As filed with the Securities and Exchange Commission on [Date]
File No. 2-99009
File No. 811-4354
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
F O R M N-1A
Registration Statement Under the Securities Act of 1933
Post-Effective Amendment No. 12 |X|
and
Registration Statement Under the Investment Company Act of 1940 |X|
Amendment No. 16
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RNC MUTUAL FUND GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
(formerly RNC Liquid Assets Fund, Inc.)
11601 Wilshire Boulevard, 24th Floor
Los Angeles, California 90025
(Address of Principal Executive Office)
(213) 477-6543
Registrant's Telephone Number, Including Area Code)
JULIE ALLECTA
ELLEN V. BARIAL
c/o Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
(Name and Address of Agent for Service)
-------------------
It is proposed that this filing will become effective:
(check appropriate box)
|_| immediately upon filing pursuant to Rule 485(b)
|_| on February 1, 1996, pursuant to Rule 485(b)
|_| 60 days after filing pursuant to Rule 485(a)(1)
|X| 75 days after filing pursuant to Rule 485(a)(2)
|_| on _______________ pursuant to Rule 485(a)
------------------
Total Number of pages _____ Exhibit Index appears at page_____
<PAGE>
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has previously registered an indefinite number of securities under the
Securities Act of 1933. The Registrant filed a notice pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940 for its fiscal year ended
September 30, 1995 on November 29, 1995.
-------------------
Please Send Copy of Communications to:
JULIE ALLECTA, ESQ.
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
(415) 772-6980
<PAGE>
RNC MUTUAL FUND GROUP, INC.
Cross Reference Sheet
---------------
FORM N-IA
Part A: Information Required in Prospectus
------- ----------------------------------
N-IA - Location in the Registration
Item No. Item Statement by Prospectus Heading
-------- ---- -------------------------------
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights;
Information General Information
4. General Description Objectives and Policies;
of Registrant General Information
5. Management Management; Purchase of Shares;
of the Fund Portfolio Transactions; General
Information
5A. Management's Annual Report to
Discussion of Fund Shareholders
Performance
6. Capital Stock and Cover Page; Dividends,
Other Securities Distributions and Taxes; General
Information
7. Purchase of Securities Purchase of Shares; Net Asset
Being Offered Value; Investor Services;
Shareholder Rule 12b-1 Plans
8. Redemption or Redemption of Shares
Repurchase
9. Pending Legal Not Applicable
Proceedings
i
<PAGE>
Part B: Information Required in Statement of Additional Information
-------------------------------------------------------------------
N-lA Location in the Registration
Item No. Item Statement by Heading
-------- ---- --------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Objectives and Policies
and History
13. Investment Objectives Objectives and Policies
and Policies
14. Management of the Management of the Group
Fund
15. Control Persons and Management of the Group
Principal Holders
of Securities
16. Investment Advisory Investment Advisory
and Other Services and Other Services; Principal
Underwriter
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and See Prospectus Section
Other Securities "General Information"
19. Purchase, Redemption Purchase of Shares;
and Pricing of Securi- Redemption of Shares
ties Being Offered
20. Tax Status Taxes
21. Underwriters Principal Underwriter
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
Part C: Additional Information Required
---------------------------------------
Information required to be included in Part C is set forth under
appropriate Item, so numbered, in Part C to this Registration Statement.
ii
<PAGE>
---------------------------------------------------------------------
PART A
PROSPECTUS
---------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION - Dated June 26, 1996
RNC MUTUAL FUND GROUP, INC.
11601 Wilshire Blvd.
25th Floor
Los Angeles, California 90025
RNC Mutual Fund Group, Inc. (the "Group") is a no-load fund group with two
diversified mutual funds - an equity fund and a money market fund.
RNC Equity Fund
RNC Equity Fund seeks to achieve above-average total return consistent
with reasonable risk. The Fund invests primarily in common stocks. RNC Equity
Fund is designed for investors seeking long-term growth and who are willing to
accept the risk of stock market volatility. Above market total return may be
difficult to achieve in all market conditions. There can be no assurance that
RNC Equity Fund will achieve its investment objective. See "Objectives and
Policies."
RNC Money Market Fund
RNC Money Market Fund is a money market fund that seeks to obtain as high
as possible current income consistent with preservation of capital and liquidity
by investing in a diversified portfolio of high-quality, short-term money market
type of securities. RNC Money Market Fund offers the advantages of professional
management, portfolio diversification, daily liquidity, principal stability and
current income.
An investment in RNC Money Market Fund is neither insured nor guaranteed
by the U.S. Government. There can be no assurance that RNC Money Market Fund
will achieve its investment objective to maintain a constant net asset value of
$1.00 per share. See "Objectives and Policies."
General Information
Shares of the Funds may be purchased, redeemed or exchanged without any
charge.
The investment adviser of the Funds is RNC Capital Management Co. (the
"Adviser").
This Prospectus sets forth basic information that a prospective investor
should know before investing in the Funds. Investors should read and retain this
Prospectus for future reference. Additional information about the Group and the
Funds has been filed with the Securities and Exchange Commission in a Statement
of Additional Information dated October 1, 1996, as may be amended from time to
time. This Statement of Additional Information is available upon request and
without charge, and is incorporated by reference into this Prospectus. Investors
and prospective investors may obtain a copy of the Statement of Additional
Information by writing to the Group at the address given above. Inquiries
regarding the Funds can be made by calling (800) 385-7003.
o o o
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF ANY STATE.
<PAGE>
TABLE OF CONTENTS
Page
----
Expense Information.................................................... 2
Financial Highlights................................................... 4
Objectives and Policies................................................ 5
Adviser's Equity Performance History................................... 7
Management............................................................. 8
Purchase of Shares ................................................... 10
Redemption of Shares...................................................11
Exchange Privileges................................................... 13
Net Asset Value....................................................... 13
Dividends, Distributions and Taxes.....................................14
Portfolio Transactions.................................................14
Investor Services......................................................15
Shareholder Rule 12b-1 Plans...........................................16
General Information....................................................17
---------------------
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.
---------------------
The date of this Prospectus is October 1, 1996
<PAGE>
EXPENSE INFORMATION
The following tables set forth certain information regarding shareholder
transaction expenses and annual operating expenses of each Fund.
<TABLE>
<CAPTION>
Equity Money
Fund Market
(Estimated) Fund
----------- ----
<S> <C> <C>
Shareholder Transaction Expenses.................................................... None None
Annual Fund Operating Expenses (as a percentage of net assets)
Management Fees............................................................... 1.00% 0.28%(1)
12b-1 Fees.................................................................... 0.25 None(2)
Other Expenses................................................................ 0.40% 0.52%
----- -----
Total Fund Operating Expenses.............................................. 1.65% 0.80%
===== =====
</TABLE>
(1) After fee reduction
(2) After fee waiver
Example
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Fund..................................................... $17 $52
------ ------- -------- --------
Money Market Fund............................................... $8 $26 $44 $99
------ ------- -------- --------
</TABLE>
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in a Fund will
bear directly or indirectly. This is the first year of operation for RNC Equity
Fund. Consequently, the Annual Fund Operating Expenses reflect estimated
expenses for RNC Equity Fund. However, the Adviser has agreed that the estimated
total fund operating expenses will not exceed the estimate for the current
fiscal year. The total fund operating expenses for RNC Money Market Fund
represent actual expenses for the fiscal year ended September 30, 1995. The
amount of the management fee for RNC Money Market Fund reflects a voluntary fee
reduction, which is anticipated to continue for the current fiscal year. The
12b-1 fees for RNC Money Market Fund are currently being waived, and such waiver
is anticipated to continue for the current fiscal year. In the absence of these
reductions, the rate of management fee payable under the Investment Advisory
Agreement for RNC Money Market Fund would be 0.41%, the 12b-1 fee would be
0.25%, and the Total Fund Operating Expenses would be 1.18% at the current asset
level. In addition to this fee reduction, the Adviser may absorb certain Fund
expenses to lower each Fund's operating costs. Any reduction of the Adviser's
fee or reimbursement by the Adviser of a Fund's expenses as described above may
be subject to reimbursement by the relevant Fund under certain circumstances.
See the sections of the Prospectus entitled "Investor Services" and "Management"
for more complete descriptions
2
<PAGE>
of the various costs and expenses and the expense reimbursement recapture policy
referred to above. The example set forth above should not be considered a
representation of past or future expenses, and actual expenses may be greater or
less than those shown.
3
<PAGE>
FINANCIAL HIGHLIGHTS
for RNC Money Market Fund*
(For One Share Outstanding Throughout Period)
The following financial highlights are for a share outstanding throughout
the period from May 12, 1986, the date on which RNC Money Market Fund operations
commenced, through September 30, 1995. The information for the five years ended
September 30, 1995, has been audited by Tait, Weller & Baker, the Fund's
independent certified public accountants, whose unqualified report thereon and
other financial statements of the Fund are incorporated by reference in the
Statement of Additional Information. This information should be read in
conjunction with the financial statements in the Fund's Annual Report to
Shareholders, copies of which may be obtained at no charge by writing or
telephoning the Group at the address or telephone number appearing on the front
page of this Prospectus.
<TABLE>
<CAPTION>
Fiscal Period Ended September 30,
-----------------------------------------------------------------------------------
May 12,
1986
to
Sept. 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
INCOME FROM
INVESTMENT
OPERATIONS
Net investment income.. 0.050 .032 .026 .038 .064 .077 .085 .066 .056 .022
LESS DISTRIBUTIONS
Dividends from net
investment income......(0.050) (.032) (.026) (.038) (.064) (.077) (.085) (.066) (.056) (.022)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year.................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return................. 5.10% 3.20% 2.65% 3.83% 6.34% 7.63% 8.82% 6.60% 5.60% 5.60%**
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of period
(in 000's)............. 31,066 43,686 29,257 46,563 66,857 119,632 103,626 99,352 88,166 9,956
Ratio of expenses, net of
reimbursement, to
average net assets:.... 0.8% 0.7% 0.7% 0.8% 0.9% 0.8% 0.7% 0.8% 0.7% 0.0%
Ratio of net investment
income to average net
assets:................ 5.0% 3.2% 2.6% 3.9% 6.4% 7.7% 8.5% 6.6% 0.0% 5.6%**
</TABLE>
* Financial highlights pertain to RNC Money Market Fund (previously known as
RNC Liquid Assets Fund) only; RNC Equity Fund commenced operations on the
date of this prospectus.
** Annualized.
4
<PAGE>
OBJECTIVES AND POLICIES
RNC Equity Fund. The investment objective of RNC Equity Fund is to achieve
above-average total return consistent with reasonable risk. The Fund pursues its
objective by investing primarily in common stocks, and in normal market
conditions at least 65%, and usually closer to 100%, of the value of the Fund's
total assets will be invested in common stocks. The Fund may also invest in
preferred stocks, warrants, convertible debt obligations, and other debt
obligations that, in the Advisor's opinion, offer the possibility of capital
appreciation. There is, of course, no assurance that the Fund's objective will
be achieved. Because prices of common stocks and other securities fluctuate, the
value of an investment in the Fund will vary as the market value of its
investment portfolio changes, and when shares are redeemed, they may be worth
more or less than their original cost. The Fund is diversified, which means that
as to 75% of its total assets, no more than 5% may be invested in the securities
of a single issuer, and the Fund may not own more than 10% of the outstanding
voting securities of a single issuer.
In order to achieve the Fund's investment goals, the Adviser utilizes a
fundamental approach to investment management that focuses on growth in
earnings. Earnings growth is evaluated relative to both earnings history and
earnings potential of the company in light of industry figures. Price trends are
also viewed relative to the long term behavior of the company's share in
comparison to industry trends.
The common stocks in which RNC Equity Fund invests are traded on either a
national securities exchange or traded in the over-the-counter market. Up to 15%
of RNC Equity Fund's net assets may be invested in foreign securities in the
form of U.S. dollar denominated American Depository Receipts ("ADRs") or
European Depository Receipts ("EDRs"). RNC Equity Fund does not expect to invest
in unsponsored ADRs and EDRs (that is, ADRs and EDRs where the depositor has no
agreement with the issuer and, among other things, may receive less information
from the issuer).
Although RNC Equity Fund is typically invested primarily in equity
securities, it may invest up to 35% of its assets in corporate or government
bonds, short-term money market instruments (such as U.S. Treasury bills,
commercial paper, certificates of deposit and bankers' acceptances) and
repurchase agreements if the Adviser believes some fixed income allocation is
appropriate. For RNC Equity Fund, these fixed income investments will be rated
within the highest short-term rating or, if a short term rating is unavailable,
the three highest long-term debt ratings issued by any two NRSROs or, if
unrated, deemed to be of comparable quality by the Fund's Board of Directors.
For more details on ratings, review "Description of Nationally Recognized
Statistical Ratings Organizations ("NRSROs")" in the Appendix to the Statement
of Additional Information.
In addition, during those times when equity securities cannot be found
that meet the Adviser's investment criteria, or for temporary, defensive
purposes or pending longer-term investment, RNC Equity Fund may invest any
amount of its assets in short-term money market instruments, including
securities issued by the U.S. Treasury and other governmental agencies and
instrumentalities, or other such instruments rated in the top three grades by a
NRSRO or, if unrated, instruments deemed to be of comparable quality by the
Fund's Adviser.
5
<PAGE>
Generally, the Adviser expects RNC Equity Fund's net asset value to track
the stock market, as measured by the S&P 500; thus, it may not be suitable for
all investors. RNC Equity Fund is designed for long-term investors who can
accept the risk entailed in these investment policies and is not intended as a
vehicle for short-term trading in the stock market.
RNC Equity Fund may write (sell) covered call options to enhance
investment returns and may both purchase and sell options on stock indices for
hedging purposes. RNC Equity Fund may also enter into futures contracts and
options on futures contracts, as described below, although generally it will not
make such investments.
RNC Money Market Fund. The investment objective of RNC Money Market Fund
is to obtain as high as possible current income consistent with preservation of
capital and liquidity by investing in a diversified portfolio of high-quality,
short-term money market securities that the Group's Board of Directors
determines present minimal credit risks. This is a fundamental policy of RNC
Money Market Fund that may not be changed without the approval of a majority of
its outstanding voting securities. For purposes of its investment policies, RNC
Money Market Fund defines short-term money market securities as securities
having a maturity of up to one year. These securities principally (that is, in
excess of 90% of RNC Money Market Fund's net assets) will consist of short-term
securities issued by the U.S. Treasury and other government agencies, bank
certificates of deposit, commercial paper, corporate bonds, bankers' acceptances
and repurchase agreements. There can be no assurance that the objective of RNC
Money Market Fund will be realized.
Typically the Fund invests only in top-rated money market securities. To
further limit risk, RNC Money Market Fund does not invest more than 5% of its
assets in the securities of any one issuer (other than the U.S. Government, its
agencies or instrumentalities). In the event that a security is not rated in the
highest short-term rating category by any one nationally recognized statistical
rating organization ("NRSRO"), the Fund limits its investment in that security
to $1 million or 1% of the Fund's total assets, whichever is less. In addition,
not more than 5% of the Fund's total assets will be invested in securities that
are not rated in the highest short-term rating category by any NRSRO or, if
unrated, are not of comparable quality to securities with the highest rating as
determined by the Fund's Board of Directors. [See the Statement of Additional
Information for more details on securities ratings in the Appendix entitled
"Description of Nationally Recognized Statistical Ratings Organizations
("NRSROs")."] With respect to RNC Money Market Fund's entire portfolio, it shall
not maintain a dollar-weighted average portfolio maturity which exceeds 90 days
and will invest only in U.S. dollar-denominated securities.
Repurchase Agreements. The Funds may enter into repurchase agreements.
Pursuant to a repurchase agreement, a Fund acquires a U.S. Government security
or other high-grade liquid debt instrument (for RNC Money Market Fund, the
instrument must be rated in the highest grade) from a financial institution that
simultaneously agrees to repurchase the same security at a specified time and
price. The repurchase price reflects an agreed-upon rate of return not
determined by the coupon rate on the underlying security. Under the Investment
Company Act, repurchase agreements are considered to be loans by a Fund and must
be fully collateralized in a manner similar to a Fund's loan of portfolio
securities. If the seller defaults on its obligation to repurchase the
underlying security, a Fund may experience delay or difficulty in exercising its
rights to realize upon the security, may incur a loss if the value
6
<PAGE>
of the security declines and may incur disposition costs in liquidating the
security. See the Statement of Additional Information for further information.
Borrowing. Each Fund may borrow money from banks in an aggregate amount
not to exceed 10% of the value of such Fund's total assets to meet temporary or
emergency purposes, and each Fund may pledge its assets in connection with such
borrowings. A Fund will not purchase any securities while any such borrowings
exceed 5% of its total assets.
Reverse Repurchase Agreements (RNC Equity Fund only). RNC Equity Fund may
enter into reverse repurchase agreements. In a reverse repurchase agreement, the
Fund sells to a financial institution a security that it holds and agrees to
repurchase the same security at an agreed-upon price and date. Although reverse
repurchase agreements are fully collateralized transactions, RNC Equity Fund
aggregates such transactions with its bank borrowings in applying its borrowing
limits. See the Statement of Additional Information for further information.
Portfolio Turnover Rate. It is currently estimated that under normal
market conditions the annual portfolio turnover rate for RNC Equity Fund will
not exceed 100%. Portfolio turnover rates may vary greatly from year to year as
well as within a particular year. High portfolio turnover rates (that is, over
100%) will generally result in higher transaction costs to the Fund and also may
result in a higher level of taxable gain for a shareholder.
Investment Restrictions. Each Fund has adopted certain restrictions and
policies relating to the investment of its assets and other activities that are
fundamental policies of the Fund and may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting securities. Among the
more significant policies and restrictions, a Fund may not: (1) invest more than
25% of its total assets in the securities of any particular industry (other than
U.S. Government securities, Government agency securities or money market
instruments issued by U.S. branches of banks located in the United States); or
(2) invest in securities having contractual restrictions on resale, repurchase
agreements or non-negotiable time deposits having more than seven days to
maturity or other illiquid securities if such investment would result in (i) RNC
Equity Fund having more than 15% of the value of its net assets so invested or
(ii) RNC Money Market Fund having more than 10% of the value of its net assets
invested in such securities or repurchase agreements.
Other restrictions and additional information on policies concerning such
portfolio strategies as investing in non-U.S. securities and lending portfolio
securities are set forth in the Statement of Additional Information under the
caption "Objectives and Policies -- Investment Restrictions."
ADVISER'S EQUITY PERFORMANCE HISTORY
Set forth in the table below is certain performance data provided by the
Adviser relating to its individually managed Equity accounts. These accounts
have substantially the same investment objective as RNC Equity Fund and are
managed using substantially similar investment strategies and techniques . See
"Objectives and Policies" above. The Portfolio Manager for these accounts is the
same individual who manages the Fund. (See "Management" below.) The results
presented are not intended to predict or suggest the return to be experienced by
the Fund or the return
7
<PAGE>
an investor might achieve by investing in the Fund. Results may differ because
of, among other things, differences in brokerage commissions paid, account
expenses, including investment advisory fees, (which expenses and fees maybe
higher for the Fund than for the accounts), the size of positions taken in
relation to account size, diversification of securities, timing of purchases and
sales, timing of cash additions and withdrawals, the private character of the
composite accounts compared with the public character of the Fund, and the
tax-exempt status of some of the accounts compared with the Fund and its
shareholders. Investors should be aware that the use of different methods of
determining performance could result in different performance results. Investors
should not rely on the following performance data as an indication of future
performance of the Adviser or the Fund.
RNC Equity Accounts
Average Annual Total Returns
For Periods Ending
December 31, 1995
Average Total
Time Periods Annual Returns
------------ --------------
One Year 32.0%
Three Years 13.3%
Five Years 13.5%
Twenty Years 16.1%
Performance results shown are net of management fees. The computation of
performance results includes all fully discretionary, unrestricted and
institutional equity accounts under RNC management for each full year within the
period ending December 31, 1995. Where applicable, the performance computation
complies with the Association for Investment Management and Research (AIMR)
Performance Presentation Standards and Level II Verification. Performance
results represent time-weighted measure of the percentage change in the total
market value after considering the effect of additions and withdrawals of
capital.
MANAGEMENT
Advisory Services. RNC Capital Management Co. (the "Adviser") is
responsible for providing investment advice to the Funds. As compensation for
its services to RNC Equity Fund, the Adviser is paid a fee at a maximum of 1.00%
of the Fund's average daily net assets. As compensation for its services to RNC
Money Market Fund, the Adviser is paid a fee at a maximum annual rate of 0.41%
of the Fund's average daily net assets. From time to time, the Adviser may
voluntarily waive all or a portion of its fees payable by the Funds and may also
absorb certain expenses. The Advisor is currently waiving part of its fee on The
RNC Money Market Fund. These waivers and expense reductions will have the effect
of lowering the overall expense ratio of each Fund and increasing the relevant
Fund's yield or return to investors
8
<PAGE>
while the fee waiver is in effect. Any reductions made by the Adviser in its
fees and any payments or reimbursement of expenses made by the Adviser which are
a Fund's obligation are subject to reimbursement within the following three
years by that Fund provided the Fund is able to effect such reimbursement and
remain in compliance with applicable expense limitations. As further discussed
in the Statement of Additional Information, the Adviser's fee is also subject to
reduction to the extent that the operating expenses of a Fund exceed the expense
limitations applicable to the Fund imposed by any state securities law or any
regulations thereunder. See the Statement of Additional Information under the
caption "Investment Advisory and Other Services."
The Adviser and its affiliates have been in the business of providing
investment advice to taxable and tax-exempt accounts for over 27 years, and the
Adviser currently manages approximately $1 billion in assets on behalf of its
clients. The Adviser is a wholly owned subsidiary of RNC Capital Group, Inc.,
which is in the business of providing financial services to institutional and
individual investors through its subsidiaries. RNC Capital Group, Inc., is an
indirect subsidiary of Bank Austria America, Inc. (the "Bank") which is an
indirect subsidiary of Bank Austria Aktiengesellschaft, a banking organization
which is organized under the laws of and domiciled in the Republic of Austria.
Anteilsverwaltung-Zentralsparkasse is the majority shareholder of the voting
securities of the Bank, and the Republic of Austria, Wiener Stadtische and
Westdeutsche Landesbank each own more than 5% of the voting securities of the
Bank. No other single entity owns more than 5% of the issued and outstanding
stock of the Bank.
John G. Marshall serves as the portfolio manager for RNC Equity Fund. Mr.
Marshall joined RNC Capital Management Co. and its predecessor affiliate in 1985
and is the Director of Equity Chairman of the Equity Strategy Committee and a
member of the Investment Policy Committee. Prior to 1985, Mr. Marshall was Vice
President, Equity Portfolio Manager with Pacific Investment Management Co.
("PIMCO") and First City National Bank of Houston.
A. Robert Blais serves as the portfolio manager for RNC Money Market Fund.
Mr. Blais joined RNC Capital Management Co. in 1988 and is the Director of Fixed
Income and a member of the Investment Policy Committee. Prior to 1988, Mr. Blais
was Vice President - Portfolio Manager/ Senior Fixed Income Trader with
Constitution Capital Management Co. and Vice President - Portfolio Manager/
Senior Fixed Income Trader with Connecticut Bank and Trust Co.
Administration Agreements. The Group has entered into an Administration
Agreement on behalf of each Fund with Investment Company Administration
Corporation ("ICAC" or the "Administrator") under which ICAC provides the Funds
with certain services in connection with their management and operation. These
services include supervising the operations of the Funds; providing the Group
with officers; coordinating the preparation of reports and other materials; and
other functions. ICAC is affiliated with the Group's Principal Underwriter. See
the Statement of Additional Information under the caption "Principal
Underwriter." As compensation for providing these services, ICAC receives a
minimum annual fee of $40,000 or .10% for the first $100 million, .05% for the
next $100 million, and .03% thereafter, whichever is greater, payable monthly by
the fifth day of the next month.
9
<PAGE>
Board of Directors. The Group has an independent Board of Directors which
establishes policies and supervises and reviews the management of each Fund. The
day-to-day operation of the Group is the responsibility of its officers, who are
appointed by the Board of Directors, as well as the Funds' Administrator and
Adviser, who are each subject to the general supervision of the Group's Board of
Directors pursuant to the respective terms of the Administrative Agreements and
the Investment Advisory Agreements.
PURCHASE OF SHARES
Shares of each Fund are offered directly to the public at the net asset
value per share next determined after receipt of the order in proper form by the
Transfer Agent. The minimum initial purchase in each Fund is $1,000. The minimum
subsequent purchase is $100.
How to Buy Shares. To purchase shares directly from the Group, investors
must complete and sign the attached Account Application and pay for the shares
purchased. Corporations, trusts or associations may be required to provide
additional information. Shares may be purchased by mail or by wire.
Purchase by Mail. Send a check or Federal Reserve draft for the purchase
price by mail to RNC Mutual Fund Group, Inc., c/o American Data Services, Inc.,
(the Group's "Transfer Agent") P.O. Box 1131, Cincinnati, Ohio, 45264-1131, and,
in the case of a new account, a completed Account Application. Checks and
Federal Reserve drafts should be made payable to RNC Equity Fund or RNC Money
Market Fund as appropriate. Certified checks are not necessary, but checks are
accepted subject to collection at full face value in United States Dollars and
must be drawn on a bank located in the United States. Third party checks will
not be accepted for initial investments. Investors purchasing shares by check
will not receive payment upon redemption of such shares until the Fund is
reasonably satisfied that the investment has been collected (which may take up
to 15 days). If the Group is unable to collect upon the full face value of an
investor's check, the purchase order will be canceled and the investor or the
dealer through which the shares are purchased will be liable for any losses or
fees incurred.
Purchase by Wire. Purchases by wire are normally used for large purchases
(purchases of $100,000 or more). You may use a bank or Federal Funds wire. Your
bank will probably charge you for the wire. Federal Funds are monies credited to
a bank's account with a Federal Reserve Bank. To purchase shares by wire, the
investor must have an application on file and must telephone the Transfer Agent,
at (800) 385-7003, to receive a wire order number. The initial purchase by an
investor may be made by wire provided that the investor has an application on
file. On the telephone, the following information will be requested by the
Transfer Agent: Fund(s) in which the investor seeks to invest name(s) in which
the account is registered, account number, amount being wired and wiring bank.
Instructions should then be given by the investor to its bank to wire the
specified amount, along with the account name(s) and number and Wire Order
Number, to:
10
<PAGE>
Star Bank, N.A. Cinti/Trust
ABA # 0420-0001-3
DDA #483897690
For Account: 19-7200 RNC Mutual Fund Group, Inc.
Investing through Financial Intermediaries. Investors may purchase shares
from a securities broker and other financial intermediaries who have entered
into some form of agency agreement with the Principal Underwriter and/or the
Group. Investors should contact such brokers and intermediaries directly for
appropriate instructions, as well as information pertaining to accounts and any
related fees. Purchase orders through brokers and intermediaries are effected at
the net asset value next determined after receipt of the order by the Transfer
Agent, and it is the responsibility of the financial intermediary to transmit
orders on a timely basis to the Funds' Transfer Agent.
General. All monies will be fully invested in full and fractional shares
on the day the order is placed with the Transfer Agent, receiving the dividend
and net asset value determined on that day, provided the order and good payment
for the order are received by the Transfer Agent (or a sub-transfer agent) prior
to 2:00 p.m. Eastern time for RNC Money Market Fund or 4:00 p.m. Eastern time
for RNC Equity Fund, on that day. The issuance of shares is recorded on the
books of the appropriate Fund, and, to avoid additional operating costs and for
investor convenience, stock certificates are not issued unless expressly
requested of the Transfer Agent in writing by a shareholder. Certificates are
not issued for fractional shares. The Transfer Agent sends to each shareholder
of record a statement of shares of the relevant Fund owned after each purchase
or redemption transaction relating to such shareholder. Any order may be
rejected by the Principal Underwriter or the Group. The Group reserves the right
to suspend the sale of shares of the Funds to the public in response to
conditions in securities markets, or otherwise.
Individual Retirement Account. An investor may establish an individual
retirement account with the Funds' Custodian and purchase shares through such
individual retirement account. The minimum initial investment in an individual
Fund for such an account is $1,000. Additional information regarding
establishment of such an account may be obtained by contacting the Group or the
Principal Underwriter.
REDEMPTION OF SHARES
Shareholders have the right to require a Fund to redeem their shares upon
receipt of a written request in proper form, by check or by wire. The redemption
price is the net asset value per share of the relevant Fund next determined
after the initial receipt of proper notice of redemption by the Transfer Agent.
Ordinary Redemption Procedure. A shareholder wishing to redeem shares of a
Fund may do so without charge by tendering a written request for redemption in
proper form, as explained below, directly to the Transfer Agent, American Data
Services, Inc., together with the stock certificates, if any, issued for such
shares. To be in proper form, the redemption request requires the signature(s)
of all persons in whose name(s) the shares are registered, signed exactly as
their name(s) appear on the Transfer Agent's register or on the stock
11
<PAGE>
certificate(s), as the case may be. In addition, the signatures on the notice
must be guaranteed by an eligible financial institution, such as a commercial
bank, a savings association, a trust company or a member firm of a national or
regional securities exchange. A notary public is not an acceptable guarantor. In
certain instances, the Transfer Agent may require additional documents such as,
but not limited to, trust instruments, death certificates, appointments as
executor or administrator, or certificates of corporate authority. For
shareholders redeeming their shares directly with the Transfer Agent, payment
will be mailed within seven days of receipt of a proper notice of redemption.
At various times, a Fund may be requested to redeem shares for which it
has not yet received good payment. A Fund may delay or cause to be delayed the
mailing of a redemption check for a period of up to 15 days until it is assured
that good payment (that is, cash or a certified check drawn against an account
maintained in a bank located in the United States) has been collected for the
purchase of such shares.
A Fund may, at its option, compel the redemption of a shareholder's shares
or charge an account maintenance fee if the value of the shareholder's account
falls below $1,000 as the result of shareholder redemptions. A shareholder will
receive 60 days' written notice before mandatory redemption occurs, during which
time the shareholder will have the right to increase his or her account above
$1,000.
Redemption by Check (RNC Money Market Fund only). The Transfer Agent will
establish a checking account for any shareholder of RNC Money Market Fund at the
shareholder's written request. Checks drawn on this account can be made payable
to the order of any person in any amount not less than $500. The payee of the
check may cash or deposit the check like any other check drawn on a bank. When
such a check is presented to the Transfer Agent for payment, the Transfer Agent
will present the check to the Group as authority to redeem a sufficient number
of shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue earning daily income dividends until the
check is cleared. The Transfer Agent will return canceled checks to the
shareholder.
Shareholders are subject to the Transfer Agent's rules and regulations
governing such checking accounts, including the right of the Transfer Agent not
to honor checks in amounts exceeding the value of the shareholder's account at
the time the check is presented for payment. Also, the Transfer Agent may not
honor checks drawn against shares purchased, other than by Federal Funds wire or
bank wire, until 15 days after the purchase of such shares.
Redemption by Wire. Shareholders may have redemption proceeds wired to a
bank account if the shareholder has checked the appropriate box on a Group
Account Application, and filed a Telephone Authorization Form with the Transfer
Agent. Redemption requests may be made by telephone or letter and, if received
by the Transfer Agent by 2:00 p.m. Eastern time, the proceeds will be wired on
the same day. Requests received after 2:00 p.m. will be wired on the next
business day after the redemption request is received. The Group reserves the
right to refuse any redemption request made by telephone, in which case ordinary
redemption procedures should be used. The minimum amount which may be wired is
$1,000. The Group may limit the frequency of telephone redemptions. Shares in
certificate form may not be redeemed by check or wire.
12
<PAGE>
The Transfer Agent and the Group have reserved the right to modify or
terminate the privileges of redemption by check or wire and disclaim any
responsibility for any unauthorized redemptions by telephone.
Repurchase. The Group will also repurchase shares of the Funds from a
shareholder through the securities broker and other financial intermediaries
through whom the shareholder originally purchased shares. The Group will
normally accept orders to repurchase shares by wire or telephone, from such
brokers and intermediaries for their customers at the net asset value next
computed after receipt of the order by the Transfer Agent, provided that the
request for repurchase is received by the Transfer Agent (or a sub-transfer
agent) prior to the close of business on the NYSE on the day received and is
received by the Group no later than 2:00 p.m. Eastern time, in the case of RNC
Money Market Fund and by 4:00 p.m. Eastern time in the case of RNC Equity Fund.
Such brokers and intermediaries have the responsibility of submitting such
repurchase requests to the Group not later than 4:00 p.m. Eastern time, in
order to obtain that day's closing price. These repurchase arrangements are for
the convenience of shareholders and do not involve a charge by the Group;
however, brokers and intermediaries may impose a charge on the shareholder for
transmitting the notice of repurchase to the Group.
For shareholders requesting repurchases through a securities broker or
other intermediary, payment for shares will be made by the Transfer Agent
directly to the broker or intermediary within seven days of the proper tender.
EXCHANGE PRIVILEGES
Shares of a Fund may be exchanged for shares of another Fund within the
Group. Shares may be exchanged by mailing or delivering written instructions to
the Group's Transfer Agent as follows: RNC Mutual Fund Group, Inc., c/o American
Data Services, Inc., P.O. Box 1131, Cincinnati, Ohio, 45265-1131. Investors may
also exchange shares by telephoning the Transfer Agent at (800) 385-7003,
subject to proper identification. A share exchange request must be received
prior to 2:00 p.m. Eastern time, in order to be effective on the date the
request is received.
The investor should note that an exchange of shares may result in the
recognition of a gain or loss for income tax purposes. The Group reserves the
right to limit excessive share exchanges, which can harm a Fund's performance.
NET ASSET VALUE
The net asset value per share is determined at 2:00 p.m. Eastern time, for
RNC Money Market Fund and as of the close of business of the New York Stock
Exchange ("NYSE"), which currently is 4:00 p.m. Eastern time, (Monday through
Friday) for RNC Equity Fund, on each business day the NYSE is open for trading.
The net asset value per share of each Fund is computed by dividing the value of
the net assets of the Fund by the total number of shares outstanding, rounded to
the nearest cent. RNC Money Market Fund uses the amortized cost method of
valuing its portfolio securities. Expenses, including the investment advisory
fees payable to the Adviser, are accrued daily.
13
<PAGE>
RNC Money Market Fund seeks to maintain a net asset value of $1.00 per
share for purchases and redemptions. There can be no assurance, however, that
the RNC Money Market Fund will be able to maintain a net asset value of $1.00
per share.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. It is anticipated that RNC Equity Fund will
declare and pay dividends annually from net income. Long-term capital gains are
currently declared and paid annually after the end of the fiscal year in which
they have been earned; distributions of any realized securities gains are made
by December 31 of each year with respect to the twelve-month period ending on
October 31 of such year. The policy of RNC Money Market Fund is to declare
dividends from net income daily and to pay them monthly. Dividends of RNC Money
Market Fund begin accruing the day shares are purchased or credited to a
shareholder's account. All dividends and distributions are automatically
reinvested in additional full and fractional shares of the appropriate Fund at
the net asset value next determined after payment of the dividend or
distribution and credited to the shareholder's account or, at the shareholder's
option, paid in cash. All expenses are accrued daily and deducted before
declaration of dividends to investors. See the section of this Prospectus
entitled "Investor Services -- Reinvestment of Dividends and Capital Gains
Distributions" for information as to how to elect either dividend reinvestment
or cash payments.
Taxes. Each Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. Under such provisions, the Funds will not be subject to federal income
tax on such part of their net ordinary income and net realized capital gains
which they distribute to its shareholders.
Dividends and distributions are taxable to shareholders and subject to
federal income tax whether they are reinvested in additional shares or received
in cash. Shareholders not subject to federal income tax on their income
generally will not be required to pay taxes on amounts being distributed to
them. Dividends and capital gains distributions may also be subject to state and
local taxes. Shareholders are urged to consult their own tax counsel or other
tax advisers regarding specific questions as to federal, state or local taxes.
PORTFOLIO TRANSACTIONS
The Funds have no obligation to execute any transactions in portfolio
securities through any dealer or group of dealers. Subject to the policies
established by the Directors of the Group, the Adviser is primarily responsible
for making portfolio decisions for the Funds and placing portfolio transactions.
In placing orders, the policy of the Funds is to seek to obtain the best
execution so that the resultant price to a Fund is as favorable as possible
under prevailing market conditions. Factors which may be considered include the
price of the security being offered (including the applicable dealer spread),
the size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities, and the risk in position in the securities
involved.
Where such transactions are executed with brokers on an agency basis, the
Adviser may also consider the provision of supplemental investment research,
market and statistical
14
<PAGE>
information and other research services and products. Brokers providing such
services may execute brokerage transactions at a higher cost to the Funds than
might result from the allocation of brokerage to other brokers solely on the
basis of most favorable price and efficient execution. Because such services are
beneficial to the Funds, the purchase and sale of securities for the Funds may
be made with brokers who provide such research analysis, subject to review by
the Group's Board of Directors. From time to time the Directors will review the
extent of this practice to determine whether each Fund continues to benefit
directly or indirectly, from such practice. The Adviser may select
broker-dealers for the execution of the Fund's portfolio transactions who
provide research and analysis as the Adviser may lawfully and appropriately use
in its investment management and advisory capacities, whether or not such
research and analysis may also be useful to the Adviser in connection with its
services to other clients.
INVESTOR SERVICES
The Group offers a number of services to shareholders of the Funds which
are designed to facilitate investment in Fund shares at no extra cost. A
description of such services is set forth below. Full details as to each such
service and copies of the various plans described below can be obtained from the
Group.
Investment Account. Every shareholder has an investment account and
receives transaction reports from the Transfer Agent after each share
transaction and dividend reinvestment. After the end of each year, each
shareholder receives federal income tax information regarding dividends and
capital gains distributions.
Automatic Investment Plan. A shareholder may make additions to his or her
investment account at any time. Additional investment can also be made through a
service known as the Automatic Investment Plan whereby the Transfer Agent is
authorized through pre-authorized checks of $50 or more to charge the regular
bank account of the shareholder on a monthly basis to provide systematic
additions to the investment account of such shareholder.
Reinvestment of Dividends and Capital Gains Distributions. Unless specific
instructions are given on the Account Application form as to the method of
payment of dividends and capital gains distributions, such payments are
automatically reinvested in additional shares of the appropriate Fund.
Reinvestment of dividends and capital gains distributions are calculated at the
net asset value of the shares of the relevant Fund as of the close of business
on the day on which the dividend or distribution is paid. Shareholders may elect
in writing to receive either their dividends or capital gains distributions, or
both, in cash, in which event payment is mailed by the Transfer Agent within
seven days after the payment date.
A shareholder may, at any time, notify the Transfer Agent in writing that
the shareholder no longer wishes to have his or her dividends and/or capital
gains distributions reinvested in shares or vice versa and, immediately upon the
receipt by the Transfer Agent of such notice, those instructions will be
effected.
Systematic Withdrawal Plan. Quarterly or monthly withdrawals from a Fund
are available for shareholders who have acquired shares having a value, based
upon the current offering price, of $10,000 or more.
15
<PAGE>
At the time of each withdrawal payment, sufficient shares are redeemed
from those on deposit in the shareholder's account to provide the withdrawal
payment specified by the shareholder. The shareholder may specify either a
dollar amount or a percentage of the value of his or her shares. Redemptions are
made at net asset value as determined at the close of business on the NYSE on
the 25th day of the last month of each quarter in the case of quarterly
distributions and on the 25th day of the month in the case of monthly
distributions. If the NYSE is not open for business on such date, the shares are
redeemed at the close of business on the preceding business day. The check for
the withdrawal payment is mailed on the next business day following redemption.
If and when a shareholder is making systematic withdrawals, dividends and
distributions on all shares in the Investment Account are automatically
reinvested in shares of the appropriate Fund. A shareholder's Systematic
Withdrawal Plan may be terminated at any time, without charge or penalty, by the
shareholder, the Group, the Transfer Agent or the Principal Underwriter.
Withdrawal payments should not be considered as dividends, yield or
income. Each withdrawal is a potentially taxable event. If periodic withdrawals
continuously exceed reinvested dividends, the shareholder's original investment
may be correspondingly reduced.
SHAREHOLDER RULE 12b-1 PLANS
The Group on behalf of each Fund has adopted a plan pursuant to Rule 12b-1
promulgated under the 1940 Act.
Each Shareholder Rule 12b-1 Plan provides that a distributor (the
"Distributor") will be reimbursed by each Fund for the actual expenses incurred
by the Distributor or a sub-agent in furnishing such Fund with services covered
by each Fund's respective plan which include: (i) sending periodic information
to service organizations that track investment company information; (ii)
answering shareholder inquiries regarding shareholder account status and
history; (iii) collecting information from shareholders regarding changes in
option and account designation and addresses and transmitting the same to the
Transfer Agent; (iv) collecting the same type of information from independent
account executives and brokers and transmitting it to the Transfer Agent; (v)
supplying other information to the Transfer Agent so that the Transfer Agent can
properly maintain shareholder account records; (vi) providing facilities,
equipment and personnel in connection with the provision of such services; and
(vii) performing such additional shareholder services as may be agreed upon by
the Group and the Distributor, which shall be approved in accordance with the
1940 Act, provided that any such additional shareholder services constitute a
permissible non-banking activity.
In addition to the above services, the Plan for the Equity Fund allows
reimbursement for additional activities, such as (i) preparation, printing and
mailing of prospectuses; (ii) shareholder reports such as semi-annual and annual
reports, performance reports and newsletters; (iii) sales literature and other
promotional material to prospective investors; (iv) direct mail solicitation;
(v) advertising; (vi) public relations; (vii) compensation of sales personnel,
advisers, or other third parties for their assistance with respect to the
distribution of the Equity Fund's shares; (viii) payments to financial
intermediaries, including ERISA third-party retirement plan administrators, for
shareholder support, administration and accounting services with respect to
shareholders of the Equity
16
<PAGE>
Fund; and (ix) such other expenses as may be approved from time to time by the
Board of Directors.
The Adviser, out of its own funds, also may compensate broker-dealers who
have signed dealer agreements for distribution of the Fund's shares as well as
other service providers who provide shareholder and administrative services.
Under the Shareholder 12b-1 Plans, each Fund will reimburse the actual
expenses incurred by the Distributor up to a maximum annual rate equal to 0.25%
of that Fund's average daily net assets, accrued daily and paid monthly.
Each Plan provides that all reimbursements shall be accounted for within
the fiscal year of each Fund in which such expenditures were made and will not
be carried forward into subsequent fiscal years of the Group. The Plans contain
reporting, renewal, termination and amendment provisions as required by the 1940
Act. Currently, the Distributor for RNC Money Market Fund is Midvale Securities
Corporation, an affiliate of the Adviser. The Distributor for the RNC Equity
Fund is First Fund Distributors, Inc., an affiliate of the Administrator and The
Principal Underwriter. See the Statement of Additional Information section
entitled "Shareholder 12b-1 Plans" for more information.
Banking Law. The Glass-Steagall Act prohibits banks and their affiliates
from engaging in certain securities-related activities, including the offering,
sale or distribution of securities. None of the service providers to the Group
and the Funds believes that the services which it provides violate the
Glass-Steagall Act or any other applicable banking statute or regulation.
However, future changes in federal or state statutes or regulations or in
judicial or administrative interpretations of present or future statutes or
regulations might prevent certain of the Group's or the Funds' service providers
from performing their duties under the applicable agreement. If such a change
should occur, the Group's Board of Directors will consider appropriate action,
including the possible retention of another service provider.
GENERAL INFORMATION
Performance Information. From time to time, RNC Money Market Fund
advertises its "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of a Fund refers to the income generated by an investment in the Fund
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment.
From time to time, each Fund may publish its total return in
advertisements and communications to investors. Total return is defined as the
change in value of an investment in a Fund over a particular period, assuming
that all distributions have been reinvested. Thus, total return reflects not
only income earned, but also variations in share prices at the beginning and end
of the period. Total return information will include the Fund's average annual
compounded rate of return over the four most recent calendar quarters and over
the period from the Fund's inception of operations. Each Fund may also advertise
aggregate and
17
<PAGE>
average total return information over different periods of time. Aggregate total
return reflects the total percentage change in the value of an investment in a
particular Fund over the stated period. Average annual return reflects the
average percentage change per year in the value of an investment in a particular
Fund. Each Fund's total return will be based upon the value of the shares
acquired through a hypothetical $1,000 investment (at beginning of the specified
period and the net asset value of such shares at the end of the period, assuming
reinvestment of all the distributions) at the maximum public offering price.
Total return figures will reflect all recurring charges against Fund income.
Investors should note that the investment results of each Fund will fluctuate
over time, and any presentation of a Fund's total return for any prior period
should not be considered as a representation of what an investor's total return
may be in any future period.
Shares and Shareholder Rights. Each Fund is a series of RNC Mutual Fund
Group, Inc. As a separate series, each Fund votes separately on matters
affecting only that Fund (e.g., approval of the Investment Management
Agreement). On matters affecting all series, the Funds vote as a single class
(e.g., election or removal of Directors). Shares do not have cumulative voting
rights, and the holders of more than 50% of the shares of the Funds voting for
the election of Directors can elect all of the Directors of the Group if they
choose to do so, and in such event the holders of the remaining shares would not
be able to elect any Directors. The Funds do not normally hold annual meetings
of shareholders except when required by the 1940 Act. See the Statement of
Additional Information section entitled "Management of the Funds" for more
information.
The authorized capital stock of the Funds consists of 500,000,000 shares
of Common Stock in the Money Market Fund and 500,000,000 Shares of Common Stock
in the Equity Fund, having a par value of $0.01 per share for a total of
1,000,000,000 authorized shares. The issued and outstanding shares have equal
dividend, distribution, liquidation and voting rights. Each issued and
outstanding share, with respect to the Fund from which it is issued, is entitled
to one vote and is entitled to participate equally in dividends and
distributions declared by the Fund and in net assets of the Fund remaining after
satisfaction of outstanding liabilities upon liquidation or dissolution. The
shares of a Fund, when issued, are fully paid and non-assessable, have no
preference, preemptive, conversion, exchange or similar rights, and are freely
transferable.
Custodian and Dividend Disbursing Agent. Star Bank is the Custodian for
the Group and the Funds.
Transfer and Dividend Disbursing Agent. American Data Services, Inc. is
the Transfer Agent, Dividend Disbursing Agent for the Group and the Funds, and
maintains the Group's accounting records.
Counsel and Auditor. The validity of the shares of common stock offered by
this Prospectus will be passed on by Heller, Ehrman, White & McAuliffe. Tait,
Weller & Baker, independent certified public accountants, are the auditors of
the Group.
Miscellaneous. The Group issues to its shareholders semi-annual reports
containing unaudited financial statements and annual reports containing
financial statements examined by auditors approved annually by the Board of
Directors.
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<PAGE>
This Prospectus does not contain all the information included in the
Registration Statement with the Securities and Exchange Commission under the
Securities Act of 1933. Certain portions of the Fund's Registration Statement
have been omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The Registration Statement, including the exhibits filed
therewith, may be examined at the office of the Securities and Exchange
Commission in Washington, D.C.
19
<PAGE>
No person has been authorized to give any information
or to make any representations, other than those
contained in this Prospectus and in the Statement of
Additional Information, in connection with the offer
made by this Prospectus, and, if given or made, such
other information or representations must not be
relied upon as having been authorized by the Group,
its Adviser or its Principal Underwriter. This
Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by the Group or by
the Principal Underwriter in any state in which such
offer to sell or solicitation of any offer to buy may
not lawfully be made.
ADVISER
RNC Capital Management Co.
11601 Wilshire Boulevard
25th Floor
Los Angeles, California 90025
CUSTODIAN
Star Bank
P.O. Box 1118
Cincinnati, Ohio 45201-1118
TRANSFER AGENT
American Data Services, Inc.
24 West Carver Street, 2nd Floor
Huntington, New York 11743
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, PA 19102
<PAGE>
------------------------------------------------------------
PART B
STATEMENT OF ADDITIONAL INFORMATION
------------------------------------------------------------
<PAGE>
Subject to Completion - Dated June 26, 1996
STATEMENT OF ADDITIONAL INFORMATION
RNC MUTUAL FUND GROUP, INC.
11601 WILSHIRE BOULEVARD, 25TH FLOOR
LOS ANGELES, CALIFORNIA 90025
FOR GENERAL INFORMATION AND PURCHASES CALL
(800) 385-7003
RNC Mutual Fund Group, Inc. (the "Group") is a no-load fund
group with two diversified mutual funds: RNC Money Market Fund and RNC Equity
Fund.
RNC Equity Fund invests primarily in common stocks with the
objective of achieving above average total return consistent with reasonable
risk. The Fund's ability to achieve above-average total return cannot be
guaranteed and is subject to the risk of occasional volatile market conditions.
RNC Money Market Fund invests in a diversified portfolio of
short-term money market securities with the objective of obtaining as high as
possible current income consistent with preservation of capital and liquidity.
There can be no assurance that the investment objective to maintain a constant
net asset value of $1.00 per share will be achieved.
Shares of the Funds may be purchased at their net asset value
with no sales load.
This Statement of Additional Information of the Group is not a
prospectus and should be read in conjunction with the Prospectus of the Group
dated October 1, 1996, as may be amended from time to time (the "Prospectus").
The Prospectus provides the basic information a prospective investor should know
before purchasing shares of the Funds and may be obtained by calling or by
writing the Group at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
Both the Prospectus and this Statement of Additional Information have been filed
with the Securities and Exchange Commission.
The date of this Statement of Additional Information is
October 1, 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement becomes
effective, This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
B-1
<PAGE>
TABLE OF CONTENTS
Page
----
Objectives and Policies.....................................................B- 3
Management of the Group.....................................................B- 6
Investment Advisory and Other Services......................................B- 7
Portfolio Transactions......................................................B- 9
Purchase of Shares..........................................................B-10
Redemption of Shares........................................................B-12
Taxes.......................................................................B-13
Dividends...................................................................B-15
Shareholder Rule 12b-1 Plans................................................B-16
Performance Information.....................................................B-17
Principal Underwriter.......................................................B-19
Financial Statements........................................................B-19
Appendix....................................................................B-21
B-2
<PAGE>
OBJECTIVES AND POLICIES
Reference is made to "Objectives and Policies" in the
Prospectus for a discussion of the investment objectives and policies of the
Funds.
The Group was organized as a Maryland corporation on April 9,
1985 and currently consists of two diversified mutual funds: a money market fund
and an equity fund.
INVESTMENT RESTRICTIONS. In addition to the investment restrictions set forth in
the Prospectus, each Fund has adopted the following investment restrictions,
none of which may be changed without the approval of a majority of the relevant
Fund's outstanding shares. For this purpose, majority approval means the vote of
(i) 67% or more of the respective Fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the respective Fund's outstanding
shares, whichever is less. The Funds may not:
(1) Make investments for the purpose of exercising control or
management.
(2) Invest in oil, gas or other mineral exploration or development
programs, commodities or commodity contracts, except that a Fund may
invest in securities of issuers which invest or deal in any of the
above.
(3) Invest in real estate or in interests in real estate, except that a
Fund may purchase readily marketable securities of companies holding
real estate or interests therein, and RNC Equity Fund may invest in
mortgaged-backed securities.
(4) Purchase any securities on margin, except for use of short-term
credit necessary for clearance of purchases and sales of portfolio
securities.
(5) Make short sales of securities or maintain a short position or
write, purchase or sell puts, calls, straddles, spreads or combinations
thereof (RNC Money Market Fund only).
(6) Make loans to other persons, except that (a) each Fund may purchase
debt obligations in accordance with its investment objective and
policies, (b) each Fund may make loans of portfolio securities
provided, among other things, that the value of the securities loaned
does not exceed 10% of the value of its net assets and (c) each Fund
may enter into repurchase agreements as
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disclosed in the Prospectus. (The Funds do not presently loan portfolio
securities.) The acquisition of bonds, debentures or other corporate
debt securities which are not publicly distributed is considered to be
the making of a loan under the Investment Company Act of 1940 (the
"1940 Act").
(7) Mortgage, pledge, hypothecate or in any manner transfer as security
for indebtedness any securities owned or held by the Fund except as may
be necessary in connection with borrowings mentioned in (8) below, and
then such mortgaging, pledging or hypothecating may not exceed 10% of
the relevant Fund's total assets, taken at market value. In order to
comply with certain state statutes, the Funds will not, as a matter of
operating policy, mortgage, pledge or hypothecate its portfolio
securities to the extent that at any time the value of pledged
securities will exceed 10% of the net assets of the relevant Fund.
(8) Borrow in excess of 10% of the total assets of the relevant Fund,
taken at market value, and then only from banks as a temporary measure
for extraordinary or emergency purposes. Usually only "leveraged"
investment companies may borrow in excess of 5% of their assets;
however, the Funds will not borrow to increase income but only to meet
redemption requests which might otherwise require untimely dispositions
of portfolio securities. In addition, the Funds will not purchase
securities while borrowings are outstanding.
(9) Act as an underwriter of securities, except to the extent that a
Fund may technically be deemed to be an underwriter when engaged in the
activities described in (6) above or insofar as each Fund may be deemed
an underwriter under the Securities Act of 1933 in selling portfolio
securities.
Bank money instruments in which a Fund invests must be issued
by depository institutions with total assets of at least $500 million or capital
surplus and undivided profits in excess of $100 million.
Each Fund's commercial paper investments will be rated at the
time of purchase in the top rating category as determined by the requisite
number of nationally recognized statistical rating organizations ("NRSROs") or
be of "comparable quality" as determined by the Board of Directors if unrated.
Each Fund's investments in corporate bonds (which for RNC Money Market Fund must
have maturities at purchase of one year or less) must be rated at least "A" by
at least two of the NRSROs. For
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further information regarding various corporate debt ratings, see the Appendix.
FORWARD COMMITMENTS. Each Fund may purchase money market securities on a forward
commitment basis at fixed purchase terms. The purchase will be recorded on the
date the Fund enters into the commitment and the value of the security will
thereafter be reflected in the calculation of the relevant Fund's net asset
value. The value of the security on the delivery date may be more or less than
its purchase price. A segregated account for each Fund will be established with
its custodian consisting of cash or liquid money market securities having a
market value at all times at least equal to the amount of the forward
commitment.
FOREIGN SECURITIES. As noted in the Prospectus, RNC Equity Fund may in the
future invest in foreign securities in the form of U.S.-denominated American
Depository Receipts ("ADRs") and European Depository Receipts ("EDRs"). Both
ADRs and EDRs are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
market and currencies. It is not expected that the Fund will invest in
unsponsored ADRs or EDRs. The Fund will not concentrate its investments in any
particular foreign country and will only purchase securities denominated in U.S.
Dollars.
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in U.S. issuers. These considerations include changes in currency
rates, currency exchange control regulations, the possibility of expropriation,
the unavailability of financial information or the difficulty of interpreting
financial information prepared under foreign accounting standards, less
liquidity and more volatility in foreign securities markets, the impact of
political, social or diplomatic developments, and the difficulty of assessing
economic trends in countries outside the United States. If it should become
necessary, a Fund could encounter greater difficulties in invoking legal
processes abroad than would be the case in the United States. Transaction costs
in foreign securities may be higher. These and other factors will be considered
before investing in foreign securities, unless such investments will meet the
relevant Fund's standards and objectives.
VARIABLE RATE DEMAND NOTES. Each Fund may also purchase variable rate demand
notes ("VRDNs") issued by U.S. and foreign companies having an outstanding debt
issue at the time of purchase rated in the top two grades of any NRSRO. (See
Appendix.) VRDNs are obligated with rates of interest that are adjusted
periodically or "float" continuously according to specific formulae. Often,
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VRDNs have a demand feature entitling the purchaser to resell the securities at
an amount approximately equal to amortized cost or the principal amount plus
accrued interest. However, many issuers or servicers of mortgage-related
securities guarantee or provide insurance for timely payment of interest and
principal. See "Investment Restrictions" in Prospectus, as may be amended from
time to time.
MANAGEMENT OF THE GROUP
The Board of Directors is responsible for the overall
management of the Group and the Funds, including general supervision and review
of investment activities. None of the Group's current Directors is an
"interested person" (as defined in the 1940 Act) of the Group, the Funds or any
adviser, administrator or principal underwriter of the Funds. The officers who
administer the Group's daily operations are appointed by the Board of Directors.
The current Directors and officers of the Group, their addresses, and their
principal occupations for the past five years are set forth below.
ERIC M. BANHAZL -- President, Treasurer and Secretary of the
Group; 2025 E. Financial Way, Suite 101, Glendora, California 91741. Currently,
Mr. Banhazl is Senior Vice President of Robert H. Wadsworth & Associates, Inc.,
Vice President of Investment Company Administration Corporation, the Funds'
administrator and First Fund Distributors, Inc., the Funds' principal
underwriter. Mr. Banhazl is also the President of E.M. Banhazl & Associates,
Inc., a mutual fund consulting firm and the Treasurer of Professionally Managed
Portfolios, Guinness Flight Investment Funds, Inc., Target Income Fund, Inc.,
and Matterhorn Growth Fund, Inc., all of which are investment companies
unaffiliated with the Group.
BRUCE B. STUART -- Director; 1440 - 2E South State College
Blvd., Anaheim, California 92806. Since 1991, Mr. Stuart has been the president
of Nu-Ceramic Technology, Inc., a company involved in the research and
development of advanced ceramic metallization for the semiconductor and hybrid
industry. From 1984 to 1991, Mr. Stuart was a partner of the Richmar Group, a
management consulting firm.
DEVERE W. McGUFFIN, II -- Director; 1441 East Chevy Chase,
Glendale, California 91206. Mr. McGuffin is the owner and principal executive
officer of the Meadow Grove Group, a finance and investment firm with which he
has been associated since 1974. Mr. McGuffin is also the Chief Executive Officer
of California Adventist Federal Credit Union. Mr. McGuffin also directs First
Interurban Development Corporation, a non-profit financial corporation which he
founded in 1981. Mr. McGuffin is also currently licensed as a securities
representative and as a commodities futures principal.
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The Directors receive an annual retainer plus fees and
expenses for each Board meeting and Audit Committee meeting attended. (For the
latest fiscal year, the Directors each received $4,500 for their attendance at
Board meetings and Audit Committee meetings). Pursuant to the terms of the
Administration Agreement, the Funds' administrator pays all compensation of
officers of the Group, and no person receives any compensation directly from the
Group or the Funds for acting as an officer of the Group. However, such officers
may be deemed to receive remuneration indirectly from the Group and the Funds
because the administrator is paid an administrative fee by the Group.
As of May 31, 1996, the following persons held of record 5% or
more of the outstanding shares of the RNC Money Market Fund: Repub & Co., c/o
Imperial Trust, (80%); 201 N. Figueroa Street, Suite 610, Los Angeles,
California 90071; and RNC Capital Management Co., 11601 Wilshire Boulevard, 25th
Floor, Los Angeles, California 90025 (17%). RNC Equity Fund commenced operations
as of the date of this Statement of Additional Information and has no record
owners.
As of May 31, 1996, the Directors and officers of the Group as
a whole owned less than 1% of the outstanding shares of RNC Money Market Fund.
RNC Equity Fund commenced operations as of the date of this Statement of
Additional Information and has no outstanding shares.
While the Group is not required and does not intend to hold
annual meetings of shareholders, such meetings may be called by the Directors in
their discretion, or upon demand by the holders of 10% or more of the
outstanding shares of the Funds for the purpose of electing or removing
Directors. Shareholders may receive assistance from the Group in communicating
with other shareholders, in connection with the election or removal of
Directors, pursuant to the provisions contained in Section 16(c) of the 1940
Act.
INVESTMENT ADVISORY AND OTHER SERVICES
The Group on behalf of each Fund has entered into Investment
Advisory Agreements with RNC Capital Management Co. (the "Adviser"). The
principal business address of the Adviser is 11601 Wilshire Boulevard, 25th
Floor, Los Angeles, California 90025. The Adviser is an indirect subsidiary of
Bank Austria America, Inc. (the "Bank"), an indirect subsidiary of Bank Austria
Aktiengesellschaft, a banking organization which is organized under the laws of
and domiciled in the Republic of Austria. Anteilsverwaltung-Zentralsparkasse is
the majority shareholder of the voting securities of the Bank, and the Republic
of Austria, Wiener Stadtische and Westdeutsche Landesbank each own more than 5%
of the voting securities of the
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Bank. No other single entity owns more than 5% of the issued and outstanding
stock of the Bank.
The Directors and principal executive officers of the Adviser
are: Daniel J. Genter, Jr., President, Chief Executive Officer and Director;
Thomas Pastore, Vice President/Assistant Secretary and Director; James O'Neill,
Vice President/Assistant Treasurer and Director; Nicanor M. Mamaril, Senior Vice
President, Treasurer and Secretary; Jan Kallik, Senior Vice President and
Director of Equity Research; A. Robert Blais, Senior Vice President and Director
of Fixed Income; Bruce A. Mandel, Senior Vice President and Director of
Marketing; and John G. Marshall, Senior Vice President and Director of Equity.
Subject to supervision by the Group's Board of Directors, the
Adviser is responsible for the actual management of each Fund's portfolio and
constantly reviews the holdings of each portfolio in light of its own research
analysis and analyses from other relevant sources. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Adviser. The
Adviser provides the portfolio managers for the Funds who consider analyses from
various sources, make the necessary investment decisions and place transactions
accordingly.
Unless earlier terminated as described below, the Investment
Advisory Agreements will continue in effect until December 31, 1996 for RNC
Money Market Fund and December 31, 1997 for RNC Equity Fund. Each Agreement will
continue in effect for successive one-year periods thereafter if approved
annually (a) by the Board of Directors of the Group or by a majority of the
outstanding voting shares of the relevant Fund and (b) by a majority of the
Directors who are not parties to such contracts or interested persons (as
defined in the Investment Company Act of 1940) of any such party. Each Agreement
terminates upon assignment and may be terminated without penalty upon 60 days'
written notice at the option of either party thereto or by the vote of the
shareholders of the relevant Fund.
In the event the operating expenses of a Fund (including the
fees payable to the Adviser but excluding taxes, interest, brokerage and
extraordinary expenses and the fees paid under a Fund's Distribution and
Shareholder Servicing Plans) for any fiscal year exceed the expense limitations
applicable to a Fund imposed by state securities laws or any regulations
thereunder, the Adviser will reduce its fee by the extent of such excess and, if
required pursuant to any such laws or regulations, will reimburse that Fund in
the amount of such excess. At present the most restrictive expense limitation
would require the Adviser to reimburse a Fund if, during any fiscal year,
ordinary operating expenses exceed 2.5% of that Fund's first $30 million of
average net assets, 2.0% of the next $70 million of average
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net assets and 1.5% of the remaining average net assets. The Adviser undertakes
to pay or refund to a Fund any amount by which such expenses exceed this expense
limitation. The payment of the management fee at the end of any month is reduced
so that there is no accrued but unpaid liability under this expense limitation.
In addition, from time to time the Adviser may voluntarily reduce its fee or
reimburse all or a portion of a Fund's other expenses, which reimbursement will
have the effect of lowering the overall net expense ratio of a Fund and of
increasing its yield or return to investors for the period for which such
expenses were payable. Any reductions made by the Adviser in its fees and any
payments or reimbursement of expenses made by the Adviser which are a Fund's
obligation are subject to reimbursement within the following three years by the
appropriate Fund provided the Fund is able to effect such reimbursement and
remain in compliance with applicable expense limitations.
For RNC Money Market Fund, in the years ended September 30,
1993, 1994 and 1995, total fees payable by the Fund to the Investment Adviser
were $61,195, $64,897 and $106,810, respectively. The amount of the management
fee paid by the Fund reflects a voluntary fee reduction by the Adviser which is
anticipated to continue for the current fiscal year. In the absence of this fee
reduction, the rate of management fee payable under the Investment Advisory
Agreement would be 0.41% for RNC Money Market Fund. RNC Equity Fund commenced
operations on the date of this Statement of Additional Information.
LICENSE OF INITIALS. The Adviser has granted the Group and the Funds a
non-exclusive license to use the initials "RNC" in its name for so long as the
Adviser serves as investment adviser to the Funds.
PORTFOLIO TRANSACTIONS
The cost of executing portfolio securities transactions for
the Funds will primarily consist of dealer spreads and underwriting commissions.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Funds
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principals for their own accounts.
On occasion, securities may be purchased directly from the
issuer. Bonds and money market securities also are generally traded on a net
basis and do not normally involve either brokerage commissions or transfer
taxes. Therefore, RNC Money Market Fund rarely pays any brokerage commissions.
During the
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three fiscal years ended September 30, 1993, 1994 and 1995, the Fund paid no
brokerage fees on behalf of RNC Money Market Fund.
With respect to RNC Equity Fund, brokerage commissions will be
paid on transactions in listed securities and futures contracts and options
thereon. [Unless deemed appropriate, RNC Equity Fund will not usually invest in
futures contracts.]
The Adviser is responsible for effecting portfolio
transactions and will do so in a manner deemed fair and reasonable to each Fund.
The primary consideration in all portfolio transactions will be the prompt
execution of orders in an efficient manner at the most favorable price. In
selecting and monitoring broker-dealers and negotiating commissions, the Adviser
considers the firm's reliability, the quality of its execution services on a
continuing basis and its financial condition.
Investment decisions for the Funds are made independently from
those of other client accounts of the Adviser or its affiliates. Nevertheless,
it is possible that at times the same securities will be acceptable for the
Funds and for one or more of such client accounts. The Adviser and its personnel
may have interests in one or more of those client accounts, either through
direct investment or because of management fees based on gains in the account.
To the extent any of these client accounts and the Funds seek to acquire the
same security at the same time, the Funds may not be able to acquire as large a
portion of such security as they would otherwise, or they may have to pay a
higher price or obtain a lower yield for such security. Similarly, the Funds may
not be able to obtain as high a price for, or as large an execution of, an order
to sell any particular security at the same time. If one or more of such client
accounts simultaneously purchases or sells the same security that the Funds are
purchasing or selling, each day's transactions in such security will be
allocated between the Funds and all such client accounts in a manner deemed
equitable by the Adviser, taking into account the respective sizes of the
accounts, the amount being purchased or sold and other factors deemed relevant
by the Adviser. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the Funds
are concerned. In other cases, however, it is believed that the ability of the
Funds to participate in volume transactions may produce better executions for
the Funds.
PURCHASE OF SHARES
As described in the Prospectus, shares of each Fund are
offered on a continuous basis at a price equal to the net asset
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value per share of the relevant Fund next determined after receipt of a purchase
order in proper form.
NET ASSET VALUE. The value of each Fund's portfolio securities is determined on
each day the New York Stock Exchange ("NYSE") is open for trading. The NYSE is
open on business days other than certain holidays (New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day).
The net asset value of shares of RNC Equity Fund will
fluctuate daily. The net asset value per share is computed by dividing the value
of the securities held in RNC Equity Fund plus any cash or other assets
(including interests and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total numbers of shares in RNC
Equity Fund outstanding at such time.
RNC Money Market Fund uses the amortized cost method of
valuation. The amortized cost method of valuation involves valuing a security at
its cost on the date of purchase, and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by this method, is higher or lower
than the price the Fund would receive if it sold the instrument. During such
periods the yield to investors in the Fund may differ somewhat from that
obtained in a similar fund which uses other methods to determine the fair or
market value of its portfolio securities.
RNC Money Market Fund intends to use its best efforts to
maintain a constant net asset value of $1.00 per share. If net unrealized gains
or losses were to exceed $.005 per share, RNC Money Market Fund's net asset
value would deviate from $1.00 per share. RNC Money Market Fund endeavors to
reduce the amount of unrealized gains and losses which result from, among other
things, interest rate changes, by maintaining a dollar weighted average
portfolio maturity of less than 90 days.
INDIVIDUAL RETIREMENT ACCOUNTS. An investor desiring to purchase shares in a
Fund through an individual retirement account may establish such an account
through the Funds' custodian, Star Bank. Through such an account, investments
may be made in each Fund and certain of the other mutual funds sponsored by the
Adviser. Star Bank charges an initial establishment fee and an annual custodial
fee for each account. Information with respect to these accounts is available
upon request from the Group or First Fund Distributors, Inc., the Funds'
principal underwriter. The minimum investment for an individual retirement
account is $1,000.
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Capital gains and income received in such an account are
generally exempt from federal income taxation until distributed from the
account. Capital gains and ordinary income may be taxable in whole or in part,
however, if the account has borrowed to purchase or carry shares of a Fund.
Investors considering participation in such an account should review specific
tax laws relating thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of such an account.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares -- Repurchase" in
the Prospectus for a discussion of the redemption and repurchase rights of
shareholders.
The right to redeem shares or to receive payment with respect
to any such redemption may be suspended for more than seven days only for
periods during which trading on the NYSE is restricted as determined by the
Securities and Exchange Commission or the NYSE is closed (other than customary
weekend and holiday closings), for periods during which an emergency exists as
defined by the Securities and Exchange Commission as a result of which disposal
of portfolio securities or determination of the net asset value of a Fund is not
reasonably practicable, and for such other periods as the Securities and
Exchange Commission may by order permit for the protection of a Fund's
shareholders.
The Prospectus indicates when signature guarantees may be
required to effect a redemption. A signature guarantee is a widely accepted way
to protect stockholders and the Group by verifying the signature on the request.
Signature guarantees should not be qualified in any way, whether by date or
otherwise. Signatures must be guaranteed by an "Eligible Guarantor Institution"
and not by a notary public or any other person or entity. An "Eligible Guarantor
Institution" means a bank, trust company, broker, dealer, municipal or
government securities broker or dealer, credit union, national securities
exchange, registered securities association, clearing agency or savings
association that is a participant in the Securities Transfer Agents Medallion
Program endorsed by the Securities Transfer Association.
Subject to the Funds' compliance with applicable regulations,
the Funds have reserved the right to pay the redemption or repurchase price,
either totally or partially, by a distribution in kind of securities (instead of
cash) from the respective Fund's portfolio. Such regulations require, in part,
that the Funds commit to pay in cash all requests for redemption by any
shareholder, limited in amount for each shareholder during
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any 90-day period to the lesser of $250,000 or 1% of the net asset value of the
respective Fund at the beginning of such period. Each Fund anticipates that it
would make redemptions in kind only if it received redemption requests with
respect to a substantial portion of its net assets at a time when disposition of
a substantial portion of its portfolio securities would be disadvantageous. The
securities distributed in such a distribution would be valued at the same price
as the price assigned to such securities in calculating the net asset value of
the particular Fund. If a shareholder receives a distribution in kind in
securities, in most instances brokerage charges will be incurred when the
securities received are converted into cash.
TAXES
In all prior fiscal years RNC Money Market Fund (previously
known as RNC Liquid Assets Fund) has qualified for and elected the special tax
treatment afforded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). RNC Money Market Fund
intends to continue to so qualify. RNC Equity Fund intends to qualify for and
elect such treatment. Under the relevant Code provisions, a Fund will not be
subject to federal income tax on that part of its net ordinary income and net
realized capital gains which it distributes to shareholders. To qualify for such
tax treatment each Fund must, among other things, pay to its shareholders in
each taxable year at least 90% of its investment company taxable income
(consisting of investment income and short-term capital gains) and derive less
than 30% of its gross income in each taxable year from gains (without deduction
for losses) from the sale or other disposition of securities held for less than
three months. If in any taxable year a Fund does not qualify as a regulated
investment company, all its taxable income will be taxed to the Fund at
corporate rates and distributions will be taxed to the shareholders as dividends
to the extent of the Fund's current and accumulated earnings and profits. The
Code also imposes a non-deductible 4% excise tax on the excess, if any, of a
Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is 98% of a Fund's ordinary income
for the calendar year plus 98% of its capital gain net income recognized for the
one-year period ending on October 31 plus undistributed amounts from prior
years. It is anticipated that each Fund will be able to meet such distribution
requirements and will not be subject to the 4% excise tax.
Dividends paid by each Fund from its short-term investment
income, and distributions of each Fund's net realized capital gains, are taxable
to shareholders as ordinary income. Dividends and distributions are taxable as
described, whether received in cash or reinvested in additional shares of a
Fund.
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Some shareholders may be subject to a 31% withholding tax on
reportable dividend distributions, capital gains distributions and redemption
payments ("backup withholding"). Generally, shareholders subject to backup
withholding will be those for whom taxpayer identification numbers are not on
file with the Group or who, to the Group's knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under
penalties of perjury that such number is correct and that he or she is not
subject to backup withholding. Foreign shareholders may also be subject to other
withholding requirements.
Shares of the Funds are redeemable at the option of the Group
if, in the opinion of the Group, ownership has or may become concentrated to an
extent which would cause the Group or a Fund to be deemed a personal holding
company within the meaning of the Internal Revenue Service Code, or in the event
that the value of a shareholder's shares in a Fund falls below $1,000 as the
result of shareholder redemptions. In the event of such concentration, the Group
may compel the redemption of, reject any order for, or refuse to give effect on
the books of the Group or the Funds to the transfer of shares in an effort to
maintain the ownership of shares so as to prevent that consequence. Neither the
Group nor the Funds, however, assumes responsibility to compel redemptions or to
reject any orders.
Depending upon the extent of the Group's activities in those
states and localities in which its offices are maintained or in which its agents
or independent contractors are located, the Group and the Funds may be subject
to the tax laws of such states or localities. In addition, the treatment of each
Fund and its shareholders under applicable state and local tax laws may differ
from their treatment under the federal income tax laws. For example,
distributions of net investment income (including capital gains) may be taxable
to shareholders as dividend income. Shareholders are advised to consult their
tax advisers concerning the application of state and local taxes.
The foregoing is a general and abbreviated summary of certain
provisions of the Internal Revenue Service Code and Treasury Regulations
currently in effect. For complete provisions, reference should be made to the
pertinent Code sections and Treasury Regulations promulgated thereunder. The
Code and Treasury Regulations are subject to change by legislative or
administrative action. Heller, Ehrman, White & McAuliffe has expressed no
opinion on the tax matters discussed herein.
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DIVIDENDS
Dividends of each Fund are automatically reinvested in
additional shares of the appropriate Fund at net asset value and credited to the
shareholder's account or, at the shareholder's option, paid in cash to the
shareholder.
Should a Fund incur or anticipate any unusual or unexpected
significant expense or loss which would affect disproportionately the Fund's
income for a particular period, the Board of Directors would at that time
consider whether to adhere to the present dividend policy or to revise it in the
light of the then-prevailing circumstances in order to ameliorate, to the extent
possible, the disproportionate effect of such expense or loss on then existing
shareholders. Such expenses or losses may nevertheless result in a shareholder's
receiving no dividends for the period during which he or she held his or her
shares and in his or her receiving upon redemption a price per share lower than
that which he or she paid.
Shareholders of RNC Money Market Fund may receive their
dividends in cash monthly by completing the appropriate section of the Account
Application. Such cash distributions will be paid by check within seven days
after the end of each month. The election to receive cash distributions may be
made at the time of purchase of Fund shares or at any time subsequent thereto by
giving written notice to the Transfer Agent. Dividends and distributions are
taxable to shareholders whether distributed in cash or reinvested in additional
shares. See "Taxes."
The Transfer Agent will send each shareholder of RNC Money
Market Fund a monthly statement showing the total number of shares owned as of
the last business day of the month, as well as the current month's and
year-to-date dividends paid in terms of total cash distributed and, for those
shareholders which have dividends reinvested, the number of shares acquired
through the reinvestment of dividends. The policy of each Fund with respect to
dividends is further explained below.
RNC Equity Fund
- ---------------
All of RNC Equity Fund's net investment income is declared and
paid as dividends on an annual basis. Dividends declared in October, November or
December of any year and payable to shareholders of record on a date in one of
such months will be deemed to have been paid by RNC Equity Fund and received by
the shareholders on the record date if the dividends are paid by RNC Equity Fund
during the following January. Accordingly, such dividends shall be taxed to
shareholders for the year in which the record date falls.
Net income of RNC Equity Fund (from the time of the
immediately preceding determination thereof) will consist of (i) interest
accrued or discount earned (including both original issue and market discount),
(ii) plus or minus all realized gains and losses, if any, on the portfolio
securities of RNC Equity Fund (iii) less the estimated expenses of RNC Equity
Fund applicable to that dividend period.
RNC Money Market Fund
- ---------------------
All of RNC Money Market Fund's net investment income is
declared as dividends daily. RNC Money Market Fund's dividends are paid monthly.
RNC Money Market Fund's net investment income for dividend
purposes is determined daily. Such determination will be made as of 4:00 p.m.
Eastern time and, on days when RNC Liquid Assets Fund's net asset value is
calculated, immediately prior to such calculation. Immediately after each
calculation of net asset value, RNC Money Market Fund will declare a dividend
(with respect to one or more days) payable to shareholders of record as
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of 2:00 p.m. Eastern time on such day. Each day's dividend will be declared and
paid with respect to shares effectively purchased at or before 2:00 p.m., but
will not be declared or paid with respect to shares effectively redeemed at or
before 2:00 p.m. Net income of RNC Money Market Fund (from the time of the
immediately preceding determination thereof) will consist of (i) interest
accrued or discount earned (including both original issue and market discount),
(ii) plus or minus all realized gains and losses, if any, on the portfolio
securities of RNC Money Market Fund (iii) less the estimated expenses of RNC
Money Market Fund applicable to that dividend period.
RNC Money Market Fund intends to use its best efforts to
maintain its net asset value at $1.00 per share. As a result of a significant
expense or realized or unrealized loss, it is possible that RNC Money Market
Fund's net asset value may fall below $1.00 per share. See "Purchase of Shares
- -- Net Asset Value."
SHAREHOLDER RULE 12b-1 PLANS
The Group on behalf of each Fund has adopted a Shareholder
Rule 12b-1 Plan pursuant to Rule 12b-1 promulgated under the Investment Company
Act of 1940 (the "1940 Act").
Each plan requires annual renewal by a vote of the Group's
Board of Directors including those Directors who are not "interested persons" of
the Group, as defined in the 1940 Act, and who have no direct or indirect
interest in the plans or any related agreements (referred to herein as
"disinterested Directors"). Each plan may be terminated at any time if so voted
B-16
<PAGE>
by a majority of the disinterested Directors or by holders of a majority of the
relevant outstanding shares.
The Rule 12b-1 plans may not be amended to increase materially
the amounts payable to First Fund Distributors, Inc., or Midvale Securities
Corporation (the "Distributors") unless approved by a majority of the affected
outstanding voting shares, as defined in the 1940 Act, and may not be amended in
any other material respect unless approved by a majority of the disinterested
Directors. Each plan requires that quarterly reports be made to the Board of
Directors detailing the payments made under each plan and the expenses for which
reimbursement is being sought. The Rule 12b-1 plans contemplate that the
Distributors may delegate their shareholder servicing functions for certain
shareholder accounts to other persons and compensate such persons accordingly.
No payments were made under a Rule 12b-1 plan during the fiscal year ended
September 30, 1995.
The Board of Directors, including the disinterested Directors,
in approving the plans for another year concluded that, in the exercise of their
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that both Rule 12b-1 plans could be of value to benefit the Group,
the Funds and their shareholders, and could be used to increase shareholder
satisfaction, and preserve and expand the shareholder base of each Fund. Among
the possible benefits considered by the disinterested Directors was the
increased potential of a continuous cash flow arising out of the retention of
current shareholders and the expansion of the Funds to include new shareholders,
enabling the Funds to meet redemptions and to take advantage of buying
opportunities without having to make unwarranted liquidations of portfolio
securities. Another benefit anticipated by the disinterested Directors is the
potential for increasing the size of the Funds and thereby reducing the
operating costs on a per share basis of the Funds. [For more information on the
expenses paid through the Funds' 12b-1 plans, see the section in the Prospectus
entitled "Shareholder 12b-1 Plans."]
PERFORMANCE INFORMATION
General
- -------
From time to time, each Fund may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to shareholders. Each Fund may also include calculations,
such as hypothetical compounding examples or tax-free compounding examples,
which describe hypothetical investment results in such communications. Such
performance examples will
B-17
<PAGE>
be based on an express set of assumptions and are not indicative of the
performance of the relevant Fund.
From time to time, the yield and total return of a Fund may be
quoted in advertisements, shareholder reports or other communications to
shareholders.
Total Return
- ------------
Average annual total return quotations used in the Funds'
advertising and promotional materials are calculated according to the following
formula:
n
P(1 + T) = ERV
where P equals a hypothetical initial investment of $1,000; T equals average
annual total return; n equals the number of years; and ERV equals the ending
redeemable value at the end of a period of a hypothetical $1,000 investment made
at the beginning of the period.
Under the foregoing formula, the time periods used in
advertising will be based on rolling calendar quarters, updated to the last day
of the most recent quarter prior to submission of the advertising for
publication. Average annual total return, or "T" in the above formula, is
computed by finding the average annual compounded rates of return over the
period that would equate the initial amount invested to the ending redeemable
value. Average annual total return assumes the reinvestment of all dividends and
distributions.
Other Information
- -----------------
Performance data of a Fund quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in a
Fund will fluctuate, and an investor's redemption proceeds may be more or less
than the original investment amount. In advertising and promotional materials a
Fund may compare its performance with data published by Lipper Analytical
Services, Inc. ("Lipper"), Morningstar, Inc. ("Morningstar") or CDA Investment
Technologies, Inc. ("CDA"). A Fund also may refer in such materials to mutual
fund performance rankings and other data, such as comparative asset, expense and
fee levels, published by Lipper, CDA or Morningstar. Advertising and promotional
materials also may refer to discussions of a Fund and comparative mutual fund
data and ratings reported in independent periodicals including, but not limited
to, The Wall Street Journal, Money Magazine, Forbes, Business Week, Financial
World and Barron's.
B-18
<PAGE>
Yield Calculation
- -----------------
RNC Money Market Fund quotes current yield and for this
purpose the yield quoted is the net average annualized yield for the most recent
7-day period. The yield quoted is computed by assuming that an account is
established with one share (the "one- share account") on the first day of the
period. To arrive at the quoted yield, the net change in the value of the
one-share account for the 7-day period (which includes interest accrued and
original issue discount earned, and is less premium amortized and expenses
accrued, but does not include any realized gains or losses or unrealized
appreciation or depreciation) is multiplied by 365 and then divided by 7 (the
number of days in the period), with the resulting figure carried to the nearest
one hundredth of one percent. RNC Money Market Fund also furnishes a quotation
of effective yield that assumes the reinvestment of dividends for a 365-day year
and a return for the entire year equal to the average annualized yield for the
period, which is computed by adding 1 to the net change in the value of the
one-share account during the period, raising the sum to a power equal to 365
divided by 7, and then subtracting one from the result.
Yields for the seven-day period ended September 30, 1995, for
RNC Money Market Fund were as follows:
Current yield......................................... 4.82%
Effective yield ...................................... 4.94%
=====
RNC Money Market Fund may also quote the average
dollar-weighted portfolio maturity for the corresponding seven-day period. At
September 30, 1995 this average was 55 days for RNC Money Market Fund.
PRINCIPAL UNDERWRITER
First Fund Distributors, Inc., is currently the principal
underwriter of the Funds' shares pursuant to underwriting agreements with the
Group on behalf of the Funds. The Funds' shares are sold to the public on a best
efforts basis in a continuous offering without a sales load or other commission.
For each of the fiscal years ended September 30, 1993, 1994 and 1995, the Funds'
principal underwriter received no underwriting commission. The Funds' principal
underwriter is under common control with Investment Company Administration
Corporation, the Funds' administrator.
FINANCIAL STATEMENTS
The RNC Liquid Assets Fund, Inc., 1995 Annual Report to
Shareholders ("Annual Report"), including audited financial
B-19
<PAGE>
statements for the fiscal year ended September 30, 1995, has been previously
sent to shareholders and filed with the Securities and Exchange Commission.
[Please Note: Effective _________, 1996, RNC Liquid Assets Fund, Inc., became
known as RNC Mutual Fund Group, Inc. to reflect the addition of an additional
series of shares, RNC Equity Fund. Previously existing shares of RNC Liquid
Assets Fund, Inc. have been redesignated as shares of RNC Money Market Fund, a
series of RNC Mutual Fund Group, Inc.]
The financial statements and independent auditors' report in
the Annual Report are incorporated by reference into this Statement of
Additional Information. Additional copies of the 1995 Annual Report may be
obtained at no charge by writing or telephoning the Group at the address or
telephone number appearing on the front page of this Statement of Additional
Information.
The Group's independent certified public accountants and
auditors for the fiscal year ending September 30, 1995 are Tait, Weller & Baker,
whose address is Two Penn Center Plaza, Philadelphia, Pennsylvania 19102. The
Funds' custodian is Star Bank, P.O. Box 1118, Cincinnati, Ohio 45201-1118.
B-20
<PAGE>
APPENDIX
DESCRIPTION OF NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATIONS ("NRSROs") AND COMMERCIAL PAPER RATINGS
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE COMMERCIAL PAPER RATINGS:
Moody's Investors Service commercial paper ratings are
opinions of the ability of issuers to repay punctually promissory obligations
not having an original maturity in excess of nine months. Moody's employs three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers. The first of these three designations,
representing the securities in which the Funds may invest, is "Prime-1." Issuers
rated "Prime-1" (or related supporting institutions) have a superior capacity
for repayment of short-term promissory obligations.
STANDARD & POOR'S COMMERCIAL PAPER RATINGS:
A Standard & Poor's Corporation commercial paper rating is a
current assessment of the likelihood of timely payment of debt having an
original maturity of no more than 365 days. Ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The highest category is described as follows:
A. Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this
category are further refined with the designation 1, 2 and 3
to indicate the relative degree of safety.
A-1. This designation indicates that the degree of safety
regarding timely payment is very strong.
DUFF & PHELPS CREDIT RATING CO. SHORT-TERM DEBT SCALE:
Duff & Phelps' short-term ratings are consistent with the
rating criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year, including commercial paper, the
uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-back commercial paper is also rated
according to this scale. Emphasis is placed on
B-21
<PAGE>
liquidity which we define as not only cash from operations, but also access to
alternative sources of funds including trade credit, bank lines, and the capital
markets. An important consideration is the level of an obligor's reliance on
short-term funds on an ongoing basis.
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short- term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
FITCH RATINGS SHORT-TERM RATINGS:
Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
CORPORATE BOND RATINGS
MOODY'S CORPORATE BOND RATINGS:
Moody's corporate bond ratings are opinions of the relative
investment qualities of bonds. Moody's employs nine designations to indicate
such relative qualities, ranging from "AAA" for the highest quality obligations
to "C" for the lowest. Issues are further refined with the designation 1, 2 and
3 to indicate the relative ranking within designations. The highest two
designations are described as follows:
Aaa. Bonds in this category are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are
B-22
<PAGE>
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa. Bonds in this category are judged to be of high quality by
all standards. Together with the Aaa group they 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 or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks somewhat
larger than in Aaa securities.
STANDARD & POOR'S CORPORATE DEBT RATINGS
A Standard & Poor's corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Ratings are graded into ten categories, ranging from "AAA" for the
highest quality obligation to "D for debt in default. Issues are further refined
with a "Plus" or "Minus" sign to show relative standing within the categories.
The highest two categories are described as follows:
AAA. Issues having this rating indicate that capacity to pay
interest and repay principal is extremely strong.
AA. This debt has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
DUFF & PHELPS CREDIT RATING CO. LONG-TERM DEBT AND PREFERRED STOCK RATING SCALE:
These ratings represent a summary opinion of the issuer's
long-term fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected viability of the obligor at the trough of the cycle is a critical
determination.
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
B-23
<PAGE>
AA+ High credit quality. Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
FITCH RATINGS INVESTMENT BOND RATINGS:
Fitch investment grade bond ratings provide a guide to
investors in determining the credit risk associated with a particular security.
The ratings represent Fitch's assessment of the issuer's ability to meet the
obligations of a specific debt issue or class of debt in a timely manner. The
rating takes into consideration special features of the issue: Its relationship
to other obligations of the issuer, the current and prospective financial
condition and operating performance of the issuer and any guarantor, as well as
the economic and political environment that might affect the issuer's future
financial strength and credit quality.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+".
B-24
<PAGE>
----------------------------------------------------
PART C
OTHER INFORMATION
---------------------------------------------------
<PAGE>
RNC MUTUAL FUND GROUP, INC.
(Formerly RNC Liquid Assets Fund, Inc.)
FORM N-IA
PART C
----------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements
1. Financial Statements are incorporated herein by
reference to:
Filing: Post-Effective Amendment No. 11
File No: 2-99009
(b) Exhibits:
1. Amended and Restated Articles of Incorporation
2. By-Laws
3. Not Applicable
4. Specimen Certificate is incorporated herein by
reference to:
Filing: Pre-Effective Amendment No. 1
File No.: 2-99009
Approximate Filing Date: August 1985
5(a). Form of Investment Advisory Agreement
5(b). Form of Administration Agreement
6(a). Form of Underwriting Agreement
6(b). Form of selected Dealers Agreement is
incorporated herein by reference to:
Filing: Post-Effective Amendment No. 5
File No.: 2-99009
Filing Date: November 8, 1990
7. Not Applicable
8. Custody Agreement
9. Not Applicable
C-1
<PAGE>
10. Opinion and consent of counsel as to the
legality of shares is incorporated herein by
reference to:
Filing: Pre-Effective Amendment No. 1
File No.: 2-99009
Approximate Filing Date: August 1985
11. Consent of Tait, Weller & Baker (filed
herewith)
12. Not Applicable
13. Investment Letter of RNC Capital Group, Inc. is
incorporated herein by reference to:
Filing: Pre-Effective Amendment No. 1
File No.: 2-99009
Approximate Filing Date: August 1985
14. Not Applicable
15(a). Form of Shareholder Servicing Plan for RNC Money
Market Fund (formerly RNC Liquid Assets Fund) is
incorporated by reference herein to:
Post-Effective Amendment No. 7
File No.: 2-99009
Approximate Filing Date: November 29, 1991
15(b). Form of Shareholder Rule 12b-1 Plan for RNC
Equity Fund
16. Schedule of Yield Computation is incorporated
herein by reference to:
Filing: Post-Effective Amendment No. 6
File No.: 2-99007
Filing Date: December 24, 1990
17. Fund Accounting Service Agreement
18. Transfer Agency and Service Agreement
Item 25. Persons Controlled by or under Common Control with
- ------- Registrant
Not Applicable.
C-2
<PAGE>
Item 26. Number of Holders of Securities
- ------- -------------------------------
Number of Record
Holders as of
Title of Class June 21, 1996
-------------- -------------
Common Stock, par value 122
$0.01 per share.
Item 27. Indemnification
- ------- ---------------
Reference is made to Article VI, Section 4 of Registrant's
Articles of Incorporation, Article VI of Registrant's By-Laws, Section 2-418 of
the Maryland General Corporation Law and Section 16 of the Underwriting
Agreement.
Insofar as the conditional advancing of indemnification monies
for actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may made only upon receipt of a written promise by, or
on behalf of, the recipient to repay that amount of the advance which exceeds
that amount to which it is ultimately determined he is entitled to receive from
the Registrant by reason of indemnification; and (iii)(a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Registrant
without a delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance; or (b) a majority of a quorum
of the Registrant's disinterested, non-party directors, or an independent legal
counsel in a written opinion shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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
in connection with the successful defense of any action, suit or proceeding) is
asserted by the director, officer or controlling person in connection with
shares being registered, the Registrant will, unless in the opinion of its
counsel the
C-3
<PAGE>
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 expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
- ------- ----------------------------------------------------
RNC Capital Management Co. (the "Investment Adviser") acts as
the investment adviser to various individuals and institutions.
A list of each director and principal officer of the
Investment Adviser is set forth below indicating each business, profession,
vocation or employment of a substantial nature in which each such person has
been engaged during the past two fiscal years for his or her own account or in
the capacity of director, officer, partner or trustee:
Other Substantial
Position with Business, Profession,
Name Investment Adviser Vocation or Employment
- ----------------- ------------------ ----------------------
James O'Neill Director Controller, Bank
Austria America, Inc.
(New York)
Thomas Pastore Director Senior Vice President,
Bank Austria America,
Inc. (New York)
Daniel J. Genter, President Director of Midvale
Jr. Securities
Corporation*
Nicanor M. Mamaril Senior Vice Senior Vice President
President, Treasurer and Treasurer of RNC
and Secretary Capital Group, Inc.;*
Treasurer and
Secretary of Midvale
Securities
Corporation*
Jan F. Kallik Senior Vice None
President and
Director of Equity
Research
A. Robert Blais Senior Vice None
President and
Director of Fixed
Income
C-4
<PAGE>
Bruce A. Mandel Senior Vice None
President and
Director of
Marketing
John G. Marshall Senior Vice None
President and
Director of Equity
- ----------------------------
* The address of RNC Capital Group, Inc. and Midvale
Securities Corporation is 11601 Wilshire Boulevard, 25th
Floor, Los Angeles, California 90025
Item 29. Principal Underwriter
- ------- ---------------------
(a) The Fund's principal underwriter also acts as principal
underwriter for Professionally Managed Portfolios, PIC Investment Trust,
Guinness Flight Investment Funds, Inc.; Hotchkis & Wiley Funds; Jurika & Voyles
Fund Group; and Ranier Investment Management Mutual Funds; and does not
otherwise act as principal underwriter, depositor or investment adviser to any
other investment company.
(b) First Fund Distributors, Inc., acts as the principal
underwriter for the Registrant. Information is set forth below concerning each
director and officer of the principal underwriter. The principal business
address of each such person is 4455 East Camelback Road, Suite 261E, Phoenix,
Arizona 85018.
Position and Position and Offices
Name Offices with Registrant
- ------------------ with Underwriter ---------------------
-------------------
Robert H. Wadsworth President and None
Director
Eric M. Banhazl Vice President Chief Executive
Officer, Chief
Financial Officer,
and Secretary
Steven J. Paggioli Secretary and None
Director
(c) The principal underwriter received no commissions or other
compensation from the Registrant during the Registrant's last fiscal year.
C-5
<PAGE>
Item 30. Location of Accounts and Records
- ------- --------------------------------
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained either at the offices of American Data Services,
Inc., 24 West Carver Street, 2nd Floor, Huntington, New York 11743 or the office
of the Registrant.
Item 31. Management Services
- ------- -------------------
Inapplicable.
Item 32. Undertakings
- ------- ------------
All Undertakings Satisfied.
C-6
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of San Francisco and
State of California on the 27 day of June 1996.
RNC MUTUAL FUND GROUP, INC.
(Registrant)
By Eric M. Banhazl*
---------------------------------
Eric M. Banhazl
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
DeVere W. McGuffin, II*
- -----------------------
DeVere W. McGuffin, II Director June 27, 1996
Bruce B. Stuart*
- ----------------
Bruce B. Stuart Director June 27, 1996
Eric M. Banhazl*
- ----------------
Eric M. Banhazl Principal June 27, 1996
Executive Officer,
Principal
Financial and
Accounting Officer
* By: /s/ Julie Allecta
---------------------------------------------
Julie Allecta, Attorney-In-Fact
Pursuant to Power of Attorney filed herewith.
C-7
<PAGE>
RNC MUTUAL FUND GROUP, INC.
(FORMERLY RNC LIQUID ASSETS FUND, INC.)
POWER OF ATTORNEY
FOR
SECURITIES AND EXCHANGE COMMISSION FILINGS
Each of the undersigned Directors and Officers of RNC Mutual Fund Group, Inc.
(the "Group") hereby appoints ERIC M. BANHAZL, JULIE ALLECTA, ELLEN BARIAL and
STEPHANIE O. WOODWORTH (with full power to each of them to act alone), his
attorney-in-fact and agent, in all capacities, to execute and to file any
documents relating to the Group's Registration Statement on Form N-1A under the
Investment Company Act of 1940 and under the Securities Act of 1933, including
any and all amendments thereto, covering the registration and the sale of shares
by the Group, including applications for exemptive orders or rulings or
otherwise. Each of the undersigned grants to each of said attorneys full
authority to do every act necessary to be done in order to effectuate the same
as fully, to all intents and purposes, as he could if personally present, hereby
ratifying all that said attorney-in-fact and agents may lawfully do or cause to
be done by virtue hereof.
The undersigned Directors and Officer hereby execute this Power of
Attorney as of this 20th day of June, 1996
Eric M. Banhazl
--------------------------
Eric M. Banhazl, President,
Treasurer and Secretary
(Principal Executive,
Financial and Accounting
Officer)
DeVere W. McGuffin II
---------------------
Directors: DeVere W. McGuffin II
Bruce B. Stuart
---------------
Bruce B. Stuart
C-8
<PAGE>
Exhibits(s) Index
Exhibit No. Document Page No.
- ----------- -------- --------
1. Amended and Restated Article of
Incorporation ____
2. By-Laws ____
5(a) Form of Investment Advisory Agreement ____
5(b) Form of Administration Agreement ____
6(a) Form of Underwriting Agreement ____
8. Custody Agreement ____
11. Independent Auditors' Consent ____
15(b) Form of Shareholder Rule 12b-1 Plan for
RNC Equity Fund ____
17. Fund Accounting Service Agreement ____
18. Transfer Agency and Service Agreement ____
C-9
RNC MUTUAL FUND GROUP, INC.
(Formerly RNC Liquid Assets Fund, Inc.)
ARTICLES OF AMENDMENT AND RESTATEMENT
RNC Mutual Fund Group, Inc. (formerly known as RNC Liquid Assets Fund,
Inc.), a Maryland corporation having its principal office in Baltimore, Maryland
(hereinafter called the "Corporation") hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and restated in its
entirety to read as follows:
ARTICLE I
NAME
----
The name of the Corporation is RNC Mutual Fund Group, Inc. (the "Corporation").
ARTICLE II
PURPOSE AND POWERS
------------------
(A) The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
(1) To conduct and carry on the business of an investment
company of the management type.
(2) To hold, invest and reinvest its assets in securities, and
in connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for
such amount or kind of consideration now or hereafter permitted by the
General Corporation Law of the State of Maryland and by these Articles
of Incorporation, as its Board of Directors may determine, provided,
however, that the value of the consideration per share to be received
by the Corporation upon the sale or other disposition of any shares of
its capital stock shall be not less than the net asset value per share
of such capital stock outstanding at the time of such event.
(4) To redeem, purchase or otherwise acquire, hold dispose of,
resell, transfer, reissue or cancel (all without the vote or
consent of the stockholders of the Corporation) shares of its
capital stock, in any manner and to the extent now
<PAGE>
or hereafter permitted by the General Corporation Law of the
State of Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to
exercise any and all such further powers or rights as may be
necessary, incidental, relative, conducive, appropriate or
desirable for the accomplishment, carrying out or attainment
of any of the foregoing purposes or objects.
(B) The Corporation shall be authorized to exercise and enjoy all the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Corporation Law of the State of Maryland now or hereafter in force, and
the enumeration of the foregoing shall not be deemed to exclude any powers,
rights or privileges so granted or conferred.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post-office address of the principal office of the Corporation in
this state is c/o The Corporation Trust Incorporated, 32 South Street, Fifth
Floor, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated, a corporation
of this State, and the post-office address of the resident agent is 32 South
Street, Fifth Floor, Baltimore, Maryland 21202.
ARTICLE IV
CAPITAL STOCK
-------------
(A) The total number of shares of capital stock which the Corporation
shall have authority to issue is FIVE HUNDRED MILLION (500,000,000) shares per
class (designated "Common Stock") of the par value of $0.01 per share and of the
aggregate par value of $5,000,000. Initially, the Corporation shall have two
classes of Common Stock consisting of 500,000,000 shares each. The Board of
Directors is expressly authorized, at any time and from time to time, to provide
by resolution for the classification or reclassification of any authorized-
and-unissued stock, subject to the following provisions as to voting powers and
other rights and in accordance with the provisions of Maryland General
Corporation Law.
(B) The holders of each share of stock of the Corporation shall be
entitled to one vote for each share of stock, irrespective of the class then
standing in his name on the books of the Corporation. On any matter submitted to
a vote of Stockholders, all shares of the Corporation then issued and
outstanding and entitled to vote shall be voted in the aggregate and not by
class except that, if more than one class has been designed by the Board (1)
when otherwise expressly required by the Maryland General Corporation Law or the
Investment Company Act of 1940, as amended, shares shall be voted by individual
class; (2) only shares of the respective classes are entitled to vote on matters
concerning only that class; and (3) fundamental policies, as specified in
Article XIV of the Corporation's by-laws, may not be changed, unless a change
affects only one class, without the approval of the holders of a majority of the
Fund's
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<PAGE>
outstanding voting shares, including a majority (as defined under the Investment
Company Act of 1940) of the shares of each class.
(C) Each class of stock of the Corporation shall have the following
powers, preferences or other special rights, and the qualifications,
restrictions, and limitations thereof shall be as follows:
(1) The shares of each class, when issues, will be fully paid
and nonassessable, have no preference, preemptive, conversion,
exchange, or similar rights, and will be freely transferable.
(2) The Board of Directors may from time to time declare and
pay dividends or distributions, in stock or in cash, on any or all
classes of stock, the amount of such dividends and distributions and
the payment of them being wholly in the discretion of the Board of
Directors.
(a) Dividends or distributions on shares of any class
of stock shall be paid only out of earned surplus or other
lawfully available assets belonging to such class.
(b) Inasmuch as one goal of the Corporation is to
qualify as a "regulated investment company" under the
Internal Revenue Code of 1954, as amended, or any
successor or comparable statute thereto, and
Regulations promulgated thereunder, and inasmuch as
the computation of net income and gains for Federal
income tax purposes may vary from the computation
thereof on the books of the Corporation, the Board of
Directors shall have the power in its discretion to
distribute in any fiscal years as dividends,
including dividends designated in whole or in part as
capital gains distributions, amounts sufficient in
the opinion of the Board of Directors, to enable the
Corporation to qualify as a regulated investment
company and to avoid liability for the Corporation
for Federal income tax in respect of that year. In
furtherance, and not in limitation of the foregoing,
in the event that a class of shares has a net capital
loss for a fiscal year, and to the extent that a net
capital loss for a fiscal year offsets net capital
gains from one or more of the other classes, the
amount to be deemed available for distribution to the
class or classes with the net capital gain may be
reduced by the amount offset.
(3) The assets belonging to any class of stock shall be
charged with the liabilities in respect to such class, and shall also
be charged with its share of the general liabilities of the Corporation
in proportion to the asset values of the respective classes. The
determination of the Board of Directors shall be conclusive as to the
amount of liabilities, the allocation of the same as to a given class,
and as to whether the same or general assets of the Corporation are
allocable to one or more classes.
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<PAGE>
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING, AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF
THE DIRECTORS AND STOCKHOLDERS
------------------------------
(A) The number of directors of the Corporation shall be two, which
number may be increased pursuant to the by-laws of the Corporation but shall
never be less than one. The names of the current directors are:
DeVere W. McGuffin II
Bruce B. Stuart
(B) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitations as may be set forth in these
Articles of Incorporation or in the by-laws of the Corporation or in the General
Corporation Law of the State of Maryland.
(C) No holder of stock of the Corporation shall, as such holder, have
any preemptive or other right to purchase or subscribe for any shares of the
capital stock of the Corporation or any other security of the Corporation which
it may issue or sell (whether out of the number of shares authorized by these
Articles of Incorporation, or out of any shares of the capital stock of the
Corporation acquired by it after the issue thereof, or otherwise) other than
such right, if any, as the Board of Directors, in its discretion, may determine.
(D) Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General
Corporation Law of the State of Maryland.
(E) The Board of Directors of the Corporation may make, alter or repeal
from time to time any of the by-laws of the Corporation except any particular
by-law which is specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of the Investment Company Act of 1940, as
amended.
ARTICLE VI
REDEMPTION
----------
Each holder of shares of capital stock of the Corporation
shall be entitled to require the Corporation to redeem all or any party of the
shares of capital stock of the Corporation standing in the name of such holder
on the books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the redemption
price of such shares as in effect from time to time as may be determined by the
Board of Directors of the Corporation in accordance with the provisions hereof,
subject to the right of the Board of Directors of the Corporation to suspend the
right of redemption of shares of capital stock of the Corporation or postpone
the date of payment of such redemption price in
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<PAGE>
accordance with provisions of applicable law. The redemption price of shares of
capital stock of the Corporation shall be the net asset value thereof as
determined by the Board of Directors of the Corporation from time to time in
accordance with the provisions of applicable law, less such redemption fee or
other charge, if any, as may be fixed by resolution of the Board of Directors of
the Corporation. Payment of the redemption price shall be made in cash or
securities by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation.
ARTICLE VII
DETERMINATION BINDING
---------------------
Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practice by or
pursuant to the direction of the Board of Directors, as to the amount of assets,
obligations or liabilities of the Corporation, as to the amount of net income of
the Corporation from dividends and interest for any period or amounts at any
time legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created has been paid or discharged or
shall be then or thereafter required to be paid or discharged), as to the price
of any security owned by the Corporation or as to any other matters relating to
the issuance, sale, redemption or other acquisition or disposition of securities
or shares of capital stock of the Corporation, and any reasonable determination
made in good faith by the Board of Directors as to whether any transaction
constitutes a purchase of securities on "margin", a sale of securities "short",
or any underwriting of the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any securities,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation shall be
effective to (A) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (B) protect or purpose to protect any director
and officer of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involves in the conduct of his office.
ARTICLE VIII
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
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<PAGE>
ARTICLE IX
AMENDMENT
---------
The Corporation reserves the right from time to time to make
any amendment of its charter, now or hereafter authorized by law, including any
amendment which alters the contract rights, as expressly set forth in its
charter, of any outstanding stock.
SECOND: This amendment and restatement does not change the outstanding capital
stock of the corporation or the aggregate par value thereof.
THIRD: The foregoing amendment to and restatement of the Charter of the
Corporation has been approved by the Board of Directors and is limited to
changes expressly permitted by Section 2-605 of the Maryland General Corporation
Law.
FOURTH: The Corporation is registered as an open-end investment company under
the Investment Company Act of 1940.
IN WITNESS WHEREOF, RNC Mutual Fund Group, Inc., has caused
these presents to be signed in its name and on its behalf by RNC Mutual Fund
Group, Inc., has caused these presents to be signed in its name and on its
behalf by its President and attested by its Secretary on June ___, 1996.
ATTEST: RNC MUTUAL FUND GROUP, INC.
Rita Dam Eric M. Banhazl
- ---------------------- ---------------------------------
Rita Dam Eric M. Banhazl
Assistant Secretary President
THE UNDERSIGNED President of RNC Mutual Fund Group, Inc., who
executed on behalf of said Corporation, the foregoing Articles of Amendment and
Restatement, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles of Amendment
and Restatement to be the corporate act of said corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval there are true
in all material respects, under the penalties of perjury.
Eric M. Banhazl
---------------------------------
Eric M. Banhazl
President
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BY-LAWS
OF
RNC MUTUAL FUND GROUP, INC.
(As Revised May 20, 1996)
ARTICLE I
Offices
-------
Section 1. Principal Office. The principal office of RNC
Mutual Fund Group, Inc. (the "Corporation") shall be in the City of Baltimore,
State of Maryland.
Section 2. Principal Executive Office. The principal executive
office of the Corporation shall be at 11601 Wilshire Boulevard, 25th Floor, Los
Angeles, California 90025.
Section 3. Other Offices. The Corporation may have such other
offices in such places as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation for the election of directors and for the
transaction of such other business as may properly be brought before the meeting
shall be held on such day in May of each year as is designated annually by the
Board of Directors. Any business of the Corporation may be transacted at the
annual meeting without being specifically designated in the notice, except such
business as is specifically required by statute to be stated in the notice.
Section 2. Special Meetings. Special meetings of the
stockholders, unless otherwise provided by law or by the Articles of
Incorporation, may be called for any purpose or purposes by a majority of the
Board of Directors, the President, or on the written request of the holders of
at least 25% of the outstanding capital stock of the Corporation entitled to
vote at such meeting.
Section 3. Place of Meetings. The annual meeting and any
special meeting of the Stockholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the
place, date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
personally or by mail, not less than ten days nor more than sixty days before
the
<PAGE>
date of such meeting, to each stockholder entitled to vote at such meeting and
to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at the address that appears on the records of the
Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived
by any stockholder who shall attend such meeting in person or by proxy, or who
shall, either before or after the meeting, submit a signed waiver of notice
which is filed with the records of the meeting. When a meeting is adjourned to
another time and place (unless the Board of Directors, after the adjournment,
shall fix a new record date for an adjourned meeting, or the adjournment is for
more than thirty days), notice of the reconvening of such adjourned meeting need
not be given if the time and place to which the meeting shall be adjourned were
announced at the meeting at which the adjournment was taken.
Section 5. Quorum. At all meetings of the stockholders, the
holders of a majority of the shares of stock of the Corporation entitled to vote
at the meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Articles of Incorporation of these By-Laws. In the absence of a quorum no
business may be transacted, except that the holders of a majority of the shares
of stock present in person or by proxy and entitled to vote may adjourn the
meeting from time to time, without notice other than announcement thereat except
as otherwise required by these By-Laws, until the holders of the requisite
amount of shares of stock shall be so present. At any such adjourned meeting at
which a quorum may be present, any business may be transacted which might have
been transacted at the meeting as originally called. The absence from any
meeting, in person or by proxy, of holders of the number of shares of stock of
the Corporation in excess of a majority thereof which may be required by the
laws of the State of Maryland, the Investment Company Act of 1940, as amended,
or other applicable statute, the Articles of Incorporation, or these By-Laws,
for action upon any given matter shall not prevent action at such meeting upon
any other matter or matters which may properly come fore the meeting, if there
shall be present threat, in person or by proxy, holders of the number of shares
of stock of the Corporation required for action in respect of such other matter
or matters.
Section 6. Organization. At each meeting of the stockholders,
the Chairman of the Board (if one has been designated by the Board), or in the
Chairman's absence or inability to act, the President, or in the absence or
inability to act of the Chairman of the Board and the President, a Vice
President, shall act as chairman of the meeting. The Secretary, or in the
Secretary's absence or inability to act, any person appointed by the chairman of
the meeting, shall act as secretary of the meeting and keep the minutes thereof.
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<PAGE>
Section 7. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.
Section 8. Voting. Except as otherwise provided by statute or
the Articles of Incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in that person's
name on the record of stockholders of the Corporation as of the record date
determined pursuant to Section 9 of this Article or if such record date shall
not have been so fixed, then at the later of (i) the close of business on the
day on which notice of the meeting is mailed or (ii) the thirtieth day before
the meeting.
Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for the stockholder
by a proxy signed by such stockholder or his or her attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except in those cases where such proxy
states that it is irrevocable and where an irrevocable proxy is permitted by
law. Except as otherwise provided by statute, the Articles of Incorporation or
these ByLaws, any corporate action to be taken by vote of the stockholders shall
be authorized by a majority of the total votes cast at a meeting of stockholders
by the holders of shares present in person or represented by proxy and entitled
to vote on such action.
If a vote shall be taken on any question other than the
election of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the stockholder voting, or by the stockholder's proxy, if
there be such proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may
fix, in advance, a record date not more than sixty days nor less than ten days
before the date then fixed for the holding of any meeting of the stockholders.
All persons who were holders of record of shares at such time, and no others,
shall be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of the duties of
inspector, shall take and sign an oath to execute faithfully those duties at
such meeting with strict
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<PAGE>
impartiality and according to the best of his or her ability. The inspectors
shall determine the number of shares outstanding and the voting number of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote in
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except
as otherwise provided by statute or the Articles of Incorporation, any action
required to be taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual or special meeting of stockholders, may
be taken without a meeting, without prior notice and without a vote, if the
following are filed with the records of stockholder meetings: (i) a unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter and (ii) a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote thereat.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. Except as otherwise provided in the
Articles of Incorporation, the business and affairs of the Corporation shall be
managed by the Board of Directors. The Board may exercise all the powers of the
Corporation and do all such lawful acts and things as are not by statute or the
Articles of Incorporation directed or required to be exercised or done by the
stockholders.
Section 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number of
directors shall in no event be less than two or more than six; provided however,
that if there is no stock outstanding, the number of directors may be less than
two but not less than one. Any vacancy created by an increase in directors may
be filed in accordance with Section 6 of this Article III. No reduction in the
number of directors shall have the effect of removing any director from office
prior to the expiration of that person's term unless such director is
specifically removed pursuant to Section 5 of this
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<PAGE>
Article III at the time of such decrease. Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be
elected annually, by written ballot at the annual meeting of stockholders or at
a special meeting held for that purpose. The term of office of each director
shall be from the time of the director's election and qualification until the
annual election of directors next succeeding the election and until a successor
shall have been elected and shall have qualified, or until the director's death,
resignation or removal as hereinafter provided in these By-Laws, or as otherwise
provided by statute or the Articles of Incorporation.
Section 4. Resignation. A director of the Corporation may
resign at any time by giving written notice of his or her resignation to the
Board, the Chairman of the Board, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any director of the
Corporation may be removed by the stockholders by a vote of a majority of the
votes entitled to be cast on the matter at any meeting of stockholders, duly
called and at which a quorum Is present.
Section 6. Vacancies. Any vacancies in the Board, whether
arising from death, resignation, removal, an increase in the number of directors
or any other cause, shall be filled by a vote of the majority of the Board of
Directors then in office even though such majority is less than a quorum,
provided that no vacancies shall be filled by action of the remaining directors,
if after the filling of said vacancy or vacancies, less than two-thirds of the
directors then holding office shall have been elected by the stockholders of the
Corporation. In the event that at any time there is a vacancy in any office of a
director which vacancy may not be filled by the remaining directors, a special
meeting of the stockholders shall be held as promptly as possible and in any
event within sixty days, for the purpose of filling said vacancy or vacancies.
Any directors elected or appointed to fill a vacancy shall hold office only
until the next annual meeting of stockholders of the Corporation and until a
successor shall have been chosen and qualifies or until the director's earlier
resignation and removal.
Section 7. Place of Meetings. Meetings of the Board may be
held at such place as the Board may from time to time determine or as shall be
specified in the notice of such meeting.
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<PAGE>
Section 8. Regular Meetings. Regular meetings of the Board may
be held without notice at such time and place as may be determined by the Board
of Directors.
Section 9. Special Meetings. Special meetings of the Board may
be called by two or more directors of the Corporation or by the Chairman of the
Board or the President.
Section 10. Annual Meeting. The annual meeting of each newly
elected Board of Directors shall be held as soon as practicable after the
meeting of stockholders at which the directors were elected. No notice of such
annual meeting shall be necessary if held immediately after the adjournment, and
at the site, of the meeting of stockholders. If not so held, notice shall be
given as hereinafter provided for special meetings of the Board of Directors.
Section 11. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter provided, in
which notice shall be stated the time and place of the meeting. Notice of each
such meeting shall be delivered to each director, either personally or by
telephone, telegraph, cable or wireless, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to the director at the director's residence or usual place of
business, at least three days before the day on which such meeting is to be
held.
Section 12. Waiver of Notice of Meetings. Notice of any
special meeting need not be given to any director who shall, either before or
after the meeting, sign a written wavier of notice or who shall attend such
meeting. Except as otherwise specifically required by these By-Laws, a notice or
wavier of notice of any meeting need not state the purposes of such meeting.
Section 13. Quorum and Voting. One-third, but not less than
two, of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by statute,
the Articles of Incorporation, these By-Laws, the Investment Company Act of
1940, as amended, or other applicable statute or regulation, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board; provided, however, that the approval of any
contract with an investment adviser or principal underwriter, as such terms are
defined in the Investment Company Act of 1940, as amended, which the Corporation
enters into or any renewal or amendment thereof, the approval of the fidelity
bond required by the Investment Company Act of 1940, as amended, and the
selection of the Corporation's independent public accountants shall each require
the affirmative vote of a majority of the directors who are not parties to any
such contract or interested persons of any such party. In the absence of a
quorum at any meeting of the Board, a
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<PAGE>
majority of the directors present thereat may adjourn such meeting to another
time and place until a quorum shall be present thereat. Notice of the time and
place of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless such time and place were
announced at the meeting at which the adjournment was taken, to the other
directors. At any adjourned meeting at which a quorum is present, any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 14. Organization. The Board may, by resolution adopted
by a majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President, or, in the
President's absence or inability to act, another person chosen by a majority of
the directors present, shall act as chairman of the meeting and preside thereat.
The Secretary (or, in the Secretary's absence or inability to act, any person
appointed by the chairman) shall act as Secretary of the meeting and keep the
minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting.
Except as otherwise expressly required by the Investment Company Act of 1940, as
amended, or other applicable statute or regulation, 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 all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 16. Compensation. Directors may receive compensation
for services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board.
Section 17. Investment Policies. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and other matters of the Corporation, as
recited in the current Prospectus of the Corporation filed from time to time
with the Securities and Exchange Commission and as required by the Investment
Company Act of 1940, as amended. The Board, however, may delegate the duty of
management of the assets and the administration of its day to day operations to
an individual or corporate management company and/or investment adviser pursuant
to a written contract or contracts which have obtained the requisite approvals,
including the requisite approvals of renewals thereof, of the Board of Directors
and/or the stockholders of the Corporation in accordance with the provisions of
the Investment Company Act of 1940, as amended.
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<PAGE>
ARTICLE IV
Committees
----------
Section 1. Executive Committee. The Board may, by resolution
adopted by a majority of the entire Board, designate an Executive Committee
consisting of two or more of the directors of the Corporation, which committee
shall have and may exercise all the powers and authority of the Board with
respect to all matters other than:
(a) the submission to stockholders of any action requiring
authorization of stockholders pursuant to statute or the Articles of
Incorporation;
(b) the filling of vacancies on the Board of Directors;
(c) the fixing of compensation of the directors for serving on
the Board or on any committee of the Board, including the Executive Committee;
(d) the approval or termination of any contract with an
investment adviser or principal underwriter, as such terms are defined in the
Investment Company Act of 1940, as amended, or the taking of any other action
required to be taken by the Board of Directors by the Investment Company Act of
1940, as amended;
(e) the amendment or repeal of these By-Laws or the adoption
of new By-Laws;
(f) the amendment or repeal of any resolution of the Board
which by its terms may be amended or repealed only by the Board; and
(g) the declaration of dividends and the issuance of capital
stock of the Corporation.
The Executive Committee shall keep written minutes of its
proceedings and shall report such minutes to the Board. All such proceedings
shall be subject to revision or alteration by the Board; provided, however, that
third parties shall not be prejudiced by any such revision or alteration.
Section 2. Other Committees of the Board. The Board of
Directors may from time to time, by resolution adopted by a majority of the
whole Board, designate one or more other committees of the Board, each such
committee to consist of such number of directors and to have such powers and
duties as the Board of Directors may, by resolution, prescribe.
Section 3. General. One-third, but not less than two, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum
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<PAGE>
for the transaction of business at such meeting, and the act of a majority
present shall be the act of such committee. The Board may designate a chairman
of any committee and such chairman or any two members of any committee may fix
the time and place of its meetings unless the Board shall otherwise provide. In
the absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not the member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. The Board shall have the power at any
time to change the membership of any committee, to fill all vacancies, to
designate alternate members to replace any absent or disqualified member, or to
dissolve any such committee. Nothing herein shall be deemed to prevent the Board
from appointing one or more committees consisting in whole or in part of persons
who are not directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority or power of the Board in the
management of the business or affairs of the Corporation.
ARTICLE V
Officers, Agents and Employees
------------------------------
Section 1. Number and Qualifications. The officers of the
Corporation shall be a President, who shall be a director of the Corporation, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. The Board of Directors may elect or appoint one or more Vice
Presidents and may also appoint such other officers, agents and employees as it
may deem necessary or proper. Any two or more offices may be held by the same
person, except the offices of President and Vice President, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity. Such
officers shall be elected by the Board of Directors each year at its first
meeting held after the annual meeting of stockholders, each to hold office until
the meeting of the Board following the next annual meeting of the stockholders
and until his successor shall have been duly elected and shall have qualified,
or until his death, or until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws. The Board may from time to time elect, or
delegate to the President the power to appoint, such officers (including one or
more Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board, the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take
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<PAGE>
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and
unless otherwise specified therein, the acceptance of such resignation shall
not-be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate such power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Such removal shall be without prejudice to such person's contact
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief
executive officer of the Corporation. In the absence of the Chairman of the
Board (or if there be none), he shall preside at all meetings of the
stockholders and of the Board of Directors. Me shall have, subject to the
control of the Board of Directors, general charge of the business and affairs of
the Corporation. Me may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers.
Section 8. Vice President. Each Vice President shall have such
powers and perform such duties as the Board of Directors or the President may
from time to time prescribe.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation, except those which the Corporation
has placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934) pursuant to a written agreement designating such bank or trust
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<PAGE>
company or member of a national securities exchange as custodian of the property
of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to
the credit of the Corporation;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor; and
(f) in general, perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 10. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.
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<PAGE>
ARTICLE VI
Indemnification
---------------
Each officer, director, employee or agent of the Corporation
shall be indemnified by the Corporation to the full extent permitted under the
General Corporation Law of the State of Maryland and the Investment Company Act
of 1940, as amended, except that such indemnity shall not protect any such
person against any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VII
Capital Stock
-------------
Section 1. Stock Certificates. Only to the extent required by
Maryland law shall each holder of stock of the Corporation be entitled upon
request to have a certificate or certificates, in such form as shall be approved
by the Board, representing the number of shares of stock of the Corporation
owned by the stockholder; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the President
or a Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation.
Any or all of the signatures or the seal on the Classification Series
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate shall be issued, it may be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were still in office at
the date of issue.
Section 2. Books of Account and Record of Stockholders. There
shall be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock
of the Corporation shall be made on the stock records of the Corporation only by
the registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or
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<PAGE>
accompanied by a duly executed stock transfer power and the payment of all taxes
thereon. Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of such share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions, and to vote as such owner, and the Corporation shall not be
bound to recognize any equitable or legal claim to or interest in any such share
or shares on the part of any other person.
Section 4. Regulations. The Board may make such additional
rules and regulations, not inconsistent with these ByLaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been mutilated,
and the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or Issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and
Distributions. The Board may fix, in advance, a date not more than sixty days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of change, conversion or exchange of common stock or other
securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend, distribution, allotment, rights or
interests.
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<PAGE>
Section 7. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Maryland.
Section 8. Information to Stockholders and Others. Any
stockholder of the Corporation or his agent may inspect and copy during usual
business hours the Corporation's By-Laws, minutes of the proceedings of its
stockholders, annual statements of its affairs, and voting trust agreements on
file at its principal office.
Section 9. Involuntary Redemption of Shares. Subject to
policies established by the Board of Directors, the Corporation shall have the
right to redeem involuntarily shares of its common stock if at any time the
value of a stockholder'S investment in the Corporation is less than $500.
ARTICLE VIII
Seal
----
The Corporation shall not be required to have a seal. If a
seal or the Corporation is adopted, it shall be circular in form and shall bear,
in addition to any other emblem or device approved by the Board of Directors,
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
-----------
The fiscal year of the Corporation is October 1-September 30.
ARTICLE X
Depositories and Custodians
---------------------------
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments
shall be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation
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<PAGE>
may from time to time determine. Every arrangement entered into with any bank or
other company for the safekeeping of the securities and investments of the
Corporation shall contain provisions complying with the Investment Company Act
of 1940, as amended, and the general rules and regulations thereunder.
ARTICLE XI
Execution of Instruments
------------------------
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates,
bonds or other securities at any time owned by the Corporation may be held on
behalf of the Corporation or sold, transferred or otherwise disposed of subject
to any limits imposed by Article XIV of these By-Laws and pursuant to
authorization by the Board and, when so authorized to be held on behalf of the
Corporation or sold, transferred or otherwise disposed of, may be transferred
from the name of the Corporation by the signature of the President or a Vice
President or the Treasurer or the Assistant Treasurer or the Secretary or the
Assistant Secretary.
ARTICLE XII
Independent Public Accountants
------------------------------
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the stockholders in accordance with the provisions of
the Investment Company Act of 1940, as amended.
ARTICLE XIII
Annual Statement
----------------
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the stockholders based upon each such examination shall be mailed to
each stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders and be placed on file at the Corporation's
principal office in the State of Maryland. Each such report shall show the
assets and liabilities of the
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<PAGE>
Corporation as of the close of the annual or quarterly period covered by the
report and the securities in which the funds of the Corporation were then
invested. Such report shall also show the Corporation's income and expenses for
the period from the end of the Corporation's preceding fiscal year to the close
of the annual or quarterly period covered by the report and any other
information required by the Investment Company Act of 1940, as amended, and
shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIV
Fundamental Policies
--------------------
Section 1. Investment Objectives. It is the fundamental policy
of the Corporation to follow the investment objectives that are set forth in the
Prospectus contained in the Registration Statement of the Corporation on Form
N-IA, or any Pre-Effective or Post-Effective Amendments thereto, at the time
such Registration Statement, or Pre-Effective or Post-Effective Amendment,
initially is declared effective.
Section 2. Investment Restrictions. It is the fundamental
policy of the Corporation to comply with the investment restrictions that are
set forth in the Statement of Additional Information contained in the
Registration Statement of the Corporation on Form N-1A, or any Pre-Effective or
Post- Effective Amendments thereto, at the time such Registration Statement, or
Pre-Effective or Post Effective Amendment, initially is declared effective.
ARTICLE XV
Amendments
----------
Section 1. By-Law. or any of them may be amended, altered or
repealed at any regular meeting of the stockholders or at any special meeting of
the stockholders at which a quorum is present or represented, provided that
notice of the proposed amendment, alteration or repeal is contained in the
notice of such special meeting.
Section 2. These By-Laws, except Article XIV hereof and this
Section 2 of Article XV, may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors. The By-Laws, or any of them, set
forth in Article XIV or in this Section 2 of Article XV of these By-Laws, may be
amended, altered or repealed only by the affirmative vote of a majority of the
outstanding shares (as defined below) of capital stock of the Corporation, at a
regular meeting or special meeting of the stockholders, the notice of which
contains the proposed amendment, alteration or repeal. For the purpose of
amending Article XIV or this Section 2 of Article XV of these By-Laws, a
majority of the outstanding shares shall be the lesser of (i) 67%
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<PAGE>
or more of the shares represented at a meeting at which more than 50% of the
outstanding are represented or (ii) more than 50% of the outstanding shares.
Section 3. A certified copy of these By-Laws, as they may be
amended from time to time, shall be kept at the principal office of the
Corporation in the State of Maryland.
-17-
FORM OF AGREEMENT
RNC EQUITY FUND
---------------
INVESTMENT ADVISORY AGREEMENT
-----------------------------
This AGREEMENT is made as of this ____ day of _______________,
1996, by and between RNC MUTUAL FUND GROUP, INC., a Maryland corporation (the
"Group"), on behalf of RNC Equity Fund (the "Fund" or "Equity Fund"), and RNC
CAPITAL MANAGEMENT CO., a California corporation (the "Adviser");
W I T N E S S E T H
WHEREAS, the Group is engaged in business as a diversified
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended, (the "1940 Act");
WHEREAS, the Equity Fund is a Series of the Group;
WHEREAS, the Adviser is engaged principally in rendering
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"); and
WHEREAS, the Group desires to retain the Adviser to render
investment supervisory services to the Group on behalf of RNC Equity Fund in the
manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Group and the Adviser hereby agree as
follows:
1. Duties of the Adviser.
----------------------
The Group hereby employs the Adviser to act as the investment
adviser to the Equity Fund and to supervise the investment and reinvestment of
the assets of the Equity Fund, subject to the supervision of the Board of
Directors of the Group, for the period and on the terms and conditions set forth
in this Agreement. The Adviser hereby accepts such employment and agrees during
such period, at its own expense, to render the services and to assume the
obligations herein set forth for the compensation provided for herein. The
Adviser 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 Group in any way or otherwise be deemed an agent of
the Group.
(a) Investment Advisory Services. In acting as investment
adviser to the Equity Fund, the Adviser shall regularly provide the Fund with
such investment research, advice and related services as the latter may from
time to time consider
1
<PAGE>
necessary for the Fund and shall furnish continuously portfolio managers and an
investment program and shall determine from time to time what securities shall
be purchased, sold or exchanged and what portion of the assets of the Fund shall
be held in the various securities in which it may invest, subject always to the
restrictions of the Group's Articles of Incorporation and ByLaws, as amended
from time to time, the provisions of the 1940 Act, the Investment Advisers Act
and the statements relating to the Fund's investment objectives, investment
policies and investment restrictions as the same are set forth in the currently
effective prospectus and/or statement of additional information of the Group
under the 1940 Act and Securities Act of 1933, as amended (the "Prospectus").
Should the Board of Directors of the Group at any time, however, make any
definite determination as to investment policy and notify the Adviser thereof,
the Adviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Adviser shall take, on behalf of the Equity Fund, all actions
which it deems necessary to implement the investment policies determined as
provided above.
(b) Brokerage. The Adviser shall place orders for the purchase
and sale of securities either directly with the issuer or with a broker or
dealer selected by the Adviser. In placing each Fund's securities trades, it is
recognized that the Adviser will give primary consideration to securing the most
favorable price and efficient execution, so that each Fund's total cost or
proceeds in each transaction will be the most favorable under all the
circumstances. Within the framework of this policy, the Adviser may consider the
financial responsibility, research and investment information, and other
services provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Adviser may be a
party.
It is also understood that it is desirable for the Funds that
the Adviser have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide such research and analysis, subject to review by
the Group's Board of Directors from time to time with respect to the extent and
continuation of this practice to determine whether each Fund benefits, directly
or indirectly, from such practice. It is understood by both parties that the
Adviser may select broker-dealers for the execution of the Funds' portfolio
transactions who provide research and analysis as the Adviser may lawfully and
2
<PAGE>
appropriately use in its investment management and advisory capacities, whether
or not such research and analysis may also be useful to the Adviser in
connection with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of one or more of the Funds as well as of
other clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.
The Adviser shall also provide the Fund, at the Adviser's
expense, with office space and related services as necessary in furtherance of
the provision of investment advisory services pursuant to this Agreement.
2. Allocation of Charges and Expenses.
-----------------------------------
(a) The Adviser. The Adviser assumes and shall pay for
maintaining the staff and personnel, and shall at its own expense provide the
equipment, office space and facilities, necessary to perform its obligations
under this Agreement. If employees of the Adviser also serve as directors,
officers or employees of the Group, the Adviser shall pay all their compensation
for actions in such capacity with the Group.
(b) The Group/Fund. The Group assumes and shall pay all
expenses of the Group and the Fund not expressly assumed by the Adviser in
paragraph (a) above, including, without limitation: expenses of redemption of
shares, expenses of portfolio transactions, organization costs, including costs
of incorporation, insurance costs, expenses for legal and auditing services,
costs of printing proxies, stock certificates, shareholder reports, shareholder
prospectuses and statements of additional information, charges of the custodian
and transfer agent, expenses for management and administrative services,
Securities and Exchange Commission fees, expenses of registering the shares of
the Fund under federal and state securities laws, fees and expenses of directors
(other than those related to interested persons), pricing costs (including the
daily calculation of net asset value), interest, certain taxes, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
properly payable by the Group on behalf of the Fund.
3
<PAGE>
3. Compensation of the Adviser.
----------------------------
(a) Investment Advisory Fee. As compensation for the services
rendered to the Equity Fund, the facilities furnished and the expenses assumed
by the Adviser, the Fund shall pay to the Adviser at periodic intervals not to
exceed one month as determined by the Board of Directors of the Group, a fee
based upon an annual rate not to exceed 1.00% of the Equity Fund's average daily
net assets, as determined and computed in accordance with the description of the
method of determination of net asset value contained in the Group's current
Prospectus. During any period when the determination of net asset value is
suspended by the Board of Directors of the Group, the net asset value of a share
as of the last business day prior to such suspension shall for this purpose be
deemed to be the net asset value at the close of each succeeding business day
until it is again determined. The Adviser may reduce its fee from time to time
consistent with its fiduciary obligations and/or reduce the Fund's expenses.
(b) Expense Limitations. In the event the operating expenses
of the Equity Fund, including the investment advisory fee applicable to the Fund
payable to the Adviser pursuant to subparagraph (a) hereof, exceed for any
fiscal year ending on a date on which this Agreement is in effect either (i) the
expense limitations applicable to the Fund imposed by state securities laws or
published regulations thereunder as such limitations may be raised or lowered
from time to time, or (ii) any voluntary expense limitations agreed to by the
Adviser and the Board of Directors of the Fund, the Adviser shall reduce its
investment advisory fee by the extent of such excess and, if required pursuant
to any such laws, regulations or voluntary agreement, will reimburse the Fund in
the amount of such excess; provided however, to the extent permitted by law,
there shall be excluded from such expenses the amount of interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited to
legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Group on behalf of the Fund.
(c) Expense Reductions, Waivers and Recapture Thereof. The
Adviser may reduce any portion of the compensation or reimbursement of expenses
due to it pursuant to this Agreement and may agree to make payments to limit the
expenses which are the responsibility of a Fund under this Agreement. Any such
reduction or payment shall be applicable only to such specific reduction or
payment and shall not constitute an agreement to reduce any future compensation
or reimbursement due to the Adviser hereunder or to continue future payments.
Any such reduction will be agreed to prior to accrual of the related expense or
fee and will be estimated daily and reconciled and paid on a monthly basis. Any
amount withheld pursuant to this
4
<PAGE>
paragraph from the Adviser or paid by the Adviser pursuant to subparagraph (b)
shall be reimbursed by the Fund to the Adviser if the aggregate expenses for the
fiscal year in which the reimbursement is made do not exceed the applicable
state limitation or any more restrictive limitation to which the Adviser has
agreed. The Adviser may seek recapture of reimbursements pursuant to this
subparagraph prior to payment of its current advisory fee or other current
fees/reimbursements due to the Adviser or other current expenses of the Fund, at
the Adviser's election.
4. Limitation of Liability of the Adviser.
---------------------------------------
The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Equity Fund in connection with
any investment policy or the purchase, sale or redemption of any securities on
the recommendation of the Adviser. Nothing herein contained shall be construed
to protect the Adviser against any liability to the Fund or its security holders
to which the Adviser shall otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties on
behalf of the Fund, reckless disregard of the Adviser's obligations and duties
under this Agreement or the violation of any applicable law.
5. Activities of the Adviser.
--------------------------
The services of the Adviser under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
6. Duration and Termination of this Agreement.
-------------------------------------------
This Agreement shall become effective as of the date upon
which the Fund commences operations and shall remain in force for an initial
term of two (2) years from such date or such shorter term as shall be
established by the Board of Directors of the Group. Thereafter, this Agreement
may be continued from year to year for successive one-year terms, but only so
long as such continuance is specifically approved at least annually by (i) the
Board of Directors of the Group, or by the vote of a majority of the outstanding
voting securities of the Equity Fund as defined in the 1940 Act and (ii) a
majority of those Directors, who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by the Board of Directors of the Group or by vote of a
majority of the outstanding voting securities of the Equity Fund, or by the
Adviser, on sixty days
5
<PAGE>
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
7. Definitions.
------------
The terms "assignment," "affiliated person" and "interested
person," when used in this Agreement, shall have the respective meanings
specified in the 1940 Act. The term "majority of the outstanding shares," when
used in this Agreement, shall mean the lesser of (i) 67% of the shares of the
Equity Fund represented at a meeting at which more than 50% of the outstanding
shares of the Equity Fund are represented or (ii) more than 50% of the Equity
Fund's outstanding shares.
8. Governing Law.
--------------
The provisions of this Agreement shall be construed and
interpreted in accordance with the law of the State of California in effect as
at that time and the applicable provisions of the 1940 Act. To the extent that
the applicable law of the State of California, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
RNC MUTUAL FUND GROUP, INC.
By
---------------------------------------
Eric M. Banhazl, President
RNC CAPITAL MANAGEMENT CO.
By
---------------------------------------
Daniel J. Genter, Jr.,
President
6
FORM OF AGREEMENT
RNC MUTUAL FUND GROUP, INC.
---------------------------
ADMINISTRATION AGREEMENT
------------------------
THIS AGREEMENT is made as of the ______ day of ________________, 1996
by and between the RNC Mutual Fund Group, Inc. (the "Funds"), a Maryland
Corporation (the "Company"), and INVESTMENT COMPANY ADMINISTRATION CORPORATION,
a Delaware Corporation (the "Administrator");
WITNESSETH
WHEREAS the Funds are diversified series of an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Company wishes to retain the Administrator to provide
certain administrative services in connection with the management of the Funds'
operations and the Administrator is willing to furnish such services:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Administrator to
provide certain administrative services, hereinafter enumerated, in connection
with the management of the Funds' operations for the period and on the terms set
forth in this Agreement. The Administrator accepts such appointment and agrees
to comply with all relevant provisions of the 1940 Act, applicable rules and
regulations thereunder, and other applicable law.
2. Services on a Continuing Basis. Subject to the overall supervision
of the Board of Directors of the Company, the Administrator will perform the
following services on a regular basis which would be daily, weekly or as
otherwise appropriate:
A) perform the services in Schedule I attached; and
B) such additional services as may be agreed upon by the Funds and the
Administrator.
3. Responsibility of the Administrator. The Administrator shall be
under no duty to take any action on behalf of the Funds except as set forth
herein or as may be agreed to by the Administrator in writing. In the
performance of its duties hereunder, the Administrator shall be obligated to
exercise
<PAGE>
reasonable care and diligence and to act in good faith and to use its best
efforts. Without limiting the generality of the foregoing or any other provision
of this Agreement, the Administrator shall not be liable for delays or errors or
loss of data occurring by reason of circumstances beyond the Administrator's
control.
4. Reliance Upon Instructions. The Company agrees that the
Administrator shall be entitled to rely upon any instructions, oral or written,
actually received by the Administrator from the Board of Directors of the
Company and shall incur no liability to the Company or the Company's Manager in
acting upon such oral or written instructions, provided such instructions
reasonably appear to have been received from a person duly authorized by the
Board of Directors of the Company to give oral or written instructions on behalf
of the Funds.
5. Confidentiality. The Administrator agrees on behalf of itself and
its employees to treat confidentially all records and other information relative
to the Funds and all prior, present or potential shareholders of the Funds,
except after prior notification to, and approval of release of information in
writing by, the Funds, which approval shall not be unreasonably withheld where
the Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Funds.
6. Equipment Failures. In the event of equipment failures or the
occurrence of events beyond the Administrator's control which render the
performance of the Administrator's functions under this Agreement impossible,
the Administrator shall take reasonable steps to minimize service interruptions
and is authorized to engage the services of third parties (at the
Administrator's expense) to prevent or remedy such service interruptions.
7. Compensation. As compensation for services rendered by the
Administrator during the term of this agreement, each series of the Fund will
pay to the Administrator a minimum annual fee of $40,000 or .10% for the first
$100 million, .05% for the next $100 million, and .03% thereafter, whichever is
greater, payable monthly by the fifth day of the next month.
8. Indemnification. The Funds agree to indemnify and hold harmless the
Administrator from all taxes, filing fees, charges, expenses, assessments,
claims and liabilities (including without limitation, liabilities arising under
the Securities Act of 1933, the Securities Exchange Act of 1934, the 1940 Act,
and any state and foreign securities laws, all as amended from time to time) and
expenses, including (without limitation) reasonable attorneys fees and
disbursements, arising directly or indirectly from any action or thing which the
Administrator takes or does or omits to take or do at the request of or in
reliance upon the advice of the Board of
<PAGE>
Directors of the Company, provided, that the Administrator will not be
indemnified against any liability to the Funds or to shareholders of the Funds
(or any expenses incident to such liability) arising out of the Administrator's
own willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement. The Administrator agrees to
indemnify and hold harmless the Funds, the Company, and each of its Directors
from all claims and liabilities (including, without limitation, liabilities
arising under the Securities Act of 1933, the Securities Exchange Act of 1934,
the 1940 Act, and any state and foreign securities laws, all as amended from
time to time) and expenses, including (without limitation) reasonable attorneys
fees and disbursements, arising directly or indirectly from any action or thing
which the Administrator takes or does or omits to take or do which is in
violation of this Agreement or not in accordance with instructions properly
given to the Administrator, or arising out of the Administrator's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement. No fund or other series of the Company shall
be liable for any claim against, or expense of, any other fund or series of the
Company.
9. Duration and Termination. This Agreement shall continue until
termination by the Funds (through the Board of Directors of the Company) or the
Administrator on 60 days' written notice to the other. All notices and other
communications hereunder shall be in writing. This Agreement cannot be assigned
without the prior written consent of the other party hereto.
10. Amendments. This Agreement or any part hereof may be changed or
waived only by instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
11. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in California and governed by
California law. 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
will not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first written
above.
RNC MUTUAL FUNDS GROUP INC.
By:____________________________________________
Title:_________________________________________
By:____________________________________________
Title:_________________________________________
FORM OF AGREEMENT
RNC MUTUAL FUND GROUP, INC.
11601 Wilshire Boulevard
25th Floor
Los Angeles, California 90025
First Fund Distributors, Inc.
479 West 22nd Street
New York, New York 10011
Date: ___________, 1996
Re: Underwriting Agreement
----------------------
Ladies and Gentlemen:
We are a Maryland corporation operating as an open-end management
investment company (hereinafter referred to as the "Group"). As such, the Group
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"). RNC Equity Fund (the "Fund" or "Equity Fund") is a series of the Group
whose shares are registered under the Securities Act of 1933, as amended (the
"1933 Act") and the 1940 Act. The Group is authorized to issue shares of its
capital stock, $0.01 par value (the "Shares"). The Group desires to offer and
sell Shares of the Equity Fund to the public in accordance with the applicable
federal and state securities laws.
A registration statement on Form N-1A (as amended from time to time,
the "Registration Statement") has been filed with the Securities and Exchange
Commission (the "SEC") with respect to the Shares we currently desire to be
offered and sold, and the Registration Statement with respect to such Shares has
been declared effective under the 1933 Act and 1940 Act by the SEC. The
Registration Statement contains a form of prospectus and statement of additional
information which, in the form such documents have been or will be filed with
the SEC pursuant to Rule 497 under the 1933 Act, are referred to herein as the
"Prospectus" and the "Statement of Additional Information." The Prospectus and
Statement of Additional Information for the Group are intended to be the primary
documents used in the offer and sale of the Shares of the Equity Fund.
You have informed us that your company, First Fund Distributors, Inc.
("FFD") is registered as a broker-dealer under the provisions of the Securities
Exchange Act of 1934 and that your company, FFD, is a member of the National
Association of Securities Dealers, Inc. You have indicated FFD's desire to act
as the exclusive selling agent and principal distributor for
<PAGE>
First Fund Distributors, Inc.
___________, 1996
Page 2
Shares of the Fund. We have been authorized to execute and deliver this
Agreement to FFD on behalf of the Group and the Fund by consent of our
Directors, given at a meeting at which a majority of our Directors, who are all
not interested persons of the Group and who are not interested persons of your
company, were present and voted in favor of the consent approving this
Agreement.
1. Appointment of Underwriter. Upon your acceptance of this Agreement
and in consideration of the covenants on your part herein expressed and upon the
terms and conditions set forth herein and in the Prospectus, we hereby appoint
FFD as the exclusive sales agent for the Shares of the Equity Fund and agree
that we will deliver such Shares as FFD may sell. You agree to use your best
efforts to promote the sale of Shares of the Fund, but are not obligated to sell
any specific number of Shares.
2. Independent Contractor. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to accept orders for the purchase or repurchase of the
Shares as our agent. You may appoint sub-agents or distribute through dealers
(pursuant to Selected Dealers Agreement approved by us substantially similar to
the Form of agreement attached as Exhibit A hereto), your own sales
representatives or otherwise as you may determine from time to time, but this
Agreement shall not be construed as authorizing any dealer or other person to
accept orders for sale or repurchase of Shares of the Fund on our behalf or
otherwise act as our agent for any purpose.
3. Public Offering. The Shares of the Equity Fund shall be offered for
sale to the public at a price equal to their net asset value per Share ("net
asset value"). On each business day that the New York Stock Exchange is open for
business, we will furnish you with the net asset value of the Shares which shall
be determined and become effective on that day as set forth in the then-current
effective Prospectus of the Group. The net asset value so determined shall apply
to all orders for the purchase of Shares received by dealers and you prior to
such determination but after the most recent previous determination. You are
authorized as our agent to accept orders and confirm sales at such net asset
value, provided that such dealers notify you of the time when they received the
particular order and that the order is placed with you prior to your close of
business on the day that the applicable net asset value is determined. To the
extent that the Transfer Agent, or Custodian for the Fund receives payments on
behalf of investors, such Agent shall be required to record the time of such
receipt with respect to each
<PAGE>
First Fund Distributors, Inc.
___________, 1996
Page 3
payment, and the applicable net asset value shall be that which is next
determined and effective after the time of receipt by them. In all events, you
shall forthwith notify all of the dealers comprising your selling group and such
Agent of the effective net asset value as received from us. Should we at any
time calculate the net asset value more frequently than once each business day,
you and we will follow procedures with respect to such additional price or
prices comparable to those set forth above in this Section 3.
4. Sales Load or Commission. Unless otherwise agreed to as provided
herein, Shares will be offered at net asset value without any sales load or
commission.
5. Payment for Shares. At or prior to the time of delivery of any of
the Shares, you will pay or cause to be paid to the Fund's Custodian, for the
Fund's account, an amount in cash equal to the net asset value of such Shares.
In the event that you pay for Shares sold by you prior to your receipt of
payment from purchasers, you are authorized to reimburse yourself for the net
asset value of such Shares when received by you.
6. Transfer Agent Registration of Shares. No Shares of the Fund shall
be registered on the books of the Fund until receipt of payment of that amount
by the Fund's Custodian. We will provide for the recording of all Shares
purchased in uncertificated form in "book accounts." Share certificates will not
be issued.
7. Purchases for Your Own Account. You shall not purchase Shares for
your own account for purposes of resale to the public, but you may purchase
shares for your own investment account upon written assurance that the purchase
is for investment purposes only and that the Shares will not be resold except
through redemption by us.
8. Furnishing and Use of Information. We will furnish to you such
information with respect to the Group, the Fund and Shares of the Fund, in such
form and signed by such of our officers as you may reasonably request, and we
warrant that the statements therein contained when so signed will be true and
correct. We will also furnish you with such information and will take such
action as you may reasonably request in order to qualify the Shares for sale to
the public under the securities laws of jurisdictions in which you may wish to
offer them. We will furnish you at least annually with audited financial
statements of the Fund's books and accounts certified by
<PAGE>
First Fund Distributors, Inc.
___________, 1996
Page 4
independent public accountants, and, from time to time, with such additional
information regarding the Fund's financial condition as you may reasonably
request. We shall be responsible for the preparation, including legal fees and
the setting of type, and for the printing of the Group's current Prospectus,
Statement of Additional Information and Annual and Semi-Annual Reports to
Shareholders and we will furnish you with as many copies of these documents as
you shall reasonably request to respond to the informational requirements of
existing shareholders of the Equity Fund; you shall be responsible for the
printing and delivery costs of additional copies of such documents although you
or your affiliate may seek reimbursement of such costs to the extent permitted
by us pursuant to Rule 12b-1 under the 1940 Act. We hereby undertake that such
Prospectus, Statement of Additional Information and Annual and Semi-Annual
Report to Shareholders will be current, accurate and complete in all material
respects and that any supplements to or revised versions of a Prospectus or
Statement of Additional Information will be promptly furnished to you. You agree
that, in distributing the Fund's Shares, you will only use the most current
versions of the Prospectus and Statement of Additional Information, and the most
current Annual and Semi-Annual Reports to Shareholders, each as prepared,
supplemented or revised by us.
9. Marketing Materials. Other than the Group's current Prospectus,
Statement of Additional Information, and Annual and Semi-Annual Report to
Shareholders, you will not disseminate to the public any information about the
Group or the Fund without our prior approval. You agree that all advertising,
sales, and marketing materials or other statements about Group or the Fund that
are disseminated to the public will conform to the requirements of all
applicable securities laws and regulations and will be or will have been filed,
where necessary, with the appropriate regulatory authorities. We must approve
all such marketing materials prior to use and no such materials shall be
published or distributed if we shall reasonably and promptly object.
10. Conduct of Business. You shall comply with the applicable
securities laws and regulations of the jurisdiction where the Shares are offered
for sale and conduct your affairs with us and with dealers, brokers or investors
in accordance with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
11. Allocation of Expenses.
<PAGE>
First Fund Distributors, Inc.
___________, 1996
Page 5
(a) We will pay all expenses which are typically associated
with the operation of the business of the Group and the Fund including, without
limitation (i) all costs associated with the preparation, printing and
distribution of current Prospectuses, Statements of Additional Information,
Annual and Semi-Annual Reports to Shareholders to existing shareholders, and
(ii) the filing and other fees to federal, state and other securities regulatory
authorities necessary to register and maintain registration of the Shares. You
will be responsible for the costs and fees associated with filing of copies of
all advertising, sales and marketing material used by you with respect to the
Group and the Fund with the appropriate federal, state and securities regulatory
authorities and obtaining the approval of the appropriate regulatory authorities
of such marketing materials if any such approval is required, although you or
your affiliates may seek reimbursement of such costs and fees to the extent
permitted by us pursuant to Rule 12b-l under the 1940 Act.
(b) You will be responsible for all costs incurred by you in
carrying out your responsibilities under this Agreement.
12. Other Activities. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as an
underwriter, distributor or dealer for other investment companies in the
offering of their shares.
13. Term of Agreement. This Agreement shall become effective on the
date of its acceptance by you and shall remain in effect for a period of two (2)
years from such date. This Agreement shall continue thereafter for periods not
exceeding one (1) year if approved at least annually (i) by a vote of a majority
of the outstanding voting securities of the Fund or by a vote of the Directors
of the Group, and (ii) by a vote of a majority of the Directors of the Group who
are not interested persons or parties to this Agreement (other than as Directors
of the Group), cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement: (i) may at any time be terminated without the
payment of any penalty, either by vote of the Directors of the Group or by a
vote of a majority of the outstanding voting securities of the Fund, on sixty
(60) days written notice to you; (ii) shall immediately terminate in the event
of its assignment; and (iii) may be terminated by you on sixty (60) days'
written notice to us.
<PAGE>
First Fund Distributors, Inc.
___________, 1996
Page 6
14. Suspension of Sales. We reserve the right at all times to suspend
or limit the public offering of the Shares upon written notice to you and to
reject any order for the purchase of the Shares in whole or in part.
15. Liability. Nothing herein shall be deemed to protect you against
any liability to us or to the Fund's securities holders to which you would
otherwise be subject by reason of your willful misfeasance, bad faith or
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
16. Indemnification. We agree to indemnify and hold you harmless from
and against any and all losses, claims, damages or liabilities to which you may
become subject under the 1933 Act, the 1940 Act or any state securities statute,
and to reimburse you for any legal or other expenses reasonably incurred by you
in connection with any claim or litigation, whether or not resulting in any
liability, insofar as such losses, claims, damages, liabilities, or litigation
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission of a material fact contained in the Registration
Statement of the Group; provided, however, that this indemnity shall not apply
to any such losses, claims, damages, liabilities, or litigation arising out of
or based upon any untrue statement or omission or alleged untrue statement or
omission of a material fact contained in the Registration Statement, which
statement or omission was made in reliance upon information furnished to us by
you for inclusion in the Registration Statement.
You agree to indemnify and hold us harmless from and against any and
all losses, claims, damage or liabilities to which we may become subject under
the 1933 Act, the 1940 Act or any state securities statute, and reimburse us for
any legal or other expenses reasonably incurred by us in connection with any
claim or litigation, whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities, or litigation arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission of
a material fact contained in the Registration Statement; provided, however, that
this indemnity shall not apply to any such losses, claims, damages, liabilities,
or litigation arising out of or based upon any untrue statement or omission or
alleged untrue statement or omission or a material fact contained in the
Registration Statement, where such statement or omission was not made in
reliance upon information furnished to us by you for inclusion in the
Registration Statement.
<PAGE>
First Fund Distributors, Inc.
___________, 1996
Page 7
17. Miscellaneous. This Agreement shall be subject to the law of the
State of California and shall be interpreted and construed to further and
promote the operation of the Group as an open-end investment company. As used
herein the terms "net asset value," "investment company," "open-end investment
company," "assignment," "principal underwriter," "interested person," "parents,"
and "majority of the outstanding voting securities," shall have the meanings set
forth in the 1933 Act and the 1940 Act and the Rules and Regulations thereunder.
If the foregoing meets with your approval, please acknowledge your
acceptance by signing each of the enclosed counterparts hereof and returning two
such counterparts to us, whereupon this shall constitute a binding agreement as
of the date first above written.
Very truly yours,
RNC MUTUAL FUND GROUP, INC.
By:
------------------------------
Eric M. Banhazl
President
Accepted:
FIRST FUND DISTRIBUTORS, INC.
By: _______________________________
Robert H. Wadsworth
President
Effective __________, 1996
CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of 1st day of March, 1996, by and between RNC
Mutual Fund Group, Inc. (the "Corporation"), a corporation organized under the
laws of Maryland and having its office at 11601 Wilshire Boulevard, 24th Floor,
Los Angeles, CA 90025 and Star Bank, National Association, (the "Custodian"), a
national banking association having its principal office at 425 Walnut Street,
Cincinnati, Ohio, 45202.
W I T N E S S E T H:
--------------------
WHEREAS, the Corporation offer shares of two separate series, RNC Money
Market Fund and RNC Equity Fund (each a "Fund", and collectively the "Funds")
WHEREAS, the Corporation desires that the Fund's Securities and cash be
held and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Corporation and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Directors to give Oral Instructions and
Written Instructions on behalf of the Fund and named in Exhibit A hereto or in
such resolutions of the Board of Directors, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Directors" shall mean the Directors from time to time
serving under the Corporation's Agreement and Articles of Incorporation, as from
time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form
of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the corporation
computes the net asset value of Shares of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.6 "Officer" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Corporation.
1.7 "Oral Instructions" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Corporation shall
cause all Oral Instructions to be confirmed by Written Instructions prior to the
end of the next Business Day. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction, it shall
in no way affect the validity of the transaction or the authorization thereof by
the Corporation. If Oral Instructions vary from the Written Instructions which
purport to confirm them, the Custodian shall notify the corporation of such
variance but such Oral Instructions will govern unless the Custodian has not yet
acted.
1.8 "Fund Custody Account" shall mean the account in the name of the
Corporation, which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy of a resolution of the
Board of Directors, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Corporation on account of the Fund.
1.13 "Sub-Custodian" shall mean and include (i) any branch of a
"qualified U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act,
(ii) any "eligible foreign custodian," as that term is defined in Rule 17f-5
under the 1940 Act, approved by the Board Of Directors and having a contract
with the Custodian which contract has been approved by the Board Of Directors,
and (iii) any securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United States, which
operates the central system for handling of securities or equivalent
book-entries in that country or a transnational system for the central handling
of securities or equivalent book-entries, which securities depository or
clearing agency has been approved by the Board Of Directors; provided, that the
Custodian, or a Sub-Custodian has entered into an agreement with such securities
depository or clearing agency.
1.14"Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board Of Directors, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 Appointment. The Corporation hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Fund at any time during the period of this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
2.3 Documents to be Furnished. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Corporation:
a. A copy of the Articles of Incorporation of the Corporation
certified by the Secretary;
b. A copy of the Bylaws of the Corporation certified by the
Secretary;
c. A copy of the resolution of the Board Of Directors of the
Corporation appointing the Custodian, certified by the
Secretary;
d. A copy of the then current Prospectus of the Fund; and
e. A certification of the President and Secretary of the
Corporation setting forth the names and signatures of the
current Officers of the Corporation and other Authorized
Persons.
2.4 Notice of Appointment of Dividend and Transfer Agent. The Trust
agrees to notify the Custodian in writing of the appointment, termination or
change in appointment of any Dividend and Transfer Agent of the Fund.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Fund Custody Account. The Custodian shall open and maintain in its
Trust Department a custody account in the name of the Corporation coupled with
the name of the Fund, subject only to draft or order of the Custodian, in which
the Custodian shall enter and carry all Securities, cash and other assets of the
Fund which are delivered to it.
3.3 Appointment of Agents. (a) In its discretion, the Custodian may
appoint one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Fund and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Fund shall be at the Custodian's expense and shall not relieve the Custodian
of any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board Of
Directors in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Fund, it will so notify the
Corporation and provide it with information reasonably necessary to determine
any such new Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act,
including a copy of the proposed agreement with such Sub-Custodian. The
Corporation shall at the meeting of the Board Of Directors next following
receipt of such notice and information give a written approval or disapproval of
the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-Custodian previously
approved by the Board Of Directors, it shall so notify the Corporation and move
the Securities and cash of the Fund deposited with such Sub-Custodian to another
Sub-Custodian previously approved by the Board Of Directors. The Custodian shall
promptly take such steps as may be required to remove any Sub-Custodian that has
ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
(e) The Custodian hereby warrants to the Corporation that in its
opinion, after due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of the Fund
pursuant to this Agreement afford protection for such property not materially
different from that afforded by the Custodian's established safekeeping
procedures with respect to similar property held by it (and its securities
depositories) in Cincinnati, Ohio.
(f) The Custodian shall oversee the maintenance of any Securities held
for the Fund by any Sub-Custodian. Any Securities held by a Sub-Custodian will
be subject only to the instructions of the Custodian or its agents; and any
Securities held in an eligible foreign securities depository for the account of
a Sub-Custodian will be subject only to the instructions of such Sub-Custodian.
In the event that a Sub-Custodian permits any of the Securities placed in its
care to be held in an eligible foreign securities depository, such Sub-Custodian
will be required by its agreement with the Custodian to identify on its books
such Securities as being held for the account of the Custodian as a custodian
for its customers.
3.4 Delivery of Assets to Custodian. The Corporation shall deliver, or
cause to be delivered, to the Custodian all of the Fund's Securities, cash and
other assets, including (a) all payments of income, payments of principal and
capital distributions received by the Fund with respect to such Securities, cash
or other assets owned by the Fund at any time during the period of this
Agreement, and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Corporation shall deliver to
the Custodian a resolution of the Board Of Directors, certified by
an Officer, authorizing and instructing the Custodian on an
on-going basis to deposit in such Securities Depository or
Book-Entry System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry System to
the extent possible and practical in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of collateral
consisting of Securities.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of
the Custodian in such Book-Entry System or Securities Depository
which includes only assets held by the Custodian as a fiduciary,
custodian or otherwise for customers.
(c) The records of the Custodian with respect to Securities of the
Fund maintained in a Book-Entry System or Securities Depository
shall, by book-entry, identify such Securities as belonging to the
Fund.
(d) If Securities purchased by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System
or Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. If Securities sold by the
Fund are held in a Book-Entry System or Securities Depository, the
Custodian shall transfer such Securities upon (i) receipt of
advice from the Book-Entry System or Securities Depository that
payment for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund.
(e) The Custodian shall provide the Corporation with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund are kept) on
the internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Corporation for any loss or
damage to the Fund resulting (i) from the use of a Book-Entry
System or Securities Depository by reason of any negligence or
willful misconduct on the part of Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above or any of its or their
employees, or (ii) from failure of Custodian or any such
Sub-Custodian to enforce effectively such rights as it may have
against a Book-Entry System or Securities Depository. At its
election, the Corporation shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person from any loss or damage
to the Fund arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Fund has not
been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Fund Custody Account. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from the Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in accordance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts
and options on futures contracts), against the delivery to the
Custodian (or any Sub-Custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in Section 3.9
below or in proper form for transfer, or if the purchase of such
Securities is effected through a Book-Entry System or Securities
Depository, in accordance with the conditions set forth in Section
3.5 above; (ii) in the case of options on Securities, against
delivery to the Custodian (or such Sub-Custodian) of such receipts
as are required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such
Sub-Custodian) of evidence of title thereto in favor of the Fund
or any nominee referred to in Section 3.9 below; and (iv) in the
case of repurchase or reverse repurchase agreements entered into
between the Corporation and a bank which is a member of the
Federal Reserve System or between the Corporation and a primary
dealer in U.S. Government securities, against delivery of the
purchased Securities either in certificate form or through an
entry crediting the Custodian's account at a Book-Entry System or
Securities Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest; taxes; administration, investment
advisory, accounting, auditing, transfer agent, custodian, trustee
and legal fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Corporation, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD, relating
to compliance with rules of The Options Clearing Corporation and
of any registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any agreement
among the Corporation, the Custodian, 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;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including
the Custodian), which deposit or account has a term of one year or
less; and
(i) For any other proper purpose, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board Of
Directors, certified by an Officer, specifying the amount and
purpose of such payment, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Fund Custody Account. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from the
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided that, in
any such case, the cash or other consideration is to be delivered
to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Fund, the Custodian or any Sub-Custodian appointed pursuant
to Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of
the issuer of such Securities, or pursuant to provisions for
conversion contained in such Securities, or pursuant to any
deposit agreement, including surrender or receipt of underlying
Securities in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the
Corporation shall have specified to the Custodian in Proper
Instructions;
(j) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Corporation, but only
against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Corporation;
(l) For delivery in accordance with the provisions of any agreement
among the Corporation, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD, relating
to compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange (or of any
similar organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Corporation, the Custodian, 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; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board Of Directors, certified by an Officer, specifying the
Securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Corporation, the Custodian shall with respect to all
Securities held for the Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all income
and other payments to which the Fund is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on
a timely basis the amount payable upon all Securities which may
mature or be called, redeemed, or retired, or otherwise become
payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities
Depository, all rights and similar securities issued with respect
to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
3.9 Registration and Transfer of Securities. All Securities held for
the Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Corporation shall furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of any of the nominees hereinabove
referred to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of the Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Fund, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Fund as the Corporation
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated
thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Corporation and in compliance with rules
and regulations of the Securities and Exchange Commission, (ii) be the property
of the Corporation and at all times during the regular business hours of the
Custodian be made available upon request for inspection by duly authorized
officers, employees or agents of the Corporation and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be maintained by
Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the
Corporation with a daily activity statement and a summary of all transfers to or
from the Fund Custody Account on the day following such transfers. At least
monthly and from time to time, the Custodian shall furnish the Corporation with
a detailed statement of the Securities and moneys held by the Custodian and the
Sub-Custodians for the Fund under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the
Corporation with such reports, as the Corporation may reasonably request from
time to time, on the internal accounting controls and procedures for
safeguarding Securities, which are employed by the Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of the Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Corporation such proxies, all proxy soliciting materials
and all notices relating to such Securities.
3.14 Information on Corporate Actions. The Custodian shall promptly
deliver to the Corporation all information received by the Custodian and
pertaining to Securities being held by the Fund with respect to optional tender
or exchange offers, calls for redemption or purchase, or expiration of rights as
described in the Standards of Service Guide attached as Exhibit B. If the
Corporation desires to take action with respect to any tender offer, exchange
offer or other similar transaction, the Corporation shall notify the Custodian
at least five Business Days prior to the date on which the Custodian is to take
such action. The Corporation will provide or cause to be provided to the
Custodian all relevant information for any Security which has unique put/option
provisions at least five Business Days prior to the beginning date of the tender
period.
ARTICLE IV
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PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 Purchase of Securities. Promptly upon each purchase of Securities
for the Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by the
Fund pay out of the moneys held for the account of the Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for the Fund, if in the Fund Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of Securities
for the Fund is made by the Custodian in advance of receipt of the Securities
purchased but in the absence of specified Written Instructions to so pay in
advance, the Custodian shall be liable to the Fund for such Securities to the
same extent as if the Securities had been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by the
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Fund as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any for the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Fund to use funds so
credited to the Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its
sole discretion and from time to time, advance funds to the Corporation. to
facilitate the settlement of the Fund's transactions in the Fund Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
ARTICLE V
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REDEMPTION OF FUND SHARES
-------------------------
5.1 Transfer of Funds. From such funds as may be available for the
purpose in the Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of the Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Corporation may designate with respect to such amount
in such Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
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SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Corporation, the Custodian and a broker-dealer registered under
the 1934 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 Trust and of any
registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in
connection with financial futures contracts (or options thereon)
purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities made by the
Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase
agreements and when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board Of Directors, certified by an Officer, setting forth
the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Corporation or the Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Corporation of any action taken or
omitted by the Custodian pursuant to advice of counsel. The Custodian shall not
be under any obligation at any time to ascertain whether the Corporation or the
Fund is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Corporation's charter documents or by-laws, or its investment
objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Fund or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 No Responsibility for Title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 Co-operation. The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Corporation to
keep the books of account of the Fund and/or compute the value of the assets of
the Fund. The Custodian shall take all such reasonable actions as the
Corporation may from time to time request to enable the Corporation to obtain,
from year to year, favorable opinions from the Corporation's independent
accountants with respect to the Custodian's activities hereunder in connection
with (a) the preparation of the Corporation's reports on Form N-1A and Form
N-SAR and any other reports required by the Securities and Exchange Commission,
and (b) the fulfillment by the Corporation of any other requirements of the
Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 Indemnification by Corporation. The Corporation shall indemnify and
hold harmless the Custodian and any Sub-Custodian appointed pursuant to Section
3.3 above, and any nominee of the Custodian or of such Sub-Custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
Sub-Custodian (i) at the request or direction of or in reliance on the advice of
the Corporation, or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-custody agreement
with a Sub-Custodian appointed pursuant to Section 3.3 above, provided that
neither the Custodian nor any such Sub-Custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such Sub-Custodian's negligence, bad faith
or willful misconduct.
8.2 Indemnification by Custodian. The Custodian shall indemnify and
hold harmless the Corporation from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence, bad faith or willful misconduct of the Custodian or
any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 Indemnity to be Provided. If the Corporation requests the Custodian
to take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Corporation shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 Security. If the Custodian advances cash or Securities to the Fund
for any purpose, either at the Corporation's request or as otherwise
contemplated in this Agreement, or in the event that the Custodian or its
nominee incurs, in connection with its performance under this Agreement, any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability or claim (except such as may arise from its or its nominee's
negligence, bad faith or willful misconduct), then, in any such event, any
property at any time held for the account of the Fund shall be security
therefor, and should the Fund fail promptly to repay or indemnify the Custodian,
the Custodian shall be entitled to utilize available cash of such Fund and to
dispose of other assets of such Fund to the extent necessary to obtain
reimbursement or indemnification.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Corporation shall be liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires; floods;
wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Fund in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 Effective Period. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 Termination. Either party 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 sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board Of Directors, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the Fund
and held by the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or for the benefit
of the Fund at the successor custodian, provided that the Corporation shall have
paid to the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Corporation may at any time immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by regulatory authorities or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian
is not designated by the Corporate on or before the date of termination
specified pursuant to Section 10.1 above, then the Custodian shall have the
right to deliver to a bank or corporation company of its own selection, which
(a) is a "bank" as defined in the 1940 Act and (b) has aggregate capital,
surplus and undivided profits as shown on its then most recent published report
of not less than $25 million, all Securities, cash and other property held by
Custodian under this Agreement and to transfer to an account of or for the Fund
at such bank or trust company all Securities of the Fund held in a Book-Entry
System or Securities Depository. Upon such delivery and transfer, such bank or
trust company shall be the successor custodian under this Agreement and the
Custodian shall be relieved of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Corporation and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Fund are set forth in Exhibit C
attached hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
It is expressly agreed that the obligations of the Corporation
hereunder shall not be binding upon any of the Directors, shareholders,
nominees, officers, agents or employees of the Corporation personally, but shall
bind only the property of the Corporation as provided in the Corporation's
Agreement and Articles of Incorporation, as from time to time amended. The
execution and delivery of this Agreement have been authorized by the Directors,
and this Agreement has been signed and delivered by an authorized officer of the
Corporation, acting as such, and neither such authorization by the Directors nor
such execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Corporation as provided in the
above-mentioned Agreement and Articles of Incorporation.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Corporation:
-------------------
RNC Mutual Fund Group, Inc.
11601 Wilshire Boulevard, 24th Floor,
Los Angeles, CA 90025
To Custodian:
-------------
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632-4430
Facsimile: (513) 632-4448
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Corporation shall not circulate any
printed matter which contains any reference to Custodian without the prior
written approval of Custodian, excepting printed matter contained in the
prospectus or statement of additional information for the Fund and such other
printed matter as merely identifies Custodian as custodian for the Fund. The
Corporation shall submit printed matter requiring approval to Custodian in draft
form, allowing sufficient time for review by Custodian and its counsel prior to
any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as
of the day and year first above written.
ATTEST: RNC Mutual Fund Group, Inc.
______________________________ By:_____________________________
ATTEST: STAR BANK, N.A.
______________________________ By:____________________________
<PAGE>
EXHIBIT A
---------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Corporation to administer the Fund Custody Account.
Name Signature
- ---- ---------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
<PAGE>
APPENDIX B
The following agents are employed currently by Star Bank, N.A. for securities
processing and control.
The Depository Corporation Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Corporation Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible
Securities)
<PAGE>
APPENDIX C
Schedule of Compensation
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. Portfolio Transaction Fees:
---------------------------
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $9.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. Market Value Fee
----------------
Based upon an annual rate of: Million
-------
.0003 (3 Basis Points) on First $20
.0002 (2 Basis Points) on Next $20
.00015 (1.5 Basis Points) on Balance
III. Monthly Minimum Fee-Per Fund $300.00
----------------------------
IV. Out-of-Pocket Expenses
----------------------
The only out-of-pocket expenses charged to your account
will be shipping fees or transfer fees.
V. IRA Documents
-------------
Per Shareholder/year to hold each IRA Document $8.00
VI. Earnings Credits
----------------
On a monthly basis any earnings credits generated from uninvested
custody balances will be applied against any cash management service
fees generated.Earnings credits are based on the average yield on the
91 day U.S. Treasury Bill for the preceding thirteen weeks less the 10%
reserve.
<PAGE>
APPENDIX C
Schedule of Compensation Continued
Services Unit Cost ($) Monthly Cost ($)
-------- ------------- ----------------
D.D.A. Account Maintenance 14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access
50.00
ACH Transaction .095
ACH Monthly Maintenance 40.00
Controlled Disbursement (1st account) 110.00
Each additional account 25.00
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
with copy of check .32
without copy of check .26
Checks Printed .20
Positive Pay .06
Issued Items .015
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic
Repetitive 12.00
Non-Repetitive 13.00
International
Repetitive 35.00
Non-Repetitive 40.00
PC - Initiated Wires:
Domestic
Repetitive 9.00
Non-Repetitive 9.00
International
Repetitive 25.00
Non-Repetitive 25.00
____________________________
*** Uncollected Charge Star Bank Prime Rate as of first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use of lockbox, the collected balance in the demand deposit account
will be significantly increased and therefore earnings to offset cash
management service fees will be maximized.
*** Fees for uncollected balances are figured on the monthly average of all
combined accounts.
****Other available cash management services are priced separately. Revised
10/31/95
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our Firm in Post-Effective Amendment
No. 12 to the Registration Statement on Form N-1A of RNC Mutual Fund Group
(formerly "RNC Liquid Assets Fund, Inc.") and to the use of our report dated
October 27, 1995 on the financial statements and financial highlights of RNC
Liquid Assets Fund, Inc (name subsequently changed to RNC Money Market Fund).
Such financial statements and financial highlights appear in the 1995 Annual
Report to Shareholders which are incorporated by reference in the Registration
Statement and Prospectus.
TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 24, 1996
FORM OF PLAN
RNC EQUITY FUND
SHAREHOLDER 12b-1 PLAN
----------------------
1. Services. This Shareholder 12b-1 Plan (the "Plan") has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"), to govern the provision of certain shareholder
servicing activities for the shareholders of RNC Equity Fund (the "Fund" or the
"Equity Fund) a series of RNC Mutual Fund Group, Inc. (the "Group"). The purpose
of the Plan is to benefit the Fund and its shareholders by providing
distribution assistance and servicing levels that will encourage the growth and
retention of shareholder investments. In furtherance of such purpose, the Board
of Directors of the Group shall designate a specific entity to act as
distribution coordinator (the "Distributor") and shall direct the Distributor to
perform various activities, to the extent permitted by the fees authorized
below, including but not limited to the following:
(a) sending periodic information to service
organizations that track investment company information;
(b) answering shareholder inquiries regarding account
status and history;
(c) collecting information from shareholders
regarding changes in option and account designation and
addresses and transmitting the same to the Fund's transfer
agent;
(d) collecting the same type of information as
referred to in subparagraph (c) from independent account
executives and brokers and transmitting it to the Fund's
transfer agent;
(e) supplying other information to the Fund's
transfer agent so that the transfer agent can properly
maintain account records;
(f) providing support services in connection with the
distribution of the Fund's shares;
(g) providing shareholder services not servicing
otherwise provided by the Fund's transfer agent;
(h) formulating and implementing marketing and
promotional activities, including but not limited to, direct
mail promotions, and television, radio, newspaper, magazine
and other mass media advertising;
-1-
<PAGE>
(i) printing and distributing prospectuses,
statements of additional information and reports of the fund;
(j) preparing, printing and distributing sales
literature pertaining to the Fund;
(k) obtaining whatever information, analyses and
reports with respect to marketing and promotional activities
that the Group may, from time to time deem advisable;
(l) making payments, including incentive
compensation, to agents and consultants, including pension
administration firms that provide distribution or shareholder
servicing related services and broker-dealers that engage in
the distribution of the Fund's shares;
(m) making payments to persons who provide support
services in connection with the distribution of the Fund's
shares and servicing of the Fund's shareholders, including,
but not limited to, personnel of Adviser, office space and
equipment, telephone facilities, answering routine inquiries
regarding the Funds, processing shareholder transactions and
providing any other shareholder services not otherwise
provided by the Trust's transfer agency or other servicing
arrangements;
(n) providing facilities, equipment and personnel in
connection with the provision of other services described
herein; and
(o) performing such additional shareholder services
as may be agreed upon by the Group on behalf of the Fund and
the Shareholder Servicing Agent, which shall be approved in
accordance with the 1940 Act, provided that any such
additional shareholder service must constitute a permissible
non-banking activity in accordance with the then current
regulations of, and interpretations thereof by, the Board of
Governors of the Federal Reserve System.
2. Distributor's Duty to Perform Services. The Distributor
shall not be required to perform any or all of the above-listed activities, nor
is the above list intended to be an all-inclusive list of appropriate services
or activities. The Distributor shall coordinate with the Board of Directors of
the Group and the Adviser to the Fund regarding the provision of specific
services on a periodic basis in order to ensure that
-2-
<PAGE>
reimbursable activities engaged in pursuant to this Plan are designed to benefit
the Fund and its shareholders.
3. Shareholder 12b-1 Fee. As reimbursement of actual expenses
incurred for the foregoing services, the Group shall pay on behalf of the Fund
to the Distributor a fee up to a maximum annual rate equal to 0.25% of the
Equity Fund's average daily net assets, accrued daily and payable monthly.
4. Sub-Agents. The Distributor may retain other sub- agents to
perform the above-listed functions and may compensate them for performing such
services. Such sub-agents shall not be entitled to seek additional or direct
compensation from the Group or Fund.
5. Term. This Plan shall take effect on the date upon which
the Equity Fund commences operations and shall continue in effect indefinitely
so long as its continuance, together with the continuance of any and all
agreements now or in the future related to the Plan, are specifically approved
at least annually by a majority of the Board of Directors of the Fund including
a majority of the Directors who are not "interested persons," as defined in the
1940 Act, of the Fund and who have no direct or indirect financial interest in
the operation of the Plan, or any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on the Plan and any related
agreements. Such meeting of the Board of Directors shall be called specifically
for the purpose of, among other things, voting on the Plan.
6. Approval by the Group/Fund. This Plan shall not take effect
until it has been approved by (i) votes of a majority of the Directors of the
Group all of whom are not "interested persons," as defined in the 1940 Act, of
the Group and who have no direct or indirect financial interest in the operation
of this Plan or any agreement related to the Plan, cast in person at a meeting
or meetings called for the purpose of voting on this Plan; and (ii) majority
vote of the outstanding voting securities, as defined in the 1940 Act, of the
Fund.
7. Initial Designation of Distributor. First Fund
Distributors, Inc., the principal underwriter for the Group and an affiliate of
the Fund's Administrator, is designated as the initial Distributor for purposes
of this Plan. First Fund Distributors, Inc. (and any successor Distributor) may
resign upon sixty days written notice and may be replaced by action of the
Group's Board of Directors. In the event that First Fund Distributors resigns or
is replaced, all legitimate and reasonable expenses incurred by First Fund
Distributors and all legitimate and reasonable obligations created by First Fund
Distributors pursuant to its appointment under this Plan shall be honored and/or
assumed by the successor Distributor to the extent (a) the Plan itself continues
in effect and (b) the Board of Directors determines that such expenses and
obligations were
-3-
<PAGE>
incurred in the best interests of shareholders, which determination shall not be
unreasonably withheld.
8. Termination. This Plan may be terminated at any time by
vote of the majority of the Directors of the Group who are not "interested
persons," as defined in the 1940 Act, of the Group and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan or by vote of a majority of the outstanding voting
securities of the Fund.
9. Quarterly Report. The Directors of the Group shall review
on a quarterly basis a written report of the amount of monies paid or payable by
the Fund pursuant to the Plan and any related agreements and the purposes for
which such expenditures were made. Such quarterly report shall be prepared by
such persons as are authorized to direct the distribution of monies paid or
payable by the Fund pursuant to the Plan and any related agreements.
10. Directors' Review. The Directors of the Group have a duty
to request and evaluate, and the Distributor agrees to provide upon request by
the Group, such information as may be reasonably necessary to make an informed
determination of whether the Plan should be implemented or continued and whether
payments should be authorized or ratified. In fulfilling their duties under this
Section, the Directors should consider and give appropriate weight to all
factors pertinent to the continued use of the Fund's assets for the Plan.
Minutes describing the factors considered and the basis for the Directors'
decision to use the Fund's assets for the Plan must be made and preserved in
accordance with Rule 12b-1 under the 1940 Act.
11. Standard of Care, Liability, Indemnification. The
Distributor agrees to observe the standard of care established in the
Underwriting Agreement in effect for the Fund, and the indemnification and
liability provisions of said Underwriting Agreement are hereby incorporated by
reference into this Plan.
12. Amendments. The Plan may not be amended to increase
materially the fee paid to the Distributor except with the approval of a
majority of the outstanding voting securities of the Fund and may not be amended
in any other material respect except with the approval of a majority of the
Board of Directors of the Group including a majority of the Directors who are
not "interested persons," as defined in the 1940 Act, of the Group cast in
person at a meeting called for the purpose of voting on such amendment to the
Plan.
-4-
<PAGE>
IN WITNESS WHEREOF, the Group has executed this Plan as of
this ____ day of ___________, 1996.
RNC MUTUAL FUND GROUP, INC.
By:
-----------------------------------
Eric M. Banhazl
President
Attachment: Schedule A - form of Sub-Agent Agreement
Acknowledgement of Services
to be Provided:
FIRST FUND DISTRIBUTORS, INC.
By:
-------------------------
-5-
FUND ACCOUNTING SERVICE AGREEMENT
between
RNC MUTUAL FUND GROUP, INC.
and
AMERICAN DATA SERVICES, INC.
[GRAPHIC OMITTED]
<PAGE>
================================================================================
INDEX
================================================================================
1. DUTIES OF ADS...............................................................3
2. COMPENSATION OF ADS.........................................................4
3. LIMITATION OF LIABILITY OF ADS..............................................4
4. REPORTS.....................................................................5
5. ACTIVITIES OF ADS...........................................................5
6. ACCOUNTS AND RECORDS........................................................5
7. CONFIDENTIALITY.............................................................6
8. DURATION AND TERMINATION OF THIS AGREEMENT..................................6
9. ASSIGNMENT..................................................................6
10. NEW YORK LAWS TO APPLY....................................................6
11. AMENDMENTS TO THIS AGREEMENT...............................................6
12. MERGER OF AGREEMENT........................................................6
13. NOTICES....................................................................7
SCHEDULE A.....................................................................8
- ----------
FUND ACCOUNTING SERVICE FEE:...................................................8
SCHEDULE B:...................................................................10
- ----------
2
<PAGE>
FUND ACCOUNTING SERVICE AGREEMENT
---------------------------------
AGREEMENT made the 1st. day of March, 1996 by and between RNC MUTUAL FUND GROUP,
INC., a ______________corporation, (the "Fund") and AMERICAN DATA SERVICES,
INC., a New York corporation ("ADS").
BACKGROUND
WHEREAS, the Fund is a diversified open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting services to
mutual funds and possesses facilities sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. DUTIES OF ADS.
ADS will perform the following services for the Fund:
(a) Timely calculate and transmit to NASDAQ the Fund's daily net asset
value and communicate such value to the Fund and its transfer agent. All
portfolio securities will be valued in accordance with the methods that are
specified in the section of the Fund's prospectus that sets forth the procedures
utilized to calculte the daily net asset value per share of the Fund.;
(b) The Fund will select the pricing agent used by ADS to obtain the
daily market quotations to value the securities in the Fund's portfolio. ADS has
electronic interfaces with the following pricing agents:
1. Interactive Data Services Corporation
2. Kenny S&P
3. Muller Data Corporation
Should the Fund select a pricing agent other than those listed above ( an
"Alternative Pricing Agent"), ADS will take the necessary steps to open an
account with the Alternative Pricing Agent, obtain the file formats of the
electronic download to be received from the Alternative Pricing Agent that will
contain the daily market quotations, and make the necessary programming changes
to enable the ADS portfolio accounting system, PAIRS, automatically receive the
electronic download from the Alternative Pricing Agent.
Should the Fund select an Alternative Pricing Agent, ADS will charge the Fund a
fee ("Programming Fee") to make the aforementioned programming changes to PAIRS.
The Programming Fee will be calculated using the rate specified in Schedule A of
this Agreement under the Heading "Custom Programming".
(c) Maintain and keep current all books and records of the Fund as
required by Rule 31a-1 under the 1940 Act, as such rule or any successor rule
may be amended from time to time ("Rule 31a-1"),
3
<PAGE>
that are applicable to the fulfillment of ADS's duties hereunder, as well as any
other documents necessary or advisable for compliance with applicable
regulations as may be mutually agreed to between the Fund and ADS. Without
limiting the generality of the foregoing, ADS will prepare and maintain the
following records upon receipt of information in proper form from the Fund or
its authorized agents:
* Cash receipts journal
* Cash disbursements journal
* Dividend record
* Capital Gain/Loss record
* Purchase and sales - portfolio securities journals
* Subscription and redemption journals
* Security ledgers
* Broker ledger
* General ledger
* Daily expense accruals
* Daily income accruals
* Securities and monies borrowed or loaned and collateral
therefore
* Foreign currency journals
* Trial balances
(d) Provide the Fund and its investment adviser with daily portfolio
valuation, net asset value calculation and other standard operational reports as
requested from time to time.
(e) Provide all raw data available from our fund accounting system
(PAIRS) for management's or the administrators preparation of the following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1a;
5. Annual proxy statement.
6. Financial data necessary to calculate all dividends and capital
gains distributions in accordance with Subchapter M of the
Internal Revenue Code.
ADS 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. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein for each portfolio listed in Schedule B, ADS shall be entitled to receive
compensation and reimbursement for all reasonable out-of-pocket expenses. The
Fund agrees to pay ADS the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
3. LIMITATION OF LIABILITY OF ADS.
(a) ADS may rely upon the advice of the Fund, or of counsel for the
Fund and upon statements of the Fund's independent accountants, brokers and
other persons reasonably believed by it in good faith to be expert in the
matters upon which they are consulted and for any actions reasonably taken in
good faith reliance upon such statements and without negligence or misconduct,
ADS shall not be liable to anyone.
4
<PAGE>
(b) ADS shall be liable to the Fund for any losses arising out of any
act or omission in the course of its duties, the negligence, misfeasance, bad
faith of ADS or breach of the agreement by ADS or disregard of ADS's obligations
and duties under this agreement or the willful violation of any applicable law.
(c) ADS, the Fund and their respective shareholders, officers,
directors, employees and agents (as "Indemnified Parties") and each of ADS and
the Fund (as "Indemnifing Parties") agree to the following indemnifications.
Except as may otherwise be provided by applicable law, no Indemnified Party
shall be subject to, and the Indemnifying Party shall indemnify and hold such
Indemnified Party harmless from and against, any liability for and any damages,
expenses or losses incurred by reason of the inaccuracy of information furnished
to such Indemnified Party provided that the Fund shall not have any
indemnification obligations with respect to inaccurate information supplied by
pricing agents selected by ADS and ADS shall not have any indemnification
obligations in circumstances where ADS has acted in accordance with the standard
of care established in Subparagraph (b) of this Section. An Indemnified Party
shall promptly notify the Indemnifying Party of the assertion of a claim for
which the Indemnifying Party may be required to indemnify the Indemnified Party
and shall keep the Indemnifying Party advised with respect to all developments
regarding such claim. The Indemnifying Party shall have the option to
participate in the defense of such claim. An Indemnified Party in no case shall
confess any claim or make any compromise in any case in which the Indemnifying
Party may be required to indemnify the Indemnified Party except with the
Indemnifying Party 's prior written consent.
4. REPORTS.
(a) The Fund shall provide to ADS on a quarterly basis a report of a
duly authorized officer of the Fund representing that all information furnished
to ADS during the preceding quarter was true, complete and correct in all
material respects. ADS shall not be responsible for the accuracy of any
information furnished to it by the Fund or its authorized agents, and the Fund
shall hold ADS harmless in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) Whenever, in the course of performing its duties under this
Agreement, ADS determines, on the basis of information supplied to ADS by the
Fund or its authorized agents, that a violation of applicable law has occurred
or that, to its knowledge, a possible violation of applicable law may have
occurred or, with the passage of time, would occur, ADS shall promptly notify
the Fund and its counsel of such violation.
5. ACTIVITIES OF ADS.
The services of ADS under this Agreement are not to be deemed
exclusive, and ADS shall be free to render similar services to others so long as
its services hereunder are not impaired thereby.
5
<PAGE>
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by ADS shall be the property of the
Fund, and shall be surrendered to the Fund promptly upon request by the Fund in
the form in which such accounts and records have been maintained or preserved
(including the electronic or computerized format in which such accounts and
records have been maintained). ADS agrees to maintain a back-up set of accounts
and records of the Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts and records are
stored. ADS shall assist the Fund's independent auditors, or, upon approval of
the Fund, any regulatory body, in any requested review of the Fund's accounts
and records. ADS shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all information obtained pursuant to, and all transactions
contemplated by this Agreement, and all other information germane thereto, as
confidential and not to be disclosed to any person except as may be authorized
by the Fund.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, without
penalty, upon ninety (90) days prior written notice.
Should the Fund exercise its right to terminate, all expenses incurred
by ADS associated with the movement of records and material will be borne by the
Fund. Such expenses will include all out-of-pocket expenses and all time
incurred to train or consult with the successor fund accounting agent with
regard to the transfer of fund accounting responsibilities. The charge for all
time incurred by ADS will be calculated in accordance with the rates specified
in Schedule A paragraph (c).
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of ADS, or by ADS without the prior written consent of the Fund.
10. NEW YORK LAWS TO APPLY
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
6
<PAGE>
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the Administrator:
_______________________ Michael Miola
_______________________ President
RNC Mutual Fund Group, Inc. American Data Services, Inc.
11601 Wilshire Boulevard, 25th Floor 24 West Carver Street
Los Angeles, California 90025 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
RNC MUTUAL FUND GROUP, INC. AMERICAN DATA SERVICES, INC.
By:____________________________ By:_________________________
Michael Miola, President
____________________________
7
<PAGE>
SCHEDULE A
----------
FUND ACCOUNTING SERVICE FEE:
For the services rendered by ADS in its capacity as fund accounting
agent, as specified in Paragraph 1. DUTIES OF ADS, the Fund shall pay ADS,
within ten (10) days after receipt of an invoice from ADS at the beginning of
each month, a fee equal to:
CALCULATED FEE WILL BE BASED UPON PRIOR MONTH AVERAGE NET ASSETS:
(No prorating partial months)
MONTHLY FEE PER PORTFOLIO:
--------------------------
Portfolio Type
Net Assets (in millions) Global Domestic Money Mkt
------------------------ ------ -------- ---------
Under $3 ........................$1,000 $ 800 $ 600
From $3 to $ 10.................. 1,375 1,000 825
From $10 to $20 ................. 1,750 1,200 1,000
From $20 to $30.................. 2,000 1,400 1,200
Over $30......................... 2,300 1,600 1,500
PLUS, NET ASSET CHARGE FOR FUNDS
OVER $30 MILLION
1/12th of 2.00 basis points on all assets over $30 million to $70
million. plus 1/12th of 1.00 basis points on all assets from $30
million to $70 million to $100 million.
Fee capped once portfolio reaches $100 million in average net assets
for month.
MULTI-CLASS PROCESSING CHARGE
-----------------------------
$300 per month will be charged for each additional class of fund
shares per portfolio.
FEE INCREASES
-------------
On the annual anniversary date of the agreement the fees enumerated above will
be increased by the change in the CPI for the north east region of the US for
the preceding 12 month period.
OUT-OF-POCKET EXPENSES
----------------------
The following expenses will be charged to the Fund as incurred by ADS in
connection with the performance of its duties to include quotation fees, capital
change information, telephone toll charges, facsimile transmissions, supplies
(related to fund records), record storage, postage and courier charges.
CONTRACT DURATION
-----------------
8
<PAGE>
3 years.
CONVERSION COSTS
----------------
Will be negotiated based upon condition of records to be converted and volume of
records to be converted.
SPECIAL REPORTS.
----------------
All reports and /or analyses requested by the Fund, its auditors, legal counsel,
portfolio manager, or any regulatory agency having jurisdiction over the Fund,
that are not in the normal course of Fund administrative activities as specified
in Paragraph 1 of this Agreement or are not required to clarify standard reports
generated by ADS, shall be subject to an additional charge, agreed upon in
advance and in writing, based upon the following rates:
Labor:
Senior staff - $100.00/hr.
Junior staff - $ 50.00/hr.
Computer time - $45.00/hr.
CUSTOM PROGRAMMING
------------------
All custom programming requested by the Fund to be made to the PAIRS portfolio
accounting system shall be subject to an additional charge, agreed upon in
advance and in writing, based upon the rate of $175.00 per hour.
9
<PAGE>
SCHEDULE B:
-----------
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
RNC MONEY MARKET FUND
RNC EQUITY FUND
10
TRANSFER AGENCY AND SERVICE AGREEMENT
between
RNC MUTUAL FUND GROUP, INC.
and
AMERICAN DATA SERVICES, INC.
[GRAPHIC OMITTED]
<PAGE>
- --------------------------------------------------------------------------------
INDEX
- --------------------------------------------------------------------------------
1. TERMS OF APPOINTMENT; DUTIES OF ADS........................................3
2. FEES AND EXPENSES..........................................................4
3. REPRESENTATIONS AND WARRANTIES OF ADS......................................5
4. REPRESENTATIONS AND WARRANTIES OF THE FUND.................................5
5. INDEMNIFICATION............................................................5
6. COVENANTS OF THE FUND AND ADS..............................................7
7. TERMINATION OF AGREEMENT...................................................7
8. ASSIGNMENT.................................................................7
9. AMENDMENT..................................................................8
10. NEW YORK LAWS TO APPLY....................................................8
11. MERGER OF AGREEMENT.......................................................8
12. NOTICES...................................................................8
FEE SCHEDULE...................................................................9
- ------------
(A) ACCOUNT MAINTENANCE CHARGE:................................................9
(B) TRANSACTION FEES:..........................................................9
FEE REDUCTION:.............................................................10
(C) IRA PLAN FEES:............................................................10
FEE INCREASES..............................................................10
(D) EXPENSES:.................................................................10
(E) SPECIAL REPORTS:..........................................................11
(F) CONVERSION CHARGE:........................................................11
SCHEDULE A....................................................................12
- ----------
2
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made the____day of _____, 1996, by and between RNC MUTUAL FUND GROUP,
INC. a _____________________ Corporation, having its principal office and place
of business at 11601 Wilshire Boulevard, 25th Floor, Los Angeles, California
90025 (the "Fund"), and American Data Services, Inc., a New York corporation
having its principal office and place of business at 24 West Carver Street.,
Huntington, New York 11743 ("ADS").
WHEREAS, the Fund desires to appoint ADS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 Subject to the terms and conditions set forth in this agreement,
the Fund hereby employs and appoints ADS to act as, and ADS agrees to act as its
transfer agent for the Fund's authorized and issued shares of its common stock,
$________ par value, ("Shares"), dividend disbursing agent and agent in
connection with any accumulation, open-account or similar plans provided to the
shareholders of the fund ("Shareholders") set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund.
1.02 ADS agrees that it will perform the following services:
(a) In accordance with the Fund's Registration Statement, which
describes how sales and redemptions of Shares shall be made, ADS shall:
(i) Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation therefore to the Custodian of the
Fund authorized by the Board of Directors of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of full and
fractional Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions and
deliver the appropriate documentation therefore to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by the
Custodian with respect to any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon receipt of
appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions declared by
the Fund, and effect dividend and capital gains distribution reinvestments in
accordance with Shareholder instructions;
(vii) Serve as a record keeping transfer agent for the Fund, and maintain
records of account for and advise the Fund and its Shareholders as to the
foregoing; and
3
<PAGE>
(viii) Record the issuance of shares of the Fund and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of shares of the Fund which are
authorized, based upon data provided to it by the Fund, and issued and
outstanding. ADS shall also provide the Fund each business day with the
following: (I) the total number and dollar amount of Shares issued and
outstanding as of the close of business on the preceding business day; (ii) the
total number and dollar amount of Shares sold on the preceding business day;
(iii) the total number and dollar amount of Shares redeemed on the preceding
business day; (iv) the total number and dollar amount of Shares sold on the
preceding business day pursuant to dividend and capital gains distribution
reinvestments; and (v) the total number and dollar amount of Shares which are
authorized and issued and outstanding as of the opening of business on such day.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), ADS shall:
(i) Perform all of the customary services of a transfer agent, dividend
disbursing agent, including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases redemptions of
Shares and other confirmable transactions in Shareholder accounts as prescribed
in the federal securities laws or as described in the Fund's Registration
Statement, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system and reports
which will enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to ADS in writing those
transactions and shares to be treated as exempt from blue sky reporting for each
State and (ii) monitor the daily activity for each State, as provided by ADS.
The responsibility of ADS pursuant to this Agreement for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and ADS.
2. FEES AND EXPENSES
2.01 For performance by ADS pursuant to this Agreement, the Fund agrees
to pay ADS an annual maintenance fee for each Shareholder account and
transaction fees for each portfolio or class of shares serviced under this
Agreement (See Schedule A) as set out in the fee schedule attached hereto. Such
fees and out-of pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Fund and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS
for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by ADS at the request or with the consent of the Fund,
will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to ADS by the Fund at least seven (7)
days prior to the mailing date of such materials.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of The State of New York.
3.02 It is duly qualified to carry on its business in The State of New
York.
3.03 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 ADS is duly registered as a transfer agent under the Securities
Exchange Act of 1934 and shall continue to be registered throughout the
remainder of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to ADS that;
4.01 It is a corporation duly organized and existing and in good
standing under the laws of __________________.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
5. INDEMNIFICATION
5.01 ADS shall not be responsible for, and the Fund shall indemnify and
hold ADS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS or its agents or subcontractors required to be taken
pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence, willful misconduct, or in reckless disregard of its
duties under this Agreement..
6
<PAGE>
(b) The Fund's refusal or failure to comply with the terms of this Agreement,
or which arise out of the Fund's lack good faith, negligence or willful
misconduct or which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by ADS or its agents or subcontractors of
information, records and documents which (i) are received by ADS or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by ADS or its agents or subcontractors
of any written instruction signed by an officer of the Fund, or any legal
opinion of counsel to the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 ADS 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 ADS as a result of ADS's lack of good faith, negligence or
willful misconduct or the breach of any warranty or representation of ADS
hereunder.
5.03 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with the Fund's legal counsel with respect to any
matter arising in connection with the services to be performed by ADS under this
Agreement, and ADS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. ADS, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided ADS or its agents
or subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Fund. ADS, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party of seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6
<PAGE>
6. COVENANTS OF THE FUND AND ADS
6.01 The Fund Shall promptly furnish to ADS a certified copy of the
resolution of the Board of Directors of the Fund authorizing the appointment of
ADS and the execution and delivery of this Agreement.
6.02 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 ADS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, ADS agrees that all such records prepared or maintained by
ADS relating to the services to be performed by ADS hereunder are the property
of the Fund and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Fund on and
in accordance with its request.
6.04 ADS and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. ADS reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person, and shall
promptly notify the Fund of any unusual request to inspect or copy the
shareholder records of the Fund or the receipt of any other unusual request to
inspect, copy or produce the records of the Fund.
7. TERMINATION OF AGREEMENT
7.01 This Agreement shall become effective as of the date hereof and
shall remain in force through and shall automatically terminate on June 30,
1998, provided however, that both parties to this Agreement have the option to
terminate the Agreement, without penalty, upon ninety (90) days prior written
notice.
7.02 Should the Fund exercise its right to terminate, all expenses
incurred by ADS associated with the movement of records and material will be
borne by the Fund. Such expenses will include all out-of-pocket expenses and all
time incurred to train or consult with the successor transfer agent with regard
to the transfer of shareholder accounting and stock transfer responsibilities.
The charge for all time incurred by ADS will be calculated in accordance with
the rates specified in the Fee Schedule paragraph (e).
8. ASSIGNMENT
8.01 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party.
7
<PAGE>
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns.
9. AMENDMENT
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of the Fund.
10. NEW YORK LAWS TO APPLY
10.01 ...The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
11. MERGER OF AGREEMENT
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
12. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the Administrator:
_______________________ Michael Miola
_______________________ President
RNC Mutual Fund Group, Inc. American Data Services, Inc.
11601 Wilshire Boulevard, 25th Floor 24 West Carver Street
Los Angeles, California 90025 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
RNC MUTUAL FUND GROUP, INC. AMERICAN DATA SERVICES, INC.
By:____________________________ By:__________________________
Michael Miola, President
8
<PAGE>
FEE SCHEDULE
------------
For the services rendered by ADS in its capacity as transfer agent, the
Fund shall pay ADS, within ten (10) days after receipt of an invoice from ADS at
the beginning of each month, a fee, calculated as a combination of account
maintenance charges and transaction charges as follows:
(a) ACCOUNT MAINTENANCE CHARGE:
The Greater of:
(1) Minimum maintenance charge per fund - $500.00/month (No prorating partial
months);
OR,
(2) Based upon the total of all open/closed accounts in the Fund upon the
following annual rates (billed monthly):
Equity Fund ....................... $ 8.00 per account
Fixed Income Fund.................. $ 10.00 per account
Money Market Fund ................. $ 12.00 per account
Closed accounts ................... $ 2.00 per account***
** All accounts closed during a calendar year will be considered as open
accounts for billing purposes until all 1099's and 5498's have been sent to
shareholders and reported (via mag media) to the IRS.
PLUS,
(b) TRANSACTION FEES:
Trade Entry (purchase/liquidation) ................... $ 1.35 each
New account set-up ................................... $ 2.50 each
Customer service calls ................................ $ 1.00 each
Correspondence/ information requests .................. $ 1.25 each
Liquidations paid by wire transfer .................... $ 3.00 each
Omnibus accounts ...................................... $ 1.25 per transaction*
ACH charge .............................................$ .30 each
SWP ....................................................$ 1.25 each *
* Not included as a Trade Entry.
9
<PAGE>
FEE REDUCTION:
--------------
As consideration for entering into a three year contract, ADS will reduce the
above fees as follows:
While the net assets of the Fund to be serviced under this Agreement (see
Schedule A) are below $15 million, account maintenance fees (EXCLUDING $500
MINIMUM MONTHLY FEE) will be reduced by 40% and transaction fees will be
reduced by 50%.
While the net assets of the Fund are between $15 million and $18 million,
account maintenance fees (EXCLUDING $500 MINIMUM MONTHLY FEE) will be
reduced by 20% and transaction fees will be reduced by 30%.
Once the net assets of the Fund exceed $18 million, the fee schedule above
will be in force without any fee reduction.
Out of pocket expenses are not subject to the fee reduction and will be
charged to the Fund as incurred.
(c) IRA PLAN FEES:
The following fees will be charged directly to the shareholder account:
Annual maintenance fee ................................. $12.00 /account *
Incoming transfer from prior custodian ................. $12.00
Distribution to a participant .......................... $15.00
Refund of excess contribution .......................... $15.00
Transfer to successor custodian ........................ $12.00
Automatic periodic distributions ....................... $15.00/year per account
* Includes Star Bank N.A. $8.00 Custody Fee.
FEE INCREASES
-------------
On each annual anniversary date of this Agreement, the fees enumerated above
(except for the IRA Plan fees) will be increased by the lesser of, the change in
the Consumer Price Index for the Northeast region (CPI), or the overall
inflation rate for the twelve month period ending with the month preceding such
annual anniversary date.
(d) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive of
salaries, advanced by ADS in connection with but not limited to the printing of
confirmation forms and statements, proxy expenses, quotation services, travel
requested by the Fund, telephone, facsimile transmissions, stationery and
supplies (related to Fund records), record storage, postage (plus a $0.07
service charge for all mailings), telex and courier charges authorized by the
Fund, incurred in connection with the performance of its duties hereunder. ADS
shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
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(e) SPECIAL REPORTS:
All reports and /or analyses requested by the Fund, its auditors, legal counsel,
portfolio manager, or any regulatory agency having jurisdiction over the Fund,
that are not in the normal course of fund stock transfer activities as specified
in Paragraph 1 of this Agreement and are not required to clarify standard
reports generated by ADS, shall be subject to an additional charge, agreed upon
in advance and in writing, based upon the following rates:
Labor:
Senior staff - $100.00/hr.
Junior staff - $ 50.00/hr.
Computer time -$ 45.00/hr.
(f) CONVERSION CHARGE:
There will be a charge to convert the Fund's shareholder accounting
records on to the ADS stock transfer system (ADSHARE). In addition, ADS will be
reimbursed for all out-of-pocket expenses, enumerated in paragraph (b) above and
data media conversion costs, incurred during the conversion process.
The aforementioned conversion charge will be agreed upon in advance and
will be based upon the condition of records and the volume of records to be
converted.
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SCHEDULE A
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PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
. RNC MONEY MARKET FUND
RNC EQUITY FUND
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