Participants - If the value of the Vested
portion of such Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500, the
Participant shall receive a distribution of the entire Vested
portion of such Individual Account and the portion which is not
Vested shall be treated as a Forfeiture and allocated in the year
of the cash-
<PAGE>
out. For purposes of this Section, if the value of the Vested
portion of a Participant's Individual Account is zero, the
Participant shall be deemed to have received a distribution of
such Vested Individual Account. A Participant's Vested Individual
Account balance shall not include accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code for Plan Years beginning prior to January 1, 1989.
3. Participants Who Elect to Receive Distributions - If such
Participant elects to receive a distribution, in accordance with
Section 6.02(B), of the value of the Vested portion of his
Individual Account derived from Employee and Employer
Contributions, the portion which is not Vested shall be treated as
a Forfeiture.
4. Re-employed Participants - If a Participant receives or is deemed
to receive a distribution pursuant to Section 6.01(D)(2) or (3)
above and the Participant resumes employment covered under this
Plan, the Participant's Employer-derived Individual Account
balance will be restored to the amount on the date of distribution
if the Participant repays to the Plan the full amount of the
distribution attributable to Employer Contributions before the
earlier of 5 years after the first date on which the Participant
is subsequently re-employed by the Employer, or the date the
Participant incurs 5 consecutive Breaks in Vesting Service
following the date of the distribution.
Amounts forfeited under Section 6.01(D) shall be allocated in
accordance with Section 3.01(C) as of the last day of the Plan
Year during which the Forfeiture arises. Any restoration of a
Participant's Individual Account pursuant to Section 6.01(D)(4)
shall be made from other Forfeitures, income or gain to the Fund
or contributions made by the Employer.
E. Distribution Prior to Full Vesting - If a distribution is made to a
Participant who was not then fully Vested in his Individual Account
derived from Employer Contributions and the Participant may increase
his Vested percentage in his Individual Account, then the following
rules shall apply:
1. a separate account will be established for the Participant's in-
terest in the Plan as of the time of the distribution, and
2. at any relevant time the Participant's Vested portion of the sep-
arate account will be equal to an amount ("X") determined by the
formula: X=P (AB + (R x D)) - (R x D) where "P" is the Vested
<PAGE>
percentage at the relevant time, "AB" is the separate account
balance at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate account balance
at the relevant time to the separate account balance after
distribution.
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. Value of Individual Account Does Not Exceed $3,500 - If the value of
the Vested portion of a Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500,
distribution from the Plan shall be made to the Participant in a
single lump sum in lieu of all other forms of distribution from the
Plan.
B. Value of Individual Account Exceeds $3,500
1. If the value of the Vested portion of a Participant's Individual
Account derived from Employee and Employer Contributions exceeds
(or at the time of any prior distribution exceeded) $3,500, and
the Individual Account is immediately distributable, the
Participant and the Participants spouse (or where either the
Participant or the spouse died, the survivor) must consent to any
distribution of such Individual Account. The consent of the
Participant and the Participant's spouse shall be obtained in
writing within the 90-day period ending on the annuity starting
date. The annuity starting date is the first day of the first
period for which an amount is paid as an annuity or any other
form. The Plan Administrator shall notify the Participant and the
Participant's spouse of the right to defer any distribution until
the Participant's Individual Account is no longer immediately
distributable. Such notification shall include a general
description of the material features, and an explanation of the
relative values of, the optional forms of benefit available under
the Plan in a manner that would satisfy the notice requirements of
Section 417(a)(3) of the Code, and shall be provided no less than
30 days and no more than 90 days prior to the annuity starting
date. If a distribution is one to which Sections 401(a)(11) and
417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under
Section 1.411(a)- 11(c) of the Income Tax Regulations is given,
provided that:
a. the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option), and
<PAGE>
b. the Participant, after receiving the notice, affirmatively
elects a distribution.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified
joint and survivor annuity while the Individual Account is
immediately distributable. Neither the consent of the Participant
nor the Participant's spouse shall be required to the extent that
a distribution is required to satisfy Section 401(a)(9) or Section
415 of the Code. In addition, upon termination of this Plan if the
Plan does not offer an annuity option (purchased from a commercial
provider), the Participant's Individual Account may, without the
Participant's consent, be distributed to the Participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975 (e)(7) of
the Code) within the same controlled group.
An Individual Account is immediately distributable if any part of
the Individual Account could be distributed to the Participant (or
surviving spouse) before the Participant attains or would have
attained (if not deceased) the later of Normal Retirement Age or
age 62.
2. For purposes of determining the applicability of the foregoing
consent requirements to distributions, made before the first day
of the first Plan year beginning after December 31, 1988, the
Vested portion of a Participant's Individual Account shall not
include amounts attributable to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) o the
Code.
C. Other Forms of Distribution to Participant - If the value of the
Vested portion of a Participant's Individual Account exceeds $3,500
and the Participant has properly waived the joint and survivor
annuity, as described in Section 6.05, the Participant may request in
writing that the Vested portion of his Individual Account be paid to
him in one or more of the following forms of payment: 91) in a lump
sum; (2) in installment payments over a period not to exceed the life
expectancy of the Participant or the joint and last survivor life
expectancy of the Participant and his designated Beneficiary; or (3)
applied to the purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the contrary, a
Participant cannot elect payments in the form of an annuity if the
safe harbor rules of Section 6.05(F) apply.
<PAGE>
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. Designation of Beneficiary - Spousal Consent - Each Participant may
designate, upon a form provided by and delivered to the Plan
Administrator, one or more primary and contingent Beneficiaries to
receive all or a specified portion of his Individual Account in the
event of his death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and
delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a primary
Beneficiary who is not his spouse, his spouse must consent in writing
to such designation, and the spouse's consent must acknowledge the
effect of such designation and be witnessed by a notary public.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Plan Administrator that such
written consent may not be obtained because there is no spouse or the
spouse cannot be located, no consent shall be required. Any change of
Beneficiary will require a new spousal consent.
B. Payment to Beneficiary - If a Participant dies before his entire
Individual Account has been paid to him, such deceased Participant's
Individual Account shall be payable to any surviving Beneficiary
designated by the Participant, or, if no Beneficiary survives the
Participant, to the Participant's estate.
C. Written Request: When Distributed - A Beneficiary of a deceased
Participant entitled to a distribution who wishes to receive a
distribution must submit a written request to the Plan Administrator.
Such request shall be made upon a form provided by the Plan
Administrator. Upon a valid request, the Plan Administrator shall
direct the Trustee (or Custodian) to commence distribution no later
than 90 days following the later of:
1. the close of the Plan Year within which the Participant dies; or
2. the close of the Plan Year in which the request is received.
D. Location of Participant or Beneficiary Unknown - In the event that
all, or any portion, of the distribution payable to a Participant or
his Beneficiary hereunder shall, at the expiration of 5 years after
it becomes payable, remain unpaid solely by reason of the inability
of the Plan Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or
his
<PAGE>
Beneficiary, the amount so distributable shall be forfeited and
allocated in accordance with the terms of the Plan. In the event a
Participant or Beneficiary is located subsequent to his benefit being
forfeited, such benefit shall be restored; provided, however, if all
or a portion of such amount has been lost by reason of escheat under
state law, the Participant or Beneficiary shall cease to be entitled
to the portion so lost.
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. Value of Individual Account Does Not Exceed $3,500 - If the value of
the Participant's Individual Account derived from Employee and
Employer Contributions does not exceed $3,500, the Plan Administrator
shall direct the Trustee (or Custodian, if applicable) to make a
distribution to the Beneficiary in a single lump sum in lieu of all
other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 - If the value of a
Par-ticipant's Individual Account derived from Employee and Employer
Contributions exceeds $3,500 the preretirement survivor annuity
requirements of Section 6.05 shall apply unless waived in accordance
with that Section or unless the safe harbor rules of Section 6.05(F)
apply.
C. Other Forms of Distribution to Beneficiary - If the value of a
Participant's Individual Account exceeds $3,500 and the Participant
has properly waived the preretirement survivor annuity, as described
in Section 6.05 (if applicable), the Beneficiary may, subject to the
requirements of Section 6.06, request in writing that the
Participant's Individual Account be paid to him as follows: (1) in a
lump sum; or (2) in installment payments over a period not to exceed
the life expectancy of such Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any Participant who is
credited with at least one Hour of Eligibility Service with the
Employer on or after August 23, 1984, and such other participants as
provided in Section 6.05(G).
B. Qualified Joint and Survivor Annuity - Unless an optional form of
benefit is selected pursuant to a qualified election within the 90-
day period ending on the annuity starting date, a married
Partici-pant's Vested account balance will be paid in the form of a
qualified joint and survivor annuity and an unmarried Participant's
Vested
<PAGE>
account balance will be paid in the form of a life annuity. The
Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan.
C. Qualified Preretirement Survivor Annuity - Unless an option form of
benefit has been selected within the election period pursuant to a
qualified election, if a Participant dies before the annuity starting
date then the Participant's Vested account balance shall be applied
toward the purchase of an annuity for the life of the surviving
spouse. The surviving spouse may elect to have such annuity
distributed within a reasonable period after the Participant's death.
D. Definitions
1. Election Period - The period which begins on the first day of the
Plan Year in which the Participant attains age 35 and ends on the
date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age 35 is
attained, with respect to the account balance as of the date of
separation, the election period shall begin on the date of
separation.
Pre-age 35 waiver - A Participant who will not yet attain age 35
as of the end of any current Plan Year may make special qualified
election to waive the qualified preretirement survivor annuity for
the period beginning on the date of such election and ending on
the first day of the Plan Year in which the Participant will
attain age 35. Such election shall not be valid unless the
Participant receives a written explanation of the qualified
prere-tirement survivor annuity in such terms as are comparable to
the explanation required under Section 6.05(E)(1). Qualified
prere-tirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date
shall be subject to the full requirements of this Section 6.05.
2. Earliest Retirement Age - The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
3. Qualified Election - A waiver of a qualified joint and survivor
annuity or a qualified preretirement survivor annuity. Any waiver
of a qualified joint and survivor annuity or a qualified
prere-tirement survivor annuity shall not be effective unless: (a)
the Participant's spouse consents in writing to the election, (b)
the election designates a specific Beneficiary, including any
class of
<PAGE>
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal
consent); (c) the spouse's consent acknowledges the effect of the
election; and (d) the spouse's consent is witnessed by a plan
representative or notary public. Additionally, a Participant's
waiver of the qualified joint and survivor annuity shall not be
effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the spouse
expressly permits designations by the Participant without any
further spousal consent). If it is established to the satisfaction
of a plan representative that there is no spouse or that the
spouse cannot be located, a waiver will be deemed a qualified
election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A consent
that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge
that the spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where applicable, and
that the spouse voluntarily elects to relinquish either or both of
such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time before
the commencement of benefits. The number of revocations shall not
be limited. No consent obtained under this provision shall be
valid unless the Participant has received notice as provided in
Section 6.05(E) below.
4. Qualified Joint and Survivor Annuity - An immediate annuity for
the life of the Participant with a survivor annuity for the life
of the spouse which is not less than 50% and not more than 100% of
the amount of the annuity which is payable during the joint lives
of the Participant and the spouse and which is the amount of
beneficiary which can be purchased with the Participant's vested
account balance. The percentage of the survivor annuity under the
Plan shall be 50% (unless a different percentage is elected by the
Employer in the Adoption Agreement).
5. Spouse (surviving spouse) - The spouse or surviving spouse of the
Participant, provided that a former spouse will be treated as the
spouse or surviving spouse and a current spouse will not be
treated as the spouse or surviving spouse to the extent provided
under a qualified domestic relations order as described in Section
<PAGE>
414(p) of the Code.
6. Annuity Starting Date - The first day of the first period for
which an amount is paid as an annuity or any other form.
7. Vested Account Balance - The aggregate value of the Participant's
Vested account balances derived from Employer and Employee
contributions (including rollovers), whether Vested before or upon
death, including the proceeds of insurance contracts, if any, on
the Participant's life. The provisions of this Section 6.05 shall
apply to a Participant who is Vested in amounts attributable to
Employer Contributions, Employee contributions (or both) at the
time of death or distribution.
E. Notice Requirements
1. In the case of a qualified joint and survivor annuity, the Plan
Administrator shall no less than 30 days and not more than 90 days
prior to the annuity starting date provide each Participant a
written explanation of: (a) the terms and conditions of a
qualified joint and survivor annuity; (b) the Participant's right
to make and the effect of an election to waive the qualified joint
and survivor annuity form of benefit; (c) the rights of a
Partici-pant's spouse; and (d) the right to make, and the effect
of, a revocation of a previous election to waive the qualified
joint and survivor annuity.
2. In the case of a qualified preretirement annuity as described in
Section 6.05(C), the Plan Administrator shall provide each
Participant within the applicable period for such Participant a
written explanation of the qualified preretirement survivor
annuity in such terms and in such manner as would be comparable to
the explanation provided for meeting the requirements of Section
6.05(E)(1) applicable to a qualified joint and survivor annuity.
<PAGE>
The applicable period for a Participant is whichever of the
following periods ends last: (a) the period beginning with the
first day of the Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year preceding the Plan Year
in which the Participant attains age 35; (b) a reasonable period
ending after the individual becomes a Participant; (c) a
reasonable period ending after Section 6.05(E)(3) ceases to apply
to the Participant; (d) a reasonable period ending after this
Section 6.05 first applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable period
ending after separation from service in the case of a Partici-
pant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (b), (c)
and (d) is the end of the two-year period beginning one year prior
to the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from service
before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a
Participant thereafter returns to employment with the Employer,
the applicable period for such Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section 6.05(E),
the respective notices prescribed by this Section 6.05(E), need
not be given to a Participant if (a) the Plan "fully subsidizes"
the costs of a qualified joint and survivor annuity or qualified
preretirement survivor annuity, and (b) the Plan does not allow
the Participant to waive the qualified joint and survivor annuity
or qualified preretirement survivor annuity and does not allow a
married Participant to designate a nonspouse beneficiary. For
purposes of this Section 6.05(E)(3), a plan fully subsidizes the
costs of a benefit if no increase in cost, or decrease in benefits
to the Participant may result from the Participants failure to
elect another benefit.
F. Safe Harbor Rules
1. If the Employer so indicates in the Adoption Agreement, this
Section 6.05(F) shall apply to a Participant in a profit sharing
plan, and shall always apply to any distribution, made on or after
the first day of the first Plan Year beginning after December 31,
1988, from or under a separate account attributable solely to
accumulated deductible employee contributions, as defined in
Section 72(o)(5)(B) of the Code, and maintained on behalf of a
Participant in a money purchase pension plan, (including a target
benefit plan) if the following conditions are satisfied:
a. the Participant does not or cannot elect payments in the form
of a life annuity; and
b. on the death of a participant, the Participant's Vested
account balance will be paid to the Participant's surviving
spouse, but if there is no surviving spouse, or if the sur-
<PAGE>
viving spouse has consented in a manner conforming to a
qualified election, then to the Participant's designated
beneficiary. The surviving spouse may elect to have
distribution of the Vested account balance commence within
the 90-day period following the date of the Participant's
death. The account balance shall be adjusted for gains or
losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of
account balances for other types of distributions. This
Section 6.05(F) shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct
or indirect transferee of a defined benefit plan, money
purchase plan, a target benefit plan, stock bonus, or profit
sharing plan which is subject to the survivor annuity
requirements of Section 401(a)(11) and Section 417 of the
code. If this Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than Section 6.05(G)
shall be inoperative.
2. The Participant may waive the spousal death benefit described in
this Section 6.05(F) at any time provided that no such waiver
shall be effective unless it satisfies the conditions of Section
6.05(D)(3) (other than the notification requirement referred to
therein) that would apply to the Participant's waiver of the
qualified preretirement survivor annuity.
3. For purposes of this Section 6.05(F), Vested account balance shall
mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate account balance
attributable solely to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code. In the case of a profit sharing plan, Vested account balance
shall have the same meaning as provided in Section 6.05(D)(7).
G. Transitional Rules
1. Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the
previous subsections of this Section 6.05 must be given the
opportunity to elect to have the prior subsections of this Section
apply if such Participant is credited with at least one Hour of
Service under this Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and such Participant had at
least 10 Years of Vesting Service when he or she separated from
service.
<PAGE>
2. Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one Hour of Service under this Plan
or a predecessor plan on or after September 2, 1974, and who is
not otherwise credited with any service in a Plan Year beginning
on or after January 1, 1976, must be given the opportunity to have
his or her benefits paid in accordance with Section 6.05(G)(4).
3. The respective opportunities to elect (as described in Section
6.05(G)(1) and (2) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to said
Participants.
4. Any Participant who has elected pursuant to Section 6.05(G)(2) and
any Participant who does not elect under Section 6.05(G)(1) or who
meets the requirements of Section 6.05(G)(1) except that such
Participant does not have at least 10 Years of Vesting Service
when he or she separates from service, shall have his or her
benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a
life annuity:
a. Automatic Joint and Survivor Annuity - If benefits in the form
of a life annuity become payable to a married Participant who:
1. begins to receive payments under the Plan on or after Normal
Retirement Age; or
2. dies on or after Normal Retirement Age while still working
for the Employer; or
3. begins to receive payments on or after the qualified early
retirement age; or
<PAGE>
4. separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the
payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits;
then such benefits will be received under this Plan in the
form of a qualified joint and survivor annuity, unless the
Participant has elected otherwise during the election
period. The election period must begin at least 6 months
before the Participant attains qualified early retirement
age and ends not more than 90 days before the commencement
of
<PAGE>
benefits. Any election hereunder will be in writing and may
be changed by the Participant at any time.
b. Election of Early Survivor Annuity - A Participant who is
employed after attaining the qualified early retirement age
will be given the opportunity to elect, during the election
period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have
been made to the spouse under the qualified joint and survivor
annuity if the Participant had retirement on the day before
his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The
election period begins on the later of (1) the 90th day before
the Participant attains the qualified early retirement age, or
92) the date on which participation begins, and ends on the
date the Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the Parti-
cipant may elect to receive retirement benefits,
b. the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
c. the date the Participant begins participation.
2. Qualified joint and survivor annuity is an annuity for the
life of the Participant with a survivor annuity for the
life of the spouse as described in Section 6.05(D)(4) of
this Plan.
6.06 DISTRIBUTION REQUIREMENTS
A. General Rules
1. Subject to Section 6.05 Joint and Survivor Annuity Requirements, the
requirements of this Section shall apply to any distribution of a
Participant's interest and will take precedence over any
inconsistent provisions of this Plan. Unless otherwise specified,
the provisions of this Section 6.06 apply to calendar years
beginning after December 31, 1984.
2. All distributions required under this Section 6.06 shall be deter-
<PAGE>
mined and made in accordance with the Income Tax Regulations under
Section 401(a)(9), including the minimum distribution incidental
benefit requirement of Section 1.401(a)(9)-2 of the regulations.
B. Required Beginning Date - The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's
required beginning date.
C. Limits on Distribution Periods - As of the first distribution calendar
year, distributions, if not made in a single sum, may only be made over
one of the following periods (or a combination thereof):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy of the
Participant, or
4. a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
D. Determination of Amount to be Distributed Each Year - If the
Partici-pant's interest is to be distributed in other than a single
sum, the following minimum distribution rules shall apply on or after
the required beginning date:
1. Individual Account
a. If a Participant's benefit is to be distributed over (1) a per-
iod not extending beyond the life expectancy of the Participant
or the joint life and last survivor expectancy of the Partici-
pant and the Participant's designated Beneficiary or (2) a per-
iod not extending beyond the life expectancy of the designated
Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first dis-
tribution calendar year, must at least equal the quotient ob-
tained by dividing the Participant's benefit by the applicable
life expectancy.
b. For calendar years beginning before January 1, 1989, if the
Par-ticipant's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is
paid within the life expectancy of the Participant.
c. For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for
<PAGE>
the first distribution calendar year shall not be less than the
quotient obtained by dividing the Participant's benefit by the
lesser of (1) the applicable life expectancy or (2) if the
Par-ticipant's spouse is not the designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4
of Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in Section
6.05(D)(1)(a) above as the relevant divisor without regard to
regulations 1.401(a)(9)-2.
d. The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Parti-cipant's required beginning date. The minimum distribution
for other calendar years, including the minimum distribution for
the distribution calendar year in which the Employee's required
beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
2. Other Forms - If the Participant's benefit is distributed in the form
of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of
Section 401(a)(9) of the Code and the regulations thereunder.
E. Death Distribution Provisions
1. Distribution Beginning Before Death - If the Participant dies after
distribution of his or her interest has begun, the remaining portion
of such interest will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the
Partici-pant's death.
2. Distribution Beginning After Death - If the Participant dies before
distribution of his or her interest begins, distribution of the
Par-ticipant's entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made to
receive distributions in accordance with (a) or (b) below:
a. if any portion of the Participant's interest is payable to a
designated Beneficiary, distributions may be made over the life
or over a period certain not greater than the life expectancy of
the designated Beneficiary commencing on or before December 31
of the calendar year immediately following the calendar year in
which the Participant died;
<PAGE>
b. if the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (a) above shall not be earlier than the later of
(1) December 31 of the calendar year immediately following the
calendar year in which the Participant dies or (2) December 31
of the calendar year in which the Participant would have
attained age 70 1/2.
If the Participant has not made an election pursuant to this
Section 6.05(E)(2) by the time of his or her death, the
Par-ticipant's designated Beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin
under this Section 6.05(E)(2), or (2) December 31 of the
calendar year which contains the fifth anniversary of the date
of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does
not elect a method of distribution, distribution of the
Participant's entire interest must be completed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the surviving spouse
dies after the Participant, but before payments to such spouse begin,
the provisions of Section 6.06(E)(2), with the exception of paragraph
(b) therein, shall be applied as if the surviving spouse were the
Participant.
4. For purposes of this Section 6.06(E), any amount paid to a child of
the Participant will be treated as if it had been paid to the
surviving spouse if the amount becomes payable to the surviving
spouse when the child reaches the age of majority.
5. For purposes of this Section 6.06(E), distribution of a Participant's
interest is considered to begin on the Participant's required
beginning date (or, if Section 6.06(E)(3) above is applicable, the
date distribution is required to begin to the surviving spouse
pursuant to Section 6.06(E)(2) above). If distribution in the form of
an annuity irrevocably commences to the Participant before the
required beginning date, the date distribution is considered to begin
is the date distribution actually commences.
F. Definitions
1. Applicable Life Expectancy - The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Parti-
<PAGE>
cipant (or designated Beneficiary) as of the Participant's (or
designated Beneficiary's) birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is
being recalculated, the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable calendar year shall be
the first distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
2. Designated Beneficiary - The individual who is designated as the
Beneficiary under the Plan in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
3. Distribution Calendar Year - A calendar year for which a minimum
distribution is required. For distributions beginning before the
Par-ticipant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains
the Participant's required beginning date. For distributions
beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are
required to begin pursuant to Section 6.05(E) above.
4. Life Expectancy - Life expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or spouse, in the case
of distributions described in Section 6.05(E)(2)(b) above) by the
time distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The
life expectancy of a nonspouse Beneficiary may not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation date in the
valuation calendar year (the calendar year immediately preceding
the distribution calendar year) increased by the amount of any
Contributions or Forfeitures allocated to the account balance as
of dates in the valuation calendar year after the valuation date
and decreased by distributions made in the valuation calendar
year after the valuation date.
b. Exception for second distribution calendar year. For purposes
<PAGE>
of paragraph (a) above, if any portion of the minimum
distribution for the first distribution calendar year is made in
the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in
the second distribution calendar year shall be treated as if it
had been made in the immediately preceding distribution calendar
year.
6. Required Beginning Date
a. General Rule - The required beginning date of a Participant is
the first day of April of the calendar year following the
calendar year in which the Participant attains age 70 1/2.
b. Transitional Rules - The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988, shall
be determined in accordance with (1) or (2) below:
(1) Non 5% Owners - The required beginning date of a
Participant who is not a 5% owner is the first day of April
of the calendar year following the calendar year in which
the later of retirement or attainment of age 70 1/2 occurs.
(2) 5% Owners - The required beginning date of a Participant
who is a 5% owner during any year beginning after December
31, 1979, is the first day of April following the later of:
(a) the calendar year in which the Participant attains age
70 1/2, or
(b) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
5% owner, or the calendar year in which the Participant
retires.
The required beginning date of a Participant who is not
a 5% owner who attains age 70 1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1,
1990.
(c) 5% Owner - A Participant is treated as a 5% owner for
purposes of this Section 6.06(F)(6) if such Participant
is a 5% owner as defined in Section 416(i) of the Code
(determined in accordance with Section 416 but without
regard to whether the Plan is top-heavy) at any time
<PAGE>
during the Plan Year ending with or within the calendar
year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
(d) Once distributions have begun to a 5% owner under this
Section 6.06(F)(6) they must continue to be
distributed, even if the Participant ceases to be a 5%
owner in a subsequent year.
G. Transitional Rule
1. Notwithstanding the other requirements of this Section 6.06 and
subject to the requirements of Section 6.05, Joint and Survivor
Annuity Requirements, distribution on behalf of any Employee,
including a 5% owner, may be made in accordance with all of the
following requirements (regardless of when such distribution
commences):
a. The distribution by the Fund is one which would not have
disqualified such Fund under Section 401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of 1984.
b. The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Fund is being
distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
c. Such designation was in writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
d. The Employee had accrued a benefit under the Plan as of December
31, 1983.
e. The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and in
the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
2. A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
3. For any distribution which commences before January 1, 1984, but con-
tinues after December 31, 1983, the Employee, or the Beneficiary, to
<PAGE>
whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is
being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in Sections 6.06(G)(1)(a)
and (e).
4. If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would
have been required to have been distributed to satisfy Section
401(a)(9) of the Code and the regulations thereunder, but for the
Section 242 (b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements in Section 1.401(a)(9)-2
of the Income Tax Regulations. Any changes in the designation will be
considered to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be
made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount
is transferred or rolled over from one plan to another plan, the
rules in Q&A J-2 and Q&A J-3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or required
by this Section 6) must be nontransferable. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or spouse
shall comply with the requirements of the Plan.
<PAGE>
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive a loan
from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a reasonably
equivalent basis.
B. Loans shall not be made available to Highly Compensated Employees (as
defined in Section 414(q) of the Code) in an amount greater than the
amount made available to other Employees.
C. Loans must be adequately secured and bear a reasonable interest rate.
D. No Participant loan shall exceed the present value of the Vested por-
tion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse, if any, to
the use of the Individual Account as security for the loan. Spousal
consent shall be obtained no earlier than the beginning of the 90 day
period that ends on the date on which the loan is to be so secured. The
consent must be in writing, must acknowledge the effect of the loan,
and must be witnessed by a plan representative or notary public. Such
consent shall thereafter be binding with respect to the consenting
spouse or any subsequent spouse with respect to that loan. A new
consent shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
F. In the event of default, foreclosure on the note and attachment of se-
curity will not occur until a distributable event occurs in the Plan.
G. No loans will be made to any shareholder-employee or Owner-Employee.
For purposes of this requirement, a shareholder-employee means an
employee or officer of an electing small business (Subchapter S)
corporation who owns (or is considered as owning within the meaning of
Section 318(a)(1) of the Code), on any day during the taxable year of
such corporation, more than 5% of the outstanding stock of the
corporation.
If a valid spousal consent has been obtained in accordance with
6.08(E), then, notwithstanding any other provisions of this Plan, the
portion of the Participant's Vested Individual Account used as a
security interest held by the Plan by reason of a loan outstanding to
the Participant shall be taken into account for purposes of determining
the amount of the account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the
loan. If less than 100% of the Participant's Vested Individual Account
(determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first
reducing the Vested Individual Account by the amount of the security
used as repayment of the loan, and then determining the benefit payable
to the surviving spouse.
No loan to any Participant can be made to the extent that such loan
when added to the outstanding balance of all other loans to the
Participant would exceed the lesser of (a) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the
one year
<PAGE>
period ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made, or (b) 50%
of the present value of the nonforfeitable Individual Account of the
Participant or, if greater, the total Individual Account up to $10,000.
For the purpose of the above limitation, all loans from all plans of
the Employer and other members of a group of employers described in
Sections 414(b), 414(c), and 414(m) of the Code are aggregated.
Furthermore, any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond 5 years
from the date of the loan, unless such loan is used to acquire a
dwelling unit which within a reasonable time (determined at the time
the loan is made) will be used as the principal residence of the
Participant. An assignment or pledge of any portion of the
Participant's interest in the Plan and a loan, pledge, or assignment
with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
The Plan Administrator shall administer the loan program in accordance
with a written document. Such written document shall include, at a
minimum, the following: (i) the identity of the person or positions
authorized to administer the Participant loan program; (ii) the
procedure for applying for loans; (iii) the basis on which loans will
be approved or denied; (iv) limitations (if any) on the types and
amounts of loans offered; (v) the procedure under the program for
determining a reasonable rate of interest; (vi) the types of collateral
which may secure a Participant loan; and (vii) the events constituting
default and the steps that will be taken to preserve Plan assets in the
event of such default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this Plan to be
made either in a form actually held in the Fund, or in cash by converting
assets other than cash into cash, or in any combination of the two
foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
A. Direct Rollover Option - This Section applies to distributions made on
or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the manner prescribed
by the Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
<PAGE>
B. Definitions
1. Eligible rollover distribution - An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include:
a. any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more;
b. any distribution to the extent such distribution is required un-
der Section 401(a)(9) of the Code; and
c. the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrea-
lized appreciation with respect to employer securities).
2. Eligible retirement plan - An eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b) of
the
<PAGE>
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
3. Distributee - A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
4. Direct rollover - A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
<PAGE>
A Participant or Beneficiary who desires to make a claim for the Vested
portion of the Participant's Individual Account shall file a written
request with the Plan Administrator on a form to be furnished to him by
the Plan Administrator for such purpose. The request shall set forth the
basis of the claim. The Plan Administrator is authorized to conduct such
examinations as may be necessary to facilitate the payment of any benefits
to which the Participant or Beneficiary may be entitled under the terms of
the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant or Beneficiary
has been wholly or partially denied, the Plan Administrator must furnish
such Participant or Beneficiary written notice of the denial within 60
days of the date the original claim was filed. This notice shall set forth
the specific reasons for the denial, specific reference to pertinent Plan
provisions on which the denial is based, a description of any additional
information or material needed to perfect the claim, an explanation of why
such additional information or material is necessary and an explanation of
the procedures for appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the Plan
Administrator. The Participant or Beneficiary may request that the review
be in the nature of a hearing. The Participant or Beneficiary shall have
the right to representation, to review pertinent documents and to submit
comments in writing. The Plan Administrator shall issue a decision on such
review within 60 days after receipt of an application for review as
provided for in Section 7.02. Upon a decision unfavorable to the
Participant or Beneficiary, such Participant or Beneficiary shall be
entitled to bring such actions in law or equity as may be necessary or
appropriate to protect or clarify his right to benefits under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the managing body
of the Employer designates a person or persons other than the Employer
as the Plan Administrator and so notifies the Prototype Sponsor and the
Trustee (or Custodian, if applicable). The Employer shall also be the
Plan Administrator if the person or persons so designated cease to be
the Plan Administrator.
B. If the managing body of the Employer designates a person or persons
other than the Employer as Plan Administrator, such person or persons
<PAGE>
shall serve at the pleasure of the Employer and shall serve pursuant to
such procedures as such managing body may provide. Each such person
shall be bonded as may be required by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the duties of the
Plan Administrator among several individuals or entities. Such
appointments shall not be effective until the party designated accepts
such appointment in writing.
B. The Plan Administrator shall have the authority to control and manage
the operation and administration of the Plan. The Plan Administrator
shall administer the Plan for the exclusive benefit of the Participants
and their Beneficiaries in accordance with the specific terms of the
Plan.
C. The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the follow-
ing:
1. To determine all questions of interpretation or policy in a manner
consistent with the Plan's documents and the Plan Administrator's
construction or determination in good faith shall be conclusive and
binding on all persons except as otherwise provided herein or by
law. Any interpretation or construction shall be done in a
nondiscriminatory manner and shall be consistent with the intent
that the Plan shall continue to be deemed a qualified plan under the
terms of Section 401(a) of the Code, as amended from time-to-time,
and shall comply with the terms of ERISA, as amended from
time-to-time;
2. To determine all questions relating to the eligibility of Employees
to become or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be contributed to
the Plan;
4. To compute the amount and kind of benefits to which a Participant or
Beneficiary shall be entitled under the Plan and to direct the
Trustee (or Custodian, if applicable) with respect to all
disbursements under the Plan, and, when requested by the Trustee (or
Custodian), to furnish the Trustee (or Custodian) with instructions,
in writing, on matters pertaining to the Plan and the Trustee (or
Custodian) may rely and act thereon;
<PAGE>
5. To maintain all records necessary for the administration of the
Plan;
6. To be responsible for preparing and filing such disclosure and tax
forms as may be required from time-to-time by the Secretary of Labor
or the Secretary of the Treasury; and
7. To furnish each Employee, Participant or Beneficiary such notices,
information and reports under such circumstances as may be required
by law.
D. The Plan Administrator shall have all of the powers necessary or
appropriate to accomplish his duties under the Plan, including, but not
limited to, the following:
1. To appoint and retain such persons as may be necessary to carry out
the functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other persons as the
Plan Administrator deems necessary or advisable in the administra-
tion of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules which it deems
necessary to carry out the terms of the Plan;
5. To make any adjustments in a uniform and nondiscriminatory manner
which it deems necessary to correct any arithmetical or accounting
errors which may have been made for any Plan Year; and
6. To correct any defect, supply any omission or reconcile any
inconsistency in such manner and to such extent as shall be deemed
necessary or advisable to carry out the purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not limited to,
those involved in retaining necessary professional assistance may be paid
from the assets of the Fund. Alternatively, the Employer may, in its
discretion, pay such expenses. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his duties, the Employer shall
<PAGE>
supply full and timely information to the Plan Administrator (or his
designated agents) on all matters relating to the Compensation of all
Participants, their regular employment, retirement, death, Disability or
Termination of Employment, and such other pertinent facts as the Plan
Administrator (or his agents) may require. The Plan Administrator shall
advise the Trustee (or Custodian, if applicable) of such of the foregoing
facts as may be pertinent to the Trustee's (or Custodian's) duties under
the Plan. The Plan Administrator (or his agents) is entitled to rely on
such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but no the duty, to amend the Plan
without any further action or consent of the Employer as the Prototype
Sponsor deems necessary for the purpose of adjusting the Plan to
comply with all laws and regulations governing pension or profit
sharing plans. Specifically, it is understood that the amendments may
be made unilaterally by the Prototype Sponsor. However, it shall be
understood that the Prototype Sponsor shall be under no obligation to
amend the Plan documents and the Employer expressly waives any rights
or claims against the Prototype Sponsor for not exercising this power
to amend. For purposes of Prototype Sponsor amendments, the mass
sub-mitter shall be recognized as the agent of the Prototype Sponsor.
If the Prototype Sponsor does not adopt the amendments made by the
mass submitter, it will no longer be identical to or a minor modifier
of the mass submitter plan.
B. An amendment by the Prototype Sponsor shall be accomplished by giving
written notice to the Employer of the amendment to be made. The notice
shall set forth the text of such amendment and the date such amendment
is to be effective. Such amendment shall take effect unless within the
30 day period after such notice is provided, or within such shorter
period as the notice may specify, the Employer gives the Prototype
Sponsor written notice of refusal to consent to the amendment. Such
written notice of refusal shall have the effect of withdrawing the Plan
as a prototype plan and shall cause the Plan to be considered an
individually designed plan. The right of the Prototype Sponsor to cause
the Plan to be amended shall terminate should the Plan cease to conform
as a prototype plan as provided in this or any other section.
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
<PAGE>
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Section 415 or Section 416 of the Code
because of the required aggregation of multiple plans, and (3) add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for any
other reason, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this prototype
plan and will be considered to have an individually designed plan.
An Employer who wishes to amend the Plan to change the options it has
chosen in the Adoption Agreement must complete and deliver a new Adoption
Agreement to the Prototype Sponsor and Trustee (or Custodian, if
applicable). Such amendment shall become effective upon execution by the
Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in its
entirety by adopting another retirement plan which the Employer designates
as a replacement plan.
9.03 LIMITATION ON POWER TO AMEND
No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's Individual Account may be reduced to
the extent permitted under Section 412(c)(8) of the Code. For purposes of
this paragraph, a plan amendment which has the effect of decreasing a
Par-ticipant's Individual Account or eliminating an optional form of
benefit with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit. Furthermore, if
the vesting schedule of a Plan is amended, in the case of an Employee who
is a Participant as of the later of the date such amendment is adopted or
the date it becomes effective, the Vested percentage (determined as of
such date) of such Employee's Individual Account derived from Employer
Contributions will not be less than the percentage computed under the Plan
without regard to such amendment.
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the
Partici-pant's Vested percentage, or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each Participant
with at least 3 Years of Vesting Service with the Employer may elect,
within the time set forth below, to have the Vested percentage computed
under the Plan without regard to such amendment.
<PAGE>
For Participants who do not have at least 1 Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Vesting Service" for "3 Years of
Vesting Service" where such language appears.
The Period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end the later
of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the amendment
by the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and payment is
not assumed as a contractual obligation. Neither the Adoption Agreement
nor the Plan nor any amendment or modification thereof nor the making of
contributions hereunder shall be construed as giving any Participant or
any person whomsoever any legal or equitable right against the Employer,
the Trustee (or Custodian, if applicable) the Plan Administrator or the
Prototype Sponsor except as specifically provided herein, or as provided
by law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by appropriate
action of its managing body. Such termination shall be effective on the
date specified by the Employer. The Plan shall terminate if the Employer
shall be dissolved, terminated, or declared bankrupt. Written notice of
the termination and effective date thereof shall be given to the Trustee
(or Custodian), Plan Administrator, Prototype Sponsor, Participants and
Beneficiaries of deceased Participants, and the required filings (such as
the Form 5500 series and others) must be made with the Internal Revenue
Service and any other regulatory body as required by current laws and
regulations. Until all of the assets have been distributed from the Fund,
the Employer must keep the Plan in compliance with current laws and
regulations by (a) making appropriate amendments to the Plan and (b)
taking such other measures as may be required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of the Employer
may continue the Plan and be substituted in the place of the present
Employer. The successor and the present Employer (or, if deceased, the
executor of the estate of a deceased Self-Employed Individual who was the
<PAGE>
Employer) must execute a written instrument authorizing such substitution
and the successor must complete and sign a new plan document.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to retain its qualified status, the Plan will no longer
be considered to be part of a prototype plan, and such Employer can no
longer participate under this prototype. In such event, the Plan will be
considered an individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without regard
to the community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience of reference
only and are to be ignored in any construction of the provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender they shall be
construed as though they were also used in the feminine gender in all
cases where they would so apply, and whenever any words are used herein in
the singular form they shall be construed as though they were also used in
the plural form in all cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with, or transfer
of assets or liabilities of such Plan to, any other plan, each Participant
shall be entitled to receive benefits immediately after the merger,
consolidation, or transfer (if the Plan had then terminated) which are
equal to or greater than the benefits he would have been entitled to
receive immediately before the merger, consolidation, or transfer (if the
Plan had then terminated). The Trustee (or Custodian) has the authority to
enter into merger agreements or agreements to directly transfer the assets
of this Plan but only if such agreements are made with trustees or
custodians of other retirement plans described in Section 401(a) of the
Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other fiduciary under
this Plan shall discharge their duties with respect to this Plan solely in
the interests of Participants and their Beneficiaries and with the care,
skill, prudence and diligence under the circumstances then prevailing that
a prudent man acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like
<PAGE>
aims. No fiduciary shall cause the Plan to engage in any transaction
known as a "prohibited transaction" under ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any interest whatsoever
hereunder agree to perform any and all acts and execute any and all
documents and papers which may be necessary or desirable for the carrying
out of this Plan and any of its provisions.
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns, as those terms shall apply to any and all parties
hereto, present and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 31, 1983, this Plan is a
Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this Plan is
not part of any required aggregation group or permissive aggregation
group of plans.
2. If this Plan is part of a required aggregation group of plans but
not part of a permissive aggregation group and the top-heavy ratio
for the group of plans exceeds 60%.
3. If this Plan is a part of a required aggregation group and part of a
permissive aggregation group of plans and the top-heavy ratio for
the permissive aggregation group exceeds 60%.
For purposes of this Section 10.08, the following terms shall have
the meanings indicated below:
B. Key Employee - Any Employee or former Employee (and the beneficiaries
of such Employee) who at any time during the determination period was
an officer of the Employer if such individual's annual compensation
exceeds 50% of the dollar limitation under Section 415(b)(1)(A) of the
Code, an owner (or considered an owner under Section 318 of the Code)
of one of the 10 largest interests in the Employer if such individual's
compensation exceeds 100% of the dollar limitation under Section 415(c)
(1)(A) of the Code, a 5% owner of the Employer, or a 1% owner of the
Employer who has an annual compensation of more than $150,000. Annual
compensation means compensation as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludable from the Employee's
<PAGE>
gross income under Section 125, Section 402(a)(8), Section 402(h) or
Section 403(b) of the Code. The determination period is the Plan Year
containing the determination date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the 5-year
period ending on the determination date(s) has or has had accrued
benefits, the top-heavy ratio for this Plan alone or for the
required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of the account balances
of all Key Employees as of the determination date(s) (including any
part of any account balance distributed in the 5-year period ending
on the determination date(s)), and the denominator of which is the
sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the determination
date(s)), both computed in accordance with Section 416 of the Code
and the regulations thereunder. Both the numerator and the
denominator of the top-heavy ratio are increased to reflect any
contribution not actually made as of the determination date, but
which is required to be taken into account on that date under
Section 416 of the Code and the regulations thereunder.
2. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which
during the 5-year period ending on the determination date(s) has or
has had any accrued benefits, the top-heavy ratio for any required
or permissive aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all Key Employees,
determined in accordance with (1) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans
for all Key Employees as of the determination date(s), and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all Participants,
determined in accordance with (1) above, and the present value of
accrued benefits under the defined benefit plan or plans for all
Participants as of the determination date(s), all determined in
accordance with Section 416 of the Code and the regulations there-
<PAGE>
under. The accrued benefits under a defined benefit plan in both the
numerator and denominator of the top-heavy ratio are increased for
any distribution of an accrued benefit made in the 5-year period
ending on the determination date.
3. For purposes of (1) and (2) above, the value of account balances and
the present value of accrued benefits will be determined as of the
most recent valuation date that falls within or ends with the 12-
month period ending on the determination date, except as provided in
Section 416 of the Code and the regulations thereunder for the first
and second plan years of a defined benefit plan. The account
balances and accrued benefits of a Participant (a) who is not a Key
Employee but who was a Key Employee in a Prior Year, or (b) who has
not been credited with at least one Hour of Service with any
employer maintaining the plan at any time during the 5-year period
ending on the determination date will be disregarded. The
calculation of the top-heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will
be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions will not
be taken into account for purposes of computing the top-heavy ratio.
When aggregating plans the value of account balances and accrued
benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (a) the method, if any, that uniformly applies
for accrual purposes under all defined benefit plans maintained by
the Employer, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation group of
plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Sections 401(a)(4) and 410
of the Code.
5. Required aggregation group: (a) Each qualified plan of the Employer
in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the
Plan has terminated), and (b) any other qualified plan of the
Employer which enables a plan described in (a) to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
<PAGE>
6. Determination date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
7. Valuation date: For purposes of calculating the top-heavy ratio,
the valuation date shall be the last day of each Plan Year.
8. Present value: For purposes of establishing the "present value" of
benefits under a defined benefit plan to compute the top-heavy
ratio, any benefit shall be discounted only for mortality and
interest based on the interest rate and mortality table specified
for this purpose in the defined benefit plan.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the
plan established for other trades or businesses must, when looked at as a
single plan, satisfy Sections 401(a) and (d) of the Code for the employees
of those trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies Sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trade or business which is controlled must
be as favorable as those provided for him under the most favorable plan of
the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business if
the Owner-Employee, or two or more Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business, or
B. in the case of a partnership, own more than 50% of either the capital
interest or the profit interest in the partnership. For purposes of
the preceding sentence, an Owner-Employee, or two or more Owner-Employ-
ees, shall be treated as owning any interest in a partnership which is
<PAGE>
owned, directly or indirectly, by a partnership which such
Owner-Employee, or such two or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to assignment
or alienation, either voluntarily or involuntarily. The preceding sentence
shall also apply to the creation, assignment, or recognition of a right to
any benefit payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified
domestic relations order, as defined in Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified domestic
relations order until January 1, 1985. However, in the case of a domestic
relations order entered before such date, the Plan Administrator:
(1) shall treat such order as a qualified domestic relations order if
such Plan Administrator is paying benefits pursuant to such order on
such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does not meet
the requirements of Section 414(p) of the Code.
#709 (1/94) 1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
National Standardized Money Purchase Pension Plan
ADOPTION AGREEMENT
______________________________________________________________________________
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
_______________________________________________________________________________
Address:
_______________________________________________________________________________
City: __________________________ State:________________ Zip:_____________
Telephone _______________ Federal Tax Identification Number _____________
Income Tax Year End
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation [ ] Other
(Specify)____________________________________________________
Nature of Business
(Describe)_____________________________________________
Plan Sequence No. (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________Date Business Established______________
Date of Birth_______________________Marital Status________________________
Home Address______________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a money purchase pension
plan by the Employer.
The Effective Date of this Plan is , 19 .
<PAGE>
NOTE: The effective date is usually the first day of the
Plan Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
money purchase pension plan (a Prior Plan).
The Prior Plan was initially effective on ________, 19___. The
Effective Date of this amendment and restatement is ___, 19__.
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing (enter 0, 1 or 2) Years of Eligibility Service. NOTE: If
more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years
of Eligibility Service required will be deemed to be 0.
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except those checked below:
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the
Employer) and the Employer under which retirement benefits were
the subject of good faith bargaining unless the agreement
provides that such Employees are to be included in the Plan, and
except those Employees who are non-resident aliens pursuant to
Section 410(b) (3)(C) of the Code and who received no earned
income from the Employer which constitutes income from sources
within the United States.
SECTION 4. EMPLOYER CONTRIBUTION FORMULA Check and Complete either
Option A or B
<PAGE>
Option A: [ ] Nonintegrated Formula: For each Plan Year the
Employer will contribute for each qualifying Participant an
amount equal to __% (not to exceed 25%) of the qualifying
Participant's Compensation for the Plan Year.
Option B: [ ] Integrated Formula: For each Plan Year, the Employer
will contribute for each qualifying Participant an amount
equal to the sum of the amounts determined in Step 1 and
Step 2:
Step 1. An amount equal to ___% (the base contribution per-
centage) of the Participant's Compensation for the
Plan Year up to the integration level, plus
Step 2. An amount equal to ___% (not to exceed the base
contribution percentage by more than the lesser of:
(1) the base contribution percentage, or (2) the
money purchase maximum disparity rate as described
in Section 3.01(b)(3) of the Plan) of such
Participant's Compensation for the Plan Year in
excess of the integration level.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $________ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
SECTION 5. VESTING Complete Parts A and B
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows (Choose
one):
_______________________________________________________________________________
YEARS OF VESTING SERVICE
(Complete Option A [ ] Option B [ ] Option C [ ] Option D [ ] if Chosen)
_______________________________________________________________________________
VESTED PERCENTAGE
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
_______________________________________________________________________________
<PAGE>
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. _____ Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B. _____ Hours of Service (no more than 500) must be exceeded to avoid
a Break in Vesting Service or a Break in Eligibility Service.
NOTE: The number of hours in Part A must be greater than the number
of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not checked
for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the Plan
be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to Sec-
tion 5.14 of the Plan? [ ] Yes [ ] No
SECTION 9. JOINT AND SURVIVOR ANNUITY
The survivor annuity portion of the Joint and Survivor Annuity shall be
a percentage equal to ____% (at least 50% but no more than 100%) of the
amount paid to the Participant prior to his or her death.
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of the
Code, which provides post-retirement medical benefits allocated to
separate accounts for key employees as defined in Section 419A(d)(3) of
the Code or an individual medical account, as defined in Section 415(1)
(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
<PAGE>
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made to
the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic Plan
Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the corres-
ponding Basic Plan Document.
Signature for Employer___________________________Date Signed__________
Type Name_____________________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers, or
[ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization____________________________________________________
Signature_________________________________________________________________
Type Name_________________________________________________________________
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Option B. [ ] Individual Trustee(s)
Signature ________________________________________________________________
Signature_________________________________________________________________
Type Name________________________ Type Name_______________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype
Sponsor_______________________________________________________________________
Address_______________________________________________________________________
Telephone Number______________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
profit sharing plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in Section
415(l)(2) of the Code, under which amounts are treated as annual additions
with respect to any Participant in this Plan.
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a regional
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans will
limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.)_________________
____________________________________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code. Such language must preclude Employer discretion.
(Complete)_________________________________________________________
<PAGE>
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
________________________________________________________________
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Standardized Profit Sharing Plan
ADOPTION AGREEMENT
-----------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
-------------------------------------------------------
Address_______________________________________________________________
City: _______________________State:______________________ Zip:______________
Telephone: _________________ Federal Tax Identification Number______________
Income Tax Year End __________________________
Type of Business (Check only one) [ ] Sole Proprietorship [ ] Partnership [ ]
Corporation [ ] Other (Specify)_______________
Nature of Business
(Describe)_______________________________________________
Plan Sequence No. __________ (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________ Date Business Established ____________
Date of Birth________________________ Marital Status_______________________
Home Address
____________________________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this Plan is ________, 19 .
<PAGE>
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was initially
effective on _____________. The Effective Date of this amendment
and restatement is ________________. NOTE: The effective date
is usually the first day of the Plan Year in which this Adoption
Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing _______ (enter 0, 1 or 2) Years of Eligibility Service. NOTE:
If more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years of
Eligibility Service required will be deemed to be 0.
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age ____________ (no more than 21). NOTE: If left blank, it
will be deemed there is no age requirement for eligibility.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan, and except those
Employees who are non-resident aliens pursuant to Section 410(b)
(3)(C) of the Code and who received no earned income from the
Employer which constitutes income from sources within the United
States.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
Part A. Contribution Formula
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
<PAGE>
Part B. Allocation Formula: (Check Option 1 or 2)
Option 1: [ ] Pro Rata Formula. Employer Contributions and Forfeitures
shall be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula: Employer Contributions and
Forfeitures shall be allocated as follows (Start with Step 3 if
this Plan is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that each qualifying Participant's Compensation for the
Plan Year in excess of the integration level bears to all
qualifying Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that the sum of each qualifying Participant's total
Compensation and Compensation in excess of the
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of the
profit sharing maximum disparity rate as described in
Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro rata
to qualifying Participants in the manner described in
Section 4, Part B, Option 1.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $______ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
<PAGE>
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
_______________________________________________________________________________
YEARS OF VESTING SERVICE
Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if Chosen)
_______________________________________________________________________________
VESTED PERCENTAGE
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
_______________________________________________________________________________
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____ (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ________ Hours of Service (no more than 1,000) shall be
required to constitute a Year of Vesting Service or a Year of
Eligibility Service.
Part B. ________ Hours of Service (no more than 500) must be exceeded to
avoid a Break in Vesting Service or a Break in Eligibility
Service.
NOTE: The number of hours in Part A must be greater than the
number of hours in Part B.
<PAGE>
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not
checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to
Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be permitted to make
withdrawals during service pursuant to Section 6.01(A)(3) of the
Plan? [ ] Yes [ ] No
NOTE: If the Plan is being adopted to amend and replace a Prior Plan
which permitted in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be permitted only on account of
hardship. [ ]
SECTION 9. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
Option 1: [ ] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to _____ (at least 50% but no more
than 100%) of the amount paid to the Participant prior to his or
her death.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of the
Code, which provides post-retirement medical benefits allocated to
separate accounts for key employees as defined in Section 419A(d) (3)
of the Code or an individual medical account, as defined in Section
415(1)(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
<PAGE>
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer_____________________________Date Signed_______________
Type Name____________________________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers,
or [ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization____________________________________________________
Signature_________________________________________________________________
<PAGE>
Type Name_________________________________________________________________
Option B. [ ] Individual Trustee(s)
Signature ________________________________________________________________
Signature_________________________________________________________________
Type Name _____________________________ Type Name_________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor
Address___________________________________________________________________
Telephone Number__________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
money purchase pension plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in
Section 415(l)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in this Plan.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.) ________________
____________________________________________________________
Part B. If the Participant is or has ever been a participant in a
<PAGE>
defined benefit plan maintained by the Employer, the Employer will
provide below the language which will satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude Employer
discretion. (Complete)____________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
____________________________________________________________________
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Simplified Standardized Money Purchase Pension Plan
ADOPTION AGREEMENT
---------------------------------------------------------------------
EMPLOYER INFORMATION
Name of
Employer_____________________________Telephone________________________
Business
Address______________________________________________________________
City__________________________State________________________Zip_________
Federal Tax Identification Number_________________Income Tax Year
End_________
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation [ ] Other
(Specify)__________________________________________
Plan Sequence No._________ Enter 001 if this is the first qualified plan the
Employer has ever maintained, enter 002 if it is the second, etc. For a Plan
which covers only the owner of the business, please provide the following
information about the owner:
Social Security No._________________Date Business
Established_________________
Date of Birth_______________________Marital
Status____________________________
Home Address_______________________________________________________________
EFFECTIVE DATES Check and complete Option A or B
Option A. [ ] This is the initial adoption of a money purchase pension plan
by the Employer.
The Effective Date of this Plan is ______________________, 19____.
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
Option B. [ ] This is an amendment and restatement of an existing
<PAGE>
money purchase pension plan (a prior plan) NOTE: The effective
date is usually the first day of the Plan Year in which this
Adoption Agreement is signed.
The Prior Plan was initially effective on _________________, 19_____.
The Effective Date of this amendment and restatement is _____, 19___.
PLAN PROVISIONS Complete Parts A through E
Part A. Service Requirement: An Employee will be eligible to become a Par-
ticipant in the Plan after completing _____ (enter 0, 1 or 2) Years
of Eligibility Service. NOTE: If left blank, the Years of Eligibil-
ity Service required will be deemed to be 0.
Part B. Age Requirement: An Employee will be eligible to become a Partici-
pant in the Plan after attaining age _____ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
Part C. 100% Vesting: A Participant shall be fully Vested at all times in
his or her Individual Account.
Part D. Normal Retirement Age: The Normal Retirement Age under the Plan is
age 59 1/2.
Part E. Contribution Formula: For each Plan Year the Employer will
contribute for each qualifying Participant an amount equal to ______%
(not to exceed 25%) of the qualifying Participant's Compensation for
the Plan Year.
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I state the
following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax implications of
adopting this Plan.
2. I understand that my failure to properly complete this Adoption Agreement
may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any amendments made
to the Plan and will notify me should it discontinue or abandon the Plan.
<PAGE>
4. I have received a copy of this Adoption Agreement and the corresponding
Basic Plan Document.
Signature for Employer_____________________Date
Signed_________________________
Type Name______________________________________________________
TRUSTEE OR CUSTODIAN
[ ] Check this box only if a financial organization is named as Trustee and
it has full trust powers.
Trustee or Custodian_______________________________________________
Signature________________________________________________________
Type Name______________________________________________________
PROTOTYPE SPONSOR
Name of Prototype Sponsor_________________________________________
Address____________________________
Telephone Number______________________
ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan (including a
welfare benefit fund, as defined in Section 419(e) of the Code, which provides
post-retirement medical benefits allocated to separate accounts for key
employees as defined in Section 419A(d)(3) of the Code or an individual medical
account, as defined in Section 415(l)(2) of the Code) in addition to this Plan
(other than a paired standardized profit sharing plan using Basic Plan Document
No. 03) may not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under Section
401 of the Code. If the Employer who adopts or maintains multiple plans wishes
to obtain reliance that the Employer's plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District Director of
Internal Revenue. This Adoption agreement may be used only in conjunction with
Basic Plan Document No. 03.
LIMITATION ON ALLOCATIONS More Than One Plan
If you maintain or ever maintained another qualified plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a participant or could become a
participant, you must complete this section. You must also complete this section
if you maintain a welfare benefit fund, as defined in Section 419(e) of the
code, or an individual medical account, as defined in Section 415(l)(2) of the
Code, under which amounts are treated as annual additions with respect to any
<PAGE>
Participant in this Plan.
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or prototype
plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(b)(6) of the
Plan will apply as if the other plan were a master or prototype
plan.
2. [ ] Other method. (Provide the method under which the plans will lim-
it total annual additions to the maximum permissible amount, and
will properly reduce any excess amounts, in a manner that pre-
cludes Employer discretion.)____________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide below the
language which will satisfy the 1.0 limitation of Section 415(e) of the Code.
Such language must preclude Employer discretion.
Part C. The limitation year is the following 12-consecutive month period:_____
---------------------------------------
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
PLAN OF DISTRIBUTION
WHEREAS MIDAS FUND, INC. (the "Fund") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-
end management investment company, and proposes to offer for public
sale shares of common stock; and
WHEREAS the Fund has entered into a Distribution Agreement
("Agreement") with Investor Service Center, Inc. (the "Distributor")
pursuant to which the Distributor has agreed to serve as the
principal distributor for the Fund;
NOW, THEREFORE, the Fund hereby adopts this plan of distri bution
("Plan") with respect to the Fund in accordance with Rule 12b-1 under the Act.
1. As Distributor for the Fund, the Distributor may spend such amounts
as it deems appropriate on any activities or expenses primarily intended to
result in the sale of the Fund's shares or the servicing and maintenance of
shareholder accounts, including, but not limited to: advertising, direct mail,
and promotional expenses; compensation to the Distributor and its employees;
compensation to and expenses, including overhead and telephone and other
communication expenses, of the Distributor, the Investment Manager, the Fund,
and selected broker/dealers and their affiliates who engage in or support the
distribution of shares or who service shareholder accounts; fulfillment
expenses, including the costs of printing and distributing prospectuses,
statements of additional information, and reports for other than existing
shareholders; the costs of preparing, printing and distributing sales literature
and advertising materials; and internal costs incurred by the Distributor and
allocated by the Distributor to its efforts to distribute shares of the Fund or
service shareholder accounts such as office rent and equipment, employee
salaries, employee bonuses and other overhead expenses.
2. A. The Fund is authorized to pay to the Distributor, as compensation
for the Distributor's distribution and service activities as defined in
paragraph 13 hereof with respect to its shareholders, a fee at the rate of 0.25%
on an annualized basis of its average daily net assets. All or a portion of such
fee may be designated by the Fund's board of directors ("Board") as a fee for
service activities or as a fee for distribution activities. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
B. The Fund may pay fees to the Distributor at a lesser rate than the
fees specified in paragraph 2A of this Plan as mutually agreed to by the
Board and the Distributor.
3. This Plan shall not take effect until it has been approved by:
<PAGE>
A. the vote of at least a majority of the outstanding
voting securities of the Fund and
B. the vote cast in person at a meeting called for the purpose
of voting on this Plan of a majority of both (i) those directors of the Fund who
are not interested persons of the Fund and have no direct or indirect financial
interest in the operation of this Plan or any agreement related to it (the "Plan
Directors"), and (ii) all of the directors then in office.
4. This Plan shall continue in effect for one year from its execution
or adoption and thereafter for so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
paragraph 3B.
5. The Distributor shall provide to the Board and the Board shall
review, at least quarterly, a written report of the amounts expended under this
Plan and the purposes for which such expenditures were made. A reasonable
allocation of overhead and other expenses of the Distributor related to its
distribution activities and service activities, including telephone and other
communication expenses, may be included in the information regarding amounts
expended for such activities.
6. This Plan may not be amended to increase materially the amount of
fees provided for in paragraphs 2A and 2B hereof unless such amendment is
approved by a vote of a majority of the outstanding voting securities of the
Fund, and no material amendment to this Plan shall be made unless approved by
the Board and the Plan Directors in the manner provided for approval of this
Plan in para graph 3B.
7. The amount of the fees payable by the Fund to the Distributor under
paragraphs 2A and 2B hereof is not related directly to expenses incurred by the
Distributor on behalf of the Fund in serving as distributor, and paragraph 2
hereof does not obligate the Fund to reimburse the Distributor for such
expenses. The fees set forth in paragraphs 2A and 2B hereof will be paid by the
Fund to the Distributor unless and until this Plan is terminated or not renewed.
If this Plan is terminated or not renewed, any expenses incurred by the
Distributor on behalf of the Fund in excess of payments of the fees specified in
paragraphs 2A and 2B hereof which the Distributor has received or accrued
through the termination date are the sole responsibility and liability of the
Distributor, and are not obligations of the Fund.
8. Any other agreements related to this Plan shall not take effect
until approved in the manner provided for approval of this Plan in paragraph 3B.
9. The Distributor shall use its best efforts in rendering services to
the Fund hereunder, but in the absence of willful misfeasance, bad faith or
gross negligence in the performance of its duties or reckless disregard of its
<PAGE>
obligations and duties hereunder, the Distributor shall not be liable to the
Fund, the Fund or to any shareholder of the Fund for any act or failure to act
by the Distributor or any affiliated person of the Distributor or for any loss
sustained by the Fund, the Fund or the Fund's shareholders.
10. This Plan may be terminated at any time by vote of a
majority of the Plan Directors, or by vote of a majority of the
outstanding voting securities of the Fund.
11. While this Plan is in effect, the selection and nomination of
directors who are not interested persons of the Fund shall be committed to the
discretion of the directors who are not interested persons.
12. The Fund shall preserve copies of this Plan and any other
agreements related to this Plan and all reports made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of this Plan, or
the date of any such agreement or of any such report, as the case may be, the
first two years in an easily accessible place.
13. For purposes of this Plan, "distribution activities" shall mean any
activities in connection with the Distributor's performance of its services
under this Plan or the Agreement that are not deemed "service activities."
"Service activities" shall mean activities covered by the definition of "service
fee" contained in amendments to Section 26(b) of the National Association of
Securities Dealers, Inc.'s Rules of Fair Practice.
14. As used in this Plan, the terms: "majority of the out
standing voting securities" and "interested person" shall have the
same meaning as those terms have in the 1940 Act.
IN WITNESS WHEREOF, the Fund has executed this Plan on the day and year
set forth below in the City and State of New York.
DATE:
ATTEST: MIDAS FUND, INC.
_____________________________ By:______________________
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXCEL
MIDAS GOLD SHARES SEMI-ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BT
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000770200
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 6,214,439
<INVESTMENTS-AT-VALUE> 8,762,432
<RECEIVABLES> 352,172
<ASSETS-OTHER> 163,780
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,278,384
<PAYABLE-FOR-SECURITIES> 109,884
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,225
<TOTAL-LIABILITIES> 139,109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,880,677
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<APPREC-INCREASE-CURRENT> 1,201,799
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 3.32
<PER-SHARE-NII> (0.02)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
