Registration No. 33-6836
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 18 [X]
(Check appropriate box or boxes.)
EASTCLIFF FUNDS, INC.
(Exact name of Registrant as Specified On Charter)
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 336-1444
(Registrant's Telephone Number, Including Area Code)
Copy to:
John Clymer Richard L. Teigen
900 Second Avenue South Foley & Lardner
Suite 300 777 East Wisconsin Avenue
Minneapolis, Minnesota 55402 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
__________________________
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the
Investment Company Act of 1940, and filed its required Rule 24f-2
Notice for the Registrant's fiscal year ended June 30, 1997 on August
28, 1997.
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[X] on September 30, 1997 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
EASTCLIFF FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the items of
Parts A and B of Form N-1A.)
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
Part A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights; Performance
Information Information
4. General Description of Introduction; Investment Objectives
Registrant and Policies; Investment Practices
and Risks
5. Management of the Management of the Funds; Brokerage
Fund Transactions
5A. Management's Discussion Included in Annual Report to
of Fund Performance Shareholders
6. Capital Stock and Dividend Reinvestment; Dividends,
Other Securities Distributions and Taxes; Capital
Structure; Shareholder Reports
Distribution Plan; Determination of
7. Purchase of Securities Net Asset Value; Purchase of
Being Offered Shares; Exchange Privilege;
Dividend Reinvestment; Automatic
Investment Plan; Retirement Plans
8. Redemption or Repurchase Redemption of Shares; Systematic
Withdrawal Plan
9. Legal Proceedings *
______________
* Answer negative or inapplicable
<PAGE>
Part B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and
History *
13. Investment Objectives Investment Restrictions; Investment
and Policies Considerations
14. Management of the Directors and Officers of the
Registrant Corporation
15. Control Persons and Directors and Officers of the
Principal Holders Corporation; Ownership of Management
of Securities and Principal Shareholders
16. Investment Advisory Investment Adviser, Portfolio
and Other Services Managers and Administrator;
Distribution of Shares; Custodian;
Independent Accountants
17. Brokerage Allocation and Allocation of Portfolio Brokerage
Other Practices
18. Capital Stock and Included in Prospectus under "Capital
Other Securities Structure" and Shareholder Meetings
19. Purchase, Redemption Included in Prospectus under
and Pricing of Secu- "Determination of Net Asset Value";
rities Being Offered "Dividend Reinvestment"; Automatic
Investment Plan"; "Systematic
Withdrawal Plan"; "Exchange
Privilege"; and "Retirement Plans";
Determination of Net Asset Value and
Performance; Information Incorporated
by Reference
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Determination of Net Asset Value and
Performance Data Performance
23. Financial Statements Financial Statements
__________
* Answer negative or inapplicable.
<PAGE>
P R O S P E C T U S
(EASTCLIFF LOGO)
EASTCLIFF FUNDS
EASTCLIFF GROWTH FUND
EASTCLIFF TOTAL RETURN FUND
EASTCLIFF REGIONAL SMALL
CAPITALIZATION VALUE FUND
NO-LOAD MUTUAL FUNDS
P R O S P E C T U S September 30, 1997
(EASTCLIFF LOGO)
EASTCLIFF FUNDS
900 SECOND AVENUE SOUTH
300 INTERNATIONAL CENTRE
MINNEAPOLIS, MINNESOTA 55402
(612) 336-1444
Eastcliff Funds, Inc. (the "Corporation") is an open-end, diversified management
investment company consisting of three separate portfolios, the Eastcliff Growth
Fund (the "Growth Fund"), the Eastcliff Total Return Fund (the "Total Return
Fund") and the Eastcliff Regional Small Capitalization Value Fund (the "Regional
Small Cap Fund") (collectively, the "Eastcliff Funds" or "Funds"), offering
distinct investment choices.
EASTCLIFF GROWTH FUND
The investment objective of the Growth Fund is to produce long-term growth of
capital. The Growth Fund seeks to achieve its objective by investing
principally in equity securities.
EASTCLIFF TOTAL RETURN FUND
The investment objective of the Total Return Fund is to realize a combination of
capital appreciation and income which will result in the highest total return,
while assuming reasonable risks. The term "reasonable risks" refers to the
judgment of the Total Return Fund's investment adviser or portfolio manager that
investment in certain securities would not present an excessive risk of loss in
light of current and anticipated future general market and economic conditions,
trends in yields and interest rates, and fiscal and monetary policies. The
Total Return Fund intends to invest in a combination of equity and debt
securities.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
The investment objective of the Regional Small Cap Fund is to produce capital
appreciation. The Regional Small Cap Fund seeks to achieve its objective by
investing principally in equity securities of small capitalization companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado, Illinois, Indiana and Ohio.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING RESOURCE TRUST COMPANY AND ANY OF ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, DUE TO
FLUCTUATIONS IN EACH FUND'S NET ASSET VALUE.
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.
This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Funds have filed with the Securities and Exchange
Commission. A Statement of Additional Information, dated September 30, 1997,
which is a part of such Registration Statement, is incorporated by reference in
this Prospectus. Copies of the Statement of Additional Information will be
provided without charge to each person to whom a Prospectus is delivered upon
written or oral request made by writing to the address or calling the telephone
number, stated above. All such requests should be directed to the attention of
the Corporation's Vice President.
TABLE OF CONTENTS
PAGE
-----
Expense Information i
Financial Highlights 1
Introduction 3
Investment Objectives and Policies 3
Investment Practices and Risks 5
Management of the Funds 9
Distribution Plan 13
Determination of Net Asset Value 13
Purchase of Shares 13
Redemption of Shares 14
Exchange Privilege 17
Dividend Reinvestment 17
Automatic Investment Plan 18
Systematic Withdrawal Plan 18
Retirement Plans 19
Dividends, Distributions and Taxes 21
Brokerage Transactions 21
Capital Structure 21
Shareholder Reports 22
Performance Information 22
Share Purchase Application centerfold
EXPENSE INFORMATION
EASTCLIFF
EASTCLIFF EASTCLIFF TOTAL REGIONAL SMALL
GROWTH FUND RETURN FUND CAP FUND
----------- ----------------- ----------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
or Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fee None*<F1> None*<F1> None*<F1>
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00% 1.00% 1.00%
12b-1 Fees 0.00%**<F2> 0.00%**<F2> 0.00%**<F2>
Other Expenses (after reimbursement) 0.30%*** 0.30%*** 0.30%***
<F3> <F3> <F3>
------- -------- --------
TOTAL FUND OPERATING EXPENSES
(AFTER REIMBURSEMENT) 1.30%***<F3>1.30%***<F3> 1.30%***<F3>
======== ======== ========
*<F1>A fee of $12.00 is charged for each wire redemption.
**<F2>Although each of the Funds has adopted a 12b-1 Plan, each presently
intends not to pay any 12b-1 Fees during the fiscal year ending June 30, 1998.
***<F3>Other Expenses and Total Fund Operating Expenses reflect the fact that
the Adviser has voluntarily agreed to waive its advisory fee
Total Fund Operating Expenses do not exceed 1.30% of the average daily net
assets of each of the Growth Fund, the Total Return Fund and the Regional Small
Cap Fund. Total Fund Operating Expenses and Other Expenses for the Growth Fund
and the Total Return Fund for the fiscal year ended June 30, 1997 would have
been 1.33% and 0.33%, respectively, for the Growth Fund and 1.49% and 0.49%,
respectively, for the Total Return Fund, without the expense reimbursement.
Total Fund Operating Expenses and Other Expenses for the Regional Small Cap Fund
for the period from September 16, 1996 (commencement of operations) to June 30,
1997 would have been 1.61% (annualized) and 0.61% (annualized), respectively,
without the expense reimbursement.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------ -------
EXAMPLE:
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
Eastcliff Growth Fund $13 $41 $71 $157
Eastcliff Total Return Fund $13 $41 $71 $157
Eastcliff Regional Small
Capitalization Value Fund $13 $41 $71 $157
The purpose of the preceding table is to assist investors in understanding
the various costs that an investor in a particular Fund will bear, directly or
indirectly. THEY SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The
Annual Fund Operating Expenses for the Growth Fund, the Total Return Fund and
the Regional Small Cap Fund are based on the actual expenses for the year ended
June 30, 1997. The example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This hypothetical rate
of return is not intended to be representative of past or future performance of
any of the Funds.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of a Fund outstanding throughout each period)
The Financial Highlights of the Funds should be read in conjunction with the
Funds' financial statements and notes thereto, included in the Funds' Annual
Report to Shareholders. Further information about the performance of the Funds
is also contained in the Funds' Annual Report to Shareholders, copies of which
may be obtained without charge upon request. Prior to December 17, 1987, the
investment adviser to the Total Return Fund was Resource Capital Advisers, Inc.
and from December 17, 1987 until December 31, 1994, the investment adviser to
the Total Return Fund was Fiduciary Management, Inc.
EASTCLIFF GROWTH FUND
FOR THE YEAR FOR THE PERIOD FROM
ENDED JULY 1, 1995+<F4> TO
JUNE 30, 1997 JUNE 30, 1996
------------- --------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.56 $10.00
Income from investment operations:
Net investment loss (a)<F5> (0.14) (0.08)
Net realized and unrealized gains
on investments 1.50 2.64
------- -------
Total from investment operations 1.36 2.56
Less distributions:
Dividend from net investment income -- --
Distribution from net realized gains -- --
------- -------
Total from distributions -- --
------- -------
Net asset value, end of period $13.92 $12.56
======= =======
TOTAL INVESTMENT RETURN 10.8% 25.6%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 46,389 46,193
Ratio of expenses (after reimbursement)
to average net assets (b)<F6> 1.3% 1.3%
Ratio of net investment loss to
average net assets (c)<F7> (1.0%) (0.8%)
Portfolio turnover rate 54.3% 40.3%
Average commission rate paid (d)<F8> $0.0600 --
+<F4>Commencement of operations.
(a)<F5>Net investment loss per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
(b)<F6>Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been for the
years ended June 30, 1997 and 1996, 1.3% and 1.4%, respectively.
(c)<F7>If the Fund had paid all of its expenses, the ratio would have been for
the years ended June 30, 1997 and 1996, (1.0%) and (0.9%), respectively.
(d)<F8>Disclosure required for fiscal years beginning after September 1, 1995.
EASTCLIFF TOTAL RETURN FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
OCTOBER 1,
YEARS ENDED 1994 TO
JUNE 30, JUNE 30, YEARS ENDED SEPTEMBER 30,
----------------- -----------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------ ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year $14.62 $11.96 $11.92 $12.38 $11.96 $11.56 $9.47 $11.40 $9.88 $13.94
Income from
investment operations:
Net investment income 0.23 0.09 0.14 0.15 0.19 0.13 0.28 0.33 0.24 0.06
Net realized and
unrealized gains (losses)
on investments 3.47 2.90 0.71 0.12 1.28 1.27 2.30 (1.82) 1.40 (1.17)
------- ------- ------- ------ ------- ------- ------- ------- ------- -------
Total from investment
operations 3.70 2.99 0.85 0.27 1.47 1.40 2.58 (1.49) 1.64 (1.11)
Less distributions:
Dividends from net
investment income (0.12) (0.17) (0.14) (0.18) (0.15) (0.23) (0.36) (0.26) (0.11) --
Distributions from net
realized gains (1.34) (0.16) (0.67) (0.55) (0.90) (0.77) (0.13) (0.18) (0.01) (2.95)
------- ------- ------- ------ ------- ------- ------- ------- ------- -------
Total from distributions (1.46) (0.33) (0.81) (0.73) (1.05) (1.00) (0.49) (0.44) (0.12) (2.95)
------- ------- ------- ------ ------- ------- ------- ------- ------- -------
Net asset value, end of year $16.86 $14.62 $11.96 $11.92 $12.38 $11.96 $11.56 $9.47 $11.40 $9.88
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
TOTAL INVESTMENT
RETURN (d)<F12> 28.1% 25.4% 10.4%(a)<F9> 2.2% 13.4% 13.2% 28.7% (13.5%) 16.8% (3.0%)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of year
(in 000's $) 21,626 17,799 15,806 2,478 2,683 2,631 2,225 2,055 2,728 1,041
Ratio of expenses
(after reimbursement)
to average net assets(b)<F10> 1.3% 1.3% 1.5%(a)<F9> 2.0% 2.0% 2.7% 2.0% 2.4% 3.0% 2.8%
Ratio of net investment
income to average
net assets(c)<F11> 1.5% 0.7% 2.5%(a)<F9> 1.3% 1.5% 1.2% 2.4% 2.8% 2.8% 1.7%
Portfolio turnover rate 58.3% 95.1% 89.4% 13.2% 28.0% 34.9% 38.0% 62.7% 27.2% 51.9%
Average commission rate paid(e)$0.0624 -- -- -- -- -- -- -- -- --
<F13>
(a)<F9>Annualized.
(b)<F10>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios would have
been, for the years ended June 30, 1997 and 1996, for the period from October 1,
1994 to June 30, 1995 and for the years ending September 30, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 as follows: 1.5%, 1.6%, 2.6%(a)<F9>, 3.0%, 2.8%, 3.3%,
3.2%, 3.1%, 4.4% and 11.8%, respectively.
(c)<F11>If the Fund had paid all of its expenses, the ratios would have been,
for the years ended June 30, 1997 and 1996, for the period from October 1, 1994
to June 30, 1995 and for the years ending September 30, 1994, 1993, 1992, 1991,
1990, 1989 and 1988 as follows: 1.3%, 0.4%, 1.4%(a)<F9>, 0.2%, 0.8%, 0.6%, 1.3%,
2.1%, 1.4% and (7.4%), respectively.
(d)<F12>Effective December 31, 1994, the Fund changed investment advisers from
Fiduciary Management, Inc. to Resource Capital Advisers, Inc.
(e)<F13>Disclosure required for fiscal years beginning after September 1, 1995.
</TABLE>
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
FOR THE PERIOD FROM
SEPTEMBER 16, 1996+<F14>TO
JUNE 30, 1997
---------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gains on investments 2.23
-------
Total from investment operations 2.25
Less distributions:
Dividend from net investment income (0.02)
Distribution from net realized gains --
-------
Total from distributions (0.02)
-------
Net asset value, end of period $12.23
=======
TOTAL INVESTMENT RETURN 22.5%**<F16>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 29,231
Ratio of expenses (after reimbursement) to average net assets (a)<F17>1.3%*<F15>
Ratio of net investment income to average net assets (b)<F18> 0.3%*<F15>
Portfolio turnover rate 29.4%
Average commission rate paid $0.0693
+<F14>Commencement of operations.
*<F15>Annualized.
**<F16>Not annualized.
(a)<F17>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have
been 1.6%*<F15>.
(b)<F18>If the Fund had paid all of its expenses, the ratio would have been
(0.0%)*<F15>.
INTRODUCTION
The Corporation is an open-end, diversified management investment company,
better known as a mutual fund, registered under the Investment Company Act of
1940 (the "Act"). It was incorporated under the laws of Wisconsin on May 23,
1986. The Corporation consists of three funds: Eastcliff Growth Fund, Eastcliff
Total Return Fund and Eastcliff Regional Small Capitalization Value Fund. Each
of the Funds obtains its assets by continuously selling its shares to the
public. Proceeds from such sales are invested by the particular Fund in
securities of other issuers. In this manner, each Fund: combines the resources
of many investors, with each individual investor having an interest in every one
of the securities owned by such Fund; provides each individual investor with
diversification by investing in the securities of many different issuers; and,
furnishes experienced management to select and watch over its investments. As an
open-end investment company, the Corporation will redeem any of its outstanding
shares on demand of the owner at their next determined net asset value.
Registration of the Corporation under the Act does not involve supervision of
the Corporation's management or policies by the Securities and Exchange
Commission.
INVESTMENT OBJECTIVES AND POLICIES
EASTCLIFF GROWTH FUND
The investment objective of the Growth Fund is to produce long-term growth of
capital. The Growth Fund will seek to meet its objective by investing
principally in equity securities. The Growth Fund generally will invest in
domestic equity securities that are listed on a securities exchange or traded in
the over-the-counter market. Under normal market conditions, the Growth Fund
will invest at least 65% of its total assets in equity securities, which may
include common stocks, preferred stocks, convertible securities, and warrants.
In addition, at least 80% of the Growth Fund's total assets will be invested in
domestic securities and no more than 20% of the Growth Fund's total assets may
be invested in foreign securities. The Growth Fund may also invest in corporate
bonds, debentures and notes, debt securities issued or guaranteed by the United
States government and its agencies or instrumentalities, and short-term money
market instruments, such as U.S. Treasury Bills, bank certificates of deposit,
commercial paper, commercial paper master notes and repurchase agreements. There
can be no assurance that the Growth Fund will achieve its investment objective.
See "Investment Practices and Risks."
Investments may be made in well-known established companies, as well as in
newer and relatively unseasoned companies. Potential investments for the Growth
Fund are evaluated using fundamental analysis including criteria such as:
earnings outlook, cash flow, asset values, sustainability of product cycles,
expansion opportunities, management capabilities, industry outlook, competitive
position, and current price relative to long-term value of the company.
Investments generally will not be made on the basis of market timing techniques;
rather, it is anticipated that the Growth Fund will be relatively fully
invested at most times.
At times, the Growth Fund's investment adviser or portfolio manager may
invest in put or call options, futures contracts and options on futures
contracts to hedge the Growth Fund's position in an individual security,
provided that not more than 5% of the Growth Fund's net assets will be invested
in put or call options and options on futures contracts and not more than 5% of
its net assets will be invested in futures contracts. Such investments will be
effected as a defensive measure during periods of anticipated market weakness
and will not result in leveraging the Growth Fund. A description of the
foregoing securities and the risks associated therewith is included in the
Statement of Additional Information.
EASTCLIFF TOTAL RETURN FUND
The investment objective of the Total Return Fund is to realize a combination
of capital appreciation and income which will result in the highest total
return, while assuming reasonable risks. The term "reasonable risks" refers to
the judgment of the Total Return Fund's investment adviser or portfolio manager
that investment in certain securities would not present an excessive risk of
loss in light of current and anticipated future general market and economic
conditions, trends in yields and interest rates, and fiscal and monetary
policies. Because the Total Return Fund's objective is to realize the highest
total return, the percentage of such Fund's portfolio invested to produce
capital appreciation may at any time be greater or less than the percentage of
such Fund's portfolio invested to produce current income. In seeking to attain
the Total Return Fund's objective, such Fund intends to invest in common stocks,
both growth and income-oriented, preferred stocks, securities convertible into
common stocks, warrants, corporate bonds, debentures and notes, debt securities
issued or guaranteed by the United States government and its agencies or
instrumentalities, short-term money market instruments, such as U.S. Treasury
Bills, bank certificates of deposit, commercial paper, commercial paper master
notes and repurchase agreements and securities of foreign issuers. There can be
no assurance that the Total Return Fund will achieve its investment objective.
See "Investment Practices and Risks."
No minimum or maximum percentage of the Total Return Fund's assets is
required to be invested in common stocks or any other type of security. At
times, the Total Return Fund may be 100% invested in common stocks and other
types of equity securities. On the other hand, when the Total Return Fund's
investment adviser or portfolio manager believes that in the light of current
economic and market conditions such Fund's investment objective may be more
readily attainable in debt securities, up to 100% of the Total Return Fund's
assets may be invested in such securities. Among the economic and market
conditions considered by the Total Return Fund's investment adviser are:
historic dividend yields as compared to current dividend yields; historic price-
earnings ratios as compared to current price-earnings ratios; interest rate
movements; and inflation measures. If, based on the investment adviser's
evaluation, the investment adviser determines that prices of common stocks will
generally rise, the investment adviser will cause the Total Return Fund to
invest principally in common stocks or other equity securities. If, based on the
investment adviser's evaluation, the investment adviser determines that prices
of common stocks will generally decline or remain stable, the investment adviser
will cause such Fund to invest principally in debt securities.
The Total Return Fund's investment adviser and portfolio manager will
consider various financial characteristics, including: earnings growth; book
value; net current asset value per share; replacement cost; and dividends. The
investment adviser will study the financial statements of the issuing
corporation and other companies in the same industry, market trends and economic
conditions in general. No formula is used in such analysis. Common stocks will
generally be purchased for long-term capital appreciation. However in
appropriate situations purchases may be made with the expectation of price
appreciation over a relatively short period of time. The Total Return Fund's
investments in commons stocks and other equity-type investments, such as
preferred stocks, securities convertible into common stocks and warrants, may be
made without regard to any objective criteria such as size, exchange listing or
seasoning. The Total Return Fund may invest in both exchange-listed and over-
the-counter securities, in small or large companies, and in well-established or
unseasoned companies.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
The investment objective of the Regional Small Cap Fund is to produce capital
appreciation. The Regional Small Cap Fund seeks to achieve its objective by
investing, in normal market conditions, at least 65% of its total assets in
equity securities of small capitalization companies headquartered in Minnesota,
North and South Dakota, Montana, Wisconsin, Michigan, Iowa, Nebraska, Colorado,
Illinois, Indiana and Ohio.
The Regional Small Cap Fund's investment adviser and portfolio manager
invests primarily in the securities of small capitalization companies which
generally have the following characteristics in their opinion: company-specific
fundamentals that grow shareholder value; experienced, shareholder-oriented
management; and undervaluation by the market. For these purposes, small
capitalization companies are deemed those with market capitalizations of less
than $1 billion.
In addition to the risks associated with investing in small capitalization
companies, the Regional Small Cap Fund's policy of concentrating its equity
investments in a geographic region means that it may be subject to adverse
economic, political or other developments in that region. Although the region in
which the Regional Small Cap Fund principally invests has a diverse industrial
base (including, but not limited to, agriculture, mining, retail,
transportation, utilities, heavy and light manufacturing, financial services,
insurance, computer technology and medical technology), this industrial base is
not as diverse as that of the country as a whole. The Regional Small Cap Fund
may be less diversified by industry and company than other funds with a similar
investment objective and no geographic limitation.
The Regional Small Cap Fund may also invest up to 35% of its total assets in
equity securities without regard to the location of the issuer's headquarters or
the issuer's market capitalization, corporate bonds, debentures and notes, debt
securities issued or guaranteed by the United States government and its agencies
or instrumentalities, short-term money market instruments, such as U.S. Treasury
Bills, bank certificates of deposit, commercial paper, commercial paper master
notes and repurchase agreements. There can be no assurance that the Regional
Small Cap Fund will achieve its investment objective. See "Investment Practices
and Risks".
At times the Regional Small Cap Fund's investment adviser or portfolio
manager may purchase put and call options on equity securities and on stock
indices and write covered call options on equity securities owned by the
Regional Small Cap Fund in an effort to reduce risk. Not more than 5% of the
Regional Small Cap Fund's net assets will be invested in put and call options
and the premium received by the Regional Small Cap Fund with respect to
unexpired call options written by the Regional Small Cap Fund will not exceed 5%
of the Regional Small Cap Fund's net assets. Such investments will be effected
during periods of anticipated market weakness and will not result in leveraging
the Regional Small Cap Fund. A description of the foregoing securities and the
risks associated therewith is included in the Statement of Additional
Information.
INVESTMENT PRACTICES AND RISKS
In addition to the investment policies described above (and subject to
certain restrictions described below) each of the Funds may invest in the
following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below. A more
complete discussion of certain of these securities and investment techniques and
the associated risks is contained in the Statement of Additional Information.
EQUITY SECURITIES GENERALLY. The market prices of individual stocks, and of
stocks in general, are frequently subject to significant volatility. Investors
should be aware that since the major portion of each Fund's portfolio will
normally be invested in common stocks, such Fund's net asset value may be
subject to greater fluctuation than a portfolio containing a substantial amount
of fixed income securities. Each Fund is intended for investors who can accept
the risks involved in investments in equity and equity-related securities. An
investment in shares of any of the Funds does not constitute a complete
investment program. Investors may wish to complement an investment in the Funds
with other types of investments.
SMALL CAPITALIZATION COMPANIES. Each Fund may invest a substantial portion of
its assets in small capitalization companies. While small capitalization
companies can provide greater growth potential than larger, more mature
companies, investing in the securities of such companies also involves greater
risk and potential price volatility. These companies often involve higher risks
because they lack the management experience, financial resources, product
diversification, markets, distribution channels and competitive strengths of
larger companies. In addition, in many instances, the frequency and volume of
their trading is substantially less than is typical of larger companies.
Therefore, the securities of smaller companies, as well as start-up companies,
may be subject to wider price fluctuations. The spreads between the bid and
asked prices of the securities of these companies in the U.S. over-the-counter
market typically are larger than the spreads for more actively traded
securities. As a result, a Fund could incur a loss if it determined to sell such
a security shortly after its acquisition. When making large sales, a Fund may
have to sell portfolio holdings at discounts from quoted prices or may have to
make a series of small sales over an extended period of time due to the trading
volume of smaller company securities. Small capitalization companies tend to
have less potential for current dividend income than investments in larger, more
mature companies. Not more than 5% of the Total Return Fund's assets and 10% of
each of the Growth Fund's and Regional Small Cap Fund's assets may be invested
in unseasoned companies defined as companies which have a record of less than
three years of continuous operation, including the operation of a predecessor
business of a company which came into existence as a result of a merger,
consolidation, reorganization or purchase of substantially all of the assets of
such predecessor business.
FOREIGN SECURITIES. The Total Return Fund may invest up to 25% and the Growth
Fund up to 20% of their respective assets in foreign securities. Such
investments may involve risks which are in addition to the usual risks inherent
in domestic investments. The value of a Fund's foreign investments may be
significantly affected by changes in currency exchange rates, and a Fund may
incur costs in converting securities denominated in foreign currencies to U.S.
dollars. In many countries, there is less publicly available information about
issuers than is available in the reports and ratings published about companies
in the United States. Additionally, foreign companies may not be subject to
uniform accounting, auditing and financial reporting standards. Dividends and
interest on foreign securities may be subject to foreign withholding taxes,
which would reduce a Fund's income without providing a tax credit for a Fund's
shareholders. Each Fund will limit such investments to securities of foreign
issuers domiciled in Australia and the non-communist nations of Western Europe,
North America and Eastern Asia. There is the possibility of expropriation,
confiscatory taxation, currency blockage or political or social instability
which could affect investments in those nations. Foreign securities include
sponsored and unsponsored American Depository Receipts ("ADRs"). ADRs typically
are issued by a U.S. bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. Unsponsored ADRs differ from
sponsored ADRs in that the establishment of unsponsored ADRs are not approved by
the issuer of the underlying securities. As a result, available information
concerning the issuer may not be as current or reliable as the information for
sponsored ADRs, and the price of unsponsored ADRs may be more volatile.
WARRANTS AND RIGHTS. Each Fund may invest up to 5% of its net assets in warrants
or rights, valued at the lower of cost or market, which entitle the holder to
buy securities during a specific period of time. A Fund will make such
investments only if the underlying securities are deemed appropriate by the
Fund's investment adviser or portfolio manager for inclusion in that Fund's
portfolio. Additionally, the Total Return Fund will purchase warrants or rights
only if they are sold as a unit with another equity or debt security. Included
in the 5% amount, but not to exceed 2% of net assets, are warrants and rights
whose underlying securities are not traded on principal domestic or foreign
exchanges. Warrants and rights acquired by a Fund in units or attached to
securities are not subject to these restrictions.
CONVERTIBLE SECURITIES. Each of the Funds will limit its investments in
convertible securities to those for which such Fund's investment adviser or
portfolio manager believes (a) the underlying common stock is a suitable
investment for the Fund using the criteria described above and (b) a greater
potential for total return exists by purchasing the convertible security because
of its higher yield. None of the Funds will invest more than 5% of its net
assets at the time of investment in convertible securities rated less than
investment grade. Securities rated BBB by Standard & Poor's Corporation
("Standard & Poor's") or Baa by Moody's Investors Service, Inc. ("Moody's"),
although investment grade, do exhibit speculative characteristics and are more
sensitive than higher rated securities to changes in economic conditions.
Investments in less than investment grade securities entail relatively greater
risk of loss of income or principal than investments in investment grade
securities.
DEBT SECURITIES. Each of the Funds may invest in interest-bearing debt
securities. In particular, to achieve its investment objective, the Total Return
Fund may at times emphasize the generation of interest income by investing in
interest-bearing debt securities, both short and intermediate to long-term.
Investment in intermediate to long-term debt securities may also be made with a
view to realizing capital appreciation when a Fund's investment adviser or
portfolio manager believes that interest rates on such investments may decline,
thereby increasing their market value. Debt securities having maturities from
three to ten years are considered to be intermediate-term, and debt securities
having maturities in excess of ten years are considered to be long-term. Each of
the Funds may also purchase "deep discount bonds," i.e., bonds which are selling
at a substantial discount from their face amount, with a view to realizing
capital appreciation. The Funds will invest only in those publicly distributed
nonconvertible debt securities which have been assigned one of the highest three
ratings of either Standard & Poor's or Moody's. The values of the interest-
bearing debt securities held by a Fund are subject to price fluctuations
resulting from various factors, including rising or declining interest rates
("market risks") and the ability of the issuers of such investments to make
scheduled interest and principal payments ("financial risks"). For example,
interest-bearing securities typically experience appreciation when interest
rates decline and depreciation when interest rates rise. The investment adviser
and portfolio managers for the Funds attempt to minimize these risks when
selecting investments by taking into account interest rates, terms and
marketability of obligations, as well as the capitalization, earnings, liquidity
and other indicators of the issuer's financial condition. The Funds' investment
in securities of, or guaranteed by, the United States government, its agencies
or instrumentalities may be supported by the full faith and credit of the United
States, supported by the right of the agency to borrow from the U.S. Treasury or
supported only by the credit of the agency or instrumentality. Agencies or
instrumentalities whose securities are supported by the full faith and credit of
the United States include, but are not limited to, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration and Government National Mortgage
Association. Examples of agencies or instrumentalities whose securities are
supported by the right of the agency to borrow from the U.S. Treasury include,
but are not limited to, the Federal Home Loan Bank, Federal Intermediate Credit
Banks and Tennessee Valley Authority. There is no assurance that these
commitments will be undertaken in full. No assurances can be given that the U.S.
government will provide financial support to obligations issued or guaranteed by
agencies or instrumentalities that are not backed by the full faith and credit
of the United States, since it is not obligated to do so by law.
PREFERRED STOCKS. Each of the Funds may invest in preferred stocks. Preferred
stocks have a preference over common stocks in liquidation (and generally
dividends as well) but are subordinated to the liabilities of the issuer in all
respects. As a general rule, the market value of preferred stocks with a fixed
dividend rate and no conversion element varies inversely with interest rates and
perceived credit risks while the market price of convertible preferred stock
generally also reflects some element of conversion value. Because preferred
stock is junior to debt securities and other obligations of the issuer,
deterioration in the credit quality of the issuer will cause greater changes in
the value of a preferred stock than in a more senior debt security with
similarly stated yield characteristics. Unlike interest payments on debt
securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions.
MONEY MARKET INSTRUMENTS. Each of the Funds has reserved the freedom to invest
any portion of its assets for temporary defensive purposes in conservative
fixed-income securities such as United States Treasury Bills, certificates of
deposit of U.S. banks (provided that the bank has capital, surplus and undivided
profits (as of the date of its most recently published annual financial
statements) with a value in excess of $100,000,000 at the date of investment),
commercial paper and commercial paper master notes (which are demand instruments
without a fixed maturity bearing interest at rates which are fixed to known
lending rates and automatically adjusted when such lending rates change) rated
A-1 by Standard & Poor's, money market mutual funds and repurchase agreements.
Repurchase agreements are agreements under which the seller of a security agrees
at the time of sale to repurchase the security at an agreed time and price. The
Funds will not enter into repurchase agreements with entities other than banks
or invest over 5% of their respective net assets in repurchase agreements.
PORTFOLIO TURNOVER. Each of the Funds typically will purchase common stocks for
long-term capital appreciation, but may on occasion place emphasis on short-term
trading profits. As a consequence, each of the Funds expects usually to have an
annual portfolio turnover rate ranging from 30% to 80%. The annual portfolio
turnover rate indicates changes in a Fund's portfolio and is calculated by
dividing the lesser of purchases or sales of portfolio securities (excluding
securities having maturities at acquisition of one year or less) for the fiscal
year by the monthly average of the value of the portfolio securities (excluding
securities having maturities at acquisition of one year or less) owned by such
Fund during the fiscal year. The annual portfolio turnover rate may vary widely
from year to year depending upon market conditions and prospects. High turnover
in any year will result in the payment by a Fund from capital of above-average
amounts of brokerage commissions and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions to
shareholders of such investment gains, to the extent they consist of net short-
term capital gains, will be considered ordinary income for federal income tax
purposes.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Each of the Funds may purchase
securities on a when-issued or delay-delivery basis. When such a transaction is
negotiated, the purchase price is fixed at the time the purchase commitment is
made, but delivery of and payment for the securities take place at a later date.
A Fund will not accrue income with respect to securities purchased on a when-
issued or delayed-delivery basis prior to their stated delivery date. Pending
delivery of the securities, each Fund will maintain in a segregated account cash
or liquid securities in an amount sufficient to meet its purchase commitments.
The purpose and effect of such segregation is to prevent the Fund from gaining
investment leverage from such transactions. The purchase of securities on a
when-issued or delayed-delivery basis exposes a Fund to risk because the
securities may decrease in value prior to delivery. The Funds will engage in
when-issued and delayed-delivery transactions only for the purpose of acquiring
portfolio securities consistent with their investment objectives and not for the
purpose of investment leverage. A seller's failure to deliver securities to a
Fund could prevent the Fund from realizing a price or yield considered to be
advantageous.
GENERAL CONSIDERATIONS. Under certain circumstances each of the Funds may (a)
temporarily borrow money from banks for emergency or extraordinary purposes,
provided that such borrowings not exceed 5% of the value of such Fund's net
assets, (b) pledge up to 10% of its net assets to secure borrowings and (c)
purchase securities of other investment companies. None of the Funds may invest
more than 10% of its net assets in illiquid securities, including repurchase
agreements maturing in more than seven days. The Funds' Statement of Additional
Information includes a more complete discussion of the circumstances in which
each of the Funds may engage in these activities, as well as certain other
investment restrictions applicable to the Funds. Except for the foregoing
investment restrictions and the Funds' policies with respect to investments in
warrants, repurchase agreements and securities of unseasoned companies, the
investment objective and other policies of each Fund described under "Investment
Objectives and Policies" are not fundamental policies and may be changed without
shareholder approval. A change in a particular Fund's investment objective may
result in such Fund having an investment objective different from the objective
which the shareholder considered appropriate at the time of investment in such
Fund.
MANAGEMENT OF THE FUNDS
As a Wisconsin corporation, the business and affairs of the Funds are managed
by its Board of Directors. The investment activities of the Funds are managed
through a multi-manager structure. Each of the Funds has entered into an
investment advisory agreement (the "Management Agreements") with Resource
Capital Advisers, Inc. (the "Adviser"), 900 Second Avenue South, 300
International Centre, Minneapolis, Minnesota 55402, pursuant to which the
Adviser will provide consulting, investment and administrative services to the
Funds. The specific security investments for each Fund will be made by one or
more portfolio managers (sub-advisers) selected for the Funds by the Adviser.
The Management Agreements provide that the Adviser, subject to the management
and direction of the Corporation's Board of Directors and officers, will
evaluate, select and monitor the various portfolio managers for each Fund. The
Adviser and the Funds will enter into separate subadvisory contracts with the
portfolio managers (the "Sub-Advisory Agreements").
The Adviser is the investment adviser to individuals and institutional
clients (including investment companies). The Adviser was organized in 1984 and
is a wholly-owned subsidiary of Resource Trust Company, a Minnesota state bank.
Resource Trust Company is a wholly-owned subsidiary of Resource Companies, Inc.
The Adviser was also the investment adviser to the Total Return Fund prior to
December 17, 1987. On such date the investment advisory agreement with the
Adviser was terminated and the Total Return Fund entered into a substantially
identical investment advisory agreement with Fiduciary Management, Inc. On
December 31, 1994 the investment advisory agreement with Fiduciary Management,
Inc. was terminated and the Total Return Fund entered into a substantially
identical investment advisory agreement with the Adviser. On June 30, 1995, the
investment advisory agreement with the Adviser was terminated and replaced with
the current Management Agreement.
THE ADVISER
The Adviser: (i) provides or oversees the provision of all general management
and administration, investment advisory and portfolio management, and general
services for the Funds; (ii) provides the Funds with office space, equipment and
personnel necessary to operate and administer the Funds' business, and to
supervise the provision of services by third parties such as the money managers
and custodian; (iii) develops the investment programs, selects money managers,
allocates assets among money managers and monitors the money managers'
investment programs and results; and (iv) is authorized to select, or hire money
managers to select, individual portfolio securities held by the Funds. The
Adviser bears the expenses it incurs in providing these services as well as the
costs of preparing and distributing explanatory materials concerning the Funds.
The Adviser also provides asset management consulting services including
objective-setting and asset-allocation input, and money manager research and
evaluation assistance.
For the foregoing, the Adviser receives from the Total Return Fund a monthly
fee of 1/12 of 1% (1% per annum) on the first $30,000,000 of the daily net
assets of such Fund and 1/12 of .75% (.75% per annum) on the daily net assets of
such Fund over $30,000,000; and from each of the Growth Fund and Regional Small
Cap Fund a monthly fee of 1/12 of 1% (1% per annum) of the daily net assets of
such Fund. The Adviser is responsible for the payment of all fees to the
portfolio managers. The advisory fees paid by the Growth Fund, the Total Return
Fund and the Regional Small Cap Fund in the fiscal year ended June 30, 1997 were
equal to 1.00%, 1.00% and 1.00% (annualized), respectively, of such Funds'
average net assets.
THE PORTFOLIO MANAGERS
The assets of each Fund are allocated currently among the portfolio managers
listed below. The allocation of a Fund's assets among portfolio managers may be
changed at any time by the Adviser. Portfolio managers may be employed or their
services may be terminated at any time by the Adviser, subject to approval by
the Corporation's Board of Directors. The employment of a new portfolio manager
for a Fund currently requires the prior approval of the shareholders of that
Fund. The Corporation, however, may request an order of the Securities and
Exchange Commission exempting the Funds from the requirement for shareholder
approval of new portfolio managers. If an order is granted, the Corporation will
notify shareholders of the Fund concerned promptly when a new portfolio manager
begins providing services. There can be no assurance, however, that the
Corporation may request such an order or that such an order will be granted with
respect to the Funds.
The Adviser pays the fees of each portfolio manager. Each portfolio manager
is paid an annual fee expressed as a percentage of Fund assets under
management; there are no performance or incentive fees. Some portfolio managers
may execute portfolio transactions for the Funds through broker-dealer
affiliates and receive brokerage commissions for doing so.
Portfolio managers are selected for the Funds based primarily upon the
research and recommendations of the Adviser, which evaluates quantitatively and
qualitatively the manager's skills and results in managing assets for specific
asset classes, investment styles and strategies. The Adviser evaluates the risks
and returns of the portfolio managers' investment style over an entire market
cycle. Short-term investment performance, by itself, is not a controlling factor
in selecting or terminating a portfolio manager.
Each portfolio manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund within such Fund's investment objectives,
restrictions and policies, and the more specific strategies developed by the
Adviser. Although the portfolio managers' activities are subject to general
oversight by the Board of Directors and officers of the Corporation, none of the
Board, the officers or the Adviser evaluate the investment merits of the
portfolio manager's individual securities selections.
As of the date of this Prospectus, the portfolio manager of the Growth Fund
is Winslow Capital Management, Inc. ("WCM"), 4720 IDS Tower, 80 South Eighth
Street, Minneapolis, Minnesota 55402. WCM was organized as a Minnesota
Corporation in 1992 and is a registered investment adviser controlled by Clark
J. Winslow, Richard E. Pyle and Gail M. Knappenberger. All investment decisions
are made by a team of investment professionals, any of whom may make
recommendations subject to final approval of Mr. Winslow or another senior
member of WCM's management team to whom he may delegate that authority. As such,
Mr. Winslow is primarily responsible for the day-to-day management of the Growth
Fund's portfolio and has been so since July 1, 1995. Mr. Winslow has served as
President, Chief Executive Officer, director and portfolio manager of WCM since
1992. Prior to such time, he was senior vice president and portfolio manager at
Alliance Capital Management from 1987 to 1992 and portfolio manager at John W.
Bristol & Co. from 1980 to 1987. WCM currently serves and has served since
October, 1992 as sub-adviser to another mutual fund, Advantus Capital
Appreciation Fund (formerly MIMLIC Capital Appreciation Fund). WCM also manages
equity portfolios for large pension and profit-sharing plans, foundations,
endowments and other private accounts. As of August 31, 1997, WCM managed
approximately $1.3 billion in assets. For its services to the Growth Fund, WCM
receives from the Adviser (not the Growth Fund) a monthly fee of 1/12 of 0.60%
(0.60% per annum) of the daily net assets of such Fund.
As of the date of this Prospectus, the portfolio manager of the Total Return
Fund is Palm Beach Investment Advisers, Inc. ("PBIA"), 249 Royal Palm Way, Suite
400, Palm Beach, Florida 33480. PBIA was incorporated as a Florida corporation
in 1990 and is a registered investment adviser. PBIA is controlled by the
Adviser. Thomas M. Keresey, the Chairman and Chief Investment Officer of PBIA,
and Patrice J. Neverett, Senior Vice President and Portfolio Manager of PBIA,
are primarily responsible for the day-to-day management of the Total Return
Fund's portfolio and have been so since July 1, 1995. Mr. Keresey and Ms.
Neverett have been employed by PBIA in various capacities since PBIA was founded
in August 1990. PBIA manages equity and fixed income portfolios for individual
and institutional clients, including pension and profit-sharing plans,
foundations and endowments. As of August 31, 1997, PBIA managed approximately
$287 million in assets. For its services to the Total Return Fund, PBIA receives
from the Adviser (not the Total Return Fund) a monthly fee of 1/12 of 0.40%
(0.40% per annum) on the first $30,000,000 of such Fund's daily net assets and
1/12 of 0.30% (0.30% per annum) on the daily net assets of such Fund in excess
of $30,000,000.
As of the date of this Prospectus, the portfolio manager of the Regional
Small Cap Fund is Woodland Partners LLC ("WP"), 60 South Sixth Street, Suite
3750, Minneapolis, Minnesota 55402. WP was organized as a Minnesota limited
liability company in 1996 and is a registered investment adviser owned in equal
parts by Richard W. Jensen, Elizabeth M. Lilly and Richard J. Rinkoff. Ms. Lilly
and Mr. Rinkoff are responsible for the day-to-day management of the Regional
Small Cap Fund's portfolio. As of August 31, 1997, WP managed approximately $350
million in assets. For its services to the Regional Small Cap Fund, WP receives
from the Adviser (not the Regional Small Cap Fund) a monthly fee of 1/12 of
0.60% (0.60% per annum) of the daily net assets of such Fund.
Prior to founding WP on June 1, 1996, Mr. Jensen, Ms. Lilly and Mr. Rinkoff
were employed at First Asset Management, a division of First Bank National
Association - Mr. Jensen since 1967, Ms. Lilly since 1992 and Mr. Rinkoff since
1977. While at First Asset Management, Ms. Lilly and Mr. Rinkoff served as
portfolio managers for the Regional Equity Fund, a series of First American
Investment Funds, Inc., and for various other similarly managed private accounts
(collectively, the "First Asset Management Regional Small Cap Value Accounts"),
all of which were managed using substantially similar, though not in all cases
identical, investment objectives, strategies and techniques as those being used
by the Regional Small Cap Fund. See "Investment Objectives and Policies." Mr.
Rinkoff alone managed the First Asset Management Regional Small Cap Value
Accounts from 1981 to April 1994 and, with Ms. Lilly, co-managed such Accounts
from April 1994 through their departure from First Asset Management on May 31,
1996. In addition, Mr. Jensen, Ms. Lilly and Mr. Rinkoff served, with certain of
their colleagues, as members of a committee managing other accounts with
investment objectives and strategies significantly different from those employed
by the First Asset Management Regional Small Cap Value Accounts or employed by
the Regional Small Cap Fund.
Set forth below is composite historical performance data relating to the
Regional Small Cap Value Accounts (hereinafter defined), measured against
relevant broad-based market indices. The Regional Small Cap Value Accounts
include all portfolios managed by Ms. Lilly and Mr. Rinkoff with objectives,
strategies and techniques substantially similar to those employed by the
Regional Small Cap Fund, including the First Asset Management Regional Small Cap
Value Accounts as well as portfolios of WP clients and the Regional Small Cap
Funds. The composite also includes the performance from June 1, 1996 - July 5,
1996 of two portfolios which were First Asset Management Regional Small Cap
Value Accounts that were unmanaged (i.e., the portfolios did not change) during
such period and became WP portfolios on July 5, 1996. All performance data
presented is historical and investors should not consider this performance data
as an indication of the future performance of the Regional Small Cap Fund or the
results an individual investor might achieve by investing in the Regional Small
Cap Fund. Investors should not rely on the historical performance when making an
investment decision. All returns quoted are dollar-weighted total rates of
return and include the reinvestment of dividends and interest. Performance
figures reflect the assessment of estimated annual operating expenses for the
Regional Small Cap Fund of 1.3% of average assets, which expenses were higher
than those actually incurred by the composite. The Regional Small Cap Value
Accounts (other than the Regional Equity Fund series of First American
Investment Funds, Inc. and the Regional Small Cap Fund) were not subject to
certain investment limitations, diversification requirements and other
restrictions imposed by the Act and the Internal Revenue Code, which, if
applicable, may have adversely affected the performance results of the
composite.
All information presented is based on data supplied by WP or from statistical
services, reports or other sources believed by WP to be reliable. However, such
information has not been verified by any third party and is unaudited.
COMPOUNDED ANNUAL RATES OF RETURN(1)<F19>
(For the Period Ended December 31, 1996)
15 Years 10 Years 5 Years 3 Years 1 Year
-------- -------- ------- ------- ------
Regional Small Cap
Value Accounts Composite(2) 16.1 17.1 18.9 20.6 16.5
<F20>
S&P 500 Index(3)<F21> 16.6 15.2 15.3 19.7 23.2
Russell 2000 Index(4)<F22> 13.5 12.4 15.6 13.6 16.5
(1)<F19>All returns quoted are dollar-weighted total rates of return and include
the reinvestment of dividends and interest. Performance figures reflect the
assessment of estimated annual operating expenses of 1.3% of average assets,
which expenses were higher than those actually incurred by the composite. Total
annual rate of return is the change in redemption value of units purchased with
an initial $1,000 investment, assuming the reinvestment of dividends. Compounded
annual rate of return represents the level annual rate which, if earned for each
year in a multiple year period, would produce the cumulative rate of return over
that period.
(2)<F20>As indicated above, Mr. Rinkoff alone managed the Regional Small Cap
Value Accounts from 1981 to April 1994 and, with Ms. Lilly, co-managed such
Accounts from April 1994 through December 31, 1996.
(3)<F21>The Standard &Poor's 500 Index consists of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Standard & Poor's
Ratings Group designates the stocks to be included in the Index on a statistical
basis. A particular stock's weighting in the Index is based on its relative
total market value (i.e., its market price per share times the number of shares
outstanding). Stocks may be added or deleted from the Index from time to time.
(4)<F22>The Russell 2000 Index is an index comprised of 2000 publicly traded
small capitalization common stocks that are ranked in terms of capitalization
below the large and mid-range capitalization sectors of the United States equity
market. The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company.
Past performance may not be indicative of future rates of return. Investors
should also be aware that other performance calculation methods may produce
different results, and that comparisons of investment results should consider
qualitative circumstances and should be made only for portfolios with generally
similar investment objectives.
THE ADMINISTRATOR
Each of the Funds also has entered into an administration agreement
(collectively, the "Administration Agreements") with Fiduciary Management, Inc.
(the "Administrator"), 225 East Mason Street, Milwaukee, Wisconsin 53202. Under
the Administration Agreements the Administrator prepares and maintains the
books, accounts and other documents required by the Act, calculates each Fund's
net asset value, responds to shareholder inquiries, prepares each Fund's
financial statements and excise tax returns, prepares certain reports and
filings with the Securities and Exchange Commission and with state Blue Sky
authorities, furnishes statistical and research data, clerical, accounting and
bookkeeping services and stationery and office supplies, keeps and maintains
each Fund's financial and accounting records and generally assists in all
aspects of the Funds' operations. The Administrator at its own expense and
without reimbursement from any of the Funds, furnishes office space and all
necessary office facilities, equipment and executive personnel for performing
the services required to be performed by it under the Administration Agreements.
For the foregoing, the Administrator receives from each of the Funds a monthly
fee of 1/12 of 0.2% (0.2% per annum) on the first $30,000,000 of the daily net
assets of such Fund, 1/12 of 0.1% (0.1% per annum) on the next $30,000,000 of
the daily net assets of such Fund and 1/12 of 0.05% (0.05% per annum) of the
daily net assets of such Fund over $60,000,000, subject to a fiscal year minimum
of $15,000 for the Total Return Fund and $20,000 for each of the Growth Fund and
Regional Small Cap Fund. The administration fee paid by the Growth Fund, the
Total Return Fund and the Regional Small Cap Fund in the fiscal year ended June
30, 1997 to the Administrator were equal to 0.17%, 0.20% and 0.20% (annualized),
respectively, of such Funds' average net assets.
The Funds pay all of their own expenses not assumed by the Adviser or the
Administrator including, without limitation, the cost of preparing and printing
their registration statements required under the Securities Act of 1933 and the
Act and any amendments thereto, the expense of registering their shares with the
Securities and Exchange Commission and in the various states, the printing and
distribution costs of prospectuses mailed to existing investors, reports to
investors, reports to government authorities and proxy statements, fees paid to
directors who are not interested persons of the Adviser, interest charges,
taxes, legal expenses, association membership dues, auditing services, insurance
premiums, brokerage commissions and expenses in connection with portfolio
transactions, fees and expenses of the custodian of the Funds' assets, printing
and mailing expenses and charges and expenses of dividend disbursing agents,
accounting services agents, registrars and stock transfer agents.
DISTRIBUTION PLAN
Each of the Funds has adopted a Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The Plan provides that each
Fund may incur certain costs which may not exceed a maximum amount equal to 1/12
of 1% (1% per annum) of such Fund's average daily net assets. However, each of
the Funds presently intends not to pay any 12b-1 fees during the fiscal year
ending June 30, 1998. Payments made pursuant to the Plan may only be used to pay
distribution expenses incurred in the current year. Amounts paid under the Plan
by a Fund may be spent by such Fund on any activities or expenses primarily
intended to result in the sale of shares of such Fund, including but not limited
to, advertising, compensation for sales and sales marketing activities of
financial institutions and others, such as dealers or distributors, shareholder
account servicing, the printing and mailing of prospectuses to other than
current shareholders, and the printing and mailing of sales literature.
Distribution expenses will be authorized by the officers of the Corporation as
the Funds do not employ a distributor. To the extent any activity financed by
the Plan is one which a Fund may finance without a 12b-1 plan, such Fund may
also make payments to finance such activity outside of the Plan and not subject
to its limitations.
DETERMINATION OF NET ASSET VALUE
The per share net asset value of each Fund is determined by dividing the
total value of such Fund's net assets (meaning its assets less its liabilities
excluding capital and surplus) by the total number of its shares outstanding at
that time. Each Fund's net asset value is determined as of the close of regular
trading (currently 4:00 p.m. Eastern time) on the New York Stock Exchange on
each day the New York Stock Exchange is open for trading. This determination is
applicable to all transactions in shares of such Fund prior to that time and
after the previous time as of which net asset value was determined. Accordingly,
purchase orders accepted or shares tendered for redemption prior to the close of
regular trading on a day the New York Stock Exchange is open for trading will be
valued as of the close of trading, and purchase orders accepted or shares
tendered for redemption after that time will be valued as of the close of the
next trading day.
Securities traded on any national stock exchange or quoted on the Nasdaq
National Market System will be valued on the basis of the last sale price on the
date of valuation or, in the absence of any sales on that date, the most recent
bid price. Other securities will be valued by an independent pricing service at
the most recent bid price, if market quotations are readily available. Any
securities for which there are no readily available market quotations and other
assets will be valued at their fair value as determined in good faith by the
Corporation's Board of Directors. Odd lot differentials and brokerage
commissions will be excluded in calculating values.
PURCHASE OF SHARES
Shares of the Funds may be purchased directly from the Corporation. A share
purchase application form is included in the center of this Prospectus. The
price per share of each Fund is the next determined per share net asset value
after receipt of an application. Additional purchase applications may be
obtained from the Corporation. Purchase applications should be mailed directly
to: Eastcliff Funds, c/o Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. The U.S. Postal Service and other independent delivery
services are not agents of the Funds. Therefore, deposit in the mail or with
such services of purchase applications does not constitute receipt by Firstar
Trust Company or the Fund. Do not mail letters by overnight courier to the Post
Office Box address. To purchase shares by overnight or express mail, please use
the following street address: Eastcliff Funds, c/o Firstar Trust Company, Third
Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202. All applications
must be accompanied by payment in the form of a check made payable to the full
name of the Fund whose shares are being purchased, or by direct wire transfer as
described below. All purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks. No cash will be accepted. Firstar Trust Company will charge
a $20 fee against a shareholder's account for any payment check returned to the
custodian. THE SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY LOSSES SUFFERED BY
ANY FUND AS A RESULT. When a purchase is made by check (other than a cashiers or
certified check), the Corporation may delay the mailing of a redemption check
until it is satisfied that the check has cleared. (It will normally take up to 3
days to clear local personal or corporate checks and up to 7 days to clear other
personal and corporate checks.) To avoid redemption delays, purchases may be
made by cashiers or certified check or by direct wire transfers. Funds should be
wired to: Firstar Bank Milwaukee, NA, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin, ABA #075000022, Firstar Trust Company, Account #112952137, for
further credit to: "full name of appropriate Fund," "name of shareholder and
existing account number" if any. The establishment of a new account by wire
transfer should be preceded by a phone call to Firstar Trust Company, 1-800-595-
5519, to provide information for the setting up of the account. A follow up
application should be sent for all new accounts opened by wire transfer.
Securities dealers and financial institutions who notify a Fund prior to the
close of any business day that they intend to wire federal funds to purchase
shares of such Fund on the next business day (prior to 10:00 a.m. Central time)
will be deemed to have purchased shares at the time of notification. Funds
should not be wired on the same day of notification. When a purchase of shares
of a Fund is made by direct wire transfer by investors other than securities
dealers and financial institutions, the purchase will become effective upon
receipt by Firstar Bank Milwaukee, N.A. Wire transmissions may be subject to
delays of several hours, in which event the effectiveness of the purchase will
be delayed. Shares cannot be purchased by direct wire transfer on any day that
the New York Stock Exchange is not open for trading. Applications are subject to
acceptance by the Corporation, and are not binding until so accepted. The
Corporation does not accept telephone orders for purchase of shares and reserves
the right to reject applications in whole or in part. The Board of Directors of
the Corporation has established $1,000 as the minimum initial purchase for each
Fund and $100 as the minimum for any subsequent purchase (except through
dividend reinvestment), which minimum amounts are subject to change at any time.
Shareholders of the Funds will be advised at least thirty days in advance of any
increases in such minimum amounts. Stock certificates for shares so purchased
are not issued unless requested in writing. There are no sales loads on
purchases of shares of the Funds nor redemption charges on redemptions of such
shares. Purchase payments are fully invested at net asset value, of the
applicable Fund.
Investors may purchase Shares of the Funds through programs of services
offered or administered by broker-dealers, financial institutions or other
service providers ("Processing Intermediaries") that have entered into
agreements with the Funds. Such Processing Intermediaries may become
shareholders of record and may use procedures and impose restrictions in
addition to or different from those applicable to shareholders who invest
directly in the Funds. Certain services of the Funds may not be available or may
be modified in connection with the programs provided by Processing
Intermediaries. The Funds may only accept requests to purchase additional shares
into an account in which the Processing Intermediary is the shareholder of
record from the Processing Intermediary.
The Funds may authorize one or more Processing Intermediaries (and other
Processing Intermediaries properly designated thereby) to accept purchase orders
on the Funds' behalf. In such event, a Fund will be deemed to have received a
purchase order when the Processing Intermediary accepts the customer order, and
the order will be priced at the Fund's net asset value next computed after it is
accepted by the Processing Intermediary.
Processing Intermediaries may charge fees or assess other charges for the
services they provide to their customers. Any such fee or charge paid directly
by shareholders is retained by the Processing Intermediary and is not remitted
to the Funds or the Adviser. Additionally, the Adviser and/or the Funds may pay
fees to Processing Intermediaries to compensate them for the services they
provide. Program materials provided by the Processing Intermediary should be
read in conjunction with the Prospectus before investing in this manner. Shares
of the Funds may be purchased through Processing Intermediaries without regard
to a Fund's minimum purchase requirement.
REDEMPTION OF SHARES
A shareholder may require the Corporation to redeem his shares of any Fund in
whole or part at any time during normal business hours. Unless the telephone
redemption privilege is requested as described below, redemption requests must
be made in writing and directed to: Eastcliff Funds, c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service or other
independent delivery services are not agents of the Funds. Therefore, deposit in
the mail or with such services of redemption requests does not constitute
receipt by Firstar Trust Company or the Funds. DO NOT mail letters by overnight
courier to the Post Office Box address. Correspondence mailed by overnight
courier should be sent to Firstar Trust Company, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. If a written redemption request is
inadvertently sent to the Corporation, it will be forwarded to Firstar Trust
Company, but the effective date of redemption will be delayed until the request
is received by Firstar Trust Company. Requests for redemption by telegram and
requests which are subject to any special conditions or which specify an
effective date other than as provided herein cannot be honored.
Redemption requests should specify the name of the appropriate Fund, the
number of shares or dollar amount to be redeemed, shareholder's name, account
number, and the additional requirements listed below that apply to the
particular account.
TYPE OF REGISTRATION REQUIREMENTS
--------------------- ------------
Individual, Joint Tenants Redemption request signed by all
Sole Proprietor, Custodial person(s) required to sign for
(Uniform Gift to Minors Act), the account, exactly as it is
General Partners registered.
Corporations, Associations Redemption request and a corporate
resolution, signed by person(s) required
to sign for the account, accompanied by
signature guarantee(s).
Trusts Redemption request signed by the
trustee(s) with a signature guarantee.
(If the trustee's name is not registered
on the account, a copy of the trust
document certified within the last 60
days is also required.)
Redemption requests from shareholders in an Individual Retirement Account
must include instructions regarding federal income tax withholding. Unless
otherwise indicated, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible plan, will be
subject to federal income tax withholding. If a shareholder is not included in
any of the above registration categories (e.g., executors, administrators,
conservators or guardians), the shareholder should call the transfer agent,
Firstar Trust Company (1-800-595-5519), for further instructions.
Signatures need not be guaranteed unless the proceeds of redemption are
requested to be sent by wire transfer, to a person other than the registered
holder or holders of the shares to be redeemed, or to be mailed to other than
the address of record, in which cases each signature on the redemption request
must be guaranteed by a commercial bank or trust company in the United States, a
member firm of the New York Stock Exchange or other eligible guarantor
institution. If certificates have been issued for any of the shares to be
redeemed, the certificates, properly endorsed or accompanied by a properly
executed stock power, must accompany the request for redemption. Redemptions
will not be effective or complete until all of the foregoing conditions,
including receipt of all required documentation by Firstar Trust Company in its
capacity as transfer agent, have been satisfied.
The redemption price for each Fund is the net asset value for such Fund next
determined after receipt by Firstar Trust Company in its capacity as transfer
agent of the request in proper form with all required documentation. The amount
received will depend on the market value of the investments in the appropriate
Fund's portfolio at the time of determination of net asset value, and may be
more or less than the cost of the shares redeemed. Proceeds for shares redeemed
will be mailed, wired or forwarded via Electronic Funds Transfer ("EFT") to the
holder no later than the seventh day after receipt of the redemption request in
proper form and all required documentation except as indicated in "Purchase of
Shares" for certain redemptions of shares purchased by check. Firstar Trust
Company currently charges a $12.00 fee for each payment made by wire or
redemption proceeds, which will be deducted from the shareholder's account.
Transfers via EFT generally will take up to 3 business days to reach the
shareholder's bank account.
If a shareholder instructs Firstar Trust Company in writing, redemption
requests may be made by telephone by calling only Firstar Trust Company, not the
Corporation, the Adviser or any portfolio manager, at (800) 595-5519 or (414)
765-4124, provided the redemption proceeds are to be mailed, wired or sent via
EFT to the shareholder's address or bank of record as shown on the records of
the transfer agent. Proceeds redeemed by telephone will be mailed, wired or sent
via EFT to an address or account other than that shown on the records of the
transfer agent only if such has been prearranged by a written request sent via
mail or facsimile copy to Firstar Trust Company. Such a request must be signed
by the shareholder with signatures guaranteed as described above. Additional
documentation may be requested from those who hold shares in a fiduciary or
representative capacity or who are not natural persons. The Funds reserve the
right to refuse a telephone redemption request if it is believed advisable to do
so. Redemption by telephone is not available for IRA accounts or if share
certificates have been issued for the account. Procedures for telephone
redemptions may be modified or terminated at any time by the Corporation or
Firstar Trust Company. Neither the Corporation, the Funds nor Firstar Trust
Company will be liable for following instructions for telephone redemption
transactions that they reasonably believe to be genuine, provided reasonable
procedures are used to confirm the genuineness of the telephone instructions,
but may be liable for unauthorized transactions if they fail to follow such
procedures. These procedures include requiring some form of personal
identification prior to acting upon the telephone instructions and recording all
telephone calls. During periods of substantial economic or market change,
telephone redemptions may be difficult to implement. In the event a shareholder
cannot contact Firstar Trust Company by telephone, he or she should make a
redemption request in writing in the manner set forth above.
Shares of the Funds purchased through programs of services offered or
administered by Processing Intermediaries that have entered into agreements with
the Fund may be required to be redeemed through such programs. Such Processing
Intermediaries may become shareholders of record and may use procedures and
impose restrictions in addition to or different from those applicable to
shareholders who redeem shares directly through the Funds. The Funds may only
accept redemption requests from an account in which the Processing Intermediary
is the shareholder of record from the Processing Intermediary. The Funds may
authorize one or more Processing Intermediaries (and other Processing
Intermediaries properly designated thereby) to accept redemption requests on the
Funds' behalf. In such event, a Fund will be deemed to have received a
redemption request when the Processing Intermediary accepts the customer
request, and the redemption price will be the Fund's net asset value next
computed after the customer redemption request is accepted by the Processing
Intermediary.
The right to redeem shares of any Fund will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension or (c)
an emergency, as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable for the
Corporation to dispose of such Fund's securities or fairly to determine the
value of its net assets.
The Corporation reserves the right to redeem the shares held in any account:
(i) in connection with the termination of a particular Fund; (ii) if the value
of the shares in an account falls below $500 or such other amount as the Board
of Directors may establish, provided the Corporation gives the shareholder 60
days prior written notice; (iii) to reimburse the appropriate Fund for any loss
it has sustained by failure of the shareholder to make full payment for his
shares; (iv) to collect any charge relating to a transaction effected for the
benefit of a shareholder; or (v) if it would otherwise be appropriate to carry
out the Corporation's responsibilities under the Investment Company Act of 1940.
The involuntary redemption procedures are designed to facilitate reimbursement
of the Funds for any losses they sustain as a result of any failures by
shareholders to pay for their shares or required fees in connection with
transactions involving their shares and to relieve the Funds of the cost of
maintaining uneconomical accounts. Involuntary redemptions of small accounts,
however, would not be made because the value of shares in an account falls below
the minimum amount solely because of a decline in a particular Fund's net asset
value. Any involuntary redemptions would be made at net asset value.
EXCHANGE PRIVILEGE
The Corporation generally permits shareholders to exchange shares of one of
the Eastcliff Funds for shares of another Eastcliff Fund. A written request to
exchange shares of one Eastcliff Fund for shares of another may be made at no
cost to the shareholder. The shareholder must give the account name, account
number and the amount or number of shares of a particular Fund to be exchanged.
The registration of the account from which the exchange is being made and the
account to which the exchange is being made must be identical. Signatures
required are the same as explained under "Redemption of Shares."
There is currently no limitation on the number of exchanges a shareholder may
make. However, shares subject to an exchange must have a current value of at
lease $1,000. Furthermore in establishing a new account in another Eastcliff
Fund through this privilege, the exchanged shares must have a value at least
equal to the minimum investment required by the Fund into which the exchange is
being made. A completed purchase application also must be sent to Eastcliff
Funds, c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701,
immediately after establishing a new account through this privilege.
The exchange privilege is available only in states where the exchange may be
legally made. Exchange requests may be subject to other limitations, including
those relating to frequency, that may be established from time to time to ensure
that the exchanges do not disadvantage a particular Fund or its shareholders.
Shareholders will be notified at least 60 days in advance of any changes in such
limitations and may obtain the terms of any such limitation by writing to
Eastcliff Funds, c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. No exchange fee is currently imposed by the Corporation on
exchanges; however, the Corporation reserves the right to impose an
administrative fee in the future.
An exchange involves a redemption of all or a portion of the shares in one
Fund and the investment of the redemption proceeds in shares of the other Fund
and is subject to any applicable adjustments in connection with such redemption
and investment. The redemption will be made at the per share net asset value of
the shares to be redeemed next determined after the exchange request is received
as described above. The shares of the Fund to be acquired will be purchased
(subject to any applicable adjustment) at the per share net asset value of those
shares next determined coincident with the time of redemption. Both the
redemption and the investment of the redemption proceeds will take place as of
the close of regular trading (currently 4:00 p.m. Eastern time) on the New York
Stock Exchange on each day the New York Stock Exchange is open for trading.
Investors may find the exchange privilege useful if their investment
objectives should change after they invest in the Eastcliff Funds. For federal
income tax purposes, an exchange of shares is a taxable event and, accordingly,
a capital gain or loss may be realized by an investor. Before making an exchange
request, an investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange.
DIVIDEND REINVESTMENT
Shareholders of any Fund may elect to have all income dividends and capital
gains distributions reinvested in such Fund or paid in cash, or elect to have
income dividends reinvested in such Fund and capital gains distributions paid in
cash or capital gains distributions reinvested in such Fund and income dividends
paid in cash. Shareholders having dividends and/or capital gains distributions
paid in cash may choose to have such amounts mailed or sent via EFT. Transfers
via EFT generally take up to 3 business days to reach the shareholder's bank
account. See the share purchase application form included in the center of this
Prospectus for further information. If the shareholder does not specify an
election, all income dividends and capital gains distributions automatically
will be reinvested in full and fractional shares of the appropriate Fund
calculated to the nearest 1,000th of a share. Shares of a particular Fund are
purchased at the net asset value of such Fund in effect on the business day
after the dividend record date and are credited to the shareholder's account on
the dividend payment date. As in the case of normal purchases, stock
certificates are not issued unless requested. Shareholders will be advised of
the number of shares purchased and the price following each reinvestment. An
election to reinvest or receive dividends and distributions in cash will apply
to all shares of a Fund registered in the same name, including those previously
purchased.
A shareholder may change an election at any time by notifying the appropriate
Fund in writing. If such a notice is received between a dividend declaration
date and payment date, it will become effective on the day following the payment
date. The Corporation may modify or terminate its dividend reinvestment program
at any time on thirty days' notice to participants.
AUTOMATIC INVESTMENT PLAN
Shareholders wishing to invest fixed dollar amounts in a particular Fund
monthly or quarterly can make automatic purchases in amounts of $50 or more on
any day they choose by using the Corporation's Automatic Investment Plan. If
such day is a weekend or holiday, such purchase shall be made on the next
business day. There is no service fee for participating in this Plan. To use
this service, the shareholder must authorize the transfer of funds from his
checking, NOW or savings account by completing the Automatic Investment Plan
application included as part of the share purchase application located in the
center of this Prospectus. Additional application forms may be obtained by
calling the Corporation's office at (612) 336-1444. The Corporation reserves the
right to suspend, modify or terminate the Automatic Investment Plan without
notice.
The Automatic Investment Plan is designed to be a method to implement dollar
cost averaging. Dollar cost averaging is an investment approach providing for
the investment of a specific dollar amount on a regular basis thereby precluding
emotions dictating investment decisions. Dollar cost averaging does not insure a
profit nor protect against a loss.
SYSTEMATIC WITHDRAWAL PLAN
The Corporation has available to shareholders a Systematic Withdrawal Plan,
pursuant to which a shareholder who owns shares of any Fund worth at least
$10,000 at current net asset value may provide that a fixed sum will be
distributed to him at regular intervals. To participate in the Systematic
Withdrawal Plan, a shareholder deposits his shares of a particular Fund with the
Corporation and appoints it as his agent to effect redemptions of shares of such
Fund held in his account for the purpose of making monthly or quarterly
withdrawal payments of a fixed amount to him out of his account. To utilize the
Systematic Withdrawal Plan, the shares cannot be held in certificate form. The
Systematic Withdrawal Plan does not apply to shares of either Fund held in
Individual Retirement Accounts or defined contribution retirement plans. An
application for participation in the Systematic Withdrawal Plan is included as
part of the share purchase application located in the center of this Prospectus.
Additional application forms may be obtained by calling the Corporation's office
at (612) 336-1444.
The minimum amount of a withdrawal payment is $100. These payments will be
made from the proceeds of periodic redemption of shares of a particular Fund in
the account at net asset value. Redemptions will be made on such day (no more
than monthly) as a shareholder chooses or, if that day is a weekend or holiday,
on the next business day. See the share purchase application located in the
center of this Prospectus for further information. Participation in the
Systematic Withdrawal Plan constitutes an election by the shareholder to
reinvest in additional shares of such Fund, at net asset value, all income
dividends and capital gains distributions payable by the Corporation on shares
held in such account, and shares so acquired will be added to such account. The
shareholder may deposit additional shares of such Fund in his account at any
time.
Withdrawal payments cannot be considered as yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of capital. Depending on the size or the frequency of the
disbursements requested, and the fluctuation in the value of the applicable
Fund's portfolio, redemptions for the purpose of making such disbursements may
reduce or even exhaust the shareholder's account.
The shareholder may vary the amount or frequency of withdrawal payments,
temporarily discontinue them, or change the designated payee or payee's address,
by notifying Firstar Trust Company.
RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNTS
Individual shareholders may establish their own tax-sheltered Individual
Retirement Accounts ("IRA"). Each of the Funds currently offers a Traditional
IRA and, effective January 1, 1998, each Fund will offer three types of IRAs,
including the Traditional IRA, that can be adopted by executing the appropriate
Internal Revenue Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts contributed to the IRA may be
tax deductible at the time of contribution depending on whether the shareholder
is an "active participant" in an employer-sponsored retirement plan and the
shareholder's income. Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution represents a return of
the shareholder's own contributions for which the shareholder did not claim (or
was not eligible to claim) a deduction. Distributions prior to age 59-1/2 may be
subject to an additional 10% tax applicable to certain premature distributions.
Distributions must commence by April 1 following the calendar year in which the
shareholder attains age 70-1/2. Failure to begin distributions by this date (or
distributions that do not equal certain minimum thresholds) may result in
adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as American Dream IRA), amounts
contributed to the IRA are taxed at the time of contribution, but distributions
from the IRA are not subject to tax if the shareholder has held the IRA for
certain minimum periods of time (generally, until age 59-1/2). Shareholders
whose incomes exceed certain limits are ineligible to contribute to a Roth IRA.
Distributions that do not satisfy the requirements for tax-free withdrawal are
subject to income taxes (and possibly penalty taxes) to the extent that the
distribution exceeds the shareholder's contributions to the IRA. The minimum
distribution rules applicable to Traditional IRAs do not apply during the
lifetime of the shareholder. Following the death of the shareholder, certain
minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution generally is
equal to the lesser of $2,000 or 100% of the shareholder's compensation (earned
income). An individual may also contribute to a Traditional IRA or Roth IRA on
behalf of his or her spouse provided that the individual has sufficient
compensation (earned income). Contributions to a Traditional IRA reduce the
allowable contribution under a Roth IRA, and contributions to a Roth IRA reduce
the allowable contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made to an IRA
maintained on behalf of a beneficiary under age 18. The maximum annual
contribution is $500 per beneficiary. The contributions are not tax deductible
when made. However, if amounts are used for certain educational purposes,
neither the contributor nor the beneficiary of the IRA are taxed upon
distribution. The beneficiary is subject to income (and possibly penalty taxes)
on amounts withdrawn from an Education IRA that are not used for qualified
educational purposes. Shareholders whose income exceeds certain limits are
ineligible to contribute to an Education IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
generally has the right to revoke his account within seven days after receiving
the disclosure statement and obtain a full refund of his contributions. The
custodian may, in its discretion, hold the initial contribution uninvested until
the expiration of the seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but reserves the right to do so.
SIMPLIFIED EMPLOYEE PENSION PLAN
A Traditional IRA may also be used in conjunction with a Simplified Employee
Pension Plan ("SEP-IRA"). A SEP-IRA is established through execution of Form
5305-SEP together with a Traditional IRA established for each eligible employee.
Generally, a SEP-IRA allows an employer (including a self-employed individual)
to purchase shares with tax deductible contributions not exceeding annually for
any one participant 15% of compensation (disregarding for this purpose
compensation in excess of $160,000 per year). The $160,000 compensation limit
applies for 1998 and is adjusted periodically for cost of living increases. A
number of special rules apply to SEP Plans, including a requirement that
contributions generally be made on behalf of all employees of the employer
(including for this purpose a sole proprietorship or partnership) who satisfy
certain minimum participation requirements.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan established by the
shareholder's employer (or by a self-employed individual). When this is done,
the IRA is known as a SIMPLE IRA, although it is similar to a Traditional IRA
with the exceptions described below. Under a SIMPLE Plan, the shareholder may
elect to have his or her employer make salary reduction contributions of up to
$6,000 per year to the SIMPLE IRA. The $6,000 limit applies for 1997 and is
adjusted periodically for cost of living increases. In addition, the employer
will contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible participants
whether or not making salary reduction contributions. A number of special rules
apply to SIMPLE Plans, including (1) a SIMPLE Plan generally is available only
to employers with fewer than 100 employees; (2) contributions must be made on
behalf of all employees of the employer (other than bargaining unit employees)
who satisfy certain minimum participation requirements; (3) contributions are
made to a special SIMPLE IRA that is separate and apart from the other IRAs of
employees; (4) the distribution excise tax (if otherwise applicable) is
increased to 25% on withdrawals during the first two years of participation in a
SIMPLE IRA; and (5) amounts withdrawn during the first two years of
participation may be rolled over tax-free only into another SIMPLE IRA (and not
to a Traditional IRA or to a Roth IRA). A SIMPLE IRA is established by executing
Form 5304-SIMPLE together with an IRA established for each eligible employee.
403(b)(7) CUSTODIAL ACCOUNT
A 403(b)(7) Custodial Account is available for use in conjunction with the
403(b)(7) program established by certain educational organizations and other
organizations that are exempt from tax under 501(c)(3) of the Internal Revenue
Code as amended (the "Code"). Amounts contributed to the custodial account in
accordance with the employer's 403(b)(7) program will be invested on a tax-
deductible basis in shares of any Fund. Various contribution limits apply with
respect to 403(b)(7) arrangements.
DEFINED CONTRIBUTION RETIREMENT PLAN (401(k))
A prototype defined contribution plan is available for employers who wish to
purchase shares of any Fund with tax deductible contributions. The plan consists
of both profit sharing and money purchase pension components. The profit sharing
component includes a Section 401(k) cash or deferred arrangement for employers
who wish to allow eligible employees to elect to reduce their compensation and
have such amounts contributed to the plan. The limit on employee salary
reduction contributions is $9,500 annually (as adjusted for cost-of-living
increases) although lower limits may apply as a result of non-discrimination
requirements incorporated into the plan. The Corporation has received an opinion
letter from the IRS holding that the form of the prototype defined contribution
retirement plan is acceptable under Section 401 of the Code. The maximum annual
contribution that may be allocated to the account of any participant is
generally the lesser of $30,000 or 25% of compensation (earned income).
Compensation in excess of $160,000 (as periodically indexed for cost-of-living
increases) is disregarded for this purpose. The maximum amount that is
deductible by the employer depends upon whether the employer adopts both the
profit sharing and money purchase components of the plan, or only one component.
RETIREMENT PLAN FEES
Firstar Trust Company, Milwaukee, Wisconsin, serves as trustee or custodian
of the retirement plans. Firstar invests all cash contributions, dividends and
capital gains distributions in shares of the appropriate Fund. For such
services, the following fees are charged against the accounts of participants;
$12.50 annual maintenance fee per participant account; $15 for transferring to a
successor trustee or custodian; $15 for distribution(s) to a participant; and
$15 for refunding any contribution in excess of the deductible limit. Firstar
Trust Company's fee schedule may be changed upon written notice.
Requests for information and forms concerning the retirement plans should be
directed to the Corporation. Because a retirement program may involve
commitments covering future years, it is important that the investment objective
of the Funds be consistent with the participant's retirement objectives.
Premature withdrawal from a retirement plan will result in adverse tax
consequences. Consultation with a competent financial and tax adviser regarding
the retirement plans is recommended.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each of the Funds will endeavor to qualify as a "regulated investment
company" under Subchapter M of the Code. Each Fund is taxed as a separate entity
under Subchapter M and qualifies on a separate basis. Pursuant to the
qualification requirements of Subchapter M, each Fund intends to distribute
substantially all of its net investment income to its shareholders annually.
Each of the Funds also intends to distribute substantially all of its net
capital gains less available capital loss carryovers annually and other income
to reduce or avoid federal income and excise taxes. For federal income tax
purposes, distributions by a Fund, whether invested in additional shares of
Common Stock or received in cash, will be taxable to such Fund's shareholders
unless exempt from federal taxation. Shareholders will be notified annually as
to the federal tax status of dividends and distributions.
Distributions and redemptions may also be taxed under state and local tax
laws. Investors are advised to consult their tax adviser concerning the
application of state and local taxes.
BROKERAGE TRANSACTIONS
The Management Agreements and Sub-Advisory Agreements authorize the Adviser,
WCM (with respect to the Growth Fund only), PBIA (with respect to the Total
Return Fund only) and WP (with respect to the Regional Small Cap Fund only) to
select the brokers or dealers that will execute the purchases and sales of the
Funds' portfolio securities. In placing purchase and sale orders for the Funds,
it is the policy of the Adviser and the portfolio managers to seek the best
execution of orders at the most favorable price in light of the overall quality
of brokerage and research services provided.
The Management Agreements and Sub-Advisory Agreements permit the Adviser, WCM
(with respect to the Growth Fund only), PBIA (with respect to the Total Return
Fund only) and WP (with respect to the Regional Small Cap Fund only) to cause
the applicable Fund to pay a broker which provides brokerage and research
services to the Adviser, WCM, PBIA or WP a commission for effecting securities
transactions in excess of the amount another broker would have charged for
executing the transaction, provided the Adviser, WCM, PBIA or WP as the case may
be, believes this to be in the best interests of such Fund. Although the Funds
do not intend to market their shares through intermediary broker-dealers, the
Funds may place portfolio orders with broker-dealers who recommend the purchase
of their shares to clients if the Adviser, WCM, PBIA or WP believes the
commissions and transaction quality are comparable to that available from other
brokers and allocate portfolio brokerage on that basis.
CAPITAL STRUCTURE
The Corporation's authorized capital consists of 10,000,000,000 shares of
Common Stock, of which 300,000,000 are allocated to the Growth Fund, 300,000,000
are allocated to the Total Return Fund and 300,000,000 are allocated to the
Regional Small Cap Fund. Each share outstanding entitles the holder to one vote.
Generally shares are voted in the aggregate and not by each Fund, except where
class voting by each Fund is required by Wisconsin law or the Act (e.g., a
change in investment policy or approval of an investment advisory agreement). By
virtue of its stock ownership Resource Trust Company controls each of the Funds
and the Corporation.
The shares of each Fund have the same preferences, limitations and rights,
except that all consideration received from the sale of shares of each Fund,
together with all income, earnings, profits and proceeds thereof, belong to that
Fund and are charged with the liabilities in respect of that Fund and of that
Fund's share of the general liabilities of the Corporation in the proportion
that the total net assets of the Fund bears to the total net assets of all of
the Funds. However the Board of Directors of the Corporation may, in their
discretion direct that any one or more general liabilities of the Corporation be
allocated among the Funds on a different basis. The net asset value per share
of eachFund is based on the assets belonging to that Fund less the liabilities
charged to that Fund, and dividends are paid on shares of each Fund only out of
lawfully available assets belonging to that Fund. In the event of liquidation
or dissolution of the Corporation, the shareholders of each Fund will be
entitled, out of the assets of the Corporation available for distribution, to
the assets belonging to such Fund.
There are no conversion or sinking fund provisions applicable to the shares
of any Fund, and the holders have no preemptive rights and may not cumulate
their votes in the election of directors. Consequently the holders of more than
50% of the Corporation's shares voting for the election of directors can elect
the entire Board of Directors, and in such event, the holders of the remaining
shares voting for the election of directors will not be able to elect any person
or persons to the Board of Directors. The Wisconsin Business Corporation Law
permits registered investment companies, such as the Corporation, to operate
without an annual meeting of shareholders under specified circumstances if an
annual meeting is not required by the Act. The Corporation has adopted the
appropriate provisions in its Bylaws and does not anticipate holding an annual
meeting of shareholders to elect directors unless otherwise required by the Act.
The Corporation has also adopted provisions in its Bylaws for the removal of
directors by its shareholders.
The shares of each Fund are redeemable and are freely transferable. All
shares issued and sold by the Corporation will be fully paid and nonassessable,
except as provided in Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law. Fractional shares of each Fund entitle the holder to the same
rights as whole shares of such Fund. Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202, acts as the Corporation's transfer agent and
dividend disbursing agent.
The Corporation will not issue certificates evidencing shares purchased
unless so requested in writing. Where certificates are not issued, the
shareholder's account will be credited with the number of shares purchased,
relieving shareholders of responsibility for safekeeping of certificates and the
need to deliver them upon redemption. Written confirmations are issued for all
purchases of shares of each Fund. Any shareholder may deliver certificates to
Firstar Trust Company and direct that his account be credited with the shares. A
shareholder may direct Firstar Trust Company at any time to issue a certificate
for his shares without charge.
SHAREHOLDER REPORTS
Shareholders of each Fund will be provided at least semi-annually with a
report showing such Fund's portfolio and other information and annually after
the close of the Corporation's fiscal year, which currently ends June 30, with
an annual report containing audited financial statements. Shareholders who have
questions about the Funds should call Firstar Trust Company at 1-800-595-5519 or
(414) 765-4124 or write to: Eastcliff Funds, 900 Second Avenue South, 300
International Centre, Minneapolis, Minnesota 55402, Attention: Corporate Vice
President.
PERFORMANCE INFORMATION
Each of the Funds may provide from time to time, in advertisements, reports
to shareholders and other communications with shareholders, its average annual
compounded rate of return. A Fund's average annual compounded rate of return
refers to the rate of return which, if applied to an initial investment in such
Fund at the beginning of a stated period and compounded over the period, would
result in the redeemable value of the investment in such Fund at the end of the
stated period. The calculation assumes reinvestment of all dividends and
distributions and reflects the effect of all recurring fees. Each Fund may also
provide "aggregate" total return information for various periods, representing
the cumulative change in value of an investment in a Fund for a specific period
(again reflecting changes in share price and assuming reinvestment of dividends
and distributions).
Any performance results will be based on historical earnings and should not
be considered as representative of the performance of a Fund in the future. An
investment in a Fund will fluctuate in value and at redemption its value may be
more or less than the initial investment.
Each of the Funds may compare its performance to other mutual funds with
similar investment objectives and to the industry as a whole, as reported by
Morningstar, Inc. and Lipper Analytical Services, Inc., Money, Forbes, Business
Week and Barron's magazines, and The Wall Street Journal. (Morningstar, Inc. and
Lipper Analytical Services, Inc. are independent ranking services that rank over
1,000 mutual funds based upon total return performance.) Each of the Fund's may
also compare its performance to the Dow Jones Industrial Average, Nasdaq
Composite Index, Nasdaq Industrials Index, Value Line Composite Index, the S&P
500 Index, S&P400 Mid-Cap Growth Index, Lehman Intermediate Corporate Bond
Index, Russell 1000 Growth Index, Russell 2000 Index and the Consumer Price
Index. Such comparisons may be made in advertisements, shareholder reports or
other communications to shareholders.
EASTCLIFF FUNDS
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
612-336-1444
INVESTMENT ADVISER
RESOURCE CAPITAL ADVISERS, INC.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
PORTFOLIO MANAGERS
EASTCLIFF GROWTH FUND
WINSLOW CAPITAL MANAGEMENT, INC.
EASTCLIFF TOTAL RETURN FUND
PALM BEACH INVESTMENT ADVISERS, INC.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
WOODLAND PARTNERS LLC
ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-595-5519
or
414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
EASTCLIFF FUNDS
PURCHASE APPLICATION
- --- This is a follow-up application to an investment by wire transfer.
Mail completed application to:
Eastcliff Funds
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Express Mail to:
Eastcliff Funds
c/o Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, WI 53202
Use this form for individual, custodial, trust, profit sharing or pension plan
accounts, including self-directed IRA and 401(k) plans. DO NOT USE THIS FORM
FOR THE EASTCLIFF FUNDS-SPONSORED IRAs, SEP-IRA, SIMPLE IRA, 402(b)(7),
DEFINED CONTRIBUTION (KEOGH OR CORPORATE PROFIT-SHARING AND MONEY-PURCHASE)
OR 401(K) PLANS WHICH REQUIRE FORMS AVAILABLE FROM THE EASTCLIFF FUNDS.
For information please call 1-800-595-5519 or 1-414-765-4124.
- ------------------------------------------------------------------------------
A. INVESTMENT
The minimum initial investment is $1,000 for shares in any of the Eastcliff
Funds. Minimum additions to any Fund are $100 (except $50 for the Automatic
Investment Plan).
Wiring instructions: Firstar Bank Milwaukee, NA, 777 E Wisconsin Ave.,
Milwaukee, WI 53202,
ABA: 075000022, For credit to Firstar Trust Co., Account # 112-952-137,
For further credit (insert full name of Fund) (shareholders name) & (account
-------------------------------------------- -------
number).
- ------
Notify Firstar Trust Company at 1-800-595-5519 or 1-414-765-4124 prior to
sending wire.
PAYMENT BY --- Check --- Wire AMOUNT
- --- Eastcliff Growth Fund $--------------
- --- Eastcliff Total Return Fund $--------------
- --- Eastcliff Regional Small Capitalization Value Fund $--------------
- ------------------------------------------------------------------------------
B. REGISTRATION
- --- Individual
- --- Self-Directed IRA
- ----------------- ---- --------------------- ---------------- --------
FIRST NAME M.I LAST NAME SOCIAL SECURITY # BIRTHDATE
(Mo/Dy/Yr)
- --- Joint Owner*<F22>
(Cannot be a minor)
- ----------------- ---- --------------------- ---------------- --------
FIRST NAME M.I LAST NAME SOCIAL SECURITY # BIRTHDATE
(Mo/Dy/Yr)
*<F22>Registration will be Joint Tenancy with Rights of Survivorship (JTWROS),
unless otherwise specified.
- --- Gift to Minor
- ---------------------------------------------- ---- -----------------------
CUSTODIAN'S FIRST NAME (only one permitted) M.I. LAST NAME
- --------------------------------------------- ---- -----------------------
MINOR'S FIRST NAME (only one permitted) M.I. LAST NAME
- --------------------------- ----------------------------- -----------------
MINOR'S SOCIAL SECURITY # MINOR'S BIRTH DATE (Mo/Dy/Yr) STATE OF RESIDENCE
- --- Trust, Estate or Guardianship**<F23>
- ------------------------------------------------------------------------------
NAME OF TRUSTEE(S) (if to be included in registration)**<F23>
- --- Corporate***<F24> (including Corporate Pension Plans)
- --- Partnership**<F23>
- --- Other Entity**<F23>
- ------------------------------------------------------------------------------
NAME OF TRUST**<F23> / CORPORATION***<F24> / PARTNERSHIP
- ------------------------------------------------- --------------------------
SOCIAL SECURITY # / TAX ID # DATE OF AGREEMENT (Mo/Dy/Yr)
**<F23>Additional documentation and certification may be requested
***<F24>Corporate Resolution is required
- ------------------------------------------------------------------------------
C. ADDRESS
Mailing Address
- ---------------------------------------------------- -----------------------
STREET APT / SUITE
- -------------------------------------------- ----------------- -----------
CITY STATE ZIP
- ----------------------------------------- ----------------------------------
DAYTIME PHONE # EVENING PHONE #
- --- Duplicate Confirmation (if desired) to:
- --------------------------- ----- ----------------------------------------
FIRST NAME M.I. LAST NAME
- ---------------------------------------------------- -----------------------
STREET APT / SUITE
- -------------------------------------------- ----------------- -----------
CITY STATE ZIP
- ------------------------------------------------------------------------------
D. DISTRIBUTION OPTIONS
Capital gains & dividends will be reinvested if no option is selected.
--- Capital Gains & --- Capital Gains &
Dividends Reinvested Dividends in Cash
--- Capital Gains in Cash & --- Capital Gains Reinvested &
Dividends Reinvested Dividends in Cash
If the distribution is to be paid in cash, specify payment method below:
--- Send check to mailing address in Section C.
--- Automatic deposit to my bank account via EFT. This transfer may take
up to 3 business days to reach your bank account (please complete bank
information below).
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- ---------------------------------------- -----------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application. Your signed application must be received
at least 15 business days prior to the initial distribution transaction.
- ------------------------------------------------------------------------------
E. TELEPHONE REDEMPTIONS
I authorize Eastcliff Funds, Inc. to act upon my telephone instructions to
redeem shares from my account.
--- The proceeds will be mailed to the address in Section C.
--- The proceeds of any redemption will be wired to your bank (complete bank
information below). A wire fee of $12.00 will be charged.
--- The proceeds of any redemption will be transferred via Electronic Funds
Transfer ("EFT"). This transfer may take up to 3 business days to reach your
bank (please complete bank information below).
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- -------------------------------------------- -------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application. Your signed application must be received
at least 15 business days prior to the initial redemption transaction.
- ------------------------------------------------------------------------------
F. EXCHANGE PRIVILEGE
If investment is by exchange, such exchange should be made from:
--- Eastcliff Growth Fund --- Eastcliff Total Return Fund
Account # --------------- Account #----------------------
--- Eastcliff Regional Small Capitalization Value Fund
Account # -----------------------
(I understand that exchanges between the Funds are taxable transactions.)
Amount of Exchange $-------------- or Number of Shares ------------------
- ------------------------------------------------------------------------------
G. SYSTEMATIC WITHDRAWALS
I would like to withdraw from Eastcliff Fund name-----------------------------
Account # ------------- $------------------ ($100 minimum) as follows:
- --- I would like to have payments made to me on or about the ------ day of each
month, Or
- --- I would like to have payments made to me on or about the ------ day of the
months that I have circled below:
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- --- I would like my payments automatically deposited to my checking, NOW or
savings account. Complete bank account information below and attach a copy of a
voided check or savings deposit slip. (A check will be mailed to the address
from section C if this selection is not marked).
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- --------------------------------------------- ------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application. A balance of at least $10,000 is
required.
- ------------------------------------------------------------------------------
H. AUTOMATIC INVESTMENT PLAN
I would like to establish an Automatic Investment Plan for the Eastcliff
Funds as described in the Prospectus. Based on these instructions, Firstar
Trust Company as Transfer Agent for the Eastcliff Funds, will automatically
transfer money directly from my checking, NOW or savings account to purchase
shares in the Eastcliff Fund of my choice. I understand if the automatic
purchase cannot be made due to insufficient funds, stop payment or any other
reason, a $20 fee will be assessed. Your signed application must be received
at least 15 business days prior to initial transaction. Attach an unsigned,
voided check (for checking accounts) or a savings account deposit slip and
complete this form.
Please indicate the day of debit from bank account------------------------
Start Date (month & year) -------------- --- Monthly --- Quarterly
Eastcliff Fund name --------------------------------
Account Number, if known ---------------------------
Indicate amount to be withdrawn from my bank account $---------- (minimum $50)
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- ---------------------------------------------- -----------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
- ------------------------------------------ ---------------------------------
SIGNATURE OF BANK ACCOUNT OWNER SIGNATURE OF JOINT OWNER (if any)
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application.
- ------------------------------------------------------------------------------
I. SIGNATURE AND CERTIFICATION REQUIRED BY THE INTERNAL REVENUE SERVICE
Neither the Fund nor its transfer agent will be responsible for the
authenticity of transaction instructions received by telephone, provided that
reasonable security procedures have been followed.
By selecting the options in Section (G or H), I hereby authorize the Fund to
initiate debits/credits to my account at the bank indicated and for the bank
to debit/credit the same to such account through the Automated Clearing House
("ACH") system.
UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER
OR TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. THE IRSDOES
NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- --------------------------------- ------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF OWNER*<F25>
- -------------------------------- -------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF JOINT OWNER, if any
*<F25>If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- ------------------------------------------------------------------------------
PRINT NAME AND TITLE OF OFFICER SIGNING FOR A CORPORATION OR OTHER ENTITY.
STATEMENT OF ADDITIONAL INFORMATION September 30, 1997
EASTCLIFF FUNDS, INC.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Eastcliff Funds, Inc.
dated September 30, 1997. Requests for copies of the prospectus should be
made in writing to Eastcliff Funds, Inc., 900 Second Avenue South, 300
International Centre, Minneapolis, Minnesota 55402, Attention: Corporate
Secretary, or by calling (612) 336-1444.
<PAGE>
EASTCLIFF FUNDS, INC.
Table of Contents
Page No.
General Information and History . . . . . . . . . . . . . . . . . . . . 1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . 3
Directors and Officers of the Corporation . . . . . . . . . . . . . . . 12
Ownership of Management and Principal Shareholders . . . . . . . . . . 15
Investment Adviser, Portfolio Managers and Administrator . . . . . . . 16
Determination of Net Asset Value and Performance . . . . . . . . . . . 21
Distribution of Shares . . . . . . . . . . . . . . . . . . . . . . . . 23
Allocation of Portfolio Brokerage . . . . . . . . . . . . . . . . . . . 24
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 27
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 28
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 28
Description of Securities Ratings . . . . . . . . . . . . . . . . . . . 29
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated September 30, 1997 and, if
given or made, such information or representations may not be relied upon
as having been authorized by Eastcliff Funds, Inc.
The Statement of Additional Information does not constitute an
offer to sell securities.
<PAGE>
GENERAL INFORMATION AND HISTORY
Eastcliff Funds, Inc., a Wisconsin corporation organized on May
23, 1986 (the "Corporation"), is an open-end, diversified management
investment company consisting of three portfolios, Eastcliff Growth Fund
(the "Growth Fund"), Eastcliff Total Return Fund (the "Total Return Fund")
and Eastcliff Regional Small Capitalization Value Fund (the "Regional
Small Cap Fund") (collectively, the "Eastcliff Funds" or the "Funds").
The Corporation was called "Fiduciary Total Return Fund, Inc." prior to
December 23, 1994.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated September 30, 1997 of the
Corporation under the caption "Investment Objectives and Policies", the
investment objective of the Growth Fund is to produce long-term growth of
capital by investing principally in equity securities. The investment
objective of the Total Return Fund is to realize a combination of capital
appreciation and income which will result in the highest total return,
while assuming reasonable risks. The term "reasonable risks" refers to
the judgment of the Total Return Fund's investment adviser or portfolio
manager that investment in certain securities would not present an
excessive risk of loss in light of current and anticipated future general
market and economic conditions, trends in yields and interest rates, and
fiscal and monetary policies. The investment objective of the Regional
Small Cap Fund is to produce capital appreciation. Consistent with these
investment objectives, each of the Funds has adopted the following
investment restrictions which are matters of fundamental policy. Each
Fund's fundamental investment policies cannot be changed without approval
of the holders of the lesser of: (i) 67% of that Fund's shares present or
represented at a shareholders' meeting at which the holders of more than
50% of such shares are present or represented; or (ii) more than 50% of
the outstanding shares of that Fund.
1. None of the Funds will purchase securities on margin,
participate in a joint-trading account, sell securities short, or write or
invest in put or call options, except that (a) the Growth Fund may invest
for hedging purposes up to 5% of its net assets in put or call options and
options on futures contracts and up to 5% of its net assets in futures
contracts, and (b) the Regional Small Cap Fund may write or invest in put
and call options to the extent permitted by the Investment Company Act of
1940. No Fund's investments in warrants, valued at the lower of cost or
market, will exceed 5% of the value of such Fund's net assets.
2. None of the Funds will borrow money or issue senior
securities, except for temporary bank borrowings (not in excess of 5% of
the value of its net assets) or for emergency or extraordinary purposes,
and none of the Funds will pledge any of its assets, except to secure
borrowings and only to an extent not greater than 10% of the value of such
Fund's net assets.
3. None of the Funds will lend money (except by purchasing
publicly distributed debt securities or entering into repurchase
agreements provided that repurchase agreements maturing in more than seven
days plus all other illiquid securities will not exceed 10% of such Fund's
net assets) or will lend its portfolio securities. A repurchase agreement
involves a sale of securities to a Fund with the concurrent agreement of
the seller to repurchase the securities at the same price plus an amount
equal to an agreed upon interest rate, within a specified time. In the
event of a bankruptcy or other default of a seller of a repurchase
agreement, such Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in
value of the collateral during the period while such Fund seeks to enforce
its rights thereto; (b) possible decreased levels of income during this
period; and (c) expenses of enforcing its rights.
4. None of the Funds will make investments for the purpose of
exercising control or management of any company.
5. None of the Funds will purchase securities of any issuer
(other than the United States or an agency or instrumentality of the
United States) if, as a result of such purchase, such Fund would hold more
than 10% of any class of securities, including voting securities, of such
issuer or more than 5% of such Fund's assets, taken at current value,
would be invested in securities of such issuer, except that up to 25% of
the Regional Small Cap Fund's assets may be invested without regard to
these limitations.
6. None of the Funds will concentrate more than 25% of the
value of its net assets, determined at the time an investment is made,
exclusive of government securities, in securities issued by companies
primarily engaged in the same industry.
7. None of the Funds will acquire or retain any security
issued by a company, an officer or director of which is an officer or
director of the Corporation or an officer, director or other affiliated
person of any Fund's investment adviser.
8. None of the Funds will acquire or retain any security
issued by a company if any of the directors or officers of the
Corporation, or directors, officers or other affiliated persons of any
Fund's investment adviser, beneficially own more than 1/2% of such
company's securities and all of the above persons owning more than 1/2%
own together more than 5% of its securities.
9. None of the Funds will act as an underwriter or distributor
of securities other than shares of the Corporation or will purchase any
securities which are restricted from sale to the public without
registration under the Securities Act of 1933, as amended.
10. None of the Funds will purchase oil, gas or other mineral
leases or any interest in any oil, gas or any other mineral exploration or
development program.
11. None of the Funds will purchase or sell real estate, real
estate mortgage loans or real estate limited partnerships.
12. None of the Funds will purchase or sell commodities or
commodities contracts, except that the Growth Fund may invest in futures
contracts and options on future contracts to the extent set forth in
Investment Restriction No. 1 above.
13. The Total Return Fund will not invest more than 5% of its
total assets, and each of the Growth Fund and the Regional Small Cap Fund
will not invest more than 10% of its total assets, in securities of
issuers which have a record of less than three years of continuous
operation, including the operation of any predecessor business of a
company which came into existence as a result of a merger, consolidation,
reorganization or purchase of substantially all of the assets of such
predecessor business.
The following investment limitation is not fundamental, and may
be changed without shareholder approval.
1. None of the Funds will purchase securities of other
investment companies except (a) as part of a plan of merger, consolidation
or reorganization approved by the shareholders of such Fund; (b)
securities of money market mutual funds; or (c) securities of registered
closed-end investment companies on the open market where no commission or
profit results, other than the usual and customary broker's commission.
No purchases described in (b) and (c) will be made if as a result of such
purchase such Fund would hold more than 3% of any class of securities,
including voting securities, of any registered investment company or more
than 5% of such Fund's assets, taken at current value, would be invested
in the securities of any registered investment company or in securities of
registered closed-end investment companies.
INVESTMENT CONSIDERATIONS
Low-Rated Securities
As set forth in the Funds' prospectus dated September 30, 1997
under the caption "Investment Practices and Risks", each of the Funds will
limit its investments in convertible securities to those for which such
Fund's investment adviser believes (a) the underlying common stock is a
suitable investment for that Fund and (b) a greater potential for total
return exists by purchasing the convertible security because of its higher
yield. Moreover, none of the Funds will invest more than 5% of its net
assets at the time of investment in convertible securities rated less than
investment grade.
Corporate obligations rated less than investment grade
(hereinafter referred to as "low-rated securities") are commonly referred
to as "junk bonds", and while generally offering higher yields than
investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are
regarded as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal. The special risk
considerations in connection with investments in low-rated securities are
discussed below.
Effect of Interest Rates and Economic Changes. Even though the exposure
of each of the Funds to the low-rated security market is limited to a
maximum of 5% of its net assets, the Funds are required to provide the
following discussion of such market.
The low-rated security market is relatively new and its growth
paralleled a long economic expansion. As a result, it is not clear how
this market may withstand a prolonged recession or economic downturn.
Such a prolonged economic downturn could severely disrupt the market for
and adversely affect the value of high-yield securities.
Interest-bearing securities typically experience appreciation
when interest rates decline and depreciation when interest rates rise.
The market values of low-rated securities tend to reflect individual
corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Low-rated securities also tend to be more sensitive to
economic conditions than are higher-rated securities. As a result, they
generally involve more credit risks than securities in the higher-rated
categories. During an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of low-rated securities may
experience financial stress and may not have sufficient revenues to meet
their payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate
developments, or the issuer's inability to meet specific projected
business forecasts or the unavailability of additional financing. The
risk of loss due to default by an issuer of low-rated securities is
significantly greater than issuers of higher-rated securities because such
securities are generally unsecured and are often subordinated to other
creditors. Further, if the issuer of a low-rated security defaulted, the
applicable Fund might incur additional expenses in seeking recovery.
Periods of economic uncertainty and changes would also generally result in
increased volatility in the market prices of low-rated securities and thus
in the applicable Fund's net asset value.
As previously stated, the value of a low-rated security
generally will decrease in a rising interest rate market, and accordingly,
so normally will the applicable Fund's net asset value. If such Fund
experiences unexpected net redemptions in such a market, it may be forced
to liquidate a portion of its portfolio securities without regard to their
investment merits. Due to the limited liquidity of low-rated securities
(discussed below), the Fund may be forced to liquidate these securities at
a substantial discount. Any such liquidation would reduce the Fund's
asset base over which expenses could be allocated and could result in a
reduced rate of return for the Fund.
Payment Expectations. Low-rated securities typically contain redemption,
call or prepayment provisions which permit the issuer of such securities
containing such provisions to, at their discretion, redeem the securities.
During periods of falling interest rates, issuers of low-rated securities
are likely to redeem or prepay the securities and refinance them with debt
securities with a lower interest rate. To the extent an issuer is able to
refinance the securities or otherwise redeem them, the applicable Fund may
have to replace the securities with a lower yielding security which would
result in lower returns for the Fund.
Credit Ratings. Credit ratings issued by credit rating agencies evaluate
the safety of principal and interest payments of rated securities. They
do not, however, evaluate the market value risk of low-rated securities
and therefore may not fully reflect the true risks of an investment. In
addition, credit rating agencies may or may not make timely changes in a
rating to reflect changes in the economy or in the condition of the issuer
that affect the market value of the security. Consequently, credit
ratings are used only as a preliminary indicator of investment quality.
Liquidity and Valuation. A Fund may have difficulty disposing of certain
low-rated securities because there may be a thin trading market for such
securities. Because not all dealers maintain markets in all low-rated
securities there is no established retail secondary market for many of
these securities. The Funds anticipate that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market does exist, it is generally not as
liquid as the secondary market for higher rated securities. The lack of a
liquid secondary market may have an adverse impact on the market price of
the security, and accordingly, the net asset value of a particular Fund
and its ability to dispose of particular securities when necessary to meet
its liquidity needs, or in response to a specific economic event, or an
event such as a deterioration in the creditworthiness of the issuer. The
lack of a liquid secondary market for certain securities may also make it
more difficult for a Fund to obtain accurate market quotations for
purposes of valuing their respective portfolios. Market quotations are
generally available on many low-rated issues only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales. During periods of thin trading, the spread
between bid and asked prices is likely to increase significantly. In
addition, adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the values and liquidity of
high-yield securities, especially in a thinly-traded market.
Hedging Instruments
As set forth above under the caption "Investment Restrictions",
the Growth Fund may invest up to 5% of its net assets in put or call
options and options on futures contracts and up to 5% of its net assets in
futures contracts. Similarly, as set forth in the Prospectus under the
caption "Investment Objectives and Policies -- Eastcliff Regional Small
Capitalization Value Fund", the Regional Small Cap Fund may purchase put
and call options on equity securities and on stock indices and write
covered call options on equity securities owned by the Regional Small Cap
Fund, provided not more than 5% of the Regional Small Cap Fund's net
assets will be invested in put and call options and the premiums received
by the Regional Small Cap Fund with respect to unexpired call options
written by the Regional Small Cap Fund will not exceed 5% of the Regional
Small Cap Fund's net assets. The foregoing investments will be effected
during periods of anticipated market weakness and will not result in
leveraging of the applicable Fund's portfolio.
Futures Contracts. When the Growth Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When the Growth Fund sells a futures contract, it agrees to sell
the underlying instrument at a specified future date. The price at which
the purchase and sale will take place is fixed when the Growth Fund enters
into the contract. Futures can be held until their delivery dates, or can
be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease
in tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase the Growth Fund's
exposure to positive and negative price fluctuations in the underlying
instrument, much as if the Growth Fund had purchased the underlying
instrument directly. When the Growth Fund sells a futures contract, by
contrast, the value of its future position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much
as if the underlying instrument had been sold.
Futures Margin Payments. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a Futures Commission Merchant ("FCM"), when the contract is
entered into. Initial margin deposits are equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain
may be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on
margin for purposes of the Growth Fund's investment limitations. In the
event of the bankruptcy of an FCM that holds margin on behalf of the
Growth Fund, such Fund may be entitled to return of margin owed to it only
in proportion to the amount received by the FCM's other customers,
potentially resulting in losses to the Fund.
Purchasing Put and Call Options. By purchasing a put option, the Growth
Fund or the Regional Small Cap Fund, as the case may be, obtains the right
(but not the obligation) to sell the option's underlying instrument at a
fixed strike price. In return for this right, the Fund pays the current
market price for the option (known as the option premium). The Growth
Fund may purchase options on futures contracts, as well as options on
equity securities and stock indices. The Regional Small Cap Fund may
purchase options on equity securities and on stock indices. The Growth
Fund or the Regional Small Cap Fund, as the case may be, may terminate its
position in a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the Fund will
lose the entire premium it paid. If a Fund exercises the option, it
completes the sale of the underlying instrument at the strike price. Such
Fund may also terminate a put option position by closing it out in the
secondary market at its current price, if a liquid secondary market
exists. The buyer of a put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing
the option, a put buyer can expect to suffer a loss (limited to the amount
of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those
of put options, except that the purchaser of a call option obtains the
right to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option. Only exchange listed options will be
acquired.
Stock Index Options. Stock index options are put options and call options
on various stock indexes. In most respects, they are identical to listed
options on common stocks. The primary difference between stock options
and index options occurs when index options are exercised. In the case of
stock options, the underlying security, common stock, is delivered.
However, upon the exercise of an index option, settlement does not occur
by delivery of the securities comprising the index. The option holder who
exercises the index option receives an amount of cash if the closing level
of the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of
the option. This amount of cash is equal to the difference between the
closing price of the stock index and the exercise price of the option
expressed in dollars times a specified multiple. A stock index fluctuates
with changes in the market value of the stocks included in the index. For
example, some stock index options are based on a broad market index, such
as the Standard & Poor's 500 or the Value Line Composite Index, or a
narrower market index, such as the Standard & Poor's 100. Indexes also
may be based on an industry or market segment, such as the AMEX Oil and
Gas Index or the Computer and Business Equipment Index. Options on stock
indexes are currently traded on the following exchanges: the Chicago
Board Options Exchange, the New York Stock Exchange, the American Stock
Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange.
Writing Call and Put Options. When the Growth Fund or the Regional Small
Cap Fund, as the case may be, writes a call option, it receives a premium
and agrees to sell the related investments to a purchaser of the call
during the call period (usually not more than nine months) at a fixed
exercise price (which may differ from the market price of the related
investments) regardless of market price changes during the call period.
If the call is exercised, the Fund forgoes any gain from an increase in
the market price over the exercise price. When writing an option on a
futures contract the Growth Fund will be required to make margin payments
to an FCM as described above for futures contracts.
To terminate its obligations on a call which it has written,
the Growth Fund or the Regional Small Cap Fund, as the case may be, may
purchase a call in a "closing purchase transaction." (As discussed above,
such Funds may also purchase calls other than as part of such closing
transactions.) A profit or loss will be realized depending on the amount
of option transaction costs and whether the premium previously received is
more or less than the price of the call purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the
premium received. Any such profits are considered short-term gains for
federal income tax purposes and, when distributed, are taxable as ordinary
income.
Writing calls generally is a profitable strategy if prices
remain the same or fall. Through receipt of the option premium, a call
writer mitigates the effects of a price decline. At the same time,
because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
When a Fund writes a put option, it takes the opposite side of
the transaction from the option's purchaser. In return for receipt of a
premium, the Fund assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option chooses to
exercise it. The Growth Fund may only write covered puts and the Regional
Small Cap Fund currently will not write put options. For a put to be
covered, the Growth Fund must maintain in a segregated account cash or
high-quality, short-term readily marketable obligations equal to the
option price. A profit or loss will be realized depending on the amount
of option transaction costs and whether the premium previously received is
more or less than the put purchased in a closing purchase transaction. A
profit may also be realized if the put lapses unexercised because the Fund
retains the premium received. Any such profits are considered short-term
gains for federal income tax purposes and, when distributed, are taxable
as ordinary income.
Combined Option Positions. The Growth Fund or the Regional Small Cap Fund
may purchase and write options (subject to the limitations discussed
above) in combination with each other to adjust the risk and return
characteristics of the overall position. For example, either Fund may
purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce
the risk of the written call option in the event of a substantial price
increase. Because combined options involve multiple trades, they result
in higher transaction costs and may be more difficult to open and close
out.
Correlation of Price Changes. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the applicable Fund's
current or anticipated investments. The Growth Fund or the Regional Small
Cap Fund may invest in options and (with respect to the Growth Fund only)
futures contracts based on securities which differ from the securities in
which it typically invests. This involves a risk that the options or
futures position will not track the performance of the Fund's investments.
Options and futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instrument match the
applicable Fund's investments well. Options and future prices are
affected by such factors as current and anticipated short-term interest
rates, changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect security
prices the same way. Imperfect correlation may also result from differing
levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and
securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Growth Fund and the Regional Small Cap Fund
may purchase or sell options and (with respect to the Growth Fund only)
futures contracts with a greater or less value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate
for differences in historical volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the applicable Fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in
other investments. Successful use of these techniques requires skills
different from those needed to select portfolio securities.
Liquidity of Options and Futures Contracts. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading
volume and liquidity if their strike prices are not close to the
underlying instruments' current price. In addition, exchanges may
establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is imposed,
it may be impossible for the Growth Fund or the Regional Small Cap Fund,
as the case may be, to enter into new positions or close out existing
positions. If the secondary market for a contract is not liquid because
of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the
applicable Fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, such Fund's
access to other assets held to cover its options or futures positions
could also be impaired.
Asset Coverage for Futures and Option Positions. The Growth Fund and the
Regional Small Cap Fund will comply with guidelines established by the
Securities and Exchange Commission with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside U.S. government securities, cash or liquid debt securities in a
segregated custodial account in the amount prescribed. Securities held in
a segregated account cannot be sold while the futures or option strategy
is outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a portion of the
applicable Fund's assets could impede portfolio management or such Fund's
ability to meet redemption requests or other current obligations.
Possible Tax Limitations on Portfolio and Hedging Strategies. The
Corporation intends that each of the Funds qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code for
each taxable year. In order to so qualify, each of such Funds must, among
other things, derive less than 30% of its gross income for the fiscal year
ending June 30, 1998, but not subsequent fiscal years, from the sale or
other disposition of stock or securities (or options thereon) held less
than three months. Due to this limitation, each of such Funds will limit
the extent to which it engages in the following activities, but will not
be precluded from them: (i) selling investments, including futures, held
for less than three months, whether or not they were purchased on the
exercise of a call; (ii) the writing of calls on investments held less
than three months; (iii) the writing or purchasing of calls or the
purchasing of puts which expire in less than three months; (iv) effecting
closing transactions with respect to calls written or purchased or puts
purchased less than three months previously; and (v) exercising certain
puts or calls held for less than three months.
Special Risks of Hedging and Income Enhancement Strategies. Participation
in the options or futures markets involves investment risks and
transactions costs to which the Growth Fund or the Regional Small Cap
Fund, as applicable, would not be subject absent the use of these
strategies. If the applicable Fund's portfolio manager(s)' prediction of
movements in the direction of the securities and interest rate markets are
inaccurate, the adverse consequences to such Fund may leave such Fund in a
worse position than if such strategies were not used. Risks inherent in
the use of futures contracts and options on futures contracts include:
(1) dependence on the portfolio manager(s)' ability to predict correctly
movements in the direction of interest rates, securities prices and
currency markets; (2) imperfect correlation between the price of options
and futures contracts and options thereon and movements in the prices of
the securities being hedged; (3) the fact that skills needed to use these
strategies are different from those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument at any time; and (5) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, age, address, principal occupation(s) during the past
five years and other information with respect to each of the directors and
officers of the Corporation are as follows:
CONLEY BROOKS, JR.*
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(PRESIDENT AND A DIRECTOR OF THE CORPORATION)
Mr. Brooks, age 51, has been President of Brooks Associates,
Inc., an asset and investment management firm, since 1982 and Chairman of
the Board of Resource Companies, Inc. since 1992. Resource Companies,
Inc. is a bank holding company which owns Resource Trust Company, the
corporate parent of Resource Capital Advisers, Inc. Mr. Brooks has been
President and a director of the Corporation since December, 1994.
JOHN J. FAUTH
3100 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
(A DIRECTOR OF THE CORPORATION)
Mr. Fauth, age 52, has been Chairman and Chief Executive
Officer of The Churchill Companies, a private investment company, since
April, 1982. Mr. Fauth has been a director of the Corporation since
December, 1994. He is also a director of Kinnard Investments, Inc.
A. SKIDMORE THORPE
4900 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
(A DIRECTOR OF THE CORPORATION)
Mr. Thorpe, age 68, is a private investor; he has been Chairman
of Andrus California Timberland Partnerships, a private investment firm,
since 1988. Mr. Thorpe has been a director of the Corporation since
December, 1994.
_______________
* Messrs. Brooks, Welch and Wilson are directors who are "interested
persons" of the Fund as that term is defined in the Investment Company Act
of 1940.
E. THOMAS WELCH*
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT AND A DIRECTOR OF THE CORPORATION)
Mr. Welch, age 59, has been President and Managing Director of
Resource Trust Company since 1984, President of Resource Companies, Inc.
since January, 1990 and Chief Operating Officer of Resource Capital
Advisers, Inc. since February, 1992. He has served as Vice President and
a director of the Corporation since December, 1994. Mr. Welch is also a
director of Casino Magic.
JOHN A. CLYMER
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT, SECRETARY AND TREASURER OF THE CORPORATION)
Mr. Clymer, age 49, has been a Managing Director of Resource
Trust Company and President of Resource Capital Advisers, Inc. since 1994.
Prior to joining the Resource companies, he was president of Minnesota
Mutual Life Insurance Company, and had held various positions within
Minnesota Mutual Life Insurance Company since 1972. Mr. Clymer has served
as a Vice President of the Corporation since June, 1996 and as Secretary
and Treasurer of the Corporation since June, 1997. Mr. Clymer is a
director of Hanover Capital Mortgage Holdings, Inc., a real estate
investment trust, and WTC Industries, Inc.
DONALD S. WILSON*
225 East Mason Street
Milwaukee, Wisconsin 53202
(A DIRECTOR OF THE CORPORATION)
Mr. Wilson, age 54, co-founded Fiduciary Management, Inc., a
Milwaukee, Wisconsin, investment advisory firm, in 1980 and has served as
a director and in various executive capacities since that time, including
as President and Treasurer since 1987. Mr. Wilson has served in various
capacities with the Corporation since its inception in 1986. He has been
a director of the Corporation since 1987. From 1986 through December,
1994, Mr. Wilson served as Vice President and Assistant Secretary of the
Corporation, and from December, 1994 through June, 1997, he served as
Secretary and Treasurer of the Corporation. Mr. Wilson also serves as a
director of Fiduciary Capital Growth Fund and FMI Focus Fund.
_______________
* Messrs. Brooks, Welch and Wilson are directors who are "interested
persons" of the Fund as that term is defined in the Investment Company Act
of 1940.
A. RODNEY BOREN
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT OF THE CORPORATION)
Mr. Boren, age 51, has been a Managing Director of Resource
Trust Company since January, 1996. Prior to joining Resource Trust
Company, he was with Norwest Bank since 1974, most recently serving as
Executive Vice President, Norwest Institutional Trust Services, from 1990
to 1995. Mr. Boren served as an Investment Officer of the Corporation
from February, 1996 to June, 1997 and has served as Vice President of the
Corporation since June, 1997.
THOMAS M. KERESEY
249 Royal Palm Way
Suite 400
Palm Beach, Florida 33480
(VICE PRESIDENT OF THE CORPORATION)
Mr. Keresey, age 66, has been a Chairman and Chief Investment
Officer of Palm Beach Investment Advisers, Inc. ("PBIA") since February,
1990. Prior to founding PBIA, he was Chairman of Palm Beach Capital
Management, an independent counseling firm advising the ABT family of
mutual funds, as well as private and institutional accounts. Previously,
he served as Chairman and Director of the First National Bank in Palm
Beach for ten years, Executive Vice President and Director of Kidder
Peabody Company in New York, and Executive Vice President and Director of
Clark, Dodge and Company. Mr. Keresey served as an Investment Officer of
the Corporation from February, 1996 to June, 1997 and has served as a Vice
President of the Corporation since June, 1997.
SARAH A. HILLESHEIM
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT AND ASSISTANT SECRETARY OF THE CORPORATION)
Ms. Hillesheim, age 36, has been employed at Resource Capital
Advisers, Inc. since 1994 and has served as a Compliance Specialist since
August, 1996. From November 1992 until June 1994, she was employed at the
Center for Diagnostic Imaging; prior to that time, she was employed at
Piper Jaffray Companies from 1985 to 1992. Ms. Hillesheim has been a Vice
President and Assistant Secretary of the Corporation since November, 1995.
The Corporation's standard method of compensating directors
is to pay each director who is not an officer of the Corporation a fee of
$150 for each meeting of the Board of Directors attended. During the
fiscal year ended June 30, 1997 the Corporation paid $1,050 in directors'
fees to the Corporation's directors who are not officers of the
Corporation. The table below sets forth the compensation paid by the
Corporation to each of the current directors of the Corporation during the
fiscal year ended June 30, 1997:
<TABLE>
COMPENSATION TABLE
<CAPTION> Total Compensation
from Corporation
Pension or Retirement Estimated Annual and Fund
Name of Aggregate Compensation Benefits Accrued As Benefits Upon Complex Paid
Person from Corporation Part of Fund Expenses Retirement to Directors
<S> <C> <C> <C> <C>
Conley Brooks, Jr. $0 $0 $0 $0
John J. Fauth $450 $0 $0 $450
A. Skidmore Thorpe $600 $0 $0 $600
E. Thomas Welch $0 $0 $0 $0
Donald S. Wilson $0 $0 $0 $0
</TABLE>
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
As of August 31, 1997, all officers and directors of the
Corporation as a group (9 persons) beneficially owned 16,783 shares of the
Growth Fund (which constituted 0.51% of its then outstanding shares),
10,424 shares of the Total Return Fund (which constituted 0.79% of its
then outstanding shares) and 16,281 shares of the Regional Small Cap Fund
(which constituted 0.63% of its then outstanding shares). As of such
date, the sole beneficial holders of more than 5% of the Growth Fund's
then outstanding shares were Resource Trust Company, Suite 300, 900 Second
Avenue South, Minneapolis, Minnesota 55402, which owned 2,960,683 shares
of such Fund (constituting 89.54% of its then outstanding shares), and
Hollybrook & Company, an affiliate of Conley Brooks, Jr., which owned
210,004 shares of the Growth Fund (constituting 6.35% of its then
outstanding shares). The Growth Fund shares held by Hollybrook & Company
are included in the 2,960,683 shares held by Resource Trust Company. As
of the same date, the sole beneficial holder of more than 5% of the Total
Return Fund's then outstanding shares was Resource Trust Company, Suite
300, 900 Second Avenue South, Minneapolis, Minnesota 55402, which owned
1,246,824 shares, or 94.69% of the total shares of such Fund then
outstanding. As of the same date, the sole beneficial holders of more
than 5% of the Regional Small Cap Fund's then outstanding shares were
Resource Trust Company, Suite 300, 900 Second Avenue South, Minneapolis,
Minnesota 55402, which owned 1,312,560 shares of such Fund (constituting
50.42% of its then outstanding shares), and First State Bank of Bayport,
950 Highway 95N, Bayport, Minnesota 55003-1014, which owned 196,054 shares
of such Fund (constituting 7.53% of its then outstanding shares).
Resource Trust Company, a Minnesota corporation, is the parent company of
Resource Capital Advisers, Inc., the investment adviser to each of the
Funds.
The Growth Fund, the Total Return Fund, the Regional Small Cap
Fund and the Corporation are controlled by Resource Trust Company.
Resource Trust Company owns sufficient shares of the Growth Fund, the
Total Return Fund and the Regional Small Cap to approve or disapprove all
matters brought before shareholders of such Funds, including the election
of directors of the Corporation and the approval of auditors. The
Corporation does not control any person.
INVESTMENT ADVISER, PORTFOLIO MANAGERS AND ADMINISTRATOR
As set forth in the Prospectus under the caption "Management of
the Funds" the investment adviser to each of the Funds is Resource Capital
Advisers, Inc. (the "Adviser"), the portfolio manager to the Growth Fund
is Winslow Capital Management, Inc. ("WCM"), the portfolio manager to the
Total Return Fund is Palm Beach Investment Advisers, Inc. ("PBIA") and the
portfolio manager to the Regional Small Cap Fund is Woodland Partners LLC
("WP"). The Adviser is a wholly-owned subsidiary of Resource Trust
Company, a Minnesota state bank. Resource Trust Company is a wholly-owned
subsidiary of Resource Companies, Inc., a Minnesota corporation. The
Adviser's executive officers include E. Thomas Welch, Chief Operating
Officer, John A. Clymer, President, Compliance Officer and Chief
Investment Officer, and Dan W. Melcher, Chief Financial Officer. The
directors of the Adviser are E. Thomas Welch, Conley Brooks, Jr. and Lyman
E. Wakefield, Jr. WCM is controlled by Clark J. Winslow, its President,
Chief Executive Officer, and principal shareholder. PBIA is controlled by
the Adviser. WP is owned in equal parts by Richard W. Jensen, Elizabeth
M. Lilly and Richard J. Rinkoff.
Prior to December 31, 1994, the Total Return Fund's investment
adviser was Fiduciary Management, Inc. (the "Administrator"). On such
date the investment advisory agreement with the Administrator was
terminated and the Total Return Fund entered into a substantially
identical investment advisory agreement with the Adviser. Effective July
1, 1995, this investment advisory agreement was terminated and replaced
with a new investment advisory agreement described below.
Pursuant to separate investment advisory agreements entered into
between the Funds and the Adviser effective July 1, 1995 with respect to
the Growth Fund and the Total Return Fund and September 16, 1996 with
respect to the Regional Small Cap Fund (the "Management Agreements"), the
Adviser provides consulting, investment and administrative services to
each of the Funds. The specific investments for each Fund will be made by
one or more portfolio managers selected for such Fund by the Adviser. The
Adviser has overall responsibility for assets under management, provides
overall investment strategies and programs for the Funds, selects
portfolio managers, allocates assets among the portfolio managers and
monitors and evaluates the portfolio managers' performance. The Adviser
and each of the Funds enter into separate sub-advisory agreements with
such Fund's portfolio managers. The Adviser also provides each of the
Funds with office space, equipment and personnel necessary to operate and
administer such Fund's business and to supervise the provision of services
by third parties such as the transfer agent and the custodian. During the
period from October 1, 1994 to December 31, 1994 and the fiscal year ended
September 30, 1994, the Total Return Fund paid the Administrator advisory
fees of $5,379 and $26,332, respectively, pursuant to an investment
advisory agreement with compensation provisions identical to the
subsequent investment advisory agreements with the Adviser, including the
new Management Agreement described above. During the fiscal years ended
June 30, 1997 and 1996 and the period from January 1, 1995 through June
30, 1995, the Total Return Fund paid the Adviser advisory fees of
$191,191, $129,207 and $17,976, respectively, and the Adviser waived $0,
$38,729 and $33,908, respectively, in additional advisory fees. The
Growth Fund did not begin operations until June 30, 1995. During the
fiscal years ended June 30, 1997 and 1996, the Growth Fund paid the
Adviser advisory fees of $454,388 and $372,152, respectively, and the
Adviser waived $0 and $15,451 in additional advisory fees, respectively.
The Regional Small Cap Fund did not begin operations until September 16,
1996. During the period from September 16, 1996 through June 30, 1997,
the Regional Small Cap Fund paid the Adviser advisory fees of $144,375.
The Adviser has undertaken to reimburse each Fund to the extent
that the aggregate annual operating expenses exceed that percentage of the
daily net assets of such Fund for such year, as determined by valuations
made as of the close of each business day of the year, which is the most
restrictive percentage provided by the state laws of the various states in
which the shares of such Fund are qualified for sale or, if the states in
which the shares of such Fund are qualified for sale impose no such
restrictions, 2%. As of the date of this Statement of Additional
Information the shares of the Funds are not qualified for sale in any
state which imposes an expense limitation. Each Fund monitors its expense
ratio on a monthly basis. If the accrued amount of the expenses of a Fund
exceeds the expense limitation, such Fund creates an account receivable
from the Adviser for the amount of such excess. In such a situation the
monthly payment of the Adviser's fee will be reduced by the amount of such
excess, subject to adjustment month by month during the balance of such
Fund's fiscal year if accrued expenses thereafter fall below this limit.
During the period from October 1, 1994 to December 31, 1994 and the fiscal
year ended September 30, 1994, the Administrator reimbursed the Total
Return Fund $6,505 and $19,352, respectively, for excess expenses pursuant
to an investment advisory agreement with an expense limitation identical
to that contained in the Management Agreement. During the fiscal years
ended June 30, 1997 and 1996 and the period from January 1, 1995 to June
30, 1995, the Adviser reimbursed the Total Return Fund $35,832, $9,060 and
$17,811, respectively (in addition to the waiver of advisory fees
described above), for excess expenses pursuant to an investment advisory
agreement also containing an identical expense limitation. The Growth
Fund did not begin operations until June 30, 1995. During the fiscal
years ended June 30, 1997 and 1996, the Adviser reimbursed the Growth Fund
$14,325 and $17,342, respectively, (in addition to the waiver of advisory
fees described above) for excess expenses pursuant to its Management
Agreement. The Regional Small Cap Fund did not begin operations until
September 16, 1996. During the period from September 16, 1996 through
September 30, 1997, the Advisor reimbursed the Regional Small Cap Fund
$45,235 for excess expenses pursuant to its Management Agreement.
Notwithstanding the most restrictive applicable expense limitation of
state securities commissions set forth above or the terms of the
Management Agreements, the Adviser has voluntarily agreed to reimburse
each of the Funds for expenses in excess of 1.3% of such Fund's average
daily net assets during the fiscal year ending June 30, 1998, and did so
for the fiscal years ended June 30, 1997 and 1996.
As of the date hereof, WCM is the sole portfolio manager of the
Growth Fund, PBIA is the sole portfolio manager of the Total Return Fund,
and WP is the sole portfolio manager of the Regional Small Cap Fund. Each
of WCM, PBIA and WP has entered into a separate sub-advisory contract with
the applicable Fund and the Adviser (the Sub-Advisory Agreements").
Pursuant to their respective Sub-Advisory Agreements, WCM makes specific
portfolio investments for that segment of the assets of the Growth Fund
under its management in accordance with such Fund's investment objective
and WCM's investment approach and strategies, PBIA makes specific
portfolio investments for that segment of the assets of the Total Return
Fund under its management in accordance with such Fund's investment
objective and PBIA's investment approach and strategies, and WP makes
specific portfolio investments for that segment of the assets of the
Regional Small Cap Fund under its management in accordance with such
Fund's investment objectives and WP's investment approach and strategies.
Portfolio managers of the Funds, including WCM, PBIA and WP, are
employed and may be terminated by the Adviser subject to prior approval by
the Board of Directors of the Corporation. The employment of a new
portfolio manager currently requires the prior approval of the
shareholders of the applicable Fund. The Corporation, however, may
request an order of the Securities and Exchange Commission exempting the
Funds from the requirements under the Investment Company Act of 1940
relating to shareholder approval of new portfolio managers. There can be
no assurance that the Corporation will request such an order, or, if
requested, that such an order will be granted with respect to the Funds.
Selection and retention criteria for portfolio managers include: (i)
their historical performance records; (ii) consistent performance in the
context of the markets and preservation of capital in declining markets;
(iii) organizational stability and reputation; (iv) the quality and depth
of investment personnel; and (v) the ability of the portfolio manager to
apply its approach consistently. Each portfolio manager will not
necessarily exhibit all of the criteria to the same degree. Portfolio
managers are paid by the Adviser (not the Funds).
The portfolio managers' activities are subject to general
supervision by the Adviser and the Board of Directors of the Corporation.
Although the Adviser and the Board do not evaluate the investment merits
of the portfolio managers' specific securities selections, they do review
the performance of each portfolio manager relative to the selection
criteria.
As set forth in the Prospectus under the caption "Management of
the Funds" the Administrator is the administrator to each of the Funds.
The Administrator is controlled by Mr. Wilson and Ted D. Kellner.
Pursuant to separate administration agreements entered into between each
of the Funds and the Administrator (the "Administration Agreements"), the
Administrator supervises all aspects of the Funds' operations except those
performed by the Adviser or the portfolio managers. In connection with
such supervision the Administrator prepares and maintains the books,
accounts and other documents required by the Investment Company Act of
1940 (the "Act"), determines the Fund's net asset value, responds to
shareholder inquiries, prepares the Fund's financial statements and excise
tax returns, prepares reports and filings with the Securities and Exchange
Commission and with state Blue Sky authorities, furnishes statistical and
research data, clerical, accounting and bookkeeping services and
stationery and office supplies, keeps and maintains the Fund's financial
accounts and records and generally assists in all aspects of the Fund's
operations. During the fiscal years ended June 30, 1997 and 1996, the
period from October 1, 1994 to June 30, 1995 and the fiscal year ended
September 30, 1994, the Total Return Fund paid the Administrator $38,238,
$33,575, $11,452, and $5,267, respectively, pursuant to such Fund's
Administration Agreement. The Growth Fund did not commence operations
until June 30, 1995. During the fiscal years ended June 30, 1997 and
1996, the Growth Fund paid the Administrator $75,438 and $68,201,
respectively, pursuant to such Fund's Administration Agreement. The
Regional Small Cap Fund did not commence operations until September 16,
1996. During the period from September 16, 1996 through June 30, 1997,
the Regional Small Cap Fund paid the Administrator $28,875 pursuant to
each Fund's Administration Agreement.
The respective Management Agreements and Administration
Agreements of each of the Funds will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Corporation, or by the vote of a majority (as defined in
the Act) of the outstanding shares of the applicable Fund, and (ii) by the
vote of a majority of the directors of the Corporation who are not parties
to the Management Agreement or Administration Agreement relating to the
applicable Fund or interested persons of the Adviser or Administrator,
cast in person at a meeting called for the purpose of voting on such
approval. Each of the Management Agreements provides that it may be
terminated at any time without the payment of any penalty, by the Board of
Directors of the Corporation or by vote of a majority of the applicable
Fund's shareholders, on sixty days' written notice to the Adviser and by
the Adviser on the same notice to the applicable Fund, and that it shall
be automatically terminated if it is assigned. Each of the Administration
Agreements provides that it may be terminated at any time without the
payment of any penalty by the Board of Directors of the Corporation on
ninety days' written notice to the Administrator and by the Administrator
on the same notice to the applicable Fund.
The Management Agreements, the Sub-Advisory Agreements and the
Administration Agreements provide that the Adviser, WCM, PBIA, WP and the
Administrator, as the case may be, shall not be liable to either of the
Funds or their shareholders for anything other than willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or
duties. The Management Agreements, the Sub-Advisory Agreements and the
Administration Agreements also provide that the Adviser, WCM, PBIA, WP and
the Administrator, and their respective officers, directors and employees,
may engage in other businesses, devote time and attention to any other
business whether of a similar or dissimilar nature, and render services to
others.
<PAGE>
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "Determination
of Net Asset Value", the net asset value of each Fund will be determined
as of the close of regular trading (currently 4:00 P.M. Eastern Time) on
each day the New York Stock Exchange is open for trading. The New York
Stock Exchange is open for trading Monday through Friday except New Year's
Day, Dr. Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. Additionally, if any of the aforementioned holidays falls on a
Saturday, the New York Stock Exchange will not be open for trading on the
preceding Friday and when any such holiday falls on a Sunday, the New York
Stock Exchange will not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the ending of a monthly
or the yearly accounting period. The New York Stock Exchange may also be
closed on national days of mourning.
Any total rate of return quotation for a particular Fund will be
for a period of three or more months and will assume the reinvestment of
all dividends and capital gains distributions which were made by such Fund
during that period. Any period total rate of return quotation of a Fund
will be calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment of $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of a Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the stated periods at the end
of the stated periods.
Total return is the cumulative rate of investment growth which
assumes that income dividends and capital gains are reinvested. It is
determined by assuming a hypothetical investment at the net asset value at
the beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the
investment at the net asset value as of the end of the specified time
period, subtracting the amount of the original investment, and dividing
this amount by the amount of the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100.
The Growth Fund's average annual compounded return for the one-
year period ended June 30, 1997 was 10.83% and for the period from the
Growth Fund's commencement of operations (July 1, 1995) through June 30,
1997 was 18.01%. The Total Return Fund's average annual compounded
returns for the one-year, five-year and ten-year periods ended June 30,
1997 and for the period from the Fund's commencement of operations
(December 30, 1986) through June 30, 1997 were 28.10%, 15.64%, 12.28% and
14.09%, respectively. The Regional Small Cap Fund's return for the period
from the Regional Small Cap Fund's commencement of operations (September
16, 1996) through June 30, 1997 was 22.50%.
The results below show the value of an assumed initial
investment in the Growth Fund of $10,000 made on June 30, 1995 through
December 31, 1996, assuming reinvestment of all dividends and
distributions.
Value of
$10,000 Cumulative
December 31 Investment % Change
1995 $ 10,860 + 8.6%
1996 12,690 +26.9%
The results below show the value of an assumed initial investment
in the Total Return Fund of $10,000 made on December 30, 1986 through
December 31, 1996, assuming reinvestment of all dividends and
distributions.
Value of
$10,000 Cumulative
December 31, Investment % Change
1986 $10,000 ---
1987 11,225 + 12.2%
1988 13,554 + 35.5
1989 15,341 + 53.4
1990 14,663 + 46.6
1991 19,070 + 90.7
1992 21,052 +110.5
1993 23,381 +133.8
1994 22,909 +129.1
1995 28,221 +182.2
1996 34,000 +240.0
The results below show the value of an assumed initial investment
in the Regional Small Cap Fund of $10,000 made on September 16, 1996
through December 31, 1996, assuming reinvestment of all dividends and
distributions.
Value of
$10,000 Cumulative
Investment % Change
December 31, 1996 $10,908 9.08%
The foregoing performance results are based on historical earnings
and should not be considered as representative of the performance of the
Growth Fund, the Total Return Fund or the Regional Small Cap Fund in the
future. Such performance results also reflect reimbursements made by the
Adviser to keep total fund operating expenses at or below 1.3% of average
daily net assets. An investment in the Growth Fund, the Total Return Fund
or the Regional Small Cap Fund will fluctuate in value and at redemption
its value may be more or less than the initial investment.
DISTRIBUTION OF SHARES
Each of the Funds has adopted a Distribution Plan (the "Plan") in
anticipation that such Fund will benefit from the Plan through increased
sales of shares, thereby reducing such Fund's expense ratio and providing
an asset size that allows the Adviser greater flexibility in management.
However, each of the Funds presently intends not to utilize the Plan or
pay any 12b-1 fees during the fiscal year ending June 30, 1998. The Plan
may be terminated by any Fund at any time by a vote of the directors of
the Corporation who are not interested persons of the Corporation and who
have no direct or indirect financial interest in the Plan or any agreement
related thereto (the "Rule 12b-1 Directors") or by a vote of a majority of
the outstanding shares of such Fund. Messrs. Fauth and Thorpe are
currently the Rule 12b-1 Directors. Any change in the Plan that would
materially increase the distribution expenses of a particular Fund
provided for in the Plan requires approval of the shareholders of such
Fund and the Board of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Corporation will be
committed to the discretion of the directors of the Corporation who are
not interested persons of the Corporation. The Board of Directors of the
Corporation must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by a Distributor, if any, or
officers of the Corporation. The Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors, including the Rule 12b-1 Directors. The Growth Fund did not
begin operations until June 30, 1995, and such Fund has not incurred any
distribution costs to date. The Regional Small Cap Fund did not begin
operations until September 16, 1996 and such Fund has not incurred any
distribution costs to date.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Growth Fund are made
by the Adviser and WCM, for the Total Return Fund are made by the Adviser
and PBIA and for the Regional Small Cap Fund are made by the Adviser and
WP, in each case subject to review by the Corporation's Board of
Directors. In placing purchase and sale orders for portfolio securities
for the Funds, it is the policy of the Adviser, WCM, PBIA and WP to seek
the best execution of orders at the most favorable price in light of the
overall quality of brokerage and research services provided, as described
in this and the following paragraph. In selecting brokers to effect
portfolio transactions, the determination of what is expected to result in
best execution at the most favorable price involves a number of largely
judgmental considerations. Among these are the evaluation by the Adviser,
WCM, PBIA and/or WP of the broker's efficiency in executing and clearing
transactions, block trading capability (including the broker's willingness
to position securities) and the broker's financial strength and stability.
The most favorable price to a Fund means the best net price without regard
to the mix between purchase or sale price and commission, if any. Over-
the-counter securities are generally purchased and sold directly with
principal market makers who retain the difference in their cost in the
security and its selling price. In some instances, the Adviser, WCM, PBIA
or WP may feel that better prices are available from non-principal market
makers who are paid commissions directly. Although none of the Funds
intends to market its shares through intermediary broker-dealers, a Fund
may place portfolio orders with broker-dealers who recommend the purchase
of such Fund's shares to clients if the Adviser, WCM, PBIA or WP, as the
case may be, believes the commissions and transaction quality are
comparable to that available from other brokers and may allocate portfolio
brokerage on that basis.
In allocating brokerage business for the Funds, the Adviser, WCM,
PBIA and WP also take into consideration the research, analytical,
statistical and other information and services provided by the broker,
such as general economic reports and information, reports or analyses of
particular companies or industry groups, market timing and technical
information, and the availability of the brokerage firm's analysts for
consultation. While each of the Adviser, WCM, PBIA and WP believes these
services have substantial value, they are considered supplemental to the
efforts of the Adviser, WCM, PBIA or WP in the performance of its duties
under the applicable Management Agreement or Sub-Advisory Agreement.
Other clients of the Adviser, WCM, PBIA or WP may indirectly benefit from
the availability of these services to the Adviser, WCM, PBIA or WP, and
the Funds may indirectly benefit from services available to the Adviser,
WCM, PBIA or WP as a result of transactions for other clients. Each of
the Management Agreements and Sub-Advisory Agreements provides that the
Adviser, WCM, PBIA or WP, as the case may be, may cause the applicable
Fund to pay a broker which provides brokerage and research services to the
Adviser, WCM, PBIA or WP, a commission for effecting a securities
transaction in excess of the amount another broker would have charged for
effecting the transaction, if the Adviser, WCM, PBIA or WP determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing broker
viewed in terms of either the particular transaction or the overall
responsibilities of the Adviser, WCM, PBIA or WP with respect to the
applicable Fund and the other accounts as to which it exercises investment
discretion. The Growth Fund did not begin operations until June 30, 1995.
During the fiscal years ended June 30, 1996 and 1997, the Growth Fund paid
brokerage commissions of $70,820 on transactions having a total market
value of $67,831,156 and $43,545 on transactions having a total market
value of $25,936,201, respectively. Brokerage commissions paid by the
Total Return Fund totaled $1,814 on transactions having a total market
value of $911,515, $25,313 on transactions having a total market value of
$37,754,478, $28,705 on transactions having a total market value of
$32,270,945 and $19,854 on transactions having a total market value of
$15,590,327 during the fiscal year ended September 30, 1994, the period
from October 1, 1994 to June 30, 1995, and the fiscal years ended June 30,
1996 and 1997, respectively. (The investment advisory agreement between
the Total Return Fund and the Administrator contained a provision similar
to that of the Total Return Fund's Management Agreement and Sub-Advisory
Agreement described above regarding allocation of portfolio brokerage.)
The Regional Small Cap Fund did not commence operations until September
16, 1996. During the period from September 16, 1996 through June 30,
1997, the Regional Small Cap Fund paid brokerage commissions of $50,392 on
transactions having a total market value of $15,758,909. All of the
brokers to whom commissions were paid by the Growth Fund, the Total Return
Fund and the Regional Small Cap Fund provided research services to the
Administrator and/or the Adviser.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Funds. As such, Firstar Trust
Company holds all securities and cash of the Funds, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Corporation. Firstar Trust Company does not
exercise any supervisory function over the management of the Funds, the
purchase and sale of securities or the payment of distributions to
shareholders. Firstar Trust Company also acts as the Funds' transfer
agent and dividend disbursing agent.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes", each of the Funds will endeavor to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, as amended.
Dividends from each Fund's net investment income and distributions
from each Fund's net realized capital gains are taxable to shareholders,
whether received in cash or additional shares of such Fund. The 70%
dividends-received deduction for corporations will apply to dividends from
a Fund's net investment income, subject to proportionate reductions if the
aggregate dividends received by a Fund from domestic corporations in any
year are less than 100% of the net investment company income taxable
distributions made by the Fund.
Any dividend or capital gains distribution paid shortly after a
purchase of shares will have the effect of reducing the per share net
asset value of such shares by the amount of the dividend or distribution.
Furthermore, if the net asset value of the shares immediately after a
dividend or distribution is less than the cost of such shares to the
shareholder, the dividend or distribution will be taxable to the
shareholder even though it results in a return of capital to him.
Each Fund may be required to withhold Federal income tax at a rate
of 31% ("backup withholding") from dividend payments and redemption
proceeds if a shareholder fails to furnish such Fund with his social
security number or other tax identification number and certify under
penalty of perjury that such number is correct and that he is not subject
to backup withholding due to the under reporting of income. The
certification form is included as part of the share purchase application
and should be completed when the account is opened.
SHAREHOLDER MEETINGS
The Wisconsin Business Corporation Law permits registered
investment companies, such as the Corporation, to operate without an
annual meeting of shareholders under specified circumstances if an annual
meeting is not required by the Act. The Corporation has adopted the
appropriate provisions in its bylaws and, at its discretion, may not hold
an annual meeting in any year in which none of the following matters is
required to be acted upon by the shareholders under the Act: (i) election
of directors; (ii) approval of an investment advisory agreement; (iii)
ratification of the selection of auditors; and (iv) approval of a
distribution agreement.
The Corporation's bylaws also contain procedures for the removal of
directors by its shareholders. At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting, the Secretary of the Corporation shall promptly call a special
meeting of shareholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more shareholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Corporation's Secretary in
writing, stating that they wish to communicate with other shareholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all shareholders as recorded on the
books of the Corporation; or (2) inform such applicants as to the
approximate number of shareholders of record and the approximate cost of
mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all shareholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may,
and if demanded by the Board of Directors or by such applicants shall,
enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 3100 Multifoods Tower, 33 South 6th Street,
Minneapolis, Minnesota 55402, currently serves as the independent
accountants for the Corporation and has so served since the fiscal year
ended September 30, 1989. The Corporation changed its fiscal year end to
June 30 effective as of June 30, 1995.
FINANCIAL STATEMENTS
The following audited financial statements are incorporated by
reference to the Annual Report, dated June 30, 1997, of Eastcliff Funds,
Inc. (File No. 811-4722), as filed with the Securities and Exchange
Commission on August 6, 1997:
- Statements of Net Assets
- Statements of Operations
- Statements of Changes in Net Assets
- Financial Highlights
- Notes to the Financial Statements
- Report of Independent Accountants
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "Investment
Objectives and Policies", each of the Funds may invest in various
securities assigned ratings of either Standard & Poor's Corporation or
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meanings follows.
Standard & Poor's Corporation Bond Ratings. A Standard & Poor's
corporate debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers of lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights;
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in the
higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC, CC Bonds are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics,
they are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service, Inc Bond Ratings.
Aaa - Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large,
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are Aa 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 appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each of the
foregoing generic rating classifications. The modifier 1 indicates that
the company ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the company ranks in the lower end of its generic rating category.
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The three highest
categories are as follows:
A-1. This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2. Capacity for timely payment on issues with this designation is
satisfactory. However the relative degree of safety is not as high as for
issuers designated "A-1".
A-3. Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects
of changes in circumstances than obligations carrying a higher
designation.
Standard & Poor's Preferred Stock Ratings. A Standard & Poor's
preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations. A preferred stock rating differs from a bond rating inasmuch
as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect
this difference, the preferred stock rating symbol will normally not be
higher than the bond rating symbol assigned to, or that would be assigned
to, the senior debt of the same issuer.
The preferred stock ratings are based on the following
considerations:
I. Likelihood of payment -- capacity and willingness of the issuer
to meet the timely payment of preferred stock dividends and any applicable
sinking fund requirements in accordance with the terms of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
"AAA" This is the highest rating that may be assigned by Standard
& Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated "AA" also qualifies as a high-
quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
"A" An issued rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
"BBB" An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
make payments for a preferred stock in this category than for issues in
the "A" category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are
regarded, on balance, as predominately speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates the
lowest degree of speculation and "CCC" the highest degree of speculation.
While such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Audited Financial Statements (Financial Highlights included in
Part A and all incorporated by reference to the Annual Report, dated June
30, 1997 (File No. 811-4722) of Eastcliff Funds, Inc. (as filed with the
Securities and Exchange Commission on August 6, 1997)).
Eastcliff Funds, Inc.
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
(b.) Exhibits
(1) Registrant's Restated Articles of Incorporation, as
amended.
(2) Registrant's By-Laws, as amended.
(3) None
(4) None
(5.1) Investment Advisory Agreement between Eastcliff Total
Return Fund (formerly Fiduciary Total Return Fund) and
Resource Capital Advisers, Inc.
(5.2) Investment Advisory Agreement between Eastcliff Growth
Fund and Resource Capital Advisers, Inc.
(5.3) Sub-Advisory Agreement among Eastcliff Growth Fund,
Resource Capital Advisers, Inc. and Winslow Capital
Management, Inc.
(5.4) Sub-Advisory Agreement among Eastcliff Total Return
Fund, Resource Capital Advisers, Inc. and Palm Beach
Investment Advisers, Inc.
(5.5) Investment Advisory Agreement between Eastcliff
Regional Small Capitalization Value Fund and Resource
Capital Advisers, Inc.; Exhibit 5.5 to Amendment No.
15 to Registrant's Registration Statement on Form N-1A
is incorporated by reference to Rule 411 under the
Securities Act of 1933.
(5.6) Sub-Advisory Agreement among Eastcliff Regional Small
Capitalization Value Fund, Resource Capital Advisers,
Inc. and Woodland Partners LLC.; Exhibit 5.6 to
Amendment No. 15 to Registrant's Registration
Statement on Form N-1A is incorporated by reference to
Rule 411 under the Securities Act of 1933.
(6) None
(7) None
(8.1) Custodian Agreement between Eastcliff Total Return
Fund (formerly Fiduciary Total Return Fund) and
Firstar Trust Company.
(8.2) Custodian Agreement between Eastcliff Growth Fund and
Firstar Trust Company.
(8.3) Custodian Agreement between Eastcliff Regional Small
Capitalization Value Fund and Firstar Trust Company.
(9.1) Administrative Agreement, including addendum, between
Eastcliff Total Return Fund (formerly Fiduciary Total
Return Fund) and Fiduciary Management, Inc.
(9.2) Administrative Agreement, including addendum, between
Eastcliff Growth Fund and Fiduciary Management, Inc.
(9.3) Administrative Agreement, including addendum, between
Eastcliff Regional Small Capitalization Value Fund and
Fiduciary Management, Inc.; Exhibit 9.4 to Amendment
No. 15 to Registrant's Registration Statement on Form
N-1A is incorporated by reference to Rule 411 under
the Securities Act of 1933.
(10) Opinion of Foley & Lardner, counsel for Registrant.
(11) Consent of Price Waterhouse LLP.
(12) None
(13) Subscription Agreement.
(14.1) Eastcliff Funds (formerly Fiduciary Funds) Individual
Retirement Account.
(14.2) Eastcliff Funds (formerly Fiduciary Funds)
Self-Employed Defined Contribution Retirement Plan.
(14.3) Eastcliff Funds (formerly Fiduciary Funds) Simplified
Employee Pension.
(14.4) Eastcliff Funds Savings Incentive Match Program for Small
Employers ("SIMPLE") Individual Retirement Account.
(14.5) Eastcliff Funds Section 403(b)(7) Retirement Plan.
(15.1) Amended and Restated Servicing and Distribution Plan
of Eastcliff Funds, Inc.
(15.2) Servicing and Distribution Agreement.
(16) Schedule for Computation of Performance Quotations;
Exhibit 16 to Amendment No. 16 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities
Act of 1933.
(17) Financial Data Schedule.
(18) None.
Item 25. Persons Controlled by or under Common Control with Registrant
The Registrant, the Eastcliff Total Return Fund, the Eastcliff
Growth Fund and the Eastcliff Regional Small Capitalization Value Fund are
controlled by Resource Trust Company, which owned 94.69%, 89.54% and
50.42% of the Total Return Fund's, the Growth Fund's and the Regional
Small Cap Fund's outstanding shares, respectively, as of August 31, 1997.
Registrant does not control any person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of August 31, 1997
Common Stock (Series A) 46
Common Stock (Series B) 60
Common Stock (Series C) 150
Item 27. Indemnification
Pursuant to the authority of the Wisconsin Business Corporation
Law, Registrant's Board of Directors has adopted the following By-Law
which is in full force and effect and has not been modified or cancelled:
Article VII
INDEMNIFICATION
7.01 Provision of Indemnification. The corporation shall
indemnify all of its corporate representatives against expenses,
including attorney's fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in
connection with the defense of any action, suit or proceeding,
or threat or claim of such action, suit or proceeding, whether
civil, criminal, administrative, or legislative, no matter by
whom brought, or in any appeal in which they or any of them are
made parties or a party by reason of being or having been a
corporate representative, if the corporate representative acted
in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation and with
respect to any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful provided that the
corporation shall not indemnify corporate representatives in
relation to matters as to which any such corporate
representative shall be adjudged in such action, suit or
proceeding to be liable for gross negligence, willful
misfeasance, bad faith, reckless disregard of the duties and
obligations involved in the conduct of his office, or when
indemnification is otherwise not permitted by the Wisconsin
Business Corporation Law.
7.02 Determination of Right to Indemnification. In the
absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each
corporate representative shall be indemnified hereunder only if
a determination that indemnification of the corporate
representative is proper because he has met the applicable
standard of conduct set forth in Section 7.01. Such
determination shall be made: (i) by the board of directors, by
a majority vote of a quorum which consists of directors who were
not parties to the action, suit or proceeding nor interested
persons of the corporation as defined in Section 2(a)(19) of the
Investment Company Act of 1940; (ii) if the required quorum is
not obtainable or if a quorum of disinterested directors so
direct, by independent legal counsel in a written opinion; or
(iii) by the shareholders. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person was guilty of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties and obligations involved in the conduct
of his or her office, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
7.03 Allowance of Expenses. Expenses, including
attorneys' fees, incurred in the preparation of and/or
presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as
authorized in the manner provided in Sections 180.0853 or
180.0856 of the Wisconsin Business Corporation Law and in
accordance with the requirements of the Securities and Exchange
Commission upon receipt of an undertaking by or on behalf of the
corporate representative to repay such amount unless it shall
ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this by-law.
7.04 Additional Rights to Indemnification. The
indemnification provided by this by-law shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under these by-laws, any agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person subject to the
limitations imposed from time to time by the Investment Company
Act of 1940, as amended.
7.05 Insurance. This corporation shall have power to
purchase and maintain insurance on behalf of any corporate
representative against any liability asserted against him or her
and incurred by him or her in such capacity or arising out of
his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability
under this by-law, provided that no insurance may be purchased
or maintained to protect any corporate representative against
liability for gross negligence, willful malfeasance, bad faith,
or reckless disregard of the duties and obligations involved in
the conduct of his or her office.
7.06 Definitions. "Corporate Representative" means an
individual who is or was a director, officer, agent or employee
of the corporation or who serves or served another corporation,
partnership, joint venture, trust or other enterprise in one of
these capacities at the request of the corporation and who, by
reason of his or her position, is, was or is threatened to be
made a party to a proceeding described herein.
In reference to Article VII, Section 7.01 of the By-laws,
Section 180.0851 of the Wisconsin Business Corporation Law provides for
mandatory indemnification (a) if a corporate representative was successful
on the merits or otherwise in the defense of a proceeding, and (b) if the
corporate representative was not successful on the merits or otherwise but
the liability incurred was not the result of a breach or failure to
perform a duty which constituted any of the following: (1) a willful
failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the corporate representative has a
material conflict of interest; (2) a violation of criminal law, unless the
corporate representative had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his or her conduct
was unlawful; (3) a transaction from which the corporate representative
derived an improper personal profit; or (4) willful misconduct.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, 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 Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Information with respect to Messrs. Wilson, Brooks, Welch, Fauth
and Thorpe is incorporated by reference to pages 12 and 13 of the
Statement of Additional Information pursuant to Rule 411 under the
Securities Act of 1933.
Item 29. Principal Underwriters
Registrant has no principal underwriters.
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are in the physical possession of
Registrant's Administrator, Fiduciary Management, Inc., at its corporate
offices, 225 East Mason Street, Milwaukee, Wisconsin 53202, Registrant's
investment adviser, Resource Capital Advisers, Inc., at its corporate
offices, 300 International Centre, 900 Second Avenue South, Minneapolis,
Minnesota 55402, the Eastcliff Growth Fund's portfolio manager, Winslow
Capital Management, Inc., at its corporate offices, 4720 IDS Tower, 80
South Eighth Street, Minneapolis, Minnesota 55402, the Eastcliff Regional
Small Capitalization Value Fund's portfolio manager, Woodland Partners
LLC, at its corporate offices, 60 South Sixth Street, Suite 3750,
Minneapolis, Minnesota 55402, or Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to any recipient of a Prospectus.
With respect to shareholder meetings, Registrant undertakes to
call shareholder meetings in accordance with the provisions of Article II
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Minneapolis
and State of Minnesota on the 25th day of September, 1997.
EASTCLIFF FUNDS, INC.
(Registrant)
By: /s/ Conley Brooks, Jr.
Conley Brooks, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Conley Brooks, Jr. Principal Executive, September 25, 1997
Conley Brooks, Jr. Financial and
Accounting Officer
and Director
/s/ E. Thomas Welch Vice President and September 25, 1997
E. Thomas Welch Director
/s/ John J. Fauth Director September 25, 1997
John J. Fauth
/s/ A. Skidmore Thorpe Director September 25, 1997
A. Skidmore Thorpe
/s/ Donald S. Wilson Director September 25, 1997
Donald S. Wilson
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Restated Articles of
Incorporation, as amended
(2) Registrant's By-Laws, as amended
(3) None
(4) None
(5.1) Investment Advisory Agreement between
Eastcliff Total Return Fund (formerly
Fiduciary Total Return Fund) and Resource
Capital Advisers, Inc.
(5.2) Investment Advisory Agreement between
Eastcliff Growth Fund and Resource Capital
Advisers, Inc.
(5.3) Sub-Advisory Agreement among Eastcliff
Growth Fund, Resource Capital Advisers,
Inc. and Winslow Capital Management, Inc.
(5.4) Sub-Advisory Agreement among Eastcliff
Total Return Fund, Resource Capital
Advisers, Inc. and Palm Beach Investment
Advisers, Inc.
(5.5) Investment Advisory Agreement between
Eastcliff Regional Small Capitalization
Value Fund and Resource Capital Advisers,
Inc.*
(5.6) Sub-Advisory Agreement among Eastcliff
Regional Small Capitalization Value Fund,
Resource Capital Advisers, Inc. and
Woodland Partners LLC*
(6) None
(7) None
(8.1) Custodian Agreement between Eastcliff Total
Return Fund (formerly Fiduciary Total
Return Fund) and Firstar Trust Company
(8.2) Custodian Agreement between Eastcliff
Growth Fund and Firstar Trust Company
(8.3) Custodian Agreement between Eastcliff
Regional Small Capitalization Value Fund
and Firstar Trust Company
(9.1) Administrative Agreement, including
addendum, between Eastcliff Total Return
Fund (formerly Fiduciary Total Return Fund)
and Fiduciary Management, Inc.
(9.2) Administrative Agreement, including
addendum, between Eastcliff Growth Fund and
Fiduciary Management, Inc.
(9.3) Administrative Agreement, including
addendum, between Eastcliff Regional Small
Capitalization Value Fund and Fiduciary
Management, Inc.*
(10) Opinion of Foley & Lardner, Counsel for
Registrant
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement
(14.1) Eastcliff Funds (formerly Fiduciary Funds)
Individual Retirement Account
(14.2) Eastcliff Funds (formerly Fiduciary Funds)
Defined Contribution Retirement Plan
(14.3) Eastcliff Funds (formerly Fiduciary Funds)
Simplified Employee Pension
(14.4) Eastcliff Funds Savings Incentive Match
Program for Small Employers ("SIMPLE")
Individual Retirement Account
(14.5) Eastcliff Funds Section 403(b)(7)
Retirement Plan
(15.1) Amended and Restated Servicing and Distribution Plan of
Eastcliff Funds, Inc.
(15.2) Servicing and Distribution Agreement
(16) Schedule for Computation of Performance
Quotations*
(17) Financial Data Schedule
(18) None
* Incorporated by reference.
Exhibit 1
RESTATED
ARTICLES OF INCORPORATION
OF
EASTCLIFF FUNDS, INC.
The following Restated Articles of Incorporation duly adopted
pursuant to the authority and provisions of Chapter 180 of the Wisconsin
Statutes supersede and take the place of the existing articles of
incorporation of Fiduciary Total Return Fund, Inc. and any amendments
thereto:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
EASTCLIFF FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purpose or purposes for which the Corporation is organized
are:
A. To engage in the business of a diversified open-end
management investment company.
B. To purchase or otherwise acquire, hold for investment or
otherwise, and to sell, exchange or otherwise dispose of the following
types of securities: common stocks, debt securities and preferred stocks
(including those convertible into common stock), warrants, United States
treasury bills and notes, certificates of deposit, commercial paper,
repurchase agreements and commercial paper master notes and other
investments.
C. To deposit its funds from time to time in such checking
account or accounts as may be reasonably required, and to deposit its
funds at interest in a bank, savings bank or trust company in good
standing organized under the laws of the United States of America or any
state thereof, or of the District of Columbia.
D. To conduct research and investigations with respect to
securities, organizations and business conditions in the United States and
elsewhere; to secure information and advice pertaining to the investment
and employment of the assets and funds of the Corporation and to pay
compensation to others for the furnishing of any or all of the foregoing.
E. Subject to any restrictions contained in the Investment
Company Act of 1940, the applicable state securities or "Blue Sky" laws,
or any rules or regulations issued pursuant to any of the foregoing, to
exercise in respect of all securities, property and assets owned by it,
all rights, powers and privileges which could be exercised by any natural
person owning the same securities, property or assets.
F. To acquire all or any part of the good will, property or
business of any firm, person, association or corporation heretofore or
hereafter engaged in any business similar to any business which this
Corporation has the power to conduct, and to hold, utilize, enjoy, and in
any manner dispose of the whole or part of the rights, property and
business so acquired and to assume in connection therewith any liabilities
of any such person, firm, association or corporation.
G. Without the vote or consent of the shareholders of the
Corporation, to purchase, acquire, hold, dispose of, transfer and reissue
or cancel shares of its own capital stock in any manner or to any extent
now or hereafter permitted by the laws of Wisconsin and by these Articles
of Incorporation.
H. To carry out all or any part of the aforesaid objects and
purposes and to conduct its business in all or any of its branches in any
or all states, territories, districts and possessions of the United States
of America and in foreign countries; to maintain offices and agencies in
any and all states, territories, districts and possessions of the United
States of America and in foreign countries.
The foregoing objects and purposes shall, except when otherwise
expressed, be in no way limited or restricted by reference to or inference
from the terms of any clause of this or any other Article of these
Articles of Incorporation, or any amendment thereto, and shall each be
regarded as independent and construed as powers as well as objects and
purposes.
The Corporation shall be authorized to exercise and enjoy all of
the powers, rights and privileges granted to, or conferred upon,
corporations of a similar character by the laws of the State of Wisconsin
now or hereafter enacted, and the enumeration of the foregoing shall not
be deemed to exclude any powers, rights or privileges so granted or
conferred.
ARTICLE IV
A. The aggregate number of shares which the Corporation shall
have authority to issue is Ten Billion (10,000,000,000) shares of Common
Stock, consisting of one class only designated as "Common Stock." The
Common Stock shall initially be divided into one (1) series designated as
Series A ("Eastcliff Total Return Fund" or such other name designated by
the Board of Directors). The Series A Common Stock of the Corporation
shall consist of Three Hundred Million (300,000,000) shares. The Board of
Directors may from time to time create one or more additional series of
shares of Common Stock and determine the number of shares and such series
and the designations, preferences, limitations and relative rights
thereof, and may amend these Articles of Incorporation to provide for such
additional series, without shareholder action, to the extent permitted by
the Wisconsin Business Corporation Law. The Board of Directors may also,
without shareholder action, amend these Articles of Incorporation to alter
or revoke any preferences, limitations or relative rights of a series
created by the Board of Directors provided shares of such series have not
been issued.
B. Shares of Series A Common Stock of the Corporation shall
have the following preferences, limitations and relative rights:
(1) Definition. For purposes of this Section B of Article IV,
the shares of Series A Common Stock and any subsequently created
series shall be defined individually and collectively as a "Series."
(2) Assets Belonging to a Series. All consideration that is
received by the Corporation for the issue or sale of shares of any
Series of the Corporation's Common Stock (a) shall not be commingled
with the consideration that is received by the Corporation for the
issue or sale of shares of any other Series of Common Stock; and
(b) together with all assets in which such consideration is invested
and reinvested, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
thereof, any such funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general
assets of the Corporation not belonging to a particular Series of
Common Stock of the Corporation which the Board of Directors may, in
its sole discretion, allocate to a Series, shall irrevocably belong
to the Series of the Corporation's Common Stock with respect to which
such assets, payments or funds were received or allocated for all
purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation. Such assets
and the income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and
any assets derived from any reinvestment of such proceeds in whatever
form, are herein referred to as "assets belonging to" such Series.
Shareholders of any Series of Common Stock of the Corporation shall
have no right, title or interest in or to the assets belonging to any
other Series of Common Stock. Any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily
attributable to any particular Series of the Corporation's Common
Stock shall be allocable among any one or more of the Series of the
Corporation's Common Stock in such manner and on such basis as the
Board of Directors, in its sole discretion, shall deem fair and
equitable. The power to make such allocations may be delegated by
the Board of Directors from time to time to one or more of the
officers of the Corporation.
(3) Liabilities Belonging to a Series. The assets belonging to
any Series of the Corporation's Common Stock shall be charged with
the direct liabilities in respect of such Series and shall also be
charged with such Series' proportionate share of the general
liabilities of the Corporation as determined by comparing the assets
belonging to such Series with the aggregate assets of the
Corporation; provided that the Board of Directors may, in their
discretion, direct that any one or more general liabilities of the
Corporation be allocated to the respective Series of its Common Stock
on a different basis. The liabilities so charged to a Series of
Common Stock are herein referred to as "liabilities belonging to"
such Series. The power of the Board of Directors to make allocations
may be delegated by the Board of Directors from time to time to one
or more of the officers of the Corporation.
(4) Dividends and Distributions. Shares of a Series of the
Corporation's Common Stock shall be entitled to such dividends and
distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors, acting in their sole
discretion, with respect to such Series; provided, however, that such
dividends and distributions shall be paid only out of the lawfully
available "assets belonging to" such Series as such phrase is defined
in this Article IV.
(5) Liquidation Dividends and Distributions. In the event of
the liquidation or dissolution of the Corporation, the shareholders
of a Series of the Corporation's Common Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to shareholders, but other than general assets not
belonging to any particular Series of Common Stock, the assets
belonging to such Series, and the assets so distributable to the
shareholders of any Series of the Corporation's Common Stock shall be
distributed among such shareholders in proportion to the number of
shares of such Series of the Corporation's Common Stock held by them
and recorded on the books of the Corporation. In the event that
there are any general assets not belonging to any particular Series
of the Corporation's Common Stock and available for distribution, the
shareholders of any Series of Common Stock shall be entitled to
receive a portion of such general assets determined by comparing the
assets belonging to such Series with the aggregate assets of the
Corporation; and the assets so distributable to the shareholders of
such Series shall be distributed among such shareholders in
proportion to the number of shares of such Series of the
Corporation's Common Stock held by them and recorded on the books of
the Corporation.
(6) Voting Rights. Shareholders of a Series of the
Corporation's Common Stock shall be entitled to one (1) vote for each
full share, and a fractional vote for each fractional share, of such
Series then sanding in his or her name on the books of the
Corporation. On any matter submitted to a vote of shareholders, all
shares of a Series of the Corporation's Common Stock then issued and
outstanding and entitled to vote shall be voted in the aggregate with
all other shares of the Corporation's Common Stock then issued and
outstanding and entitled to vote, irrespective of Series, and not as
a separate voting group, except (a) as otherwise required by the
Wisconsin Business Corporation Law, the Investment Company Act of
1940 or the regulations thereunder, or other applicable law; or
(b) when the matter to be acted upon affects only the interests of
shareholders of one or more Series of the Corporation's Common Stock
(in which case only shares of the affected Series shall be entitled
to vote thereon). At all elections of directors of the Corporation,
each shareholder shall be entitled to vote the shares owned of record
by such shareholder for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of
cumulative voting.
(7) Redemption of Shares. To the extent of the assets of the
Corporation legally available for such redemptions, a shareholder of
the Corporation shall have the right to require the Corporation to
redeem his full and fractional shares of any Series of Common Stock
out of the assets belonging to such Series at a redemption price
equal to the net asset value per share next determined after receipt
of a request to redeem in proper form as determined by the Board of
Directors, subject to the right of the Corporation to suspend the
right of redemption of shares or postpone the date of payment of such
redemption price in accordance with the provisions of applicable law.
The Board of Directors shall establish such rules and procedures as
they deem appropriate for the redemption of shares, provided that all
redemptions shall be in accordance with the Investment Company Act of
1940 and the Wisconsin Business Corporation Law. Without limiting
the foregoing, the Corporation shall, to the extent permitted by
applicable law, have the right at any time to redeem the shares of
any Series of Common Stock owned by any holder thereof: (a) in
connection with the termination of any Series of the Corporation's
Common Stock as provided hereunder; (b) if the value of such shares
in the account maintained by the Corporation or its transfer agent
for any Series is less than Five Hundred Dollars ($500) or such other
amount as the Board may establish provided that the Corporation shall
provide a shareholder with written notice at least sixty (60) days
prior to effecting such a redemption of shares as a result of not
satisfying such requirement; (c) to reimburse the Corporation for any
loss it has sustained by reason of the failure of such shareholder to
make full payment for shares of the Corporation's Common Stock
purchased by such shareholder; (d) to collect any charge relating to
a transaction effected for the benefit of such shareholder which is
applicable to shares of the Corporation's Common Stock as provided in
the prospectus relating to such shares; or (e) it if would otherwise
be appropriate to carry out the Corporation's responsibilities under
the Investment Company Act of 1940, in each case subject to such
further terms and conditions as the Board of Directors may from time
to time establish. The redemption price of shares of any Series of
the Corporation's Common Stock shall, except as otherwise provided in
this sub-section, be the net asset value thereof as determined by the
Board of Directors 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 the Board of Directors. Payment
of the redemption price, if any, shall be made in cash by the
Corporation at such time and in such manner as may be determined from
time to time by the Board of Directors unless, in the opinion of the
Board of Directors, which shall be conclusive, conditions exist which
make payment wholly in cash unwise or undesirable; in such event the
Corporation may make payment in the assets belonging or allocable to
the Series redemption of which is being sought, the value of which
shall be determined as provided herein. Any shares of a Series of
the Corporation's Common Stock that are redeemed by the Corporation
shall be deemed to be cancelled and returned to the status of
authorized but unissued shares of the particular Series involved and,
unless otherwise determined by the Board of Directors of the
Corporation, may be reissued from time to time in the same manner and
to the same extent as other authorized, unissued shares of the same
Series.
(8) Termination of Series. Without the vote of the shares of
any Series of the Corporation's Common Stock then outstanding (unless
otherwise required by applicable law), the Corporation may, if so
determined by the Board of Directors:
(a) Sell and convey the assets belonging to any Series of
Common Stock to another corporation or trust that is a
management investment company (as defined in the Investment
Company Act of 1940) and is organized under the laws of any
jurisdiction within the United States for consideration which
may include the assumption of all outstanding obligations, taxes
and other liabilities, accrued or contingent, belonging to such
Series and which may include securities issued by such
corporation or trust. Following such sale and conveyance, and
after making provision for the payment of any liabilities
belonging to such Series of Common Stock that are not assumed by
the purchaser of the assets belonging to such Series, the
Corporation may, at its option, redeem all outstanding shares of
such Series at the net asset value thereof as determined by the
Board of Directors in accordance with the provisions of
applicable law, less such redemption fee or other charge, if
any, as may be fixed by the Board of Directors. Notwithstanding
any other provision of these Articles of Incorporation to the
contrary, the redemption price may be paid in cash or by
distribution of the securities or other consideration received
by the Corporation for the assets belonging to such Series of
Common Stock upon such conditions as the Board of Directors
deem, in their sole discretion, to be appropriate consistent
with applicable law and these Articles of Incorporation;
(b) Sell and convert the assets belonging to a Series of
Common Stock into money and, after making provisions for the
payment of all obligations, taxes and other liabilities, accrued
or contingent, belonging to such Series, the Corporation may, at
its option (i) redeem all outstanding shares of such Series at
the net asset value thereof as determined by the Board of
Directors in accordance with the provisions of applicable law,
less such redemption fee or other charge, if any, as may be
fixed by the Board of Directors upon such conditions as the
Board of Directors deem, in their sole discretion, to be
appropriate consistent with applicable law and these Articles of
Incorporation; or (ii) combine the assets belonging to such
Series following such sale and conversion with the assets
belonging to any one or more other Series of Common Stock of the
Corporation pursuant to and in accordance with Section (B)(8)(c)
of this Article IV; or
(c) Combine the assets belonging to a Series of Common
Stock with the assets belonging to any one or more other Series
of Common Stock of the Corporation if the Board of Directors
reasonably determine that such combination will not have a
material adverse effect on the shareholders of any Series of
Common Stock of the Corporation participating in such
combination. In connection with any such combination of assets,
the shares of any Series of Common Stock then outstanding may,
if so determined by the Board of Directors, be converted into
shares of any other Series of Common Stock of the Corporation
with respect to which conversion is permitted by applicable law,
or may be redeemed, at the option of the Corporation, at the net
asset value thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less such
redemption fee or other charge, or conversion cost, if any, as
may be fixed by the Board of Directors upon such conditions as
the Board of Directors deem, in their sole discretion, to be
appropriate consistent with applicable law and these Articles of
Incorporation. Notwithstanding any other provisions of these
Articles of Incorporation to the contrary, any redemption price,
or part thereof, paid pursuant to this Section (B)(8)(c) may be
paid in shares of any other Series of Common Stock of the
Corporation participating in such combination.
(9) No Preemptive Rights. No holder of shares of any Series of
the Corporation's Common Stock shall, as such holder, have any
preemptive or other right to purchase, subscribe for or otherwise
acquire any shares of any Series of Common Stock of the Corporation,
or any securities of the Corporation convertible into such shares or
carrying a right to subscribe to or acquire such shares (whether such
shares or securities are now or hereinafter authorized or are
acquired by the Corporation after the issuance thereof), other than
such right, if any, as the Board of Directors, in their discretion,
may determine.
ARTICLE V
Any determination made in good faith, and so far as accounting
matters are involved in accordance with accepted accounting practices, by
or pursuant to the direction of the Board of Directors of the Corporation
as to the amount and value of assets, obligations or liabilities of the
Corporation of any Series of Common Stock, as to the amount of net income
of the Corporation or any Series of Common Stock 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 shall have been paid or
discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation or
any Series of Common Stock, as to the allocation of any assets or
liabilities to a Series of Common Stock, as to the times at which shares
of any Series of Common Stock shall be deemed to be outstanding or no
longer outstanding or as to any other matters relating to the issuance,
sale, redemption or other acquisition or disposition of securities or
shares of the Corporation, and any reasonable determination made in good
faith by the Board of Directors of the Corporation as to whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short", or an underwriting of the sale of, or a participation
in any underwriting or selling group in connection with the public
distribution of, any securities, shall be final and conclusive, and shall
be binding upon the Corporation and all holders of its shares past,
present and future, and shares of the Corporation are issued and sold on
the condition and understanding, evidenced by the purchase of such shares
or acceptance of share certificates, that any and all such determination
shall be binding as aforesaid. No provision of these Articles of
Incorporation shall be effective to (i) require a waiver of compliance
with any provision of the Securities Act of 1933 or the Investment Company
Act of 1940, or of any valid rule, regulation or order of the Securities
and Exchange Commission thereunder; or (ii) protect or purport to protect
any director or 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 involved in the conduct of his office.
ARTICLE VI
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the shareholders:
A. The Board of Directors of the Corporation shall authorize
an initial issuance of shares of each Series of Common Stock for such
consideration as the Board of Directors shall determine. After such
initial issuance, the Board of Directors may authorize the issuance
form time to time of shares of Common Stock and the reissuance from
time to time of retired shares of Common Stock, whether now or
hereafter authorized, for such consideration as said Board of
Directors may deem advisable, provided that, except with respect to
shares issued as a share dividend or distribution, such consideration
shall be in the form of cash or its equivalent and shall not be less
than the net asset value of such shares.
B. The holders of any fractional shares of any Series of
Common Stock shall be entitled to the payment of dividends on such
fractional shares, to receive the net asset value thereof upon
redemption, to share in the assets of the Corporation upon
liquidation and to exercise voting rights with respect thereto as
provided herein.
C. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of
dividends and what receipts shall constitute principal and to make
such allocation of any particular receipt between principal and
income as it may deem proper; and (b) from time to time, in its
discretion (i) to determine whether any and all expenses and other
outlays paid or incurred (including any and all taxes, assessments or
governmental charges which the Corporation may be required to pay or
hold under any present or future law of the United States of America
or of any other taxing authority therein) shall be charged to or paid
from principal or income or both, and (ii) to apportion any and all
of said expenses and outlays, including taxes, between principal and
income.
D. The Board of Directors shall have the power to determine
from time to time whether and to what extent and at what times and
places and under what conditions and regulations the books, accounts
and documents of the Corporation, or any of them, shall be open to
the inspection of the shareholders, except as otherwise provided by
statute or by law; and except as so provided, no shareholder shall
have any right to inspect any book, account or document of the
Corporation unless authorized to do so by resolution of the Board of
Directors.
E. Each director and each officer of the Corporation shall be
indemnified by the Corporation against all liabilities and expenses
reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding in which he may
be involved or with which he may be threatened by reason of his being
or having been such a director or officer to the full extent
permitted by the Wisconsin Business Corporation Law and the
Investment Company Act of 1940, as such statutes are now or hereafter
in force, and shall be entitled to the advance of related expenses.
F. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders of the purchase of
shares of any Series of Common Stock, and may, in addition, require
such orders to be in such minimal amounts as it shall determine.
G. Each holder of shares of the Corporation's Common Stock,
irrespective of the Series, may, upon request to the Corporation
accompanied by surrender of the appropriate stock certificate or
certificates, if any, in proper form for transfer and after complying
with any other conversion procedures established by the Board of
Directors, convert such shares into shares of any other Series of the
Corporation's Common Stock on the basis of their relative net asset
values (determined in accordance with the Bylaws of the Corporation)
less a conversion charge or discount determined by the Board of
Directors. Any fee so imposed shall be uniform as to all
stockholders.
H. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Wisconsin the Board of
Directors of the Corporation is expressly authorized:
(1) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by the By-Laws
to the shareholders, and except as otherwise required by the
Investment Company Act of 1940, as now or hereafter in force.
(2) Without the assent or vote of the shareholders, to
authorize the issuance from time to time of shares of any Series
of Common Stock of the Corporation for such consideration as the
Board of Directors may deem advisable.
(3) Without the assent or vote of the shareholders, to
authorize and issue such obligations of the Corporation, secured
and unsecured, as the Board of Directors may determine, and to
authorize and cause to be executed mortgages and liens upon the
property of the Corporation, real or personal.
(4) Notwithstanding anything in these Articles of
Incorporation to the contrary, to establish in its absolute
discretion the basis or method for determining the value of the
assets belonging to any Series of Common Stock of the
Corporation, the value of the liabilities belonging to any
Series of Common Stock, the allocation of assets or liabilities
to any Series of Common Stock, the times at which shares of any
Series of Common Stock shall be deemed outstanding and the net
asset value of each share of each Series of Common Stock for
purposes of sales, redemptions and repurchases and for any other
purposes.
(5) To determine in accordance with accepted accounting
principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine
what accounting periods shall be used by the Corporation for any
purposes, whether annual or any other period, including daily;
to set apart out of any funds of the Corporation such reserves
for such purposes as it shall determine and to abolish the same;
to declare and pay any dividends and distributions in cash,
securities or other property from surplus or any funds legally
available therefor, at such intervals (which may be as
frequently as daily) or on such other periodic basis, as it
shall determine; to declare such dividends or distributions by
means of a formula or other method of determination, at meetings
held less frequently than the frequency of the effectiveness of
such declarations; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring
less frequently than the effectiveness of declarations thereof;
and to provide for the payment of declared dividends on a date
earlier or later than the specified payment date in the case of
shareholders of the Corporation redeeming their entire ownership
of shares of any Series of the Corporation.
(6) In addition to the powers and authorities granted
herein and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all such powers and do all
such acts and things as may be exercised or done by the
Corporation, subject nevertheless, to the provisions of
Wisconsin law, these Articles of Incorporation and Bylaws of the
Corporation.
ARTICLE VII
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate distributors, custodians, transfer
agents, registrars and/or dividend disbursing agents for the stock and
assets of the Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation for each such distributor, custodian,
transfer agent, registrar and/or dividend disbursing agent.
ARTICLE VIII
The number of directors shall be such number (not less than
three) as is fixed from time to time by the By-Laws.
ARTICLE IX
The address of the registered office of the Corporation is
225 East Mason Street, Milwaukee, Wisconsin 53202, which is in Milwaukee
County and the name of the initial registered agent of the Corporation at
such address is Donald S. Wilson.
CERTIFICATE
This is to certify that these Restated Articles of Incorporation
of EASTCLIFF FUNDS, INC. contain an amendment to the articles of
incorporation, adopted on December 12, 1994 by the Board of Directors and
shareholders of Fiduciary Total Return Fund, Inc. in accordance with
Section 180.1003 of the Wisconsin Statutes. Upon the effectiveness of the
foregoing Restated Articles of Incorporation, each then outstanding share
of Common Stock, $.01 par value, shall automatically be reclassified into
a share of Series A Common Stock.
Executed on behalf of the Corporation on December 20, 1994.
/s/ Ted D. Kellner
Ted D. Kellner, President
This instrument was drafted by Richard L. Teigen of Foley &
Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
<PAGE>
ARTICLES OF AMENDMENT
relating to
SERIES B COMMON STOCK
of
EASTCLIFF FUNDS, INC.
________________________________________
Pursuant to Sections 180.0602 and 180.1002
of the Wisconsin Business Corporation Law
________________________________________
I, CONLEY BROOKS, JR., President of EASTCLIFF FUNDS, INC., a
corporation organized and existing under the Wisconsin Business
Corporation Law (the "Corporation"), in accordance with the provisions of
Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT:
A. Pursuant to the authority conferred upon the Board of Directors
of the Corporation by its Restated Articles of Incorporation, and in
accordance with Sections 180.0602 and 180.002 of the Wisconsin Business
Corporation Law, said Board of Directors adopted resolutions on June 6,
1995, creating a new series of shares of Common Stock of the Corporation,
designated as "Series B Common Stock".
B. Said resolution of the Board of Directors of the Corporation
creating the series designated as "Series B Common Stock" provides that
said series shall have such designation and number of shares and such
preferences, limitations and relative rights as are set forth in the
paragraphs below:
Series B Common Stock
1. Designation and Amount. The Corporation is authorized
to issue a series of Common Stock, which is hereby designated as
"Series B Common Stock" ("Eastcliff Growth Fund" or such other
name designated by the Board of Directors). The Series B Common
Stock of the Corporation shall consist of Three Hundred
Million (300,000,000) shares.
2. Preferences, Limitations and Relative Rights. Shares
of Series B Common Stock shall have the preferences, limitations
and relative rights of a "Series" of Common Stock as set forth
in Article III.B. of the Corporation's Restated Articles of
Incorporation.
3. Other Terms. Shares of Series B Common Stock shall be
subject to the other terms, provisions and restrictions set
forth in the Restated Articles of Incorporation with respect to
the shares of a Series of Common Stock of the Corporation.
* * *
C. No shares of Series B Common Stock have been issued as of the
date hereof.
D. The amendment creating the Series B Common Stock was adopted by
the Board of Directors of the Corporation in accordance with
Section 180.1002 of the Wisconsin Business Corporation Law and shareowner
action was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed these
Articles of Amendment on behalf of the Corporation and does affirm the
foregoing as true this 7th day of June, 1995.
By: /s/ Conley Brooks, Jr.
Conley Brooks, Jr.
President
_______________
This instrument was drafted by and should be returned to Todd B.
Pfister of the firm of Foley & Lardner, 777 South Flagler Drive,
Suite 200, West Palm Beach, Florida 33401.
<PAGE>
ARTICLES OF AMENDMENT
relating to
SERIES C COMMON STOCK
of
EASTCLIFF FUNDS, INC.
___________________________________
Pursuant to Sections 180.0602 and 180.1002
of the Wisconsin Business Corporation Law
___________________________________
I, Conley Brooks, Jr., President of Eastcliff Funds, Inc., a
corporation organized and existing under the Wisconsin Business
Corporation Law (the "Corporation"), in accordance with the provisions of
Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT:
A. Pursuant to the authority conferred upon the Board of Directors
of the Corporation by its Restated Articles of Incorporation, and in
accordance with Sections 180.0602 and 180.002 of the Wisconsin Business
Corporation Law, said Board of Directors adopted resolutions on June 14,
1996, creating a new series of shares of Common Stock of the Corporation,
designated as "Series C Common Stock".
B. Said resolution of the Board of Directors of the Corporation
creating the series designated as "Series C Common Stock" provides that
said series shall have such designation and number of shares and such
preferences, limitations and relative rights as are set forth in the
paragraphs below:
Series C Common Stock
1. Designation and Amount. The Corporation is authorized
to issue a series of Common Stock, which is hereby designated as
"Series C Common Stock" ("Eastcliff Regional Small
Capitalization Value Fund" or such other name designated by the
Board of Directors). The Series C Common Stock of the
Corporation shall consist of Three Hundred Million (300,000,000)
shares.
2. Preferences, Limitations and Relative Rights. Shares
of Series C Common Stock shall have the preferences, limitations
and relative rights of a "Series" of Common Stock as set forth
in Article IV.B. of the Corporation's Restated Articles of
Incorporation.
3. Other Terms. Shares of Series C Common Stock shall be
subject to the other terms, provisions and restrictions set
forth in the Restated Articles of Incorporation with respect to
the shares of a Series of Common Stock of the Corporation.
* * *
C. No shares of Series C Common Stock have been issued as of the
date hereof.
D. The amendment creating the Series C Common Stock was adopted by
the Board of Directors of the Corporation in accordance with Section
180.1002 of the Wisconsin Business Corporation Law and shareowner action
was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed these
Articles of Amendment on behalf of the Corporation and does affirm the
foregoing as true this ___ day of ___________, 1996.
By: _________________________________
Conley Brooks, Jr.
President
___________________
This instrument was drafted by and should be returned to Todd B.
Pfister of the firm of Foley & Lardner, 777 South Flagler Drive, Suite
200, West Palm Beach, Florida 33401.
Exhibit 2
BYLAWS
OF
EASTCLIFF FUNDS, INC.
(a Wisconsin corporation)
<PAGE>
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may
have such principal and other business offices, either within or without
the State of Wisconsin, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the corporation shall be identical to such registered
office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the
shareholders, if the annual meeting shall be held, shall be held in
December of each year, or at such other time and date as may be fixed by
or under the authority of the Board of Directors, for the purpose of
electing directors and for the transaction of such other business as may
come before the meeting. The corporation shall not be required to hold an
annual meeting in any year in which none of the following is required to
be acted on by shareholders under the Investment Company Act of 1940:
(i) Election of directors;
(ii) Approval of the corporation's investment advisory
contract;
(iii) Ratification of the selection of the
corporation's independent public accountants; and
(iv) Approval of the corporation's distribution
agreement, if any.
2.02. Special Meetings.
(a) Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by the Wisconsin Business
Corporation Law, may be called by the Board of Directors or the President.
Notwithstanding any other provision of these bylaws, the corporation shall
call a special meeting of shareholders in the event that the holders of at
least 10% of all of the votes entitled to be cast on any issue proposed to
be considered at the proposed special meeting sign, date and deliver to
the corporation one or more written demands for the meeting describing one
or more purposes for which it is to be held. The corporation shall give
notice of such a special meeting within thirty days after the date that
the demand is delivered to the corporation.
(b) Whenever ten or more shareholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's Secretary in writing,
stating that they wish to communicate with other shareholders with a view
to obtaining signatures to a request for a meeting pursuant to subsection
(a) above and accompanied by a form of communication and request which
they wish to transmit, the Secretary shall within five business days after
receipt of such application either (1) afford to such applicants access to
a list of the names and addresses of all shareholders as recorded on the
books of the corporation; or (2) inform such applicants as to the
approximate number of shareholders of record and the approximate cost of
mailing to them the proposed communication and form of request.
(c) If the secretary elects to follow the course specified in
clause (2) of subsection (b) above, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record as of a date
selected by the corporation at their addresses as recorded on the books,
unless within five business days after such tender the Secretary shall
mail to such applicants and file with the Securities and Exchange
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Board of Directors to the
effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion.
(d) After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
2.03. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of Wisconsin, as
the place of meeting for any annual or special meeting of shareholders.
If no designation is made, the place of meeting shall be the principal
office of the corporation. Any meeting may be adjourned to reconvene at
any place designated by vote of a majority of the shares represented
thereat.
2.04. Notice of Meeting. Written notice stating the date,
time and place of any meeting of shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than sixty days before the date
of the meeting (unless a different time is provided by applicable law or
regulation or the articles of incorporation), either personally or by
mail, by or at the direction of the President or the Secretary, to each
shareholder of record entitled to vote at such meeting and to such other
persons as required by the Wisconsin Business Corporation Law. If mailed,
such notice shall be deemed to be effective when deposited in the United
States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the corporation, with postage thereon
prepaid. If an annual or special meeting of shareholders is adjourned to
a different date, time or place, the corporation shall not be required to
give notice of the new date, time or place if the new date, time or place
is announced at the meeting before adjournment; provided, however, that if
a new record date for an adjourned meeting is or must be fixed, the
corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new record date.
2.05. Waiver of Notice. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the articles of
incorporation or these bylaws before or after the date and time stated in
the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, contain the same information that would have been
required in the notice under applicable provisions of the Wisconsin
Business Corporation Law (except that the time and place of meeting need
not be stated) and be delivered to the corporation for inclusion in the
corporate records. A shareholder's attendance at a meeting, in person or
by proxy, waives objection to all of the following: (a) lack of notice or
defective notice of the meeting, unless the shareholder at the beginning
of the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to considering the matter
when it is presented.
2.06. Fixing of Record Date. The Board of Directors may fix
in advance a date as the record date for the purpose of determining
shareholders entitled to notice of and to vote at any meeting of
shareholders, shareholders entitled to demand a special meeting as
contemplated by Section 2.02 hereof, shareholders entitled to take any
other action, or shareholders for any other purpose. Such record date
shall not be more than seventy days prior to the date on which the
particular action requiring such determination of shareholders is to be
taken. If no record date is fixed by the Board of Directors or by the
Wisconsin Business Corporation Law for the determination of shareholders
entitled to notice of and to vote at a meeting of shareholders, the record
date shall be the close of business on the day before the first notice is
given to shareholders. If no record date is fixed by the Board of
Directors or by the Wisconsin Business Corporation Law for the
determination of shareholders entitled to demand a special meeting as
contemplated in Section 2.02 hereof, the record date shall be the date
that the first shareholder signs the demand. Except as provided by the
Wisconsin Business Corporation Law for a court-ordered adjournment, a
determination of shareholders entitled to notice of and to vote at a
meeting of shareholders is effective for any adjournment of such meeting
unless the Board of Directors fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting. The record date for determining
shareholders entitled to a distribution (other than a distribution
involving a purchase, redemption or other acquisition of the corporation's
shares) or a share dividend is the date on which the Board of Directors
authorized the distribution or share dividend, as the case may be, unless
the Board of Directors fixes a different record date.
2.07. Shareholders' List for Meetings. After a record date
for a special or annual meeting of shareholders has been fixed, the
corporation shall prepare a list of the names of all of the shareholders
entitled to notice of the meeting. The list shall be arranged by class or
series of shares, if any, and show the address of and number of shares
held by each shareholder. Such list shall be available for inspection by
any shareholder, beginning two business days after notice of the meeting
is given for which the list was prepared and continuing to the date of the
meeting, at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A
shareholder or his or her agent may, on written demand, inspect and,
subject to the limitations imposed by the Wisconsin Business Corporation
Law, copy the list, during regular business hours and at his or her
expense, during the period that it is available for inspection pursuant to
this Section 2.07. The corporation shall make the shareholders' list
available at the meeting and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any
adjournment thereof. Refusal or failure to prepare or make available the
shareholders' list shall not affect the validity of any action taken at a
meeting of shareholders.
2.08. Quorum and Voting Requirements. Shares entitled to
vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. If
the corporation has only one class of common stock outstanding, such class
shall constitute a separate voting group for purposes of this Section
2.08. Except as otherwise provided in the articles of incorporation or
the Wisconsin Business Corporation Law, a majority of the votes entitled
to be cast on the matter shall constitute a quorum of the voting group for
action on that matter. Once a share is represented for any purpose at a
meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes
of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or
must be set for the adjourned meeting. If a quorum exists, except in the
case of the election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action exceed the
votes cast opposing the action, unless the articles of incorporation, the
Wisconsin Business Corporation Law, the Investment Company Act of 1940 or
any other applicable law or regulation requires a greater number of
affirmative votes. Unless otherwise provided in the articles of
incorporation, each director shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election of directors at a
meeting at which a quorum is present. Though less than a quorum of the
outstanding votes of a voting group are represented at a meeting, a
majority of the votes so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
2.09. Conduct of Meeting. The President, and in his or her
absence, a Vice President in the order provided by Section 4.07 hereof,
and in their absence, any person chosen by the shareholders, shall call
the meeting of the shareholders to order and shall act as chairman of the
meeting, and the Secretary of the corporation or any other person
appointed by the chairman of the meeting, shall act as secretary of all
meetings of the shareholders.
2.10. Proxies. At all meetings of shareholders, a
shareholder may vote his or her shares in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the
shareholder by signing an appointment form, either personally or by his or
her attorney-in-fact. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the corporation
authorized to tabulate votes. An appointment is valid for eleven months
from the date of its signing unless a different period is expressly
provided in the appointment form.
2.11. Voting of Shares. Except as provided in the articles
of incorporation, the Wisconsin Business Corporation Law, the Investment
Company Act of 1940 or other applicable law or regulation, each
outstanding share, regardless of class or series, is entitled to one vote
on each matter voted on at a meeting of shareholders.
2.12. Action without Meeting. Any action required or
permitted by the articles of incorporation or these bylaws or any
provision of the Wisconsin Business Corporation Law to be taken at a
meeting of the shareholders may be taken without a meeting and without
action by the Board of Directors if a written consent or consents,
describing the action so taken, is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof and delivered
to the corporation for inclusion in the corporate records.
2.13. Acceptance of Instruments Showing Shareholder Action.
If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and
give it effect as the act of a shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of a
shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver or proxy appointment and give it effect as the act
of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity.
(b) The name purports to be that of a personal
representative, administrator, executor, guardian or conservator
representing the shareholder and, if the corporation requests,
evidence of fiduciary status acceptable to the corporation is
presented with respect to the vote, consent, waiver or proxy
appointment.
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation
is presented with respect to the vote, consent, waiver or proxy
appointment.
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if
the corporation requests, evidence acceptable to the corporation
of the signatory's authority to sign for the shareholder is
presented with respect to the vote, consent, waiver or proxy
appointment.
(e) Two or more persons are the shareholders as co-tenants
or fiduciaries and the name signed purports to be the name of at
least one of the co-owners and the person signing appears to be
acting on behalf of all co-owners.
The corporation may reject a vote, consent, waiver or proxy appointment if
the Secretary or other officer or agent of the corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall
be exercised by or under the authority of, and the business and affairs of
the corporation managed under the direction of, the Board of Directors.
The number of directors of the corporation shall be five.
3.02. Tenure and Qualifications. Each director shall hold
office until the next annual meeting of shareholders and until his or her
successor shall have been elected and, if necessary, qualified, or until
there is a decrease in the number of directors which takes effect after
the expiration of his or her term, or until his or her prior death,
resignation or removal. A director may be removed by the shareholders
only at a meeting called for the purpose of removing the director, and the
meeting notice shall state that the purpose, or one of the purposes, of
the meeting is removal of the director. A director may be removed from
office with or without cause if the votes cast to remove the director
exceeds the number of votes cast not to remove such director. A director
may resign at any time by delivering written notice which complies with
the Wisconsin Business Corporation Law to the Board of Directors, to the
President (in his or her capacity as chairperson of the Board of
Directors) or to the corporation. A director's resignation is effective
when the notice is delivered unless the notice specifies a later effective
date. Directors need not be residents of the State of Wisconsin or
shareholders of the corporation but must be eligible to serve as a
director of a registered investment company under the Investment Company
Act of 1940.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately
before or after the annual meeting of shareholders and each adjourned
session thereof. The place of such regular meeting shall be the same as
the place of the meeting of shareholders which precedes or follows it, as
the case may be, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors shall provide, by
resolution, the date, time and place, either within or without the State
of Wisconsin, for the holding of additional regular meetings of the Board
of Directors without other notice than such resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President, Secretary
or any two directors. The President or Secretary may fix any place,
either within or without the State of Wisconsin, as the place for holding
any special meeting of the Board of Directors, and if no other place is
fixed the place of the meeting shall be the principal business office of
the corporation in the State of Wisconsin.
3.05. Notice; Waiver. Notice of each special meeting of the
Board of Directors shall be given orally in person or by telephone or by
written notice delivered in person, by telegraph, teletype, facsimile or
other form of wire or wireless communication, or by mail or private
carrier, to each director at his business address or at such other address
as such director shall have designated in writing filed with the
Secretary, in each case not less than forty-eight hours prior to the
meeting. The notice need not prescribe the purpose of the special meeting
of the Board of Directors or the business to be transacted at such
meeting. If mailed, such notice shall be deemed to be effective when
deposited in the United States mail so addressed, with postage thereon
prepaid. If notice is given by telegram, such notice shall be deemed to
be effective when the telegram is delivered to the telegraph company. If
notice is given by private carrier, such notice shall be deemed to be
effective when delivered to the private carrier. Whenever any notice
whatever is required to be given to any director of the corporation under
the articles of incorporation or these bylaws or any provision of the
Wisconsin Business Corporation Law or other applicable law or regulation,
a waiver thereof in writing, signed at any time, whether before or after
the date and time of meeting, by the director entitled to such notice
shall be deemed equivalent to the giving of such notice. The corporation
shall retain any such waiver as part of the permanent corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him or her of the meeting unless the director at the
beginning of the meeting or promptly upon his or her arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
3.06. Quorum. Except as otherwise provided by the Wisconsin
Business Corporation Law or by the articles of incorporation or these
bylaws, a majority of the number of directors specified in Section 3.01 of
these bylaws shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. Except as otherwise provided by
the Wisconsin Business Corporation Law or by the articles of incorporation
or these bylaws, a quorum of any committee of the Board of Directors
created pursuant to Section 3.12 hereof shall consist of a majority of the
number of directors appointed to serve on the committee. A majority of
the directors present (though less than such quorum) may adjourn any
meeting of the Board of Directors or any committee thereof, as the case
may be, from time to time without further notice.
3.07. Manner of Acting. The affirmative vote of a majority
of the directors present at a meeting of the Board of Directors at which a
quorum is present shall be the act of the Board of Directors, unless the
Wisconsin Business Corporation Law, the Investment Company Act of 1940 or
other applicable law or regulation, the articles of incorporation or these
bylaws require the vote of a greater number of directors.
3.08. Conduct of Meetings. The President, and in his or her
absence, a Vice President in the order provided under Section 4.07, and in
their absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as chairman of
the meeting. The Secretary of the corporation shall act as secretary of
all meetings of the Board of Directors unless the presiding officer
appoints another person present to act as secretary of the meeting.
Minutes of any regular or special meeting of the Board of Directors shall
be prepared and distributed to each director.
3.09. Vacancies. Except as provided below, any vacancy
occurring in the Board of Directors, including a vacancy resulting from an
increase in the number of directors, may be filled by any of the
following: (a) the shareholders; or (b) the Board of Directors, if
immediately after filling any such vacancy at least two-thirds of the
directors then holding office shall have been elected to such office at an
annual or special meeting of shareholders. A vacancy that will occur at a
specific later date, because of a resignation effective at a later date or
otherwise, may be filled before the vacancy occurs, but the new director
may not take office until the vacancy occurs. If by reason of the death,
disqualification or bona fide resignation of any director or directors,
more than sixty percent (60%) of the members of the Board of Directors are
interested persons of the corporation, as defined in the Investment
Company Act of 1940, such vacancy shall be filled within thirty days if it
may be filled by the Board of Directors, or within sixty days if a vote of
shareholders is required to fill such a vacancy; provided that such
vacancy may be filled within such longer period as the Securities and
Exchange Commission may prescribe by rules and regulations, upon its own
motion or by order upon application. In the event that at any time less
than a majority of the directors were elected by the shareholders, the
Board of Directors or the President shall forthwith cause to be held as
promptly as possible, and in any event within sixty days, a meeting of the
shareholders for the purpose of electing directors to fill any existing
vacancies in the Board of Directors, unless the Securities and Exchange
Commission shall by order extend such period.
3.10. Compensation. No director shall receive any stated
salary or fees from the corporation for his services as such if such
director is, otherwise than by reason of being such director, an
interested person (as such term is defined by the Investment Company Act
of 1940) of the corporation's investment adviser. Except as provided in
the preceding sentence, the Board of Directors, irrespective of any
personal interest of its members, may establish reasonable compensation of
all directors for service to the corporation as directors, officers or
otherwise, or may delegate such authority to an appropriate committee.
3.11. Presumption of Assent. A director who is present and
is announced as present at a meeting of the Board of Directors, when
corporate action is taken, assents to the action taken unless any of the
following occurs: (a) the director objects at the beginning of the
meeting or promptly upon his or her arrival to holding the meeting or
transacting business at the meeting; (b) the director's dissent or
abstention from the action taken is entered in the minutes of the meeting;
or (c) the director delivers written notice that complies with the
Wisconsin Business Corporation Law of his or her dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting. Such right of
dissent or abstention shall not apply to a director who votes in favor of
the action taken.
3.12. Committees. The Board of Directors by resolution
adopted by the affirmative vote of a majority of all of the directors then
in office may create one or more committees, appoint members of the Board
of Directors to serve on the committees and designate other members of the
Board of Directors to serve as alternates. Each committee shall have two
or more members who shall, unless otherwise provided by the Board of
Directors, serve at the pleasure of the Board of Directors. A committee
may be authorized to exercise the authority of the Board of Directors,
except that a committee may not do any of the following: (a) authorize
distributions; (b) approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires to be approved by
shareholders; (c) fill vacancies on the Board of Directors or, unless the
Board of Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the corporation's articles of
incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of
merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors; or
(i) take any action required by the Investment Company Act of 1940 to be
taken by the independent directors of the corporation or by the full Board
of Directors. Unless otherwise provided by the Board of Directors in
creating the committee, a committee may employ counsel, accountants and
other consultants to assist it in the exercise of its authority.
3.13. Telephonic Meetings. Except as herein provided and
notwithstanding any place set forth in the notice of the meeting or these
bylaws, members of the Board of Directors may participate in regular or
special meetings by, or through the use of, any means of communication by
which all participants may simultaneously hear each other, such as by
conference telephone. If a meeting is conducted by such means, then at
the commencement of such meeting the presiding officer shall inform the
participating directors that a meeting is taking place at which official
business may be transacted. Any participant in a meeting by such means
shall be deemed present in person at such meeting. If action is to be
taken at any meeting held by such means on any of the following: (a) a
plan of merger or share exchange; (b) a sale, lease, exchange or other
disposition of substantial property or assets of the corporation; (c) a
voluntary dissolution or the revocation of voluntary dissolution
proceedings; or (d) a filing for bankruptcy, then the identity of each
director participating in such meeting must be verified by the disclosure
at such meeting by each such director of each such director's social
security number to the secretary of the meeting before a vote may be taken
on any of the foregoing matters. For purposes of the preceding clause
(b), the phrase "sale, lease, exchange or other disposition of substantial
property or assets" shall mean any sale, lease, exchange or other
disposition of property or assets of the corporation having a net book
value equal to 10% or more of the net book value of the total assets of
the corporation on and as of the close of the fiscal year last ended prior
to the date of such meeting and as to which financial statements of the
corporation have been prepared. Notwithstanding the foregoing, no action
may be taken at any meeting held by such means (i) on any particular
matter which the presiding officer determines, in his or her sole
discretion, to be inappropriate under the circumstances for action at a
meeting held by such means (such determination shall be made and announced
in advance of such meeting), or (ii) if the purpose of the meeting is to
approve the corporation's investment advisory agreement and/or to approve
the selection of the corporation's auditors, or if participation in such a
manner would otherwise violate or not be consistent with the requirements
of the Investment Company Act of 1940 or other applicable laws.
3.14. Action Without Meeting. Any action required or
permitted by the Wisconsin Business Corporation Law to be taken at a
meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board. The action shall be
evidenced by one or more written consents describing the action taken,
signed by each director or committee member and retained by the
corporation. Such action shall be effective when the last director signs
the consent, unless the consent specifies a different effective date.
Notwithstanding this Section 3.14, no action may be taken by the Board of
Directors pursuant to a written consent with respect to the approval of
the corporation's investment advisory agreement, the approval of the
selection of the corporation's auditors, or any action required by the
Investment Company Act of 1940 or other applicable law to be taken at a
meeting of the Board of Directors to be held in person.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation
shall be a President, the number of Vice Presidents as authorized from
time to time by the Board of Directors, a Secretary, and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers
and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. The Board of Directors may also
authorize any duly authorized officer to appoint one or more officers or
assistant officers. Any two or more offices may be held by the same
person.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as is practicable. Each officer shall
hold office until his or her successor shall have been duly elected or
until his or her prior death, resignation or removal.
4.03. Removal. The Board of Directors may remove any
officer and, unless restricted by the Board of Directors or these bylaws,
an officer may remove any officer or assistant officer appointed by that
officer, at any time, with or without cause and notwithstanding the
contract rights, if any, of the officer removed. The appointment of an
officer does not of itself create contract rights.
4.04. Resignation. An officer may resign at any time by
delivering notice to the corporation that complies with the Wisconsin
Business Corporation Law. The resignation shall be effective when the
notice is delivered, unless the notice specifies a later effective date
and the corporation accepts the later effective date.
4.05. Vacancies. A vacancy in any principal office because
of death, resignation, removal, disqualification or otherwise, shall be
filled by the Board of Directors for the unexpired portion of the term.
If a resignation of an officer is effective at a later date as
contemplated by Section 4.04 hereof, the Board of Directors may fill the
pending vacancy before the effective date if the Board provides that the
successor may not take office until the effective date.
4.06. President. The President shall be the principal
executive officer of the corporation and, subject to the direction of the
Board of Directors, shall in general supervise and control all of the
business and affairs of the corporation. The President shall, when
present, preside at all meetings of the shareholders and of the Board of
Directors. He or she shall have authority, subject to such rules as may
be prescribed by the Board of Directors, to appoint such agents and
employees of the corporation as he or she shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority
to them. Such agents and employees shall hold office at the discretion of
the President. He or she shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds,
stock certificates, contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by resolution
of the Board of Directors; and, except as otherwise provided by law or the
Board of Directors, he or she may authorize any Vice President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his or her place and stead. In general he or
she shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to
time.
4.07. The Vice Presidents. In the absence of the President
or in the event of the President's death, inability or refusal to act, or
in the event for any reason it shall be impracticable for the President to
act personally, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority
as from time to time may be delegated or assigned to him or her by the
President or by the Board of Directors. The execution of any instrument
of the corporation by any Vice President shall be conclusive evidence, as
to third parties, of his or her authority to act in the stead of the
President.
4.08. The Secretary. The Secretary shall: (a) keep minutes
of the meetings of the shareholders and of the Board of Directors (and of
committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) see that all
notices are duly given in accordance with the provisions of these bylaws
or as required by the Wisconsin Business Corporation Law; (c) be custodian
of the corporate records and of the seal of the corporation and see that
the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d)
maintain a record of the shareholders of the corporation, in a form that
permits preparation of a list of the names and addresses of all
shareholders, by class or series of shares and showing the number and
class or series of shares held by each shareholder; (e) sign with the
President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned
by the President or by the Board of Directors.
4.09. The Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
corporation; (b) maintain appropriate accounting records; (c) receive and
give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Sections 9.08 and 9.09;
and (d) in general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other authority as
from time to time may be delegated or assigned by the President or by the
Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his or her duties in such
sum and with such surety or sureties as the Board of Directors shall
determine.
4.10. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors may from time to time authorize. The Assistant
Secretaries may sign with the President or a Vice President certificates
for shares of the corporation the issuance of which shall have been
authorized by a resolution of the Board of Directors. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give
bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such
duties and have such authority as shall from time to time be delegated or
assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
4.11. Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint, or to authorize any duly
appointed officer of the corporation to appoint, any person to act as
assistant to any officer, or as agent for the corporation in his or her
stead, or to perform the duties of such officer whenever for any reason it
is impracticable for such officer to act personally, and such assistant or
acting officer or other agent so appointed by the Board of Directors or an
authorized officer shall have the power to perform all the duties of the
office to which he or she is so appointed to be an assistant, or as to
which he or she is so appointed to act, except as such power may be
otherwise defined or restricted by the Board of Directors or the
appointing officer.
ARTICLE V. CERTIFICATES FOR SHARES; TRANSFER OF SHARES
5.01. Certificates for Shares. Unless and to the extent
that the Board of Directors requires the issuance of shares without
certificates, each shareholder shall be entitled upon request to have a
certificate or certificates which shall represent and certify the number
and kind of shares owned by him or her in the corporation. Certificates
representing shares of the corporation shall be in such form, consistent
with the Wisconsin Business Corporation Law, as shall be determined by the
Board of Directors. Such certificates shall be signed by the President or
a Vice President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation for transfer shall be
cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except as provided in Section 5.05. The corporation shall
deliver to shareholders not requesting certificates statements containing
the information required by Section 408.408 of the Wisconsin Statutes.
Such statements confer no rights on shareholders and are neither
negotiable instruments nor securities.
5.02. Facsimile Signatures and Seal. The seal of the
corporation, if any, on any certificates for shares may be a facsimile.
The signature of the President or Vice President and the Secretary or
Assistant Secretary upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent, or a
registrar, other than the corporation itself.
5.03. Signature by Former Officers. The validity of a share
certificate is not affected if a person who signed the certificate (either
manually or in facsimile) no longer holds office when the certificate is
issued.
5.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for redemption or registration of transfer the
corporation may treat the registered owner of such shares as the person
exclusively entitled to vote, to receive notifications and otherwise to
have and exercise all the rights and power of an owner. Except as
provided in Section 408.207(3)(4) and (6) of the Wisconsin Statutes
relating to registered pledges, the corporation may treat the registered
owner of uncertificated shares as the person exclusively entitled to vote,
to receive notifications, and otherwise to exercise all the rights and
powers of an owner. Where a certificate for shares is presented to the
corporation with a request for redemption or to register for transfer, the
corporation shall not be liable to the owner or any other person suffering
loss as a result of such registration of transfer or redemption if (a)
there were on or with the certificate the necessary endorsements, and (b)
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable
assurance that such endorsements are genuine and effective and compliance
with such other regulations as may be prescribed by or under the authority
of the Board of Directors. The corporation shall not be liable to the
owner, pledgee or any other person suffering loss as a result of the
registration of a transfer, pledge or release of uncertificated shares if
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. Transfer or redemption of shares of stock of
the corporation shall be made only on the stock transfer books of the
corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto duly authorized by power of
attorney duly executed and filed with the transfer agent or the Secretary
of the corporation, and on surrender for cancellation of the certificate
for such shares, if any.
5.05. Lost, Destroyed or Stolen Certificates. Where the
owner claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the corporation has notice that such
shares have been acquired by a bona fide purchaser, (b) files with the
corporation a sufficient indemnity bond if required by the Board of
Directors or any principal officer, and (c) satisfies such other
reasonable requirements as may be prescribed by or under the authority of
the Board of Directors.
5.06. Stock Regulations. The Board of Directors shall have
the power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the corporation.
ARTICLE VI. SEAL
6.01. The Board of Directors may provide for a corporate
seal for the corporation.
ARTICLE VII. INDEMNIFICATION
7.01. Provision of Indemnification. The corporation shall
indemnify all of its corporate representatives against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by them in connection with the defense of any
action, suit or proceeding, or threat or claim of such action, suit or
proceeding, whether civil, criminal, administrative, or legislative, no
matter by whom brought, or in any appeal in which they or any of them are
made parties or a party by reason of being or having been a corporate
representative, if the corporate representative acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests
of the corporation and with respect to any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful provided that the
corporation shall not indemnify corporate representatives in relation to
matters as to which any such corporate representative shall be adjudged in
such action, suit or proceeding to be liable for gross negligence, willful
misfeasance, bad faith, reckless disregard of the duties and obligations
involved in the conduct of his office, or when indemnification is
otherwise not permitted by the Wisconsin Business Corporation Law.
7.02. Determination of Right to Indemnification. In the
absence of an adjudication which expressly absolves the corporate
representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if a determination that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in Section 7.01. Such
determination shall be made: (i) by the Board of Directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding nor interested persons of the corporation as
defined in Section 2(a)(19) of the Investment Company Act of 1940; (ii) if
the required quorum is not obtainable or if a quorum of disinterested
directors so direct, by independent legal counsel in a written opinion; or
(iii) by the shareholders. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person was guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard to the duties and obligations
involved in the conduct of his or her office, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
7.03 Allowance of Expenses. Expenses, including attorneys'
fees, incurred in the preparation of and/or presentation of the defense of
a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in Sections 180.0853 or
180.0856 of the Wisconsin Business Corporation Law upon receipt of an
undertaking by or on behalf of the corporate representative, secured by a
surety bond or other similar insurance paid for by such corporate
representative, to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw.
7.04 Additional Rights to Indemnification. The indemnification
provided by this bylaw shall not be deemed exclusive of any other rights
to which those indemnified may be entitled under these bylaws, any
agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person subject to the limitations imposed from time to time by the
Investment Company Act of 1940, as amended.
7.05 Insurance. This corporation shall have power to purchase
and maintain insurance on behalf of any corporate representative against
any liability asserted against him or her and incurred by him or her in
such capacity or arising out of his or her status as such, whether or not
the corporation would have the power to indemnify him or her against such
liability under this bylaw provided that no insurance may be purchased or
maintained to protect any corporate representative against liability for
gross negligence, willful misfeasance, bad faith or reckless disregard of
the duties and obligations involved in the conduct of his or her office.
7.06. Definitions. "Corporate Representative" means an
individual who is or was a director, officer, agent or employee of the
corporation or who serves or served another corporation, partnership,
joint venture, trust or other enterprise in one of these capacities at the
request of the corporation and who, by reason of his or her position, is,
was or is threatened to be made a party to a proceeding described herein.
ARTICLE VIII. AMENDMENTS
8.01. Amendments by Shareholders and Directors. The Board
of Directors shall have the power to alter or repeal any bylaws of the
corporation and to make new bylaws, except that the Board of Directors
shall not alter or repeal any bylaw made by the shareholders and, after
capital stock of the corporation is issued, shall not alter or repeal
Sections 7.01 through 7.06 of Article VII or Section 8.01 of Article VIII.
The shareholders shall have the power at any meeting, if notice thereof be
included in the notice of such meeting, to alter or repeal any bylaws of
the corporation and to make new bylaws by vote of a majority of the shares
entitled to vote at such meeting, as the term "majority" is defined in the
Investment Company Act of 1940, as amended from time to time.
8.02. Implied Amendments. Any action taken or authorized by
the shareholders or by the Board of Directors which would be inconsistent
with the bylaws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the bylaws so that the bylaws would be
consistent with such action shall be given the same effect as though the
bylaws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.
ARTICLE IX. MISCELLANEOUS
9.01. Bonding. Each officer and employee of the corporation
who singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance company
authorized to do business in Wisconsin. Each such bond, which may be in
the form of an individual bond, a schedule or blanket bond covering the
corporation's officers and employees and the officers and employees of the
investment adviser to the corporation and other corporations to which said
investment adviser also acts as investment adviser, shall be in such form
and for such amount (determined at least annually) as the Board of
Directors shall determine in compliance with the requirements of Section
17(g) of the Investment Company Act of 1940, as amended from time to time,
and the rules, regulations or orders of the Securities and Exchange
Commission thereunder.
9.02. Compensation and Profit from Purchase and Sales. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Investment Company Act of 1940, or the
rules, regulations or orders of the Securities and Exchange Commission
thereunder, (i) acting as agent, accept from any source any compensation
for the purchase or sale of any property or securities to or for the
corporation or any controlled company of the corporation, as defined in
the Investment Company Act of 1940, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction. The
investment adviser to the corporation shall not profit directly or
indirectly from sales of securities to or from the corporation.
9.03. Transactions with Affiliated Person. No affiliated
person of the corporation, as defined in the Investment Company Act of
1940, or affiliated person of such person shall knowingly (i) sell any
security or other property to the corporation or to any company controlled
by the corporation, as defined in the Investment Company Act of 1940,
except shares of stock of the corporation or securities of which such
person is the issuer and which are part of a general offering to the
holders of a class of its securities, (ii) purchase from the corporation
or any such controlled company any security or property except shares of
stock of the corporation or securities of which such person is the issuer,
(iii) borrow money or other property from the corporation or any such
controlled company, or (iv) acting as a principal effect any transaction
in which the corporation or controlled company is a joint or joint and
several participant with such person; provided, however, that this section
shall not apply to any transaction permitted by Sections 17(a), (b), (c),
(d) or 21(b) of the Investment Company Act of 1940 or the rules,
regulations or orders of the Securities and Exchange Commission
thereunder.
9.04. Portfolio Transactions. The corporation shall not
purchase, acquire or retain:
(a) any security of an issuer, any of whose officers or
directors is an officer, director, or investment adviser of the
corporation or an affiliated person, as defined in the
Investment Company Act of 1940, of such investment adviser;
(b) any security issued by or any interest in the business
of an investment company, insurance company, broker, dealer,
underwriter or investment adviser, except as permitted under
Sections 12(d), (e) and (g) of the Investment Company Act of
1940, as amended from time to time, or the rules, regulations or
orders of the Securities and Exchange Commission thereunder;
(c) voting securities of another issuer, the acquisition
or retention of which would result in circular or cross
ownership, as defined in Section 20(c) of the Investment Company
Act of 1940; or
(d) during the existence of any underwriting or selling
syndicate, any security, except stock of the corporation, a
principal underwriter of which is an officer, director,
investment adviser or employee of the corporation, or is a
person (other than a company of the character described in
Section 12(d)(3) (A) and (B) of the Investment Company Act of
1940, as amended from time to time) of which any such officer,
director, investment adviser or employee is an affiliated
person, as defined in the Investment Company Act of 1940, unless
in acquiring such security the corporation is itself acting as a
principal underwriter for the issue, except as the Securities
and Exchange Commission, by rules, regulations, or order shall
permit.
9.05. General Business and Investment Activities. The
corporation shall not:
(a) purchase any security on margin, except such short-
term credits as are necessary for the clearance of transactions;
(b) participate on a joint or joint and several basis in
any trading account in securities;
(c) effect a short sale of any security;
(d) act as an underwriter in the distribution of any
security other than stock of the corporation;
(e) make loans to other persons except through the
purchase of debt obligations permissible under Article III of
the articles of incorporation of this corporation and through
repurchase agreements provided that repurchase agreements
maturing in more than seven days will not exceed 10% of the
total net assets of this corporation;
(f) borrow money or issue senior securities except to the
extent permitted under Sections 18(f), (g) and (h) of the
Investment Company Act of 1940, as amended from time to time,
provided that the amount of money that may be borrowed shall not
exceed that which would be permitted under the margin
requirements of the Board of Governors of the Federal Reserve
System, in force at the time of borrowing, as specified in
Regulation T, or any amendment thereto;
(g) purchase or sell real estate or interests in real
estate or commodities;
(h) issue any warrant or right to subscribe to or purchase
stock of the corporation, except in the form of warrants or
rights to subscribe expiring not later than one hundred twenty
days after their issuance and issued exclusively and ratably to
its shareholders, or any voting trust certificate relating to
stock of the corporation;
(i) deviate from its policy in respect to concentration of
investments in any particular industry or group of industries as
reported in its registration statement under the Investment
Company Act of 1940, or deviate from any fundamental policy
recited in such registration statement pursuant to Section
8(b)(2) of the Investment Company Act of 1940;
(j) change the nature of its business so as to cease to be
an investment company;
(k) charge any sales load or commission in connection with
the sale or redemption of any stock of the corporation; provided
that the Board of Directors may impose a redemption charge in
such amount, with such limitations and at such times as the
Board of Directors in its discretion shall determine.
9.06. Preparation and Maintenance of Accounts, Records and
Statements. The President, a Vice President or the Treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the shareholders and filed within twenty days thereafter at the principal
office of the corporation in the State of Wisconsin. The proper officers
of the corporation shall also prepare, maintain and preserve or cause to
be prepared, maintained and preserved the accounts, books and other
documents required by Section 31 of the Investment Company Act of 1940 and
shall prepare and file or cause to be prepared and filed the reports
required by Section 30 of such Act. No financial statement shall be filed
with the Securities and Exchange Commission unless the officers or
employees who prepared or participated in the preparation of such
financial statement have been specifically designated for such purpose by
the Board of Directors.
9.07. Auditors. No independent public accountant shall be
retained or employed by the corporation to examine, certify or report on
its financial statements for any fiscal year unless such selection: (i)
shall have been approved by a majority of the entire Board of Directors
within thirty days before or after the beginning of such fiscal year or
before the annual meeting of shareholders for such fiscal year; (ii) shall
have been ratified at the next succeeding annual meeting of shareholders,
provided that any vacancy occurring between annual meetings due to the
death or resignation of such accountant may be filled by the Board of
Directors; and (iii) shall otherwise meet the requirements of Section 32
of the Investment Company Act of 1940.
9.08. Custodian. All securities, evidences of indebtedness
and funds of the corporation shall be entrusted to the custody of one or
more custodians or depositaries, each of which shall be a bank or trust
company which is a member of the Federal Reserve System having capital,
surplus and undivided profits of not less than Two Million Dollars
($2,000,000), as set forth in its most recently published report of
condition, and the qualifications prescribed by and pursuant to Section
17(f) and 26 of the Investment Company Act of 1940 and which shall be
employed as agent or agents of the corporation by the Board of Directors.
9.09. Agreement with Custodian. Each such custodian shall
be employed pursuant to a written agreement which shall conform to the
requirements prescribed by any applicable rules and regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940, and, except as otherwise provided by such rules and regulations,
shall provide substantially as follows:
(a) The custodian shall keep (i) all cash on deposit with
such other banks in the name of the custodian as the corporation
shall direct, and (ii) all securities in a separate account, not
commingled with other assets, in the name of the custodian, its
nominee or the corporation in care of the custodian, or in the
custody of the custodian or agents in street certificate or
bearer form. The custodian may utilize a central securities
clearing agency or securities depository in accordance with the
provisions of the Investment Company Act of 1940 and the rules
and regulations of the Securities and Exchange Commission
promulgated thereunder. The custodian shall receive and collect
the income or funds due with respect to such securities.
(b) Securities and cash held by the custodian may be
withdrawn only upon written order signed on behalf of the
corporation by two employees at least one of whom shall be an
officer included within a list of five officers and employees
certified for such purpose by resolution of the Board of
Directors.
(c) Securities held by the custodian may be withdrawn only
for the following purposes:
(i) The sale of such securities for the account
of the corporation with delivery and payment therefore
in accord with procedures and customs used by the
custodian in the sale of securities for the trust
estates for which it is trustee;
(ii) The delivery of securities in exchange for
or conversion into other securities alone, cash or
cash and other securities pursuant to the provisions
of such securities or a plan of merger, consolidation,
reorganization, recapitalization or readjustment of
the securities of the issuer thereof;
(iii) The surrender of warrants, rights or similar
securities in the exercise of such warrants, rights or
similar securities or the surrender of interim
receipts or temporary securities for definitive
securities;
(iv) The delivery of securities to a lender as
collateral on borrowing effected by the corporation or
to a broker selling any such securities in accordance
with "street delivery" customs;
(v) The delivery of securities as a redemption
in kind of or distribution of stock of the corporation
or in connection with a retirement of such securities;
(vi) The delivery of securities for other proper
corporate purposes;
provided that in each case specified in clauses (i), (iii) and
(iv) the payment, collateral or securities to be received are
delivered to the custodian simultaneously or as promptly
thereafter as possible.
(d) Cash held by the custodian may be withdrawn only for
the following purposes:
(i) The purchase of securities to be retained by
the custodian with delivery and payment therefor in
accord with procedures and customs used by the
custodian in the purchase of securities for the trust
estates for which it is trustee;
(ii) The redemption or purchase of stock in the
corporation;
(iii) The payment of interest, dividends or other
distributions on stock of the corporation;
(iv) The payment of taxes, interest, the
investment adviser's fees incurred in connection with
the operation of the corporation and operating
expenses (including, without limitation thereto, fees
for legal, accounting and auditing services);
(v) The payment in connection with the
conversion, exchange or surrender of securities owned
by the corporation;
(vi) The deposit of funds in the name of the
custodian in or with any other bank or trust company
designated by the corporation;
(vii) Other proper corporate purposes as certified
by resolution of the Board of Directors.
9.10. Termination of Custodian Agreement. Any employment
agreement with a custodian shall be terminable on not more than sixty
days' notice in writing by the Board of Directors or the custodian and
upon any such termination the custodian shall turn over only to the
succeeding custodian designated by the Board of Directors all funds,
securities and property and documents of the corporation in its
possession.
9.11. Checks and Requisitions. Except as otherwise authorized
by the Board of Directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefor, all promissory notes, all assignments
of stock or securities standing in the name of the corporation, and all
requisitions or orders for the assignment of stock or securities standing
in the name of a custodian or its nominee, or for the execution of powers
to transfer the same, shall be signed in the name of the corporation by
not less than two persons (who shall be among those persons, not in excess
of five, designated for this purpose by the Board of Directors) at least
one of which shall be an officer. Promissory notes, checks or drafts
payable to the corporation may be endorsed only to the order of a
custodian or its nominee by the Treasurer or President or by such other
person or persons as shall be thereto authorized by the Board of
Directors.
9.12. Dividends. Dividends upon the stock of the corporation,
subject to the provisions of the charter, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
The source of each dividend payment shall be disclosed to the shareholders
receiving such dividend, to the extent required by the laws of the State
of Wisconsin and by Section 19 of the Investment Company Act of 1940 and
the rules and regulations of the Securities and Exchange Commission
thereunder. The total of each dividend payment made to shareholders in
respect of any one fiscal year shall be approximately equal to the sum of
(a) the net income for such fiscal year exclusive of profits or losses
realized upon the sale of securities or other property, and (b) the excess
of profits over losses on sales of securities or other property for such
fiscal year; provided the above provision shall be interpreted to give the
Board of Directors the power in its discretion to distribute for any
fiscal year as ordinary dividends and as capital gains distributions,
respectively, amounts sufficient to enable the corporation to avoid or
reduce its tax liability.
9.13. Net Asset Value.
(a) The net asset value to which a holder of shares of
Common Stock shall be entitled upon redemption of shares held by
such holder is the net asset value, as such value is determined
under subsections (c) and (d) of this Section 9.13, applicable
at the time when any of the following events effecting
redemption occur:
(i) The corporation receives, at such place as
the Board of Directors designates from time to time,
irrevocable instructions in writing in form acceptable
to the Board of Directors to redeem stock held by such
holder and, if such stock to be redeemed is
represented by certificates, the certificates, duly
endorsed or accompanies by proper instructions of
assignment, with proper stock transfer stamps affixed,
if required;
(ii) The corporation receives documents, drafts,
telegrams, telephonic communications, in such manner,
form and place and under such circumstances as the
Board of Directors may determine from time to time in
its discretion, transmitted or made by such holder for
the purpose of redeeming stock held by such holder.
(b) The time for payment for shares redeemed shall be
within seven (7) days after receipt by the corporation of
documents properly prepared, executed and submitted in
accordance with the provisions of sub-section (a) of this
Section 9.13 for the purpose of redeeming shares.
(c) The net asset value of each share of a Series of
Common Stock shall be determined as of the close of regular
trading on the New York Stock Exchange each day that said
Exchange is open for trading and any such net asset value shall
be applicable to all transactions in such Series of Common Stock
occurring at or before such time on that day and after such time
on the last preceding day on which said Exchange was open for
trading, subject to adjustment for declared dividends or
distributions, or in accordance with any controlling provisions
of the Investment Company Act of 1940 or any rules or
regulations thereunder.
(d) The net asset value of each share of a Series of
Common Stock shall be determined in accordance with generally
accepted accounting principles by dividing the total value of
the Series net assets (meaning the assets belonging to the
Series as defined in the Articles of Incorporation less the
liabilities belonging to the Series as defined in the Articles
of Incorporation excluding capital and surplus) by the total
number of shares of such Series outstanding at that time. The
net asset value is determined as of the close of regular trading
on the New York Stock Exchange on each day the Exchange is open
for trading. This determination is applicable to all
transactions in shares of the Series prior to that time and
after the previous time as of which net asset value was
determined. Accordingly, purchase orders accepted or shares
tendered for redemption prior to the close of regular trading on
a day the Exchange is open for trading will be valued as of the
close of regular trading, and purchase orders accepted or shares
tendered for redemption after that time will be valued as of the
close of the next trading day.
(i) Securities traded on any national stock
exchange or quoted on the NASDAQ National Market
System will ordinarily be valued on the basis of the
last sale price on the date of valuation, or, in the
absence of any sale on that date, the most recent bid
price. Other securities will generally be valued at
the most recent bid price, if market quotations are
readily available. Any securities for which there are
no readily available market quotations and other
assets will be valued at their fair value as
determined in good faith by the Board of Directors.
Odd lot differentials and brokerage commissions will
be excluded in calculating values.
(ii) The liabilities of the corporation shall be
deemed to include all bills and accounts payable; all
administrative expenses payable and/or accrued,
including the estimated amount of any fees payable
under an investment advisory agreement(s), plans of
distribution or administration agreements, all
contractual obligations for the payment of money or
property; all reserves authorized or approved by the
Board of Directors for taxes or contingencies,
including such reserves, if any, for taxes based on
any unrealized appreciation in the value of the assets
of the corporation; and all other liabilities of the
corporation whatsoever kind and nature, except
liabilities represented by outstanding shares and
surplus of the corporation.
(iii) Securities purchased shall be included among
the assets of the corporation, and the cost thereof
shall simultaneously be regarded as a liability, not
later than the first business day following the date
of purchase; and securities sold shall be excluded
from such assets, and the amount receivable therefore
shall simultaneously be included as an asset, not
later than the first business day following the date
of sale.
(iv) Shares of Common Stock shall be considered
as no longer outstanding on the first business day
subsequent to receipt of the properly endorsed
certificate representing such shares or receipt of the
properly prepared request for redemption for those
shares not represented by certificates, and the amount
payable on such redemption or repurchase shall
simultaneously become a liability of the corporation.
The endorsed certificates or redemption requests shall
be in the form established by the Board of Directors
pursuant to subsection (a) hereof.
(v) Shares of Common Stock for which purchase
orders have been accepted shall be considered as
issued and outstanding not later than the first
business day after the receipt of payment therefor,
and if payment is in the form of a check made payable
to Fiduciary Total Return Fund, Inc., the amount
receivable therefor shall simultaneously become an
asset of the corporation.
(vi) Notwithstanding the provisions of paragraphs
(i) and (iii) of this subsection (d), interest
declared or accrued and not yet received, and accrued
expenses, may be omitted from any calculation of net
asset value, in the discretion of the Board of
Directors, if the net amount of all interest and
expenses is less than one percent of the net asset
value per share.
(e) In the event that the New York Stock Exchange shall be
closed at any time because of then existing financial conditions
or for any other unusual or extraordinary reason, the right of a
holder of shares of Common Stock to have his shares redeemed by
the corporation shall be suspended for a period from and
including the day on which the action is taken for the closing
of said Exchange to and including the day on which said Exchange
is reopened. In accordance with the provisions of the
Investment Company Act of 1940 and the rules and regulations
promulgated thereunder the Securities and Exchange Commission,
the corporation may also suspend such right of redemption (a)
for any period during which trading on the New York Stock
Exchange is restricted; (b) for any period during when an
emergency exists as a result of which (i) disposal by the
corporation of securities owned by it is not reasonably
practicable or (ii) it is not reasonably practicable for the
corporation to fairly determine the value of its net assets; or
(c) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of
shareholders of the corporation.
(f) The corporation may purchase in the open market or
otherwise acquire from any owner or holder thereof any shares of
Common Stock, in which case the consideration paid therefor (in
cash or in securities in which the funds of the corporation
shall then be invested) shall not exceed the net asset value
thereof determined or estimated in accordance with any method
deemed proper by the Board of Directors and producing an amount
approximately equal to the net asset value of said shares
(determined in accordance with the provisions of this Section
9.13) at the time of the purchase or acquisition by the
corporation thereof. In respect of all powers, duties and
authorities conferred by the preceding subsections (d), (e) and
this subsection (f), the corporation may act by and through
agents from time to time designated and appointed by the Board
of Directors and the Board of Directors may delegate to any such
agent any and all powers, duties and authorities conferred upon
the corporation or upon the Board of Directors by said
subsections.
Exhibit 5.1
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made this 30th
day of June, 1995, between EASTCLIFF FUNDS, INC., a Wisconsin corporation
(the "Company"), and RESOURCE CAPITAL ADVISERS, INC., a Minnesota
corporation (the "Adviser").
W I T N E S S E T H :
WHEREAS, the Company is currently registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the
"Act") as an open-end management investment company consisting of one
series, the Eastcliff Total Return Fund (the "Fund");
WHEREAS, the Adviser currently provides investment advisory
services to the Fund pursuant to an Investment Advisory Agreement dated
December 31, 1994; and
WHEREAS, the Company and the Adviser desire to enter into a new
Investment Advisory Agreement providing for, among other things, the
ability of the Adviser to delegate all or a portion of its portfolio
management responsibilities to one or more portfolio managers. NOW,
THEREFORE, the Company and the Adviser do mutually promise and agree as
follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund and to
administer its business and administrative operations, subject to the
direction of the Board of Directors of the Company (the "Board of
Directors") and the officers of the Company, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such
employment for the compensation herein provided and agrees during such
period to render the services and to assume the obligations herein set
forth.
2. Authority of the Adviser. 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 Company or the Fund in any way or otherwise be
deemed an agent of the Company or the Fund. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Company, but without compensation or
reimbursement of expenses for such services from the Company. Nothing
herein contained shall be deemed to require the Company to take any action
contrary to its Articles of Incorporation, as amended, restated or
supplemented, or any applicable statute or regulation, or to relieve or
deprive the Board of Directors of its responsibility for and control of
the affairs of the Fund.
3. Obligations of and Services to be Provided by the Adviser.
The Adviser undertakes to provide the services hereinafter set forth and
to assume the following obligations:
A. Management and Administrative Services.
(1) The Adviser shall furnish to the
Company adequate office space, which may be space
within the offices of the Adviser or in such other
place as may be agreed upon from time to time, and all
office furnishings, facilities and equipment as may be
reasonably required for performing services relating
to advisory, research, asset allocation, portfolio
manager selection and evaluation activities and
otherwise managing and administering the business and
operations of the Fund.
(2) The Adviser shall employ or provide and
compensate the executive, administrative, secretarial
and clerical personnel necessary to supervise the
provision of the services set forth in sub-paragraph
3(A)(1) and shall bear the expense of providing such
services, except as provided in Section 4 of this
Agreement. The Adviser shall also compensate all
officers and employees of the Company who are officers
or employees of the Adviser or its affiliated
companies.
B. Investment Management Services.
(1) The Adviser shall, subject to and in
accordance with the investment objective and policies
of the Fund and any directions which the Board of
Directors may issue to the Adviser, have overall
responsibility for the general management and
investment of the assets and securities portfolios of
the Fund.
(2) The Adviser may delegate its investment
responsibilities under sub-paragraph 3(B)(1) with
respect to the Fund or segments thereof to one or more
persons or companies ("Portfolio Manager[s]") pursuant
to an agreement between the Adviser, the Company and
each such Portfolio Manager ("Sub-Advisory
Agreement"). Each Sub-Advisory Agreement may provide
that the Portfolio Manager, subject to the control and
supervision of the Board of Directors and the Adviser,
shall have full investment discretion for the Fund and
shall make all determinations with respect to the
investment of the Fund's assets assigned to the
Portfolio Manager and the purchase and sale of
portfolio securities with those assets, and such steps
as may be necessary to implement its decision. Any
delegation of duties pursuant to this paragraph shall
comply with any applicable provisions of Section 15 of
the Act, except to the extent permitted by any
exemptive order of the Securities and Exchange
Commission or similar relief. Adviser shall not be
responsible or liable for the investment merits of any
decision by a Portfolio Manager to purchase, hold or
sell a security for the Fund's portfolio.
(3) The Adviser shall develop overall
investment programs and strategies for the Fund, or
segments thereof, shall revise such programs as
necessary, and shall monitor and report periodically
to the Board of Directors concerning the
implementation of the programs.
(4) The Adviser shall research and evaluate
Portfolio Managers and shall advise the Board of
Directors of the Company of the Portfolio Managers
which the Adviser believes are best-suited to invest
the assets of the Fund; shall monitor and evaluate the
investment performance of each Portfolio Manager;
shall determine the portion of the Fund's assets to be
managed by each Portfolio Manager; shall recommend
changes or additions of Portfolio Managers when
appropriate; and shall coordinate the investment
activities of the Portfolio Managers.
(5) The Adviser shall be solely responsible
for paying the fees of each Portfolio Manager.
(6) The Adviser shall render to the Board
of Directors such periodic reports concerning the
business and investments of the Fund as the Board of
Directors shall reasonably request.
C. Provision of Information Necessary for
Preparation of Securities Registration Statements, Amendments
and Other Materials.
The Adviser will make available and provide financial,
accounting and statistical information required by the Fund for
the preparation of registration statements, reports and other
documents required by federal and state securities laws, and
with such information as the Fund may reasonably request for use
in the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution of
the Fund's shares.
D. Provision of Personnel.
The Adviser shall make available its officers and
employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administration
and management of the Company and its investment activities.
4. Expenses. The Adviser shall not be required to pay any
expenses of the Fund except as provided herein; provided, however, that if
the aggregate annual operating expenses, including the Adviser's fee and
the fees paid to the Fund's Administrator but excluding all federal, state
and local taxes, interest, brokerage commissions and other costs incurred
in connection with the purchase or sale of portfolio securities and
extraordinary items, in any year exceed that percentage of the average net
assets of the Fund for such year, as determined by valuations made as of
the close of each business day of the year, which is the most restrictive
percentage provided by the state laws of the various states in which the
Fund's shares are qualified for sale or, if the states in which the Fund's
shares are qualified for sale impose no such restrictions, 2%, then the
Adviser's fee shall be reduced as hereinafter provided. Notwithstanding
the foregoing, if the laws of any such state require that fees paid
pursuant to the Company's Distribution Plan be included in the calculation
of the expense limitation percentage, the Fund shall (a) not qualify its
shares for sale in such state, (b) withdraw or rescind its qualification
for sale in such state, or (c) take such other actions which result in
payments made pursuant to the Distribution Plan not being included in the
calculation of the expense limitation percentage. The expenses of the
Fund's operations borne by the Fund include by way of illustration and not
limitation, directors fees paid to those directors who are not officers of
the Company, the costs of preparing and printing registration statements
required under the Securities Act of 1933 and the Act (and amendments
thereto), the expense of registering its shares with the Securities and
Exchange Commission and in the various states, the printing and
distribution cost of prospectuses mailed to existing shareholders, the
cost of stock certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser in the amount of such excess. In such
a situation the monthly payment of the Adviser's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses thereafter fall
below the expense limitation.
5. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of
the Fund, shall pay to the Adviser an advisory fee, paid monthly, based on
the average net asset value of the Fund, as determined by valuations made
as of the close of each business day of the month. The advisory fee shall
be 1/12 of 1.0% of the average daily net asset value of the Fund up to
$30,000,000 and 1/12 of 0.75% of the average daily net asset value of the
Fund over $30,000,000. For any month in which this Agreement is not in
effect for the entire month, such fee shall be reduced proportionately on
the basis of the number of calendar days during which it is in effect and
the fee computed upon the average net asset value of the business days
during which it is so in effect.
6. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase or in connection with the initial
capitalization of the Fund.
7. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has agreed to permit the
Company to use the name "Eastcliff", if it so desires, it is understood
and agreed that the Adviser reserves the right to use and to permit other
persons, firms or corporations, including investment companies, to use
such name. During the period that this Agreement is in effect, and except
as herein provided, the Adviser shall be the Fund's sole investment
adviser.
8. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors, and any Portfolio Managers,
subject to the control and direction of the Board of Directors and the
Adviser, shall have authority and discretion to select brokers and dealers
to execute portfolio transactions for the Fund and for the selection of
the markets on or in which the transactions will be executed. The Adviser
or the Portfolio Managers may cause the Fund to pay a broker-dealer which
provides brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"),
to the Adviser or the Portfolio Managers a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser or the
Portfolio Manager determines in good faith that such amount of commission
is reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Adviser shall provide such
reports as the Board of Directors may reasonably request with respect to
each Fund's total brokerage and the manner in which that brokerage was
allocated.
10. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall
permit the Company to examine the reports required to be made by the
Adviser pursuant to Rule 17j-1(c)(1).
11. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the Board of Directors in the manner
required by the Act, and by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Directors or by a vote
of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for an
initial period beginning as of July 1, 1995 and ending June 30, 1997 and
indefinitely thereafter, but only so long as the continuance after such
initial period is specifically approved annually (i) by the Board of
Directors or by the vote of a majority of the outstanding voting
securities of the Company, as defined in the Act, and (ii) the Board of
Directors in the manner required by the Act, provided that any such
approval may be made effective not more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
RESOURCE CAPITAL ADVISERS, INC.
(the "Adviser")
Attest:________________________ By:_________________________________
John A. Clymer, Chief E. Thomas Welch, Chief
Investment Officer Administrative Officer
EASTCLIFF FUNDS, INC.
(the "Company")
Attest:_________________________ By:________________________________
Donald S. Wilson, Secretary Conley Brooks, Jr., President
EXHIBIT 5.2
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made this ____
day of _________, 1995, between EASTCLIFF FUNDS, INC., a Wisconsin
corporation (the "Company"), and RESOURCE CAPITAL ADVISERS, INC., a
Minnesota corporation (the "Adviser").
W I T N E S S E T H :
WHEREAS, the Company is currently registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the
"Act") as an open-end management investment company consisting of one
series, the Eastcliff Total Return Fund;
WHEREAS, the Adviser provides investment advisory services to
the Eastcliff Total Return Fund pursuant to an Investment Advisory
Agreement dated December 31, 1994;
WHEREAS, the Company is in the process of creating a second
series, the Eastcliff Growth Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940
and which is engaged principally in the business of rendering investment
supervisory services within the meaning of Section 202(a)(13) of the
Investment Advisors Act of 1940, as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund and to
administer its business and administrative operations, subject to the
direction of the Board of Directors of the Company (the "Board of
Directors") and the officers of the Company, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such
employment for the compensation herein provided and agrees during such
period to render the services and to assume the obligations herein set
forth.
2. Authority of the Adviser. 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 Company or the Fund in any way or otherwise be
deemed an agent of the Company or the Fund. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Company, but without compensation or
reimbursement of expenses for such services from the Company. Nothing
herein contained shall be deemed to require the Company to take any action
contrary to its Articles of Incorporation, as amended, restated or
supplemented, or any applicable statute or regulation, or to relieve or
deprive the Board of Directors of its responsibility for and control of
the affairs of the Fund.
3. Obligations of and Services to be Provided by the Adviser.
The Adviser undertakes to provide the services hereinafter set forth and
to assume the following obligations:
A. Management and Administrative Services.
(1) The Adviser shall furnish to the
Company adequate office space, which may be space
within the offices of the Adviser or in such other
place as may be agreed upon from time to time, and all
office furnishings, facilities and equipment as may be
reasonably required for performing services relating
to advisory, research, asset allocation, portfolio
manager selection and evaluation activities and
otherwise managing and administering the business and
operations of the Fund.
(2) The Adviser shall employ or provide and
compensate the executive, administrative, secretarial
and clerical personnel necessary to supervise the
provision of the services set forth in sub-paragraph
3(A)(1) and shall bear the expense of providing such
services, except as provided in Section 4 of this
Agreement. The Adviser shall also compensate all
officers and employees of the Company who are officers
or employees of the Adviser or its affiliated
companies.
B. Investment Management Services.
(1) The Adviser shall, subject to and in
accordance with the investment objective and policies
of the Fund and any directions which the Board of
Directors may issue to the Adviser, have overall
responsibility for the general management and
investment of the assets and securities portfolios of
the Fund.
(2) The Adviser may delegate its investment
responsibilities under sub-paragraph 3(B)(1) with
respect to the Fund or segments thereof to one or more
persons or companies ("Portfolio Manager[s]") pursuant
to an agreement between the Adviser, the Company and
each such Portfolio Manager ("Sub-Advisory
Agreement"). Each Sub-Advisory Agreement may provide
that the Portfolio Manager, subject to the control and
supervision of the Board of Directors and the Adviser,
shall have full investment discretion for the Fund and
shall make all determinations with respect to the
investment of the Fund's assets assigned to the
Portfolio Manager and the purchase and sale of
portfolio securities with those assets, and such steps
as may be necessary to implement its decision. Any
delegation of duties pursuant to this paragraph shall
comply with any applicable provisions of Section 15 of
the Act, except to the extent permitted by any
exemptive order of the Securities and Exchange
Commission or similar relief. Adviser shall not be
responsible or liable for the investment merits of any
decision by a Portfolio Manager to purchase, hold or
sell a security for the Fund's portfolio.
(3) The Adviser shall develop overall
investment programs and strategies for the Fund, or
segments thereof, shall revise such programs as
necessary, and shall monitor and report periodically
to the Board of Directors concerning the
implementation of the programs.
(4) The Adviser shall research and evaluate
Portfolio Managers and shall advise the Board of
Directors of the Company of the Portfolio Managers
which the Adviser believes are best-suited to invest
the assets of the Fund; shall monitor and evaluate the
investment performance of each Portfolio Manager;
shall determine the portion of the Fund's assets to be
managed by each Portfolio Manager; shall recommend
changes or additions of Portfolio Managers when
appropriate; and shall coordinate the investment
activities of the Portfolio Managers.
(5) The Adviser shall be solely responsible
for paying the fees of each Portfolio Manager.
(6) The Adviser shall render to the Board
of Directors such periodic reports concerning the
business and investments of the Fund as the Board of
Directors shall reasonably request.
C. Provision of Information Necessary for
Preparation of Securities Registration Statements, Amendments
and Other Materials.
The Adviser will make available and provide financial,
accounting and statistical information required by the Fund for
the preparation of registration statements, reports and other
documents required by federal and state securities laws, and
with such information as the Fund may reasonably request for use
in the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution of
the Fund's shares.
D. Provision of Personnel.
The Adviser shall make available its officers and
employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administration
and management of the Company and its investment activities.
4. Expenses. The Adviser shall not be required to pay any
expenses of the Fund except as provided herein; provided, however, that if
the aggregate annual operating expenses, including the Adviser's fee and
the fees paid to the Fund's Administrator but excluding all federal, state
and local taxes, interest, brokerage commissions and other costs incurred
in connection with the purchase or sale of portfolio securities and
extraordinary items, in any year exceed that percentage of the average net
assets of the Fund for such year, as determined by valuations made as of
the close of each business day of the year, which is the most restrictive
percentage provided by the state laws of the various states in which the
Fund's shares are qualified for sale or, if the states in which the Fund's
shares are qualified for sale impose no such restrictions, 2%, then the
Adviser's fee shall be reduced as hereinafter provided. Notwithstanding
the foregoing, if the laws of any such state require that fees paid
pursuant to the Company's Distribution Plan be included in the calculation
of the expense limitation percentage, the Fund shall (a) not qualify its
shares for sale in such state, (b) withdraw or rescind its qualification
for sale in such state, or (c) take such other actions which result in
payments made pursuant to the Distribution Plan not being included in the
calculation of the expense limitation percentage. The expenses of the
Fund's operations borne by the Fund include by way of illustration and not
limitation, directors fees paid to those directors who are not officers of
the Company, the costs of preparing and printing registration statements
required under the Securities Act of 1933 and the Act (and amendments
thereto), the expense of registering its shares with the Securities and
Exchange Commission and in the various states, the printing and
distribution cost of prospectuses mailed to existing shareholders, the
cost of stock certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser in the amount of such excess. In such
a situation the monthly payment of the Adviser's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses thereafter fall
below the expense limitation.
5. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of
of the Fund, shall pay to the Adviser an advisory fee, paid monthly, based
on the average net asset value of the Fund, as determined by valuations
made as of the close of each business day of the month. The advisory fee
shall be 1/12 of 1.0% of the average daily net asset value of the Fund.
For any month in which this Agreement is not in effect for the entire
month, such fee shall be reduced proportionately on the basis of the
number of calendar days during which it is in effect and the fee computed
upon the average net asset value of the business days during which it is
so in effect.
6. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase or in connection with the initial
capitalization of the Fund.
7. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has agreed to permit the
Company to use the name "Eastcliff", if it so desires, it is understood
and agreed that the Adviser reserves the right to use and to permit other
persons, firms or corporations, including investment companies, to use
such name. During the period that this Agreement is in effect, and except
as herein provided, the Adviser shall be the Fund's sole investment
adviser.
8. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors, and any Portfolio Managers,
subject to the control and direction of the Board of Directors and the
Adviser, shall have authority and discretion to select brokers and dealers
to execute portfolio transactions for the Fund and for the selection of
the markets on or in which the transactions will be executed. The Adviser
or the Portfolio Managers may cause the Fund to pay a broker-dealer which
provides brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"),
to the Adviser or the Portfolio Managers a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser or the
Portfolio Manager determines in good faith that such amount of commission
is reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Adviser shall provide such
reports as the Board of Directors may reasonably request with respect to
each Fund's total brokerage and the manner in which that brokerage was
allocated.
10. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall
permit the Company to examine the reports required to be made by the
Adviser pursuant to Rule 17j-1(c)(1).
11. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the Board of Directors in the manner
required by the Act, and by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Directors or by a vote
of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for an
initial period beginning as of the date hereof and ending ____________,
19__ and indefinitely thereafter, but only so long as the continuance
after such initial period is specifically approved annually by (i) the
Board of Directors or by the vote of the majority of the outstanding
voting securities of the Company, as defined in the Act, and (ii) the
Board of Directors in the manner required by the Act, provided that any
such approval may be made effective not more than sixty (60) days
thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
RESOURCE CAPITAL ADVISERS, INC.
(the "Adviser")
Attest:________________________ By:______________________________
John A. Clymer, Chief E. Thomas Welch, Chief
Investment Officer Administrative Officer
EASTCLIFF FUNDS, INC.
(the "Company")
Attest:_________________________ By:______________________________
Donald S. Wilson, Secretary Conley Brooks, Jr., President
Exhibit 5.3
SUB-ADVISORY AGREEMENT
EASTCLIFF GROWTH FUND
THIS SUB-ADVISORY AGREEMENT, made this ____ day of _________,
1995, by and among EASTCLIFF FUNDS, INC., a Wisconsin corporation (the
"Company"), RESOURCE CAPITAL ADVISERS, INC., a Minnesota corporation (the
"Adviser"), and WINSLOW CAPITAL MANAGEMENT, INC., a Minnesota corporation
(the "Portfolio Manager").
W I T N E S S E T H :
The Company is a diversified open-end management investment
company registered as an investment company under the Investment Company
Act of 1940 (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Company's authorized shares of Common Stock
are presently divided into two series designated as Series A and Series B,
respectively, each of which constitutes a separate investment portfolio or
fund with different investment objectives and policies. Each share of a
fund represents an undivided interest in the assets, subject to the
liabilities, allocated to that portfolio. The Series B Common Stock
comprises the Eastcliff Growth Fund (the "Fund").
The Adviser acts as the "investment adviser" to the Fund (as
defined in Section 2(a)(20) of the Act) pursuant to the terms of an
Investment Advisory Agreement. The Adviser is responsible for the day-to-
day management and overall administration of the Fund and the coordination
of investment of the Fund's assets in portfolio securities. However,
specific portfolio purchases and sales for the Fund's investment
portfolio, or a portion thereof, are to be made by advisory organizations
recommended and selected by the Adviser, subject to the approval of the
Board of Directors of the Company.
WHEREAS, the Adviser and the Company desire to retain the
Portfolio Manager as the investment adviser and portfolio manager for the
Fund.
NOW, THEREFORE, the Company, the Adviser and the Portfolio
Manager do mutually promise and agree as follows:
1. Employment. The Adviser being duly authorized hereby
appoints and employs the Portfolio Manager as a discretionary portfolio
manager to the Fund for those assets of the Fund which the Adviser
determines to assign to the Portfolio Manager (those assets being referred
to as the "Fund Account"), for the period and on the terms set forth in
this Agreement. The Portfolio Manager hereby accepts the appointment as a
discretionary portfolio manager and agrees to use its best professional
judgment to make timely investment decisions for the Fund with respect to
the investments of the Fund Account in accordance with the provisions of
this Agreement.
2. Authority of the Portfolio Manager. The Portfolio Manager
shall for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Company or the Fund in any way or
otherwise be deemed an agent of the Company or the Fund.
3. Portfolio Management Services of Portfolio Manager.
Portfolio Manager is hereby employed and authorized to select portfolio
securities for investment by the Fund, to purchase and sell securities of
the Fund Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
paragraphs 5 and 6 hereof and such operational procedures as may be agreed
to from time to time by the Portfolio Manager and the Company or the
Adviser (the "Operational Procedures"). In providing portfolio management
services to the Fund Account, Portfolio Manager shall be subject to such
investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
the supervision and control of the Board of Directors of the Company, such
specific instructions as the Board of Directors may adopt and communicate
to Portfolio Manager, the investment objectives, policies and restrictions
of the Fund furnished pursuant to paragraph 4, the provisions of Schedule
A hereto and instructions from the Adviser. Portfolio Manger is not
authorized by the Company to take any action, including the purchase or
sale of securities for the Fund Account, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. Portfolio Manager shall maintain on behalf of the Fund
the records listed in Schedule A hereto (as amended from time to time).
At the Company's or the Adviser's reasonable request, Portfolio Manager
will consult with Company or with the Adviser with respect to any decision
made by it with respect to the investments of the Fund Account.
4. Investment Objectives, Policies and Restrictions. The
Company will provide Portfolio Manager with a statement of the investment
objectives, policies and restrictions applicable to the Fund and any
specific investment restrictions applicable to the Fund as established by
the Company, including those set forth in its registration statement under
the Act and the Securities Act of 1933. Company retains the right, on
written notice to Portfolio Manager from Company or Adviser, to modify any
such objectives, policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be
consummated by payment to or delivery by Firstar Trust Company (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or
securities due to or from the Fund Account, and Portfolio Manager shall
not have possession or custody thereof or any responsibility or liability
with respect thereto. Portfolio Manager shall advise Custodian and
confirm in writing to Company and to the Fund's administrator, Fiduciary
Management, Inc., or any other designated agent of Company, all
transactions for the Fund Account executed by it with brokers and dealers
at the time and in the manner as set forth in the Operational Procedures.
Portfolio Manager shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated
by Portfolio Manager. Company shall be responsible for all custodial
arrangements and the payment of all custodial charges and fees, and, upon
giving proper instructions to the Custodian, Portfolio Manager shall have
no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian, except that it
shall be the responsibility of the Adviser to take appropriate action if
the Custodian fails to confirm in writing proper execution of the
instructions.
6. Proxies. The Company or the Adviser will vote all proxies
solicited by or with respect to the issuers of securities in which assets
of the Fund Account may be invested from time to time. At the request of
Company, Portfolio Manager shall provide Company with its recommendations
as to the voting of such proxies.
7. Compensation of the Portfolio Manager. The compensation of
Portfolio Manager for its services under this Agreement shall be
calculated and paid by Adviser in accordance with the attached Schedule B.
Pursuant to the provisions of the Management and Advisory Agreement
between Company and Adviser, Adviser is solely responsible for the payment
of fees to Portfolio Manager, and Portfolio Manager agrees to seek payment
of its fees solely from Adviser.
8. Other Investment Activities of Portfolio Manager. Company
acknowledges that Portfolio Manager or one or more of its affiliates may
have investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for
its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 2 hereof, Company agrees that Portfolio Manager or
its affiliates may give advice or exercise investment responsibility and
take such other action with respect to other Affiliated Accounts which may
differ from the advice given or the timing or nature of action taken with
respect to the Fund Account, provided that Portfolio Manager acts in good
faith, and provided further, that it is Portfolio Manager's policy to
allocate, within its reasonable discretion, investment opportunities to
the Fund Account over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the Fund and any specific investment
restrictions applicable thereto. Company acknowledges that one or more of
the Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the
Fund Account may have an interest from time to time, whether in
transactions which involve the Fund Account or otherwise. Portfolio
Manager shall have no obligation to acquire for the Fund Account a
position in any investment which any Affiliated Account may acquire, and
Company shall have no first refusal, co-investment or other rights in
respect of any such investment, either for the Fund Account or otherwise.
9. Certificate of Authority. Company, Adviser and Portfolio
Manager shall furnish to each other from time to time certified copies of
the resolutions of their Boards of Directors or executive committees, as
the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of Company, the Fund Account, the
Portfolio Manager and/or Adviser.
10. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Portfolio Manager, Portfolio Manager shall not be
liable for any act or omission in the course of, or connected with,
rendering services hereunder, or for any losses that may be sustained in
the purchase, holding or sale of any security.
11. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors of the Company, and the Portfolio
Manager, subject to the control and direction of the Board of Directors of
the Company and the Adviser, shall have authority and discretion to select
brokers and dealers to execute portfolio transactions initiated by the
Portfolio Manager for the Fund and for the selection of the markets on or
in which the transactions will be executed. The Adviser or the Portfolio
Manager may cause the Fund to pay a broker-dealer which provides brokerage
and research services, as such services are defined in Section 28(e) of
the Securities Exchange Act of 1934 (the "Exchange Act"), to the Adviser
or the Portfolio Manager a commission for effecting a securities
transaction in excess of the amount another broker-dealer would have
charged for effecting such transaction, if the Adviser or the Portfolio
Manager determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Portfolio Manager shall
provide such reports as the Board of Directors of the Company or the
Adviser may reasonably request with respect to the Fund's total brokerage
and the manner in which that brokerage was allocated.
12. Confidentiality. Subject to the duty of Portfolio Manager
and Company to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all information pertaining to the Fund Account
and the actions of Portfolio Manager and Company in respect thereto.
13. Representations, Warranties and Agreements of Company.
Company represents, warrants and agrees that:
A. Portfolio Manager has been duly appointed by the
Board of Directors of Company to provide investment services to
the Fund Account as contemplated hereby.
B. Company will deliver to Portfolio Manager a true
and complete copy of its then current prospectus and statement
of additional information as effective from time to time and
such other documents or instruments governing the investment of
the Fund Account and such other information as is necessary for
Portfolio Manager to carry out its obligations under this
Agreement.
14. Representations, Warranties and Agreements of Portfolio
Manager. Portfolio Manager represents, warrants and agrees that:
A. Portfolio Manager is registered as an "investment
adviser" under the Investment Advisers Act of 1940 ("Advisers
Act"); or is a "bank" as defined in Section 202(a)(2) of the
Advisers Act or an "insurance company" as defined in Section
202(a)(2) of the Advisers Act.
B. Portfolio Manager will maintain, keep current and
preserve on behalf of Company, in the manner required or
permitted by the Act, the records identified in Schedule A.
Portfolio Manager agrees that such records (unless otherwise
indicated on Schedule A) are the property of Company, and will
be surrendered to the Company promptly upon request.
C. Portfolio Manager will complete such reports
concerning purchases or sales of securities on behalf of the
Fund Account as the Adviser or Company may from time to time
require to ensure compliance with the Act, the Internal Revenue
Code and applicable state securities laws.
D. Portfolio Manager will adopt a written code of
ethics complying with the requirements of Rule 17j-1 under the
act and will provide Company with a copy of the code of ethics
and evidence of its adoption. Upon the written request of
Company, Portfolio Manager shall permit Company, its employees
or its agents to examine the reports required to be made to
Portfolio Manager by Rule 17j-1(c)(1).
E. Portfolio Manager will promptly after filing with
the Securities and Exchange Commission an amendment to its Form
ADV furnish a copy of such amendment to each Company and the
Adviser.
F. Portfolio Manager will immediately notify Company
and the Adviser of the occurrence of any event which would
disqualify Portfolio Manager from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the
Act or otherwise.
15. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the Board of Directors in the manner
required by the Act.
16. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by any party hereto immediately upon
written notice to the others in the event of a breach of any provision
hereof by the party so notified, or otherwise, upon giving thirty (30)
days' written notice to the others, but any such termination shall not
affect the status, obligations or liabilities of any party hereto to the
others. This Agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the Act). Subject to prior
termination as hereinbefore provided, this Agreement shall continue in
effect for an initial period beginning as of the date hereof and ending
______________________, 1997 and indefinitely thereafter, but only so long
as the continuance after such initial period is specifically approved
annually by the Board of Directors of the Company in the manner required
by the Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
EASTCLIFF FUNDS, INC.
(the "Company")
Attest:_______________________ By: _________________________________
Donald S. Wilson Conley Brooks, Jr.
Secretary President
RESOURCE CAPITAL ADVISERS,
INC.
(the "Adviser")
Attest: ________________________ By: _________________________________
John A. Clymer E. Thomas Welch
Chief Investment Officer Chief Administrative Officer
WINSLOW CAPITAL MANAGEMENT, INC.
(the "Portfolio Manager")
Attest: ________________________ By: _________________________________
________________________ Clark Joseph Winslow
President
<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (1940 Act Rule 31a-1(b)(5) and (6)). A record of each brokerage
order, and all other portfolio purchases and sales, given by the
Portfolio Manager on behalf of the Fund for, or in connection with,
the purchase or sale of securities, whether executed or unexecuted.
Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications
or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the
Fund.
2. (1940 Act Rule 31a-1(b)(9)). A record for each fiscal quarter,
completed within ten (10) days after the end of the quarter, showing
specifically the basis or bases upon which the allocation of orders
for the purchase and sale of portfolio securities to named brokers or
dealers was effected, and the division of brokerage commissions or
other compensation on such purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers
to:
(a) The Fund,
(b) The Adviser,
(c) The Portfolio Manager, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the determination
of such allocation and such division of brokerage commissions or
other compensation.
3. (1940 Act Rule 31a-1(b)(10)). A record in the form of an appropriate
memorandum identifying the person or persons, committees or groups
authorizing the purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a record shall be kept
of the names of its members who participate in the authorization.
There shall be retained as part of this record: any memorandum,
recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is
appropriate to support the authorization.1/
____________
1/ Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation; i.e., buy, sell, hold) or any
internal reports or portfolio adviser reviews).
4. (1940 Act Rule 31a-1(f)). Such accounts, books and other documents
as are required to be maintained by registered investment advisers by
rule adopted under Section 204 of the Investment Advisers Act of
1940, to the extent such records are necessary or appropriate to
record the Portfolio Manager's transactions with respect to the Fund
Account.
<PAGE>
SCHEDULE B
FEE SCHEDULE
For its services to the Fund, the Adviser shall pay the
Portfolio Manager a fee, paid monthly, based on the average net asset
value of the Fund, as determined by valuations made as of the close of
each business day of the month. The fee shall be 1/12 of 0.6% of the
average daily net asset value of the Fund.
The fee shall be pro-rated for any month during which the
Agreement is in effect for only a portion of the month.
Exhibit 5.4
SUB-ADVISORY AGREEMENT
EASTCLIFF TOTAL RETURN FUND
THIS SUB-ADVISORY AGREEMENT, made this ____ day of _________,
1995, by and among EASTCLIFF FUNDS, INC., a Wisconsin corporation (the
"Company"), RESOURCE CAPITAL ADVISERS, INC., a Minnesota corporation (the
"Adviser"), and PALM BEACH INVESTMENT ADVISERS, INC., a Florida
corporation (the "Portfolio Manager").
W I T N E S S E T H :
The Company is a diversified open-end management investment
company registered as an investment company under the Investment Company
Act of 1940 (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Company's authorized shares of Common Stock
are divided into two series designated as Series A and Series B,
respectively, each of which constitutes a separate investment portfolio or
fund with different investment objectives and policies. Each share of a
fund represents an undivided interest in the assets, subject to the
liabilities, allocated to that portfolio. The Series A Common Stock
comprises the Eastcliff Total Return Fund (the "Fund").
The Adviser acts as the "investment adviser" to the Fund (as
defined in Section 2(a)(20) of the Act) pursuant to the terms of an
Investment Advisory Agreement. The Adviser is responsible for the day-to-
day management and overall administration of the Fund and the coordination
of investment of the Fund's assets in portfolio securities. However,
specific portfolio purchases and sales for the Fund's investment
portfolio, or a portion thereof, are to be made by advisory organizations
recommended and selected by the Adviser, subject to the approval of the
Board of Directors of the Company.
WHEREAS, the Adviser and the Company desire to retain the
Portfolio Manager as the investment adviser and portfolio manager for the
Fund.
NOW, THEREFORE, the Company, the Adviser and the Portfolio
Manager do mutually promise and agree as follows:
1. Employment. The Adviser being duly authorized hereby
appoints and employs the Portfolio Manager as a discretionary portfolio
manager to the Fund for those assets of the Fund which the Adviser
determines to assign to the Portfolio Manager (those assets being referred
to as the "Fund Account"), for the period and on the terms set forth in
this Agreement. The Portfolio Manager hereby accepts the appointment as a
discretionary portfolio manager and agrees to use its best professional
judgment to make timely investment decisions for the Fund with respect to
the investments of the Fund Account in accordance with the provisions of
this Agreement.
2. Authority of the Portfolio Manager. The Portfolio Manager
shall for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Company or the Fund in any way or
otherwise be deemed an agent of the Company or the Fund.
3. Portfolio Management Services of Portfolio Manager.
Portfolio Manager is hereby employed and authorized to select portfolio
securities for investment by the Fund, to purchase and sell securities of
the Fund Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
paragraphs 5 and 6 hereof and such operational procedures as may be agreed
to from time to time by the Portfolio Manager and the Company or the
Adviser (the "Operational Procedures"). In providing portfolio management
services to the Fund Account, Portfolio Manager shall be subject to such
investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
the supervision and control of the Board of Directors of the Company, such
specific instructions as the Board of Directors may adopt and communicate
to Portfolio Manager, the investment objectives, policies and restrictions
of the Fund furnished pursuant to paragraph 4, the provisions of Schedule
A hereto and instructions from the Adviser. Portfolio Manger is not
authorized by the Company to take any action, including the purchase or
sale of securities for the Fund Account, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. Portfolio Manager shall maintain on behalf of the Fund
the records listed in Schedule A hereto (as amended from time to time).
At the Company's or the Adviser's reasonable request, Portfolio Manager
will consult with Company or with the Adviser with respect to any decision
made by it with respect to the investments of the Fund Account.
4. Investment Objectives, Policies and Restrictions. The
Company will provide Portfolio Manager with a statement of the investment
objectives, policies and restrictions applicable to the Fund and any
specific investment restrictions applicable to the Fund as established by
the Company, including those set forth in its registration statement under
the Act and the Securities Act of 1933. Company retains the right, on
written notice to Portfolio Manager from Company or Adviser, to modify any
such objectives, policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be
consummated by payment to or delivery by Firstar Trust Company (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or
securities due to or from the Fund Account, and Portfolio Manager shall
not have possession or custody thereof or any responsibility or liability
with respect thereto. Portfolio Manager shall advise Custodian and
confirm in writing to Company and to the Fund's administrator, Fiduciary
Management, Inc., or any other designated agent of Company, all
transactions for the Fund Account executed by it with brokers and dealers
at the time and in the manner as set forth in the Operational Procedures.
Portfolio Manager shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated
by Portfolio Manager. Company shall be responsible for all custodial
arrangements and the payment of all custodial charges and fees, and, upon
giving proper instructions to the Custodian, Portfolio Manager shall have
no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian, except that it
shall be the responsibility of the Adviser to take appropriate action if
the Custodian fails to confirm in writing proper execution of the
instructions.
6. Proxies. The Company or the Adviser will vote all proxies
solicited by or with respect to the issuers of securities in which assets
of the Fund Account may be invested from time to time. At the request of
Company, Portfolio Manager shall provide Company with its recommendations
as to the voting of such proxies.
7. Compensation of the Portfolio Manager. The compensation of
Portfolio Manager for its services under this Agreement shall be
calculated and paid by Adviser in accordance with the attached Schedule B.
Pursuant to the provisions of the Investment Advisory Agreement between
Company and Adviser, Adviser is solely responsible for the payment of fees
to Portfolio Manager, and Portfolio Manager agrees to seek payment of its
fees solely from Adviser.
8. Other Investment Activities of Portfolio Manager. Company
acknowledges that Portfolio Manager or one or more of its affiliates may
have investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for
its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 2 hereof, Company agrees that Portfolio Manager or
its affiliates may give advice or exercise investment responsibility and
take such other action with respect to other Affiliated Accounts which may
differ from the advice given or the timing or nature of action taken with
respect to the Fund Account, provided that Portfolio Manager acts in good
faith, and provided further, that it is Portfolio Manager's policy to
allocate, within its reasonable discretion, investment opportunities to
the Fund Account over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the Fund and any specific investment
restrictions applicable thereto. Company acknowledges that one or more of
the Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the
Fund Account may have an interest from time to time, whether in
transactions which involve the Fund Account or otherwise. Portfolio
Manager shall have no obligation to acquire for the Fund Account a
position in any investment which any Affiliated Account may acquire, and
Company shall have no first refusal, co-investment or other rights in
respect of any such investment, either for the Fund Account or otherwise.
9. Certificate of Authority. Company, Adviser and Portfolio
Manager shall furnish to each other from time to time certified copies of
the resolutions of their Boards of Directors or executive committees, as
the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of Company, the Fund Account, the
Portfolio Manager and/or Adviser.
10. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Portfolio Manager, Portfolio Manager shall not be
liable for any act or omission in the course of, or connected with,
rendering services hereunder, or for any losses that may be sustained in
the purchase, holding or sale of any security.
11. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors of the Company, and the Portfolio
Manager, subject to the control and direction of the Board of Directors of
the Company and the Adviser, shall have authority and discretion to select
brokers and dealers to execute portfolio transactions initiated by the
Portfolio Manager for the Fund and for the selection of the markets on or
in which the transactions will be executed. The Adviser or the Portfolio
Manager may cause the Fund to pay a broker-dealer which provides brokerage
and research services, as such services are defined in Section 28(e) of
the Securities Exchange Act of 1934 (the "Exchange Act"), to the Adviser
or the Portfolio Manager a commission for effecting a securities
transaction in excess of the amount another broker-dealer would have
charged for effecting such transaction, if the Adviser or the Portfolio
Manager determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Portfolio Manager shall
provide such reports as the Board of Directors of the Company or the
Adviser may reasonably request with respect to the Fund's total brokerage
and the manner in which that brokerage was allocated.
12. Confidentiality. Subject to the duty of Portfolio Manager
and Company to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all information pertaining to the Fund Account
and the actions of Portfolio Manager and Company in respect thereto.
13. Representations, Warranties and Agreements of Company.
Company represents, warrants and agrees that:
A. Portfolio Manager has been duly appointed by the
Board of Directors of Company to provide investment services to
the Fund Account as contemplated hereby.
B. Company will deliver to Portfolio Manager a true
and complete copy of its then current prospectus and statement
of additional information as effective from time to time and
such other documents or instruments governing the investment of
the Fund Account and such other information as is necessary for
Portfolio Manager to carry out its obligations under this
Agreement.
14. Representations, Warranties and Agreements of Portfolio
Manager. Portfolio Manager represents, warrants and agrees that:
A. Portfolio Manager is registered as an "investment
adviser" under the Investment Advisers Act of 1940 ("Advisers
Act"); or is a "bank" as defined in Section 202(a)(2) of the
Advisers Act or an "insurance company" as defined in Section
202(a)(2) of the Advisers Act.
B. Portfolio Manager will maintain, keep current and
preserve on behalf of Company, in the manner required or
permitted by the Act, the records identified in Schedule A.
Portfolio Manager agrees that such records (unless otherwise
indicated on Schedule A) are the property of Company, and will
be surrendered to the Company promptly upon request.
C. Portfolio Manager will complete such reports
concerning purchases or sales of securities on behalf of the
Fund Account as the Adviser or Company may from time to time
require to ensure compliance with the Act, the Internal Revenue
Code and applicable state securities laws.
D. Portfolio Manager will adopt a written code of
ethics complying with the requirements of Rule 17j-1 under the
act and will provide Company with a copy of the code of ethics
and evidence of its adoption. Upon the written request of
Company, Portfolio Manager shall permit Company, its employees
or its agents to examine the reports required to be made to
Portfolio Manager by Rule 17j-1(c)(1).
E. Portfolio Manager will promptly after filing with
the Securities and Exchange Commission an amendment to its Form
ADV furnish a copy of such amendment to each Company and the
Adviser.
F. Portfolio Manager will immediately notify Company
and the Adviser of the occurrence of any event which would
disqualify Portfolio Manager from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the
Act or otherwise.
15. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the Board of Directors in the manner
required by the Act.
16. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by any party hereto immediately upon
written notice to the others in the event of a breach of any provision
hereof by the party so notified, or otherwise, upon giving thirty (30)
days' written notice to the others, but any such termination shall not
affect the status, obligations or liabilities of any party hereto to the
others. This Agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the Act). Subject to prior
termination as hereinbefore provided, this Agreement shall continue in
effect for an initial period beginning as of July 1, 1995 and ending June
30, 1997 and indefinitely thereafter, but only so long as the continuance
after such initial period is specifically approved annually by the Board
of Directors of the Company in the manner required by the Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
EASTCLIFF FUNDS, INC.
(the "Company")
Attest: ________________________ By: _________________________________
Donald S. Wilson Conley Brooks, Jr.
Secretary President
RESOURCE CAPITAL ADVISERS,
INC.
(the "Adviser")
Attest: ________________________ By: _________________________________
John A. Clymer E. Thomas Welch
Chief Investment Officer Chief Administrative Officer
PALM BEACH INVESTMENT
ADVISERS, INC.
(the "Portfolio Manager")
Attest: ________________________ By: _________________________________
Patrice J. Neverett Thomas M. Keresey
Vice President Chairman
<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (1940 Act Rule 31a-1(b)(5) and (6)). A record of each brokerage
order, and all other portfolio purchases and sales, given by the
Portfolio Manager on behalf of the Fund for, or in connection with,
the purchase or sale of securities, whether executed or unexecuted.
Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications
or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the
Fund.
2. (1940 Act Rule 31a-1(b)(9)). A record for each fiscal quarter,
completed within ten (10) days after the end of the quarter, showing
specifically the basis or bases upon which the allocation of orders
for the purchase and sale of portfolio securities to named brokers or
dealers was effected, and the division of brokerage commissions or
other compensation on such purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers
to:
(a) The Fund,
(b) The Adviser,
(c) The Portfolio Manager, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the determination
of such allocation and such division of brokerage commissions or
other compensation.
3. (1940 Act Rule 31a-1(b)(10)). A record in the form of an appropriate
memorandum identifying the person or persons, committees or groups
authorizing the purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a record shall be kept
of the names of its members who participate in the authorization.
There shall be retained as part of this record: any memorandum,
recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is
appropriate to support the authorization.1/
__________
1/ Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation; i.e., buy, sell, hold) or any
internal reports or portfolio adviser reviews).
4. (1940 Act Rule 31a-1(f)). Such accounts, books and other documents
as are required to be maintained by registered investment advisers by
rule adopted under Section 204 of the Investment Advisers Act of
1940, to the extent such records are necessary or appropriate to
record the Portfolio Manager's transactions with respect to the Fund
Account.
<PAGE>
SCHEDULE B
FEE SCHEDULE
For its services to the Fund, the Adviser shall pay the
Portfolio Manager a fee, paid monthly, based on the average net asset
value of the Fund, as determined by valuations made as of the close of
each business day of the month. The fee shall be 1/12 of 0.40% of the
average daily net asset value of the Fund up to $30,000,000 and 1/12 of
0.30% of the average daily net asset value of the Fund over $30,000,000.
The fee shall be pro-rated for any month during which the
Agreement is in effect for only a portion of the month.
EXHIBIT 8.1
CUSTODIAN AGREEMENT
THIS AGREEMENT made on this 1st day of February, 1995, between
EASTCLIFF TOTAL RETURN FUND, a Wisconsin corporation (hereinafter called
the "Fund") and FIRSTAR TRUST COMPANY, a corporation organized under the
laws of the State of Wisconsin (hereinafter called "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of Eastcliff
Total Return Fund.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon
proper instructions from the Eastcliff Total Return Fund;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including,
without limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by
the Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c)
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made; provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f) and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g) or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate 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, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items. In the event of any
advance of cash for any purpose made by Custodian resulting from orders or
instructions of the Fund, or in the event that Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be security
therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 900 Second Avenue South, 300 International Centre, Minneapolis,
Minnesota 55402, as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to Custodian or a vote of
the shareholders of the Fund to dissolve or to function without a
custodian of its cash, securities and other property, Custodian shall not
deliver cash, securities or other property of the Fund to the Fund, but
may deliver them to a bank or trust company of its own selection, having
an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by
the Fund of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository; provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
_______________________________ By _________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: EASTCLIFF TOTAL RETURN FUND
________________________________ By _________________________________
EXHIBIT 8.2
CUSTODIAN AGREEMENT
THIS AGREEMENT made on June 30, 1995, between EASTCLIFF GROWTH
FUND, a Wisconsin corporation (hereinafter called the ["Fund"]) and
FIRSTAR TRUST COMPANY, a corporation organized under the laws of the State
of Wisconsin (hereinafter called "Custodian").
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of Eastcliff
Growth Fund.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon
proper instructions from the Eastcliff Growth Fund;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including,
without limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by
the Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c)
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made; provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f) and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g) or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate 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, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items.
In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Fund, or in the
event that Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefore.
Custodian agrees to indemnify and hold harmless Fund from all
charges, expenses, assessments, and claims/liabilities (including counsel
fees) incurred or assessed against it in connection with the performance
of this agreement, except such as may arise from the Fund's own negligent
action, negligent failure to act, or willful misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 900 Second Avenue South, 300 International Centre, Minneapolis,
Minnesota 55402, as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to Custodian or a vote of
the shareholders of the Fund to dissolve or to function without a
custodian of its cash, securities and other property, Custodian shall not
deliver cash, securities or other property of the Fund to the Fund, but
may deliver them to a bank or trust company of its own selection, having
an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by
the Fund of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository; provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
_________________________________ By _________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: EASTCLIFF GROWTH FUND
_________________________________ By _________________________________
EXHIBIT 8.3
CUSTODIAN AGREEMENT
THIS AGREEMENT made on September 15, 1996, between EASTCLIFF
SMALL CAPITALIZATION VALUE FUND, a Wisconsin corporation (hereinafter
called the "Fund"), and FIRSTAR TRUST COMPANY, a corporation organized
under the laws of the State of Wisconsin (hereinafter called "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of Eastcliff
Small Capitalization Value Fund.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon
proper instructions from the Eastcliff Small Capitalization
Value Fund;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including,
without limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by
the Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c)
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made; provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f) and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g) or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate 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, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items.
In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Fund, or in the
event that Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefore.
Custodian agrees to indemnify and hold harmless Fund from all
charges, expenses, assessments, and claims/liabilities (including counsel
fees) incurred or assessed against it in connection with the performance
of this agreement, except such as may arise from the Fund's own negligent
action, negligent failure to act, or willful misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 900 Second Avenue South, 300 International Centre, Minneapolis,
Minnesota 55402, as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to Custodian or a vote of
the shareholders of the Fund to dissolve or to function without a
custodian of its cash, securities and other property, Custodian shall not
deliver cash, securities or other property of the Fund to the Fund, but
may deliver them to a bank or trust company of its own selection, having
an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by
the Fund of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository; provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
_________________________________ By _________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: EASTCLIFF SMALL CAPITALIZATION
VALUE FUND
_________________________________ By _________________________________
Exhibit 9.1
ADMINISTRATIVE AGREEMENT
AGREEMENT made this 31st day of December, 1994, between
EASTCLIFF TOTAL RETURN FUND (the "Fund") and FIDUCIARY MANAGEMENT, INC., a
Wisconsin corporation (the "Administrator").
W I T N E S S E T H :
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940 (the "Act");
WHEREAS, upon so registering with the Securities and Exchange
Commission, the Fund will be a registered investment company; and
WHEREAS, the Fund desires to retain the Administrator to perform
the following management-related services for the Fund and the
Administrator desires to perform such services for the Fund.
NOW, THEREFORE, the Fund and the Administrator do mutually
promise and agree as follows:
1. Employment. The Fund hereby employs the Administrator to
be its Administrator for the period and on the terms set forth in this
Agreement. The Administrator hereby accepts such employment for the
compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority and Duties of the Administrator. The
Administrator shall perform the following management-related services for
the Fund:
(a) Prepare and maintain the books, accounts and other
documents specified in Rule 31a-1, under the Act in accordance
with the requirements of Rule 31a-1 and Rule 31a-2 under the
Act;
(b) Determine the Fund's net asset value in accordance
with the provisions of the Fund's Articles of Incorporation and
its Registration Statement;
(c) Respond to stockholder inquiries forwarded to it by
the Fund;
(d) Prepare the financial statements contained in reports
to stockholders of the Fund;
(e) Prepare reports to and filings with the Securities and
Exchange Commission (other than the Fund's Registration
Statement on Form N-1A);
(f) Furnish statistical and research data, clerical,
accounting and bookkeeping services and stationery and office
supplies; and
(g) Keep and maintain the Fund's financial accounts and
records, and generally assist in all aspects of the Fund's
operations to the extent agreed to by the Administrator and the
Fund.
The Administrator shall not act, and shall not be required to
act, as an investment adviser to the Fund and shall not have any authority
to supervise the investment or reinvestment of the cash, securities or
other property comprising the Fund's assets or to determine what
securities or other property may be purchased or sold by the Fund. The
Administrator 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.
3. Expenses. The Administrator, at its own expense and
without reimbursement from the Fund, shall furnish office space, and all
necessary office facilities, equipment and executive personnel for
performing the services required to be performed by it under the
Agreement. The Administrator shall not be required to pay any expenses of
the Fund. The expenses of the Fund's operations borne by the Fund include
by way of illustration and not limitation, directors fees paid to those
directors who are not interested persons of the Fund, as defined in the
Act, the professional costs of preparing and the costs of printing its
registration statements required under the Securities Act of 1933 and the
Act (and amendments thereto), the expense of registering its shares with
the Securities and Exchange Commission and in the various states, the
printing and distribution cost of prospectuses mailed to existing
shareholders, the cost of stock certificates, director and officer
liability insurance, the printing and distribution costs of reports to
stockholders, reports to government authorities and proxy statements,
interest charges, taxes, legal expenses, association membership dues,
auditing services, insurance premiums, brokerage and other expenses
connected with the execution of portfolio securities transactions, fees
and expenses of the custodian of the Fund's assets, printing and mailing
expenses and charges and expenses of dividend disbursing agents,
registrars and stock transfer agents.
4. Compensation of the Administrator. For the services to be
rendered by the Administrator hereunder, the Fund shall pay to the
Administrator an administration fee, paid monthly, based on the average
net assets of the Fund, as determined by valuations made as of the close
of each business day of the month. The administration fee shall be 1/12
of 0.2% of such net assets up to and including $30,000,000 and 1/12 of .1%
of the next $30,000,000 of daily net assets and 1/12 of 0.05% of the daily
net assets in excess of $60,000,000; provided, however, that the minimum
fee payable by the Fund shall be $15,000 annually (such minimum fee will
be waived for the first fiscal year). For any month in which this
Agreement is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which
it is in effect and the fee computed upon the net assets of the business
days during which it is so in effect.
5. Exclusivity. The services of the Administrator to the Fund
hereunder are not to be deemed exclusive and the Administrator shall be
free to furnish similar services to others as long as the services
hereunder are not impaired thereby. During the period that this Agreement
is in effect, the Administrator shall be the Fund's sole administrator.
6. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Administrator, the Administrator shall not be
subject to liability to the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
7. Amendments and Termination. This Agreement may be amended
by the mutual consent of the parties. This Agreement may be terminated at
any time, without the payment of any penalty, by the board of directors of
the Fund upon the giving of ninety (90) days' written notice to the
Administrator. This Agreement may be terminated by the Administrator at
any time upon the giving of ninety (90) days' written notice to the Fund.
Upon termination of the Agreement the Administrator shall deliver to the
Fund all books, accounts and other documents then maintained by it
pursuant to Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC.
(the "Administrator")
By: ___________________________ By: _________________________________
Secretary President
EASTCLIFF TOTAL RETURN
(the "Fund")
By: ___________________________ By: _________________________________
Secretary President
<PAGE>
Date: 12/31/94
Fiduciary Management, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
Gentlemen:
Pursuant to Section 2(f) of the Administration Agreement dated
12/31/94, you are hereby authorized to perform the following ministerial
services in connection with EASTCLIFF TOTAL RETURN FUND (the "Fund")
investment in commercial paper master notes purchased through Firstar
Trust Co. Prior to 10:30 a.m. on each day the New York Stock Exchange is
open for trading you will review the activity account statement for the
Fund for the previous business day provided to you by Firstar Trust Co.
and a list of the securities transactions to be settled by the Fund on
such date. Such list of securities transactions will be compiled by you
from information supplied to you by the Fund or the Fund's investment
adviser.
After reviewing such list and statement you will subtract (the
sum obtained by adding [the purchase price and related commissions and
expenses to be paid by the Fund in connection with all purchases of
securities by the Fund to be settled on such date) to (the amounts to be
paid to honor redemption requests, if any, received by Firstar Trust Co.
on the previous business day)] from [the sum obtained by adding (the
proceeds to be received from all sales of securities of the Fund to be
settled on such date) to (the amounts received pursuant to all purchase
orders, if any, received by Firstar Trust Co. on the previous business
day)].
The Fund's investment adviser has determined that if the result
of such subtraction is a positive number, the remainder shall be invested
to the extent allowed by the Fund's prospectus in the commercial paper
master notes or repurchase agreements then offered by Firstar Trust Co.
bearing the highest rates of interest. In the event that one or more
commercial paper master notes bear the same rate of interest, the order of
preference in investing shall be based on the assets of the issuers, with
the issuer having the most assets being given the highest preference.
Investments in the commercial paper master notes of any issuer may not
exceed 5% of the Fund's total assets on the date of purchase.
The Fund's investment adviser has determined that if the result
of such subtractions is a negative number, the deficiency shall be
obtained by selling the commercial paper master notes then held by the
Fund bearing the lowest rates of interest. In the event that one or more
commercial paper master notes bear the same rate of interest, the order of
preference in selling shall be the inverse of the order set forth in the
preceding paragraph.
You are instructed to notify Firstar Trust Co. each day prior to
10:30 a.m. of the commercial paper master notes to be purchased and sold
by the Fund as determined above.
If the amount to be invested exceeds the amount which can be
invested as provided above, you will so inform the Fund's investment
adviser who will tell you how the excess should be invested.
These instructions will remain in effect unless and until you
are notified by the Fund or the Fund's investment adviser to the contrary.
Very truly yours,
EASTCLIFF TOTAL RETURN FUND
By: _________________________________
Accepted and agreed to
____________________________________
FIDUCIARY MANAGEMENT, INC.
By ______________________________
Exhibit 9.2
ADMINISTRATIVE AGREEMENT
AGREEMENT made this 1st day of July, 1995, between EASTCLIFF
GROWTH FUND (the "Fund") and FIDUCIARY MANAGEMENT, INC., a Wisconsin
corporation (the "Administrator").
W I T N E S S E T H :
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940 (the "Act");
WHEREAS, upon so registering with the Securities and Exchange
Commission, the Fund will be a registered investment company; and
WHEREAS, the Fund desires to retain the Administrator to perform
the following management-related services for the Fund and the
Administrator desires to perform such services for the Fund.
NOW, THEREFORE, the Fund and the Administrator do mutually
promise and agree as follows:
1. Employment. The Fund hereby employs the Administrator to
be its Administrator for the period and on the terms set forth in this
Agreement. The Administrator hereby accepts such employment for the
compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority and Duties of the Administrator. The
Administrator shall perform the following management-related services for
the Fund:
(a) Prepare and maintain the books, accounts and other
documents specified in Rule 31a-1, under the Act in accordance
with the requirements of Rule 31a-1 and Rule 31a-2 under the
Act;
(b) Determine the Fund's net asset value in accordance
with the provisions of the Fund's Articles of Incorporation and
its Registration Statement;
(c) Respond to stockholder inquiries forwarded to it by
the Fund;
(d) Prepare the financial statements contained in reports
to stockholders of the Fund;
(e) Prepare reports to and filings with the Securities and
Exchange Commission (other than the Fund's Registration
Statement on Form N-1A);
(f) Furnish statistical and research data, clerical,
accounting and bookkeeping services and stationery and office
supplies; and
(g) Keep and maintain the Fund's financial accounts and
records, and generally assist in all aspects of the Fund's
operations to the extent agreed to by the Administrator and the
Fund.
The Administrator shall not act, and shall not be required to
act, as an investment adviser to the Fund and shall not have any authority
to supervise the investment or reinvestment of the cash, securities or
other property comprising the Fund's assets or to determine what
securities or other property may be purchased or sold by the Fund. The
Administrator 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.
3. Expenses. The Administrator, at its own expense and
without reimbursement from the Fund, shall furnish office space, and all
necessary office facilities, equipment and executive personnel for
performing the services required to be performed by it under the
Agreement. The Administrator shall not be required to pay any expenses of
the Fund. The expenses of the Fund's operations borne by the Fund include
by way of illustration and not limitation, directors fees paid to those
directors who are not interested persons of the Fund, as defined in the
Act, the professional costs of preparing and the costs of printing its
registration statements required under the Securities Act of 1933 and the
Act (and amendments thereto), the expense of registering its shares with
the Securities and Exchange Commission and in the various states, the
printing and distribution cost of prospectuses mailed to existing
shareholders, the cost of stock certificates, director and officer
liability insurance, the printing and distribution costs of reports to
stockholders, reports to government authorities and proxy statements,
interest charges, taxes, legal expenses, association membership dues,
auditing services, insurance premiums, brokerage and other expenses
connected with the execution of portfolio securities transactions, fees
and expenses of the custodian of the Fund's assets, printing and mailing
expenses and charges and expenses of dividend disbursing agents,
registrars and stock transfer agents.
4. Compensation of the Administrator. For the services to be
rendered by the Administrator hereunder, the Fund shall pay to the
Administrator an administration fee, paid monthly, based on the average
net assets of the Fund, as determined by valuations made as of the close
of each business day of the month. The administration fee shall be 1/12
of 0.2% of such net assets up to and including $30,000,000 and 1/12 of .1%
of the next $30,000,000 of daily net assets and 1/12 of 0.05% of the daily
net assets in excess of $60,000,000; provided, however, that the minimum
fee payable by the Fund shall be $20,000 annually. For any month in which
this Agreement is not in effect for the entire month, such fee shall be
reduced proportionately on the basis of the number of calendar days during
which it is in effect and the fee computed upon the net assets of the
business days during which it is so in effect.
5. Exclusivity. The services of the Administrator to the Fund
hereunder are not to be deemed exclusive and the Administrator shall be
free to furnish similar services to others as long as the services
hereunder are not impaired thereby. During the period that this Agreement
is in effect, the Administrator shall be the Fund's sole administrator.
6. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Administrator, the Administrator shall not be
subject to liability to the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
7. Amendments and Termination. This Agreement may be amended
by the mutual consent of the parties. This Agreement may be terminated at
any time, without the payment of any penalty, by the board of directors of
the Fund upon the giving of ninety (90) days' written notice to the
Administrator. This Agreement may be terminated by the Administrator at
any time upon the giving of ninety (90) days' written notice to the Fund.
Upon termination of the Agreement the Administrator shall deliver to the
Fund all books, accounts and other documents then maintained by it
pursuant to Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC.
(the "Administrator")
By: ___________________________ By: _________________________________
Secretary President
EASTCLIFF GROWTH FUND
(the "Fund")
By: ___________________________ By: _________________________________
Secretary President
<PAGE>
Date: July 1, 1995
Fiduciary Management, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
Gentlemen:
Pursuant to Section 2(f) of the Administration Agreement dated
July 1, 1995, you are hereby authorized to perform the following
ministerial services in connection with the EASTCLIFF GROWTH FUND (the
"Fund") investments in commercial paper master notes purchased through
Firstar Trust Co. Prior to 10:30 a.m. on each day the New York Stock
Exchange is open for trading you will review the activity account
statement for the Fund for the previous business day provided to you by
Firstar Trust Co. and a list of the securities transactions to be settled
by the Fund on such date. Such list of securities transactions will be
compiled by you from information supplied to you by the Fund's investment
adviser.
After reviewing such list and statement you will subtract (the
sum obtained by adding [the purchase price and related commissions and
expenses to be paid by the Fund in connection with all purchases of
securities by the Fund to be settled on such date) to (the amounts to be
paid to honor redemption requests, if any, received by Firstar Trust Co.
on the previous business day)] from [the sum obtained by adding (the
proceeds to be received from all sales of securities of the Fund to be
settled on such date) to the amounts received pursuant to all purchase
orders, if any, received by Firstar Trust Co. on the previous business
day)].
The Fund's investment adviser has determined that if the result
of such subtraction is a positive number, the remainder shall be invested
to the extent allowed by the Fund's prospectus in the commercial paper
master notes or repurchase agreements then offered by Firstar Trust Co.
bearing the highest rates of interest. In the event that one or more
commercial paper master notes bear the same rate of interest, the order of
preference in investing shall be based on the assets of the issuers, with
the issuer having the most assets being given the highest preference.
Investments in the commercial paper master notes of any issuer may not
exceed 5% of such Fund's total assets on the date of purchase.
The Fund's investment adviser has determined that if the result
of such subtractions is a negative number, the deficiency shall be
obtained by selling the commercial paper master notes then held by the
Fund bearing the lowest rates of interest. In the event that one or more
commercial paper master notes bear the same rate of interest, the order of
preference in selling shall be the inverse of the order set forth in the
preceding paragraph.
You are instructed to notify Firstar Trust Co. each day prior to
10:30 a.m. of the commercial paper master notes to be purchased and sold
by the Fund as determined above.
If the amount to be invested exceeds the amount which can be
invested as provided above, you will so inform the Fund's investment
adviser who will tell you how the excess should be invested.
These instructions will remain in effect unless and until you
are notified by the Fund or the Fund's investment adviser to the contrary.
Very truly yours,
EASTCLIFF GROWTH FUND
By: _________________________________
Accepted and agreed to
____________________________________
FIDUCIARY MANAGEMENT, INC.
By ______________________________
Exhibit 10
January 30, 1992
Fiduciary Total Return Fund, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as counsel for you in connection with the
preparation of an Amended Registration Statement on Form N-1A relating to
the sale by you of an indefinite amount of Fiduciary Total Return Fund,
Inc. Common Stock, $.01 par value (such Common Stock being hereinafter
referred to as the "Stock") in the manner set forth in the Registration
Statement to which reference is made. In this connection we have
examined: (a) the Amended Registration Statement on Form N-1A; (b) your
Articles of Incorporation and By-Laws, as amended to date; (c) corporate
proceedings relative to the authorization for issuance of the Stock; and
(d) such other proceedings, documents and records as we have deemed
necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares
of Stock when sold as contemplated in the Amended Registration Statement
will be legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to
the Amended Registration Statement on Form N-1A. In giving this consent,
we do not admit that we are experts within the meaning of Section 11 of
the Securities Act of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
FOLEY & LARDNER
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 16 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated July 24, 1997, relating to
the financial statements and financial highlights appearing in the
June 30, 1997 Annual Report to Shareholders of Eastcliff Funds, Inc.,
portions of which are incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading
"Independent Accountants" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
September 26, 1997
Exhibit 13
SUBSCRIPTION AGREEMENT
Resource Total Return Fund, Inc.
222 East Mason Street
Milwaukee, Wisconsin 53202
Gentlemen:
The undersigned hereby subscribes to 10,000 shares of the Common
Stock, $.01 par value of Resource Total Return Fund, Inc., and agrees to
pay to said corporation the sum of $100,000 in cash.
It is understood that upon acceptance hereof by said corporation
a certificate or certificates representing the shares subscribed for shall
be issued to the undersigned and that said shares shall be deemed to be
fully paid and nonassessable except for the statutory liability imposed by
Section 180.40(6) of the Wisconsin Statutes.
The undersigned agrees that the shares are being purchased for
investment with no present intention of reselling or redeeming said
shares.
Dated and effective as of this 23rd day of December, 1986.
FIDUCIARY MANAGEMENT, INC.
By: _________________________________
Ted D. Kellner, President
Attest: _________________________________
Donald S. Wilson, Secretary
The foregoing subscription is hereby accepted. Dated and
effective as of this 23rd day of December, 1986.
RESOURCE TOTAL RETURN
FUND, INC.
By: _________________________________
William E. Fritz, President
Attest: _________________________________
Donald S. Wilson, Asst. Secretary
Exhibit 14.1
EASTCLIFF FUNDS
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, (April 1 following the calendar year end in which the Depositor
reaches age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Resource Capital
Advisors, Inc. serves as investment advisor, or any other regulated
investment company designated by the investment advisor. Shares of stock
of an Investment Company shall be referred to as Investment Company
Shares."
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The Custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the Depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian, and the Custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
EASTCLIFF FUNDS
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
Please read the following information together with the
Individual Retirement Account Custodial Agreement and the Prospectus(es)
for the fund(s) you select for investment of your IRA contributions.
You may revoke this account any time within seven calendar days
after it is established by mailing or delivering a written request for
revocation to: Eastcliff Funds, c/o Firstar Trust Company, Mutual Fund
Services, 615 East Michigan Street, 3rd Floor, P. O. Box 701, Milwaukee,
Wisconsin 53201-0701. If your revocation is mailed, the date of the
postmark (or the date of certification if sent by certified or registered
mail) will be considered your revocation date. Upon proper revocation,
you will receive a full refund of your initial contribution, without any
adjustments for items such as administrative fees or fluctuations in
market value.
1. General. Your IRA is a custodial account created for your
exclusive benefit, and Firstar Trust Company serves as custodian. Your
interest in the account is nonforfeitable.
2. Investments. Contributions made to your IRA will be
invested in one or more of the regulated investment companies for which
Resource Capital Advisers, Inc. serves as investment advisor or any other
regulated investment company designated by Resource Capital Advisers, Inc.
No part of your account may be invested in life insurance contracts;
further, the assets of your account may not be commingled with other
property.
3. Eligibility. Employees and self-employed individuals are
eligible to contribute to an IRA. Employers may also contribute to
employer-sponsored IRAs established for the benefit of their employees.
You may also establish an IRA to receive rollover contributions and
transfers from another IRA custodian or trustee or from certain other
retirement plans.
4. Time of Contribution. You may make regular contributions
to your IRA any time up to and including the due date for filing your tax
return for the year, not including extensions. You may continue to make
regular contributions to your IRA up to (but not including) the calendar
year in which you reach 70-1/2. Employer contributions to a SEP - IRA
plan may be continued after you attain age 70-1/2. Rollover contributions
and transfers may be made at any time, including after you reach age 70-
1/2.
5. Amount of Contribution. You may make annual regular
contributions to an IRA in any amount up to 100% of your compensation for
the year or $2,000, whichever is less. Qualifying rollover contributions
and transfers are not subject to this limitation. In addition, if you are
married and file a joint return, you may make contributions to your
spouse's IRA. However, the maximum amount contributed to both your own
and to your spouse's IRA may not exceed 100% of your combined compensation
or $4,000, whichever is less. Moreover, the annual contribution to either
your account or your spouse's account may not exceed $2,000. Note that a
different rule for spousal IRAs applied for tax years beginning before
January 1, 1997.
6. Rollovers and Transfers. You are allowed to "roll over" a
distribution or transfer your assets from one individual retirement
account to another without any tax liability. Rollovers between IRAs may
be made once per year and must be accomplished within 60 days after the
distribution. Also, under certain conditions, you may roll over (tax
free) all or a portion of a distribution received from a qualified plan or
tax-sheltered annuity in which you participate or in which your deceased
spouse participated. However, strict limitations apply to such rollovers,
and you should seek competent advice in order to comply with all of the
rules governing rollovers.
Most distributions from qualified retirement plans will be
subject to a 20% withholding requirement. The 20% withholding can be
avoided by directly transferring the amount of the distribution to an
individual retirement account or to certain other types of retirement
plans. You should receive more information regarding these new
withholding rules and whether your distribution can be transferred to an
IRA from the plan administrator prior to receiving your distribution.
7. Tax Deductibility of Annual Contributions. Although you
may make an IRA contribution within the limitations described above, all
or a portion of your contribution may be nondeductible. No deduction is
allowed for a rollover contribution or transfer. If you are not married
and are not an "active participant" in an employer-sponsored retirement
plan, you may make a fully deductible IRA contribution in any amount up to
$2,000 or 100% of your compensation for the year, whichever is less. The
same limits apply if you are married and file a joint return with your
spouse and neither you nor your spouse is an "active participant" in an
employer-sponsored retirement plan.
An employer-sponsored retirement plan includes any of the
following types of retirement plans:
-- a qualified pension, profit-sharing, or
stock bonus plan established in accordance
with IRC 401(a) or 401(k),
-- a Simplified Employee Pension Plan (SEP)
(IRC 408(k)),
-- a deferred compensation plan maintained by a
governmental unit or agency,
-- tax-sheltered annuities and custodial
accounts (IRC 403(b) and 403(b)(7)),
-- a qualified annuity plan under IRC Section
403(a).
-- a Savings Incentive Match Plan for Employees
of Small Employers (SIMPLE Plan).
Generally, you are considered an "active participant" in a
defined contribution plan if an employer contribution or forfeiture was
credited to your account during the year. You are considered an "active
participant" in a defined benefit plan if you are eligible to participate
in a plan, even though you elect not to participate. You are also treated
as an "active participant" if you make a voluntary or mandatory
contribution to any type of plan, even if your employer makes no
contribution to the plan.
If you (or your spouse, if filing a joint tax return) are
covered by an employer-sponsored retirement plan, your IRA contribution is
fully deductible if your adjusted gross income (or combined income if you
file a joint tax return) does not exceed certain limits. For this
purpose, your adjusted gross income (1) is determined without regard to
the exclusions from income arising under Section 135 (exclusion of certain
savings bond interest), 137 (exclusion of certain employer provided
adoption expenses) and 911 (certain exclusions applicable to U.S. citizens
or residents living abroad) of the Code, (2) is not reduced for any
deduction that you may be entitled to for IRA contributions, and (3) takes
into account the passive loss limitations under Section 469 of the Code
and any taxable benefits under the Social Security Act and Railroad
Retirement Act as determined in accordance with Section 86 of the Code.
If you (or your spouse, if filing a joint tax return) are
covered by an employer-sponsored retirement plan, the deduction for your
IRA contribution is reduced proportionately for adjusted gross income
which exceeds the applicable dollar amount. The applicable dollar amount
for an individual is $25,000 and $40,000 for married couples filing a
joint tax return. The applicable dollar limit for married individuals
filing separate returns if $0. If your adjusted gross income exceeds the
applicable dollar amount by $10,000 or less, you may make a deductible IRA
contribution. The deductible amount, however, will be less than $2,000.
To determine the amount of your deductible contribution, use the
following calculations:
1) Subtract the applicable dollar amount from
your adjusted gross income. If the result
is $10,000 or more, you can only make a
nondeductible contribution to your IRA.
2) Divide the above figure by $10,000, and
multiply that percentage by $2,000.
3) Subtract the dollar amount (result from #2
above) from $2,000 to determine the amount
which is deductible.
If the deduction limit is not a multiple of $10 then it should
be rounded up to the next $10. There is a $200 minimum floor on the
deduction limit if your adjusted gross income does not exceed $35,000 (for
a single taxpayer), $50,000 (for married taxpayers filing jointly) or
$10,000 (for a married taxpayer filing separately).
Even if your income exceeds the limits described above, you may
make a contribution to your IRA up to the contribution limitations
described in Section 5 above. To the extent that your contribution
exceeds the deductible limits, it will be nondeductible. However,
earnings on all IRA contributions are tax deferred until distribution.
8. Excess Contributions. Contributions which exceed the
allowable maximum for federal income tax purposes are treated as excess
contributions. A nondeductible penalty tax of 6% of the excess amount
contributed will be added to your income tax for each year in which the
excess contribution remains in your account.
9. Correction of Excess Contribution. If you make a
contribution in excess of your allowable maximum, you may correct the
excess contribution and avoid the 6% penalty tax for that year by
withdrawing the excess contribution and its earnings on or before the
date, including extensions, for filing your tax return for the tax year
for which the contribution was made. Any earnings on the withdrawn excess
contribution will be taxable in the year the excess contribution was made
and may be subject to a 10% early distribution penalty tax if you are
under age 59 1/2. In addition, in certain cases an excess contribution
may be withdrawn after the time for filing your tax return. Finally,
excess contributions for one year may be carried forward and applied
against the contribution limitation in succeeding years.
10. Simplified Employee Pension Plan. An IRA may also be used
in connection with a Simplified Employee Pension Plan established by your
employer (or by you if you are self-employed.) In addition, if your SEP
Plan as in effect on December 31, 1996 permitted salary reduction
contributions, you may elect to have your employer make salary reduction
contributions. Several limitations on the amount that may be contributed
apply. First, salary reduction contributions (for plans that are
eligible) may not exceed $9,500 per year (certain lower limits may apply
for highly compensated employees). The $9,500 limit applies for 1997 and
is adjusted periodically for cost of living increases. Second, the
combination of all contributions for any year (including employer
contributions and, if your SEP Plan is eligible, salary reduction
contributions) cannot exceed 15 percent of compensation (disregarding for
this purpose compensation in excess of $160,000 per year). The $160,000
compensation limit applies for 1997 and is adjusted periodically for cost
of living increases. A number of special rules apply to SEP/IRA,
including a requirement that contributions be made on behalf of all
employees of the employer who satisfy certain minimum participation
requirements. It is your responsibility and that of your employer to see
that contributions in excess of normal IRA limits are made under and in
accordance with a valid SEP Plan.
11. Savings and Incentive Match Plan for Employees of Small
Employers ("SIMPLE"). An IRA may also be used in connection with a SIMPLE
Plan established by your employer (or by you if you are self-employed).
Under a SIMPLE Plan, you may elect to have your employer make salary
reduction contributions of up to $6,000 per year to your SIMPLE IRA. The
$6,000 limit applies for 1997 and is adjusted periodically for cost of
living increases. In addition, your employer will contribute certain
amounts to your SIMPLE IRA, either as a matching contribution to those
participants who make salary reduction contributions or as a non-elective
contribution to all eligible participants whether or not making salary
reduction contributions. A number of special rules apply to SIMPLE Plans,
including (1) a SIMPLE Plan generally is available only to employers with
fewer than 100 employees, (2) contributions must be made on behalf of all
employees of the employer (other than bargaining unit employees) who
satisfy certain minimum participation requirements, (3) contributions are
made to a special SIMPLE IRA that is separate and apart from your other
IRAs, (4) if you withdraw from your SIMPLE IRA during the 2 year period
during which you first began participation in the SIMPLE Plan, the early
distribution excise tax (if otherwise applicable) is increased to 25
percent; and (5) during this two year period, any amount withdrawn may be
rolled over tax-free only into another SIMPLE IRA (and not to a "regular"
IRA). It is your responsibility and that of your employer to see that
contributions in excess of normal IRA limits are made under and in
accordance with a valid SIMPLE Plan.
12. Form of Distributions. Distributions may be made in any
one of three methods:
(a) a lump-sum distribution,
(b) installments over a period not extending beyond your life
expectancy (as determined by actuarial tables), or
(c) installments over a period not extending beyond the joint
life expectancy of you and your designated beneficiary (as
determined by actuarial tables).
You may also use your account balance to purchase an annuity
contract, in which case your custodial account will terminate.
13. Latest Time to Withdraw. You must begin receiving the
assets in your account no later than April 1 following the calendar year
in which you reach age 70-1/2 (your "required beginning date"). In
general, the minimum amount that must be distributed each year is equal to
the amount obtained by dividing the balance in your IRA on the last day of
the prior year (or the last day of the year prior to the year in which you
attain age 70-1/2) by your life expectancy, the joint life expectancy of
you and your beneficiary, or the specified payment term, whichever is
applicable. A federal tax penalty may be imposed against you if the
required minimum distribution is not made for the year you reach age 70-
1/2 and for each year thereafter. The penalty is equal to 50% of the
amount by which the actual distribution is less than the required minimum.
Unless you or your spouse elects otherwise, your life expectancy
and/or the life expectancy of your spouse will be recalculated annually.
An election not to recalculate life expectancy(ies) is irrevocable and
will apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated.
If you have two or more IRAs, you may satisfy the minimum
distribution requirements by receiving a distribution from one of your
IRAs in an amount sufficient to satisfy the minimum distribution
requirements for your other IRAs. You must still calculate the required
minimum distribution separately for each IRA, but then such amounts may be
totalled and the total distribution taken from one or more of your
individual IRAs.
Distribution from your IRA must satisfy the special "incidental
death benefit" rules of the Internal Revenue Code. These provisions set
forth certain limitations on the joint life expectancy of you and your
beneficiary. If your beneficiary is not your spouse, your beneficiary
will be generally considered to be no more than 10 years younger than you
for the purpose of calculating the minimum amount that must be
distributed.
14. Distribution of Account Assets After Death. If you die
before receiving the balance of your account, distribution of your
remaining account balance is subject to several special rules. If you die
on or after your required beginning date, distribution must continue in a
method at least as rapid as under the method of distribution in effect at
your death. If you die before your required beginning date, your
remaining interest will, at the election of your beneficiary or
beneficiaries, (i) be distributed by December 31 of the year in which
occurs the fifth anniversary of your death, or (ii) commence to be
distributed by December 31 of the year following your death over a period
not exceeding the life or life expectancy of your designated beneficiary
or beneficiaries.
Two additional distribution options are available if your spouse
is the beneficiary: (i) payments to your spouse may commence as late as
December 31 of the year you would have attained age 70-1/2 and be
distributed over a period not exceeding the life or life expectancy of
your spouse, or (ii) your spouse can simply elect to treat your IRA as his
or her own, in which case distributions will be required to commence by
April 1 following the calendar year in which your spouse attains age 70-
1/2.
15. Tax Treatment of Distributions. Amounts distributed to you
are generally includable in your gross income in the taxable year you
receive them and are taxable as ordinary income. To the extent, however,
that any part of a distribution constitutes a return of your nondeductible
contributions, it will not be included in your income. The amount of any
distribution excludable from income is the portion that bears the same
ratio as your aggregate nondeductible contributions bear to the balance of
your IRA at the end of the year (calculated after adding back
distributions during the year). For this purpose, all of your IRAs are
treated as single IRA. Furthermore, all distributions from an IRA during
a taxable year are to be treated as one distribution. The aggregate
amount of distributions excludable from income for all years cannot exceed
the aggregate nondeductible contributions for all calendar years.
No distribution to you or anyone else from your account can
qualify for capital gains treatment under the federal income tax laws.
Similarly, you are not entitled to the special five- or ten-year averaging
rule for lump-sum distributions available to persons receiving
distributions from certain other types of retirement plans. All
distributions are taxed to the recipient as ordinary income except the
portion of a distribution which represents a return of nondeductible
contributions. The tax on excess distributions (but not the additional
estate tax payable with respect to excess accumulations) under Section
4980A of the Code does not apply with respect to distributions made in
1997, 1998 and 1999.
Any distribution which is properly rolled over will not be
includable in your gross income.
16. Early Distributions. Distributions from your IRA made
before age 59-1/2 will be subject to a 10% nondeductible penalty tax
unless the distribution is a return of nondeductible contributions or is
made because of your death, disability, as part of a series of
substantially equal periodic payments over your life expectancy or the
joint life expectancy of you and your beneficiary, or the distribution is
made for medical expenses in excess of 7.5% of adjusted gross income, is
made for reimbursement of medical premiums while you are unemployed, or is
an exempt withdrawal of an excess contribution. The penalty tax may also
be avoided if the distribution is rolled over to another individual
retirement account. See paragraph 11 above for special rules applicable
to distributions from a SIMPLE IRA.
17. Qualification of Plan. Your Individual Retirement Account
Plan has been approved as to form by the Internal Revenue Service. The
Internal Revenue Service approval is a determination only as to the form
of the Plan and does not represent a determination of the merits of the
Plan as adopted by you. You may obtain further information with respect
to your Individual Retirement Account from any district office of the
Internal Revenue Service.
18. Prohibited Transactions. If you engage in a "prohibited
transaction," as defined in section 4975 of the Internal Revenue Code,
your account will be disqualified, and the entire balance in your account
will be treated as if distributed to you and will be taxable to you as
ordinary income. Examples of prohibited transactions are:
(a) the sale, exchange, or leasing of any property between
you and your account,
(b) the lending of money or other extensions of credit
between you and your account,
(c) the furnishing of goods, services, or facilities
between you and your account.
If you are under age 59-1/2, you may also be subject to the 10% penalty
tax on early distributions.
19. Penalty for Pledging Account. If you use (pledge) all or
part of your IRA as security for a loan, then the portion so pledged will
be treated as if distributed to you and will be taxable to you as ordinary
income during the year in which you make such pledge. The 10% penalty tax
on early distributions may also apply.
20. Reporting for Tax Purposes. Deductible contributions to
your IRA may be claimed as a deduction on your IRS form 1040 for the
taxable year contributed. If any nondeductible contributions are made by
you during a tax year, such amounts must be reported on Form 8606 and
attached to your Federal Income Tax Return for the year contributed. If
you report a nondeductible contribution to your IRA and do not make the
contribution, you will be subject to a $100 penalty for each overstatement
unless a reasonable cause is shown for not contributing. Other reporting
will be required by you in the event that special taxes or penalties
described herein are due. You must also file Treasury Form 5329 with the
IRS for each taxable year in which the contribution limits are exceeded, a
premature distribution takes place, or less than the required minimum
amount is distributed from your IRA.
21. Allocation of Earnings. The method of computing and
allocating annual earnings is set forth in Article VIII, Section 1 of the
Individual Retirement Account Custodial Agreement. The growth in value of
your IRA is neither guaranteed or projected.
22. Income Tax Withholding. You must indicate on distribution
requests whether or not federal income taxes should be withheld.
Redemption request not indicating an election not to have federal income
tax withheld will be subject to withholding.
23. Other Information. Information about the shares of each
mutual fund available for investment by your IRA must be furnished to you
in the form of a prospectus governed by rules of the Securities and
Exchange Commission. Please refer to the prospectus for detailed
information concerning your mutual fund. You may obtain further
information concerning IRAs from any District Office of the Internal
Revenue Service.
Fees and other expenses of maintaining your account may be
charged to you or your account. The Custodian's current fee schedule is
included as part of these materials.
Exhibit 14.2
WPH1927C 07/02/97 MCW/GHD/jem
EASTCLIFF FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
EASTCLIFF FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
EASTCLIFF FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Table of Contents
Page
ARTICLE I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . 10
Section 3.1. Participation at Effective Date . . . . . . . . . 10
Section 3.2. Participation after Effective Date . . . . . . . 10
Section 3.3. Reentry . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4. Participation by an Owner-Employee of More Than
One Trade or Business . . . . . . . . . . . . . . 10
ARTICLE IV. CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 12
Section 4.1. Employer Profit Sharing Contributions . . . . . . 12
Section 4.2. Employer Pension Contributions . . . . . . . . . 14
Section 4.3. Participant Voluntary Contributions . . . . . . . 14
Section 4.4. Time for Making Contributions . . . . . . . . . . 15
Section 4.5. Leased Employees . . . . . . . . . . . . . . . . 15
Section 4.6. Rollovers and Transfers . . . . . . . . . . . . . 15
ARTICLE V. CASH OR DEFERRED ARRANGEMENT (CODE SECTION 401(k)) . . 17
Section 5.1. Cash or Deferred Arrangement (Code Section
401(k)) . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2. Elective Deferrals . . . . . . . . . . . . . . . 17
Section 5.3. Matching Contributions . . . . . . . . . . . . . 22
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions . . . . . . . . . . . 25
Section 5.5. Special Distribution Rules . . . . . . . . . . . 26
Section 5.6. Definitions . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI. SECTION 415 LIMITATIONS . . . . . . . . . . . . . . . . 32
Section 6.1. Employers Maintaining Only this Plan . . . . . . 32
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans . . . . . . . . . . . 33
Section 6.3. Employers Maintaining Other Defined Contribution
Plans . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.4. Employers Maintaining Defined Benefit Plans . . . 34
Section 6.5. Definitions . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII. PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . 38
Section 7.1. Separate Accounts . . . . . . . . . . . . . . . . 38
Section 7.2. Vesting . . . . . . . . . . . . . . . . . . . . . 38
Section 7.3. Computation of Vesting Service . . . . . . . . . 38
Section 7.4. Allocation of Forfeitures . . . . . . . . . . . . 39
ARTICLE VIII. PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . 40
Section 8.1. Benefits Payable Under the Plan . . . . . . . . . 40
Section 8.2. Manner of Distributions . . . . . . . . . . . . . 41
Section 8.3. Commencement of Payments . . . . . . . . . . . . 45
Section 8.4. Payment of Small Amounts . . . . . . . . . . . . 49
Section 8.5. Persons Under Legal or Other Disability . . . . . 50
Section 8.6. Withdrawals from Profit Sharing Plan . . . . . . 50
Section 8.7. Transfer of Benefits to Eligible Retirement Plan 51
ARTICLE IX. ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS . . . . 52
Section 9.1. Custodial Account . . . . . . . . . . . . . . . . 52
Section 9.2. Receipt of Contributions . . . . . . . . . . . . 52
Section 9.3. Investment of Account Assets . . . . . . . . . . 52
Section 9.4. Exclusive Benefit . . . . . . . . . . . . . . . . 53
Section 9.5. Expenses . . . . . . . . . . . . . . . . . . . . 53
Section 9.6. Voting . . . . . . . . . . . . . . . . . . . . . 53
Section 9.7. Reports of the Custodian and Administrator . . . 53
Section 9.8. Limitation of Custodian's Duties and Liability . 54
ARTICLE X. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . 56
Section 10.1. Amendment . . . . . . . . . . . . . . . . . . . . 56
Section 10.2. Termination . . . . . . . . . . . . . . . . . . . 57
ARTICLE XI. FIDUCIARY RESPONSIBILITIES . . . . . . . . . . . . . . 58
Section 11.1. Administrator . . . . . . . . . . . . . . . . . . 58
Section 11.2. Powers of Administrator . . . . . . . . . . . . . 58
Section 11.3. Records and Reports . . . . . . . . . . . . . . . 58
Section 11.4. Other Administrative Provisions . . . . . . . . . 58
Section 11.5. Claims Procedure . . . . . . . . . . . . . . . . 59
Section 11.6. Claims Review Procedure . . . . . . . . . . . . . 59
ARTICLE XII. AMENDMENT AND CONTINUATION OF ORIGINAL PLAN . . . . . . 60
ARTICLE XIII. TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . 62
Section 13.1. Effect of Top-Heavy Status . . . . . . . . . . . 62
Section 13.2. Additional Definitions . . . . . . . . . . . . . 62
Section 13.3. Minimum Allocations . . . . . . . . . . . . . . . 64
Section 13.4. Benefit Limit Change . . . . . . . . . . . . . . 65
ARTICLE XIV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 66
Section 14.1. Rights of Employees and Participants . . . . . . 66
Section 14.2. Merger With Other Plans . . . . . . . . . . . . . 66
Section 14.3. Non-Alienation of Benefits . . . . . . . . . . . 66
Section 14.4. Failure to Qualify . . . . . . . . . . . . . . . 66
Section 14.5. Mistake of Fact; Disallowance of Deduction . . . 67
Section 14.6. Participation under Prototype Plan . . . . . . . 67
Section 14.7. Gender . . . . . . . . . . . . . . . . . . . . . 67
Section 14.8. Headings . . . . . . . . . . . . . . . . . . . . 67
Section 14.9. Governing Law . . . . . . . . . . . . . . . . . . 67
<PAGE>
EASTCLIFF FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
ARTICLE I. INTRODUCTION
This Plan, which is made available by Resource Capital Advisers,
Inc., has been adopted by the Employer named in the Adoption Agreement(s)
as a qualified money purchase pension and/or profit sharing plan for its
eligible employees which is intended to qualify under Code Section 401(a).
The Employer's Plan shall consist of the following provisions, together
with the Adoption Agreement(s).
ARTICLE II. DEFINITIONS
Section 2.1. "Account" means the account or accounts
maintained by the Custodian for a Participant, as described in Article
VII.
Section 2.2. "Administrator" means the plan administrator and
fiduciary of the Plan with authority and responsibility to control and
manage the operation and administration of the Plan in accordance with its
terms and to comply with the reporting, disclosure and other requirements
of ERISA. Unless a different Administrator is appointed by the Employer,
the Administrator shall be the Employer.
Section 2.3. "Beneficiary" means the person or persons
designated by a Participant or otherwise entitled to receive benefits in
the event of the Participant's death as provided herein. Such designation
shall be made in writing and in such form as may be required by the
Administrator, and shall be filed with the Administrator. Any designation
may include contingent or successive Beneficiaries. Where such
designation has been properly made, distribution of benefits shall be made
directly to such Beneficiary or Beneficiaries. The Beneficiary or
Beneficiaries designated by a Participant may be changed or withdrawn at
any time from time to time, by the Participant, but only by filing with
the Administrator a new designation, and revoking all prior designations.
The most recent valid designation on file with the Administrator at the
time of the Participant's death shall be the Beneficiary. Notwithstanding
the foregoing, in the event the Participant is married at the time of his
death, the Beneficiary shall be the Participant's surviving spouse unless
such spouse consented in writing to the designation of an alternative
Beneficiary after notice of the spouse's rights and such consent was
witnessed by a Plan representative appointed by the Administrator or a
notary public as provided in Section 8.2(a) hereof. In the event no valid
designation of Beneficiary is on file with the Administrator at the date
of death or no designated Beneficiary survives him, the Participant's
spouse shall be deemed the Beneficiary; in the further event the
Participant is unmarried or his spouse does not survive him, the
Participant's estate shall be deemed to be his Beneficiary.
Section 2.4. "Break in Service" means a Plan Year in which a
Participant fails to complete at least five hundred one (501) Hours of
Service. Breaks in Service and Years of Service will be measured on the
same vesting computation period.
Section 2.5. "Code" means the Internal Revenue Code of 1986,
as interpreted by applicable regulations and rulings issued pursuant
thereto, all as amended and in effect from time to time. Reference to a
Code Section shall include that Section, and any comparable section or
sections of any future legislation that amends, supplements or supersedes
that Section.
Section 2.6. "Compensation" is defined as wages within the
meaning of Section 3401(a) of the Code and all other payments of
compensation to the Employee by the Employer (in the course of the
Employer's trade or business) for which the Employer is required to
furnish the Employee a written statement under Sections 6041(d),
6051(a)(3) and 6052 of the Code, determined without regard to any rules
under Section 3401(a) that limit the remuneration included in wages based
on the nature or locations of the employment or the services performed.
For any Self-Employed Individual covered under the Plan, Compensation
shall mean such individual's Earned Income.
For Plan Years beginning after December 31, 1988, the maximum
amount of Compensation taken into account under the Plan for a Participant
in any Plan Year shall not exceed two hundred thousand dollars ($200,000)
or such greater amount as permitted by the Secretary of the Treasury,
except that the dollar increase in effect on January 1 of any calendar
year is effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effective on January 1, 1990. If
the Plan determines Compensation on a period of time that contains fewer
than 12 calendar months, then the annual compensation limit is an amount
equal to the annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
For purposes of this limitation, the family aggregation rules of
Code Section 414(q)(6) shall apply, except that the term "family" shall
include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age nineteen (19) before the close
of such year. If, as a result of the application of such rules the
adjusted two hundred thousand dollars ($200,000) limitation is exceeded,
then (except for purposes of determining the portion of Compensation up to
the integration level if the Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion
to each such individual's Compensation as determined under this Section
prior to the application of this limitation. If Compensation for any
prior Plan Year is taken into account in determining an Employee's
contributions or benefits for the current year, the Compensation for such
prior year is subject to the applicable annual compensation limit in
effect for that prior year. For this purpose, for years beginning before
January 1, 1990, the applicable annual compensation limit is $200,000.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the contrary,
for plan years beginning on or after January 1, 1994, the annual
Compensation of each employee taken into account under the plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
Section 2.7. "Custodial Account" means the account established
by the Custodian, in accordance with Article IX, in the name of the
Employer or for each Participant as elected in the Adoption Agreement.
Section 2.8. "Custodian" means Firstar Trust Company, or any
successor thereto.
Section 2.9. "Disability" means a mental or physical condition
of injury or sickness, as determined by the Administrator based upon the
report of a medical examiner satisfactory to the Employer, which prevents
a Participant from carrying out the duties of his position and which is
likely to be permanent. Any such determination by the Administrator shall
be made in a uniform and nondiscriminatory manner.
Section 2.10. "Earned Income" means net earnings from
self-employment in the trade or business with respect to which the Plan is
established for which the personal services of the individual are a
material income-producing factor. Net earnings shall be determined
without regard to items not included in gross income and the deductions
allocable to such items. Net earnings shall be reduced by contributions
by the Employer to a qualified plan to the extent deductible under Code
Section 404. Net earnings shall be determined with regard to the
deduction allowed to the Employer under Code Section 164(f) for taxable
years beginning after December 31, 1989.
Section 2.11. "Effective Date" means the date as of which this
Plan is initially effective as indicated in item 3 of the Adoption
Agreement.
Section 2.12. "Elective Deferrals" means any Employer
contributions made to the Plan at the election of a participating
Employee, in lieu of payment of an equal amount to the participating
Employee in cash as Compensation pursuant to Section 5.2 hereof, and shall
include contributions made pursuant to a salary reduction agreement or
other deferral method. With respect to any taxable year, a participating
Employee's Elective Deferrals are the sum of all employer contributions
made on behalf of such Employee pursuant to an election to defer under any
qualified CODA as described in Code Section 401(k), any simplified
employee pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code Section
457, any plan as described under Code Section 501(c)(18), and any employer
contributions made on the behalf of a participating Employee for the
purchase of an annuity contract under Code Section 403(b) pursuant to a
salary reduction agreement.
Section 2.13. "Employee" means an individual employed by the
Employer (including any eligible Self-Employed Individual) or any Related
Employer adopting this Plan except as excluded pursuant to item 4 of the
Adoption Agreement. The term Employee shall also include any individual
who is a Leased Employee, unless excluded pursuant to item 4 of the
Adoption Agreement.
Section 2.14. "Employer" means any entity adopting the Plan.
Section 2.15. "Employer Pension Contributions" means the
contributions made by the Employer pursuant to Section 4.2 hereof if
elected in item 6 of the Adoption Agreement (Pension Plan).
Section 2.16. "Employer Profit Sharing Contributions" means the
contributions made by the Employer pursuant to Section 4.1 hereof if
elected in item 6 of the Adoption Agreement (Profit Sharing Plan).
Section 2.17. "ERISA" means the Employee Retirement Income
Security Act of 1974, as interpreted and applied under regulations and
rulings issued pursuant thereto, all as amended and in effect from time to
time.
Section 2.18. "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled to
payment for the performance of duties for the Employer. These hours shall
be credited to the Employee for the computation period in which the duties
are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than five hundred one (501) Hours of service shall be credited under
this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours of Service under
this paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which are incorporated
herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours
of Service shall not be credited both under subsection (a) or subsection
(b), as the case may be, and under this subsection (c). These hours shall
be credited to the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation period in
which the award, agreement or payment is made.
(d) Solely for purposes of determining whether a Break in
Service, as defined in Section 2.4, for participation and vesting purposes
has occurred in a computation period, an individual who is absent from
work for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be determined,
eight (8) hours of service per normal workday of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence:
(i) by reason of the pregnancy of the individual;
(ii) by reason of a birth of a child of the individual;
(iii) by reason of the placement of a child with the individual
in connection with the adoption of such child by such
individual; or
(iv) for purposes of caring for such child for a period
beginning immediately following such birth or placement.
The Hours of Service credited under this Section 2.18 shall be credited
(i) in the computation period in which the absence begins if the crediting
is necessary to prevent a Break in Service in that period, or (ii) in all
other cases the following computation period.
(e) Hours of Service shall be determined on the basis of actual
hours for which an Employee is paid or entitled to payment unless a
different method of determining Hours of Service is selected in item 4(A)
of the Adoption Agreement.
(f) In the event the Employer maintains the plan of a
predecessor employer, service for such predecessor employer shall be
treated as service for the Employer. Hours of Service will be credited
for employment with members of an affiliated service group under Code
Section 414(m), a controlled group of corporations under Code Section
414(b), or a group of trades or businesses under common control under Code
Section 414(c) of which the Employer is a member and any other entity
required to be aggregated with the Employer pursuant to Code Section
414(o) and the Regulations thereunder. Hours of Service will also be
credited for any Leased Employee for purposes of this Plan under Code
Sections 414(n) or (o) and the Regulations thereunder, unless excluded
under item 4 of the Adoption Agreement.
Section 2.19. "Investment Advisor" means Resource Capital
Advisers, Inc.
Section 2.20. "Investment Company" means one or more of the
series of the regulated investment company commonly known as the
Eastcliff Funds or any other regulated investment company(ies) designated
by the Investment Advisor.
Section 2.21. "Investment Company Shares" means the shares of
each Investment Company.
Section 2.22. "Leased Employee" means any individual who is
considered a leased employee within the meaning of Code Sections 414(n) or
(o). For purposes of this Section, a Leased Employee means any person
who, pursuant to an agreement between the Employer and any other person
(which may include the Leased Employee), has performed services for the
Employer (or for the Employer and any Related Employer) in a capacity
other than as a common law employee on a substantially full-time basis for
a period of at least one year, and such services are of a type
historically performed by employees in the business field of the Employer.
Notwithstanding the foregoing, no individual shall be considered to be a
Leased Employee if (a) such individual is covered by a money purchase
pension plan providing: (i) a non-integrated employer contribution rate
of at least ten percent (10%) of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the individual's gross
income under Code Sections 125, 402(a)(8), 402(h) or 403(b), (ii)
immediate participation, and (iii) full and immediate vesting and (b)
Leased Employees do not constitute more than twenty percent (20%) of the
Employer's nonhighly compensated work force. Contributions or benefits
provided to a Leased Employee by the leasing organization which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
Section 2.23. "Matching Contribution" means an Employer
contribution made to the Plan or any other defined contribution plan on
behalf of a participating Employee on account of a participating
Employee's Elective Deferrals pursuant to Section 5.3 hereof or on account
of any employee contributions or elective deferrals made to any other
plan.
Section 2.24. "Net Profits" means the current or accumulated
earnings of the Employer before federal and state taxes and contributions
to this or any other qualified plan.
Section 2.25. "Normal Retirement Age" means age 65 or such
other age as selected in item 11 of the Adoption Agreement (Profit Sharing
Plan) and item 9 of the Adoption Agreement (Pension Plan). If the
Employer enforces a mandatory retirement age, the Normal Retirement Age
shall be the lesser of such mandatory retirement age or the age specified
in the Adoption Agreement.
Section 2.26. "Original Plan" means any defined contribution
plan which meets the requirements of Code Section 401 and referred to in
Article XII of the Plan.
Section 2.27. "Owner-Employee" means an individual who is a
sole proprietor, or who is a partner owning more than ten percent (10%) of
either the capital or profits interest of the partnership.
Section 2.28. "Participant" means each Employee (including any
eligible Self-Employed Individual) who has completed the requirements for
eligibility specified in Section 3.1 hereof. Each such Employee shall
become a Participant as of the earlier of: (i) the first day of the Plan
Year or (ii) the first day of the seventh month of the Plan Year beginning
after he completes such requirements.
Section 2.29. "Participant Voluntary Contributions" means
contributions by a Participant under the Plan pursuant to Section 4.3, if
elected in item 9 of the Adoption Agreement (Profit Sharing Plan) and item
8 of the Adoption Agreement (Pension Plan).
Section 2.30. "Pension Plan" means the feature of the Plan
pursuant to which the Employer makes Employer Pension Contributions. Such
feature applies only to the extent elected in item 6 of the Adoption
Agreement (Pension Plan).
Section 2.31. "Plan" means this prototype profit sharing plan
and/or money purchase pension plan, together with the appropriate Adoption
Agreement(s), as set forth herein and as may be amended from time to time.
As used herein, the term Plan shall mean either or both the money purchase
pension plan and the profit-sharing plan depending on whether the Employer
has adopted one or both plans.
Section 2.32. "Plan Year" means the twelve (12) consecutive
month period designated in item 2 of the Adoption Agreement. The first
Plan Year shall commence on the Effective Date.
Section 2.33. "Profit Sharing Plan" means the features of the
Plan pursuant to which all contributions, other than Employer Pension
Contributions, are made to the Plan, including any contributions pursuant
to the cash or deferred arrangement (Section 401(k)) described in Article
V hereof. Such features apply only to the extent elected in items 6
and/or 8 of the Adoption Agreement (Profit Sharing Plan).
Section 2.34. "Related Employer" means an organization which,
together with the Employer, constitutes (i) a controlled group of
corporations as defined in Code Section 414(b); (ii) trades or businesses
under common control as defined in Code Section 414(c); (iii) an
affiliated service group as defined in Code Section 414(m); or (iv) a
group of employers required to be aggregated under Code Section 414(o).
Section 2.35. "Self-Employed Individual" means an individual
who has Earned Income for the taxable year from the trade or business for
which.the Plan was established or who would have had Earned Income but for
the fact that the trade or business had no Net Profits for the taxable
year.
Section 2.36. "Valuation Date" means the last day of each Plan
Year and such other times as shall be determined by the Administrator.
Section 2.37. "Year of Employment" means the twelve (12)
consecutive month period, beginning on the date the Employee first
performs an Hour of Service or any anniversary thereof, in which the
Employee completes at least one thousand (1,000) Hours of Service or such
lesser number of Hours of Service as selected in item 4 of the Adoption
Agreement.
Section 2.38. "Year of Service" means a Plan Year in which the
Employee completes at least one thousand (1,000) Hours of Service or such
lesser number of Hours of Service as selected in item 7 of the Adoption
Agreement.
ARTICLE III. PARTICIPATION
Section 3.1. Participation at Effective Date. Each Employee
shall become a Participant on the Effective Date, if on the Effective Date
such Employee has completed the number of Years of Employment and has
attained age 21 or such lesser age as elected in item 4 of the Adoption
Agreement.
Section 3.2. Participation after Effective Date. Each
Employee who did not become a Participant as of the Effective Date,
including future Employees, shall be entitled to become a Participant in
accordance with Section 2.28 after such Employee has completed the number
of Years of Employment and has attained age 21 or such lesser age as
elected in item 4 of the Adoption Agreement.
Section 3.3. Reentry. A former Participant shall become a
Participant immediately upon his return to employment with the Employer or
his return to an eligible class of Employees, whichever is applicable. In
the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee will
become a Participant in accordance with Section 3.2 above; provided that
if the Employee has previously satisfied the eligibility requirements of
Section 3.2, the Employee shall become a Participant immediately upon
becoming a member of the eligible class of Employees.
Section 3.4. Participation by an Owner-Employee of More Than
One Trade or Business.
(a) If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business with respect to which
this Plan is established, and one or more other trades or businesses, this
Plan and the plan established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy Code Sections
401(a) and (d) with respect to the employees of this and all such other
trades or businesses.
(b) If this Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or businesses,
the employees of each such other trade or business must be included in a
plan which satisfies Code Section 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for such
Owner-Employees under this Plan.
(c) If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which he does not control, and
such individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trade or business which he
or she does control must be as favorable as those provided for him or her
under the most favorable plan of the trade or business which he or she
does not control.
(d) For purposes of the preceding subparagraphs, an
Owner-Employee, or two or more Owner-Employees, shall be considered to
control a trade or business if such Owner-Employee, or such two or more
Owner-Employees together, own the entire interest in an unincorporated
trade or business, or, in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits interest in
such partnership. For purposes of the preceding sentence, an
Owner-Employee, or two or more Owner-Employees, shall be treated as owning
any interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to control within the meaning of the
preceding sentence.
(e) Employees and Owner-Employees of trades or businesses which
are under common control (within the meaning of Code Section 414(c)) and
Employees and Owner-Employees of the members of an affiliated service
group (within the meaning of Code Section 414(m)) or of a group of
aggregated employers (under Code Section 414(o)) will be treated as
employed by a single Employer for purposes of employee benefit
requirements of Code Section 414(m)(4).
ARTICLE IV. CONTRIBUTIONS
Section 4.1. Employer Profit Sharing Contributions.
(a) If elected in item 6 of the Adoption Agreement (Profit
Sharing Plan), the Employer shall make an Employer Profit Sharing
Contribution for each Plan Year ending on or after the Effective Date in
the amount determined under such Adoption Agreement.
(b) The total amount of such Employer Profit Sharing
Contribution for a Plan Year shall be allocated to the Account of each
eligible Participant as follows:
(i) Unless otherwise elected in item 6(C) of the Adoption
Agreement, the total amount of such Employer Profit Sharing Contribution
shall be allocated based on the ratio that such eligible Participant's
Compensation and/or Earned Income for the Plan Year bears to the total
Compensation and Earned Income of all eligible Participants for the Plan
Year.
(ii) If the Integration Formula is selected in item 6(C) of the
Adoption Agreement, the total amount of such Employer Profit Sharing
Contribution shall be allocated based on the ratio that such eligible
Participant's Compensation and/or Earned Income for the Plan Year in
excess of the integration level for the Plan Year bears to the total
Compensation and Earned Income for all eligible Participants in excess of
the integration level for the Plan Year; provided, however, that
contributions allocated to a Participant with respect to Compensation
and/or Earned Income in excess of the integration level shall not
represent a greater percentage of such excess Compensation and/or Earned
Income than the lesser of
(A) 200% of the base contribution
percentage, or
(B) the base contribution percentage
plus the greater of
(I) 5.7%, or
(II) the rate of tax under
Code Section 3111(a)
which is attributable to
old-age insurance in
effect at the beginning
of the Plan Year.
Any Employer Profit Sharing Contribution remaining after the allocation in
this subsection (ii) shall be allocated in accordance with subsection (i)
above. The "integration level" shall be the taxable wage base or such
lesser level of Compensation and/or Earned Income selected in item 6(C) of
the Adoption Agreement. The "base contribution percentage" shall mean the
percentage of Compensation and/or Earned Income which is contributed under
the Plan with respect to each Participant's Compensation and/or Earned
Income not in excess of the integration level.
If the integration level exceeds the greater of ten thousand
dollars ($10,000) or one-fifth (1/5) of the taxable wage base but is not
more than eighty percent (80%) of the taxable wage base, the percentage
referred to in (I) above shall be reduced to 4.3% and a proportionate
reduction shall be made to the rate described in (II) above. If the
integration level is more than eighty percent (80%) but less than one
hundred percent (100%) of the taxable wage base, the percentage referred
to in (I) above shall be reduced to 5.4% and a proportionate reduction
shall be made to the rate described in (II) above. The "taxable wage
base" shall be the maximum amount of earnings which may be considered
wages for a year under Code Section 3121(a)(1) in effect as of the
beginning of the applicable Plan Year.
Notwithstanding the above, for any Plan Year in which the Plan
is top-heavy (as defined in Section 13.1 hereof) the Employer Profit
Sharing Contribution shall be allocated
(A) first, to each eligible
Participant based on the ratio
that such Participant's
Compensation and/or Earned Income
for the Plan Year bears to the
total Compensation and Earned
Income of all eligible
Participants for the Plan Year,
but not more than three percent
(3%) of such Participant's
Compensation and/or Earned Income,
(B) second, to each eligible
Participant based on the ratio
that such Participant's
Compensation and/or Earned Income
in excess of the integration level
for the Plan Year bears to the
total Compensation and Earned
Income of all eligible
Participants in excess of the
integration level for the Plan
Year, but not more than three
percent (3%) of such Participant's
excess Compensation and/or Earned
Income, and
(C) any remaining Employer Profit
Sharing Contribution shall be
allocated pursuant to the
provisions of this subsection (ii)
above.
(c) A Participant will be considered eligible for an allocation
of the Employer Profit Sharing Contribution if the Participant (i) is
employed by the Employer on the last day of the Plan Year or (ii) has
completed at least Five Hundred one (501) Hours of Service during the Plan
Year.
(d) If elected in item 6(B) of the Adoption Agreement, Employer
Profit Sharing Contributions for a Plan Year shall not exceed the Net
Profits of the Employer for such Plan Year.
Section 4.2. Employer Pension Contributions.
(a) If elected in item 6 of the Adoption Agreement (Pension
Plan), the Employer shall make an Employer Pension Contribution for each
eligible Participant for each Plan Year ending on or after the Effective
Date in an amount determined under such Adoption Agreement.
(b) The total amount of such Employer Pension Contribution for
a Plan Year shall be allocated to the Account of each eligible Participant
as follows:
(i) Unless otherwise elected in item 6(B) of the Adoption
Agreement, each eligible Participant shall be allocated an amount equal to
the percentage of such eligible Participant's Compensation and/or Earned
Income as specified in the Adoption Agreement.
(ii) If the Integration Formula is selected in item 6(B) of the
Adoption Agreement, the total amount of such Employer Pension Contribution
shall be allocated in accordance with the method described in Section
4.1(b)(ii) above. Notwithstanding the foregoing, if the Integration
Formula is selected under the Profit Sharing Plan, the Employer Pension
Contribution shall be allocated in accordance with subsection (b)(i)
above.
(c) A Participant will be considered eligible for an Employer
Pension Contribution if the Participant (i) is employed by the Employer on
the last day of the Plan Year or (ii) has completed at least Five Hundred
one (501) Hours of Service during the Plan Year.
Section 4.3. Participant Voluntary Contributions.
(a) If elected in item 9 of the Adoption Agreement (Profit
Sharing Plan) or item 8 of the Adoption Agreement (Pension Plan), a
Participant may voluntarily contribute to the Plan an amount up to ten
percent (10%) of his aggregate Compensation for all years since becoming a
Participant under this Plan and all other qualified plans of the Employer.
Any Participant Voluntary Contributions shall be limited in accordance
with the provisions of Section 5.3, even if the Employer does not elect
the Cash or Deferred Arrangement (Section 401(k)) under item 8 of the
Adoption Agreement (Profit Sharing Plan). If the Profit Sharing Plan is
elected, all Participant Voluntary Contributions shall be deemed made to
such plan. Participant Voluntary Contributions shall be limited to
Participants who are not highly compensated employees (within the meaning
of Code Section 414(q)) if elected in the Adoption Agreement.
(b) A Participant shall be entitled to withdraw from his
appropriate Account at any time upon thirty (30) days' notice from the
Administrator to the Custodian (which notice shall specify the amount of
the withdrawal), a sum not in excess of the capital amount contributed by
him as Participant Voluntary Contributions under the provisions of this
Section 4.3, or the value of such Account, whichever is less, provided
that no ordinary income or capital gains attributable to such
contributions shall be subject to withdrawal. Notwithstanding anything to
the contrary herein, (i) all withdrawals are subject to the provisions of
Article VIII, and (ii) no forfeiture shall occur solely as a result of a
Participant's withdrawal of all or any portion of his Participant
Voluntary Contributions.
(c) No deductible voluntary employee contributions may be made
for taxable years beginning after December 31, 1986. Such contributions
made prior to that date will be maintained in a separate Account which
will be nonforfeitable at all times. The Account will share in the gains
or losses in the same manner as described in Section 9.3 of the Plan.
Subject to Section 8.2, a Participant may withdraw any part of the
deductible voluntary contribution Account by making a written application
to the Administrator.
Section 4.4. Time for Making Contributions. Employer Pension
Contributions and Employer Profit Sharing Contributions must be made no
later than the due date, including extensions thereof, for filing the
Employer's Federal income tax return for the year coincident with or
within which the Plan Year ends (or such later time as authorized by
Treasury Regulations). Participant Voluntary Contributions for any Plan
Year shall be made no later than thirty (30) days after the end of such
Plan Year. The Employer may establish a payroll deduction system or other
procedure to assist the making of Participant Voluntary Contributions and
shall transfer such contributions to the Custodian as soon as practicable
after collected.
Section 4.5. Leased Employees. Contributions or benefits
provided to a Leased Employee by the leasing organization (within the
meaning of Code Section 414(n)) which are attributable to services
performed for the Employer shall be treated as provided by the Employer
for purposes of this Plan.
Section 4.6. Rollovers and Transfers. In the discretion of
the Administrator according to such uniform and nondiscriminatory rules
established by the Administrator, and in accordance with Sections 402 and
408 of the Code, a Participant may make a rollover to the Plan or the Plan
may accept a direct transfer (including voluntary after-tax contributions)
from another plan qualified under Section 401(a) of the Code or from an
individual retirement account. If the Employer has adopted the Profit
Sharing Plan, any rollover or transfer shall be made to such Plan.
ARTICLE V. CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k))
Section 5.1. Cash or Deferred Arrangement (Code Section
401(k)). The provisions of this Article shall be effective as of the
first day of the Plan Year in which this cash or deferred arrangement is
elected in item 8 of the Adoption Agreement (Profit Sharing Plan). Under
no circumstances shall the provisions of this Article apply prior to the
time specified in the preceding sentence.
Section 5.2. Elective Deferrals. (a) Election. (i) An
Employee who has satisfied the minimum age and service requirements set
forth in item 8(A) of the Adoption Agreement (Profit Sharing Plan) may
elect to have Elective Deferrals made to the Plan pursuant to a salary
reduction agreement to the extent permitted in item 8(A) of the Adoption
Agreement (Profit Sharing Plan). Such an election shall be effective as
of the time specified in item 8(A) of the Adoption Agreement (Profit
Sharing Plan) and may not be made effective retroactively.
(ii) An eligible Employee may also base Elective Deferrals, to
the extent provided in item 8(A) of the Adoption Agreement (Profit Sharing
Plan), on cash bonuses that, at the Employee's election, may be
contributed to the Plan or received by the Employee. Such an election
shall be effective as of the time specified in item 8(A) of the Adoption
Agreement (Profit Sharing Plan) and may not be made effective
retroactively.
(b) Change in Rate. The rate at which Elective Deferrals are
made shall remain in effect until modified in accordance with item 8(A) of
the Adoption Agreement (Profit Sharing Plan). Notwithstanding the
foregoing, Elective Deferrals may be suspended entirely by an Employee at
any time by written notice to the Administrator. Any such suspension
shall be effective as soon as administratively practicable following the
Administrator's receipt of such notice.
(c) Vesting. A Participant shall at all times have a fully
vested and nonforfeitable interest in his Elective Deferrals.
(d) Excess Elective Deferrals. (i) No Participating Employee
shall be permitted to have Elective Deferrals made under this Plan or any
other qualified plan maintained by the Employer during any taxable year
pursuant to Code Sections 401(k), 408(k) or 403(b) in excess of the dollar
limitation contained in Code Section 402(g) in effect at the beginning of
such taxable year.
(ii) A Participating Employee may assign to the Plan any Excess
Elective Deferrals made during a taxable year of such Employee by
notifying the Administrator on or before the date specified below of the
Excess Elective Deferrals to be assigned to the Plan. Notwithstanding any
other provision of the Plan, Excess Elective Deferrals, plus any income
and minus any loss allocable thereto, may be distributed no later than
April 15 to any Participating Employee to whose Accounts Excess Elective
Deferrals were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year. A Participating Employee's
claim for Excess Elective Deferrals shall be made in writing and shall be
submitted to the Administrator not later than the March 1 immediately
preceding the relevant April 15. Such claim shall specify the amount of
the Participating Employee's Excess Elective Deferrals for the preceding
taxable year and shall be accompanied by the Participating Employee's
written statement that if such amounts are not distributed, such Excess
Elective Deferrals, when added to amounts deferred under other plans or
arrangements described in Code Sections 401(k), 408(k) or 403(b), exceed
the limit imposed on the Participating Employee by Code Section 402(g) for
the year of the deferral.
(iii) Excess Elective Deferrals shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to Excess Elective Deferrals is the sum of:
(A) income or loss allocable to the
participating Employee's Elective Deferrals
Account for the taxable year for which the
Excess Elective Deferrals occurred
multiplied by a fraction, the numerator of
which is such Participating Employee's
Excess Elective Deferrals for such taxable
year and the denominator of which is such
Participating Employee's Elective Deferrals
Account balance as of the end of the taxable
year without regard to any income or loss
occurring during such taxable year; and
(B) income or loss allocable to the
Participating Employee's Elective Deferrals
Account for the period between the end of
such taxable year and the date of
distribution under (A) above; or, at the
option of the Employer, ten percent (10%) of
the amount determined under (A) above
multiplied by the number of whole calendar
months between the end of such taxable year
and the date of distribution, counting the
month of distribution if distribution occurs
after the fifteenth (15th) of such month.
The amount of Excess Elective Deferrals that may be distributed with
respect to a Participating Employee shall be reduced by any Excess
Contributions previously distributed or recharacterized with respect to
such Participating Employee for the Plan Year beginning with or within
such taxable year. In no event may the amount distributed exceed the
Participating Employee's total Elective Deferrals for such taxable year.
(e) Actual Deferral Percentage. (i) The Actual Deferral
Percentage for Participating Employees who are Highly Compensated
Employees for each Plan Year and the Actual Deferral Percentage for
Participating Employees who are not Highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
(A) The Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Deferral
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(B) The Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Deferral
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided
that the Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees does not exceed the
Actual Deferral Percentage for Participating
Employees who are not Highly Compensated
Employees by more than two (2) percentage
points.
(ii) The Actual Deferral Percentage for any Participating
Employee who is a Highly Compensated Employee for the Plan Year and who is
eligible to have Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) allocated to
his Accounts under two or more arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) were made
under a single arrangement. If a Highly Compensated Employee participates
in two or more cash or deferred arrangements that have different Plan
Years, contributions for such employee shall be aggregated for purposes of
this subsection (e). Contributions which are required to be aggregated
are any contributions made under all cash or deferred arrangements ending
with or within the same calendar year.
(iii) In the event that the Plan satisfies the requirements
of Code Sections 401(k), 401(a)(4) or 410(b) only if aggregated with one
or more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan, then
this subsection shall be applied by determining the Actual Deferral
Percentage of Participating Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code Section 401(k) only if they have the
same Plan Year.
(iv) For purposes of determining the Actual Deferral Percentage
of a Participating Employee who is a five (5) percent owner or one of the
ten (10) most highly-paid Highly Compensated Employees, the Elective
Deferrals (and Qualified Non-Elective Contributions and Qualified Matching
Contributions, or both) and Compensation of such Participating Employee
shall include the Elective Deferrals (and, if applicable, Qualified
Non-Elective Contributions and Qualified Matching Contributions, or both)
and Compensation for the Plan Year of Family Members. Family Members,
with respect to such Highly Compensated Employees, shall be disregarded as
separate employees in determining the Actual Deferral Percentage both for
Participating Employees who are not Highly Compensated Employees and for
Participating Employees who are Highly Compensated Employees.
(v) For purposes of determining the Actual Deferral Percentage
test, Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions must be made before the last day of the
twelve-month period immediately following the Plan Year to which such
contributions relate.
(vi) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Deferral Percentage test and the
amount of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(vii) The determination and treatment of the Actual Deferral
Percentage amounts of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(f) Distribution of Excess Contributions. (i) Notwithstanding
any other provision of this Plan, Excess Contributions, plus any income
and minus any loss allocable thereto, shall be distributed no later than
the last day of each Plan Year to Participating Employees to whose
Accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than two and one-half
(2-1/2) months after the last day of the Plan Year in which such excess
amounts arose, a ten percent (10%) excise tax will be imposed on the
Employer with respect to such amounts. Such distributions shall be made
to Highly Compensated Employees on the basis of the respective portions of
the Excess Contributions attributable to each of such Employees. Excess
Contributions shall be allocated to Participating Employees who are
subject to the family member aggregation rules of Code Section 414(q)(6)
in the manner prescribed by the regulations. Excess Contributions
(including any amounts recharacterized) shall be treated as Annual
Additions for purposes of Article VI of the Plan.
(ii) Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Contributions is the sum of:
(A) income or loss allocable to the
Participating Employee's Elective Deferrals
Account (and, if applicable, the Qualified
Non-Elective Contributions Account or the
Qualified Matching Contributions Account, or
both) for the Plan Year for which the Excess
Contributions occurred multiplied by a
fraction, the numerator of which is such
Participating Employee's Excess
Contributions for such Plan Year and the
denominator of which is such Participating
Employee's Account balance(s) attributable
to Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified
Matching Contributions, or both) as of the
end of the Plan Year without regard to any
income or loss occurring during such Plan
Year; and
(B) income or loss allocable to the
Participant's Elective Deferrals Account
(and, if applicable, the Qualified
Non-Elective Contribution Account or the
Qualified Matching Contribution Account, or
both) for the period between the end of such
Plan Year and the date of distribution
multiplied by the fraction determined under
(A) above; or, at the option of the
Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the
number of whole calendar months between the
end of such Plan Year and the date of
distribution, counting the month of
distribution if distribution occurs after
the fifteenth (15th) of such month.
(iii) Excess Contributions shall be distributed from the
Participating Employee's Elective Deferrals Account and Qualified Matching
Contributions Account (if applicable) in proportion to the Participating
Employee's Elective Deferrals and Qualified Matching Contributions (to the
extent used in the Actual Deferral Percentage test) for the Plan Year.
Excess Contributions shall be distributed from the Participating
Employee's Qualified Non-Elective Contributions Account only to the extent
that such Excess Contributions exceed the balance in the Participating
Employee's Elective Deferrals Account and Matching Contributions Account.
(g) Recharacterization. (i) A Participating Employee may
treat his Excess Contributions as an amount distributed to the
Participating Employee and then contributed by the Participating Employee
to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective Deferrals.
Amounts may not be recharacterized by a Highly Compensated Employee to the
extent that such amount in combination with other Participant Voluntary
Contributions would exceed any stated limit under the Plan on Participant
Voluntary Contributions. Recharacterizing Excess Contributions shall be
limited to Participants who are not Highly Compensated Employees if
elected in the Adoption Agreement.
(ii) Recharacterization must occur no later than two and
one-half (2-1/2) months after the end of the Plan Year in which such
Excess Contributions arose and is deemed to occur no earlier than the date
the last Highly Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts
will be taxable to the Participating Employee for such Participating
Employee's taxable year in which the Participating Employee would have
received them in cash.
Section 5.3. Matching Contributions. (a) The Employer shall
make Employer Matching Contributions to the Plan to the extent elected in
item 8(B) of the Adoption Agreement (Profit Sharing Plan).
(b) A Participant shall have a vested interest in his Matching
Contributions Account as determined under the vesting schedule elected in
item 8(B) of the Adoption Agreement (Profit Sharing Plan). Forfeitures
derived from Matching Contributions which become available because of the
vesting provisions above, shall be applied to reduce the Employer Matching
Contributions that would otherwise be due for the Plan Year, or subsequent
Plan Years.
(c) Actual Contribution Percentage. (i) The Actual
Contribution Percentage for Participating Employees who are Highly
Compensated Employees for each Plan Year and the Actual Contribution
Percentage for Participating Employees who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the following tests:
(A) The Actual Contribution Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Contribution
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(B) The Actual Contribution Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Contribution
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by two (2),
provided that the Actual Contribution
Percentage for Participating Employees who
are Highly Compensated Employees does not
exceed the Actual Contribution Percentage
for Participating Employees who are not
Highly Compensated Employees by more than
two (2) percentage points.
(ii) If one or more Highly Compensated Employees participate in
both a cash or deferred arrangement and a plan subject to the Actual
Contribution Percentage test maintained by the Employer and the sum of the
Actual Deferral Percentage and the Actual Contribution Percentage of those
Highly Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the Actual Contribution Percentage of those Highly
Compensated Employees who also participate in a cash or deferred
arrangement will be reduced (beginning with such Highly Compensated
Employee whose Actual Contribution Percentage is the highest) so that the
limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amount is reduced shall be treated as
an Excess Aggregate Contribution. The Actual Deferral Percentage and the
Actual Contribution Percentage of the Highly Compensated Employees are
determined after any corrections required to meet the Actual Deferral
Percentage and the Actual Contribution Percentage tests. Multiple use
does not occur if both the Actual Deferral Percentage and the Actual
Contribution Percentage of the Highly Compensated Employees does not
exceed 1.25 multiplied by the Actual Deferral Percentage and the Actual
Contribution Percentage of the Participating Employees who are not Highly
Compensated Employees.
(iii) For purposes of this subsection, the Contribution
Percentage for any Participating Employee who is a Highly Compensated
Employee and who is eligible to have Contribution Percentage Amounts
allocated to his account under two or more plans described in Code Section
401(a), or arrangements described in Code Section 401(k) that are
maintained by the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall be treated
as a single arrangement.
(iv) In the event that this Plan satisfies the requirements of
Code Sections 401(m), 401(a)(4) or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements
of such Code Sections only if aggregated with this Plan, then this
subsection shall be applied by determining the Contribution Percentage of
employees as if all such plans were a single plan. For plan years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy Code Section 401(m) only if they have the same plan year.
(v) For purposes of determining the Contribution Percentage of
a Participating Employee who is a five percent owner or one of the ten
(10) most highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participating Employee shall
include the Contribution Percentage Amounts and Compensation for the Plan
Year of Family Members. Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate employees in
determining the Contribution Percentage both for Participating Employees
who are not Highly Compensated Employees and for Participating Employees
who are Highly Compensated Employees.
(vi) For purposes of determining the Contribution Percentage
test, Employee Contributions are considered to have been made in the Plan
Year in which contributed to the trust. Matching Contributions and
Qualified Non-Elective Contributions shall be considered made for a Plan
Year if made no later than the end of the twelve-month period beginning on
the day after the close of the Plan Year.
(vii) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Contribution Percentage test and
the amount of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(viii) The determination and treatment of the Contribution
Percentage of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(d) Distribution of Excess Aggregate Contributions. (i)
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participating Employees to whose
Accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated to
Participating Employees who are subject to the family member aggregation
rules of Code Section 414(q)(6) in the manner prescribed by the
regulations. If such Excess Aggregate Contributions are distributed more
than two and one-half (2-1/2) months after the last day of the Plan Year
in which such excess amounts arose, a ten percent (10%) excise tax will be
imposed on the Employer with respect to those amounts. Excess Aggregate
Contributions shall be treated as Annual Additions for purposes of Article
VI of the Plan.
(ii) Excess Aggregate Contributions shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to Excess Aggregate Contributions is the sum of:
(A) income or loss allocable to the
Participating Employee's Participant
Voluntary Contributions Account, Matching
Contributions Account, Qualified Matching
Contribution Account (if any, and if all
amounts therein are not used in the Actual
Deferral Percentage test) and, if
applicable, Qualified Non-Elective
Contributions Account and Elective Deferrals
Account for the Plan Year for which the
Excess Aggregate Contributions occurred
multiplied by a fraction, the numerator of
which is such Participating Employee's
Excess Aggregate Contributions for such Plan
Year and the denominator of which is the
Participating Employee's Account balance(s)
attributable to Contribution Percentage
Amounts as of the end of the Plan Year
without regard to any income or loss
occurring during such Plan Year; and
(B) income or loss allocable to the
Participating Employee's Participant
Voluntary Contribution Account, Matching
Contributions Account, Qualified Matching
Contribution Account (if any, and if all
amounts therein are not used in the Actual
Deferral Percentage test) and, if
applicable, Qualified Non-Elective
Contributions Account and Elective Deferrals
Account for the period between the end of
such Plan Year and the date of distribution
multiplied by the fraction determined under
(A) above; or, at the election of the
Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the
number of whole calendar months between the
end of such Plan Year and the date of
distribution, counting the month of
distribution if distribution occurs after
the fifteenth (15th) of such month.
(iii) Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer contributions for subsequent Plan Years.
(iv) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a prorata basis from the Participating
Employee's Participant Voluntary Contributions Account, Matching
Contributions Account and Qualified Matching Contribution Account (and, if
applicable, the Participating Employee's Qualified Non-Elective
Contributions Account or Elective Deferrals Account, or both).
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions. (a) Qualified Matching Contributions. The
Employer may elect to make Qualified Matching Contributions under the Plan
in item 8(C) of the Adoption Agreement. Qualified Matching Contributions
may be made in lieu of distributing Excess Contributions as provided in
Section 5.2(f) hereof. Qualified Matching Contributions may be either (i)
additional amounts contributed to the Plan by the Employer and allocated
to the Accounts of Participating Employees who are not Highly Compensated
Employees based on such Employees' Elective Deferrals or (ii) Matching
Contributions otherwise made to the Plan pursuant to Section 5.3(a) hereof
which the Employer designates as Qualified Matching Contributions. The
amount of Qualified Matching Contributions (if any) shall be determined by
the Employer for each year. All Qualifying Matching Contributions shall
be used to satisfy the Actual Deferral Percentage test pursuant to
regulations under the Code.
(b) The Employer may elect to make Qualified NonElective
Contributions under the Plan in item 8(C) of the Adoption Agreement.
Qualified Non-Elective Contributions may be made in lieu of distributing
Excess Contributions as provided in Section 5.2(f) or Excess Aggregate
Contributions as provided in Section 5.3(d) hereof. Qualified
Non-Elective Contributions may be either (i) additional amounts
contributed to the Plan by the Employer and allocated to the Accounts of
Participating Employees who are not Highly Compensated Employees based on
such Employees' Compensation or (ii) Profit Sharing Contributions
otherwise made to the Plan pursuant to Section 4.1(a) hereof which the
Employer designates as Qualified Non-Elective Contributions. The amount
of Qualified Non-Elective Contributions (if any) shall be determined by
the Employer for each year. All Qualified Non-Elective Contributions
shall be used to satisfy either the Actual Deferral Percentage test or the
Average Contribution Percentage test, or both, pursuant to regulations
under the Code.
(c) Separate accounts for Qualified Non-Elective Contributions
and Qualified Matching Contributions will be maintained for each
Participant consistent with Section 7.1 hereof. Each account will be
credited with the applicable contributions and earnings thereon.
(d) For purposes of the special distribution rules in Section
5.5, Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be treated as Elective Deferrals.
(e) Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be appropriately designated when contributed.
Section 5.5. Special Distribution Rules. Except as provided
below, Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions, and income allocable to each, are not
distributable to a Participant or a Beneficiary, in accordance with such
Participant's or Beneficiary's election, earlier than upon separation from
service, death, or disability.
(a) Financial Hardship. (i) If elected by the Employer in item
8(D) of the Adoption Agreement (Profit Sharing Plan), a Participant may
elect to withdraw all or any portion of his Elective Deferrals (excluding
net earnings credited thereto after December 31, 1988) on account of
financial hardship. For purposes of this Section 5.5, a financial
hardship shall mean an immediate and heavy financial need of the
Participant which cannot be satisfied from other resources reasonably
available to such Participant. Hardship withdrawals are subject to the
spousal consent requirements of Code Sections 401(a)(11) and 417.
(ii) A withdrawal is made on account of an immediate and heavy
financial need of a Participant only if it is made on account of: (A)
unreimbursed medical expenses described in Code Section 213(d) of the
Participant or the Participant's spouse or dependents (as defined in Code
Section 152); (B) the purchase (excluding mortgage payments) of a
principal residence for the Participant; (C) payment of tuition for the
next term of post-secondary education for the Participant or the
Participant's spouse, children or dependents; or (D) the need to prevent
the Participant's eviction from, or foreclosure on the mortgage of, the
Participant's principal residence or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
(iii) A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the Participant only if:
(A) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer; (B) all plans maintained by the Employer provide that the
Participant's Elective Deferrals and any other elective contributions or
employee contributions under this Plan and any other plan maintained by
the Employer (both qualified and nonqualified) will be automatically
suspended for twelve (12) months after the receipt of the hardship
distribution; (C) the distribution is not in excess of the amount of an
immediate and heavy financial need; and (D) all plans maintained by the
Employer provide that the Participant may not make Elective Deferrals for
the Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such taxable year less the amount of such Participant's
Elective Deferrals for the taxable year of the hardship distribution.
(iv) A request for a hardship distribution shall be made in
writing and in such form as may be prescribed by the Administrator.
Processing of applications and distributions of amounts under this
Section, on account of a bona fide financial hardship, shall be made as
soon as administratively feasible.
(b) Elective Deferrals at Age 59-1/2. Upon attaining age
fifty-nine and one-half (59-1/2), a Participant may elect to withdraw all
or any portion of his Elective Deferrals Account and/or Employer Matching
Contributions Account, as of the last day of any month, even if he is
still employed.
Section 5.6. Definitions. For purposes of this Article, the
following words and phrases shall have the following meanings:
(a) "Actual Deferral Percentage" means, for a specified group
of Participating Employees for a Plan Year, the average of the ratios
(calculated separately for each Participating Employee in such group) of
(i) the amount of Employer contributions actually paid over to the trust
on behalf of such Participating Employee for the Plan Year to (ii) the
Participating Employee's Compensation for such Plan Year (whether or not
the Employee was a Participating Employee for the entire Plan Year).
Employer contributions on behalf of any Participating Employee shall
include: (i) any Elective Deferrals made pursuant to the Participating
Employee's deferral election, including Excess Elective Deferrals of
Highly Compensated Employees, but excluding Elective Deferrals that are
taken into account in the Contribution Percentage test (provided the
Actual Deferral Percentage test is satisfied both with and without
exclusion of these Elective Deferrals); and (ii) at the election of the
Employer, Qualified Non-Elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participating Employee but for the failure to make
Elective Deferrals shall be treated as a Participating Employee on whose
behalf no Elective Deferrals are made.
(b) "Aggregate Limit" means the sum of (i) one hundred
twenty-five percent (125%) of the greater of the Actual Deferral
Percentage of the Participating Employees who are not Highly Compensated
Employees for the Plan Year or the Actual Contribution Percentage of
Participating Employees who are not Highly Compensated Employees under the
Plan subject to Code Section 401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred arrangement and (ii) the
lesser of two hundred percent (200%) or two (2) plus the lesser of such
Actual Deferral Percentage or Actual Contribution Percentage. "Lesser" is
substituted for "greater" in (i) above and "greater" is substituted for
"lesser" after "two plus the" in (ii) above if it would result in a larger
Aggregate Limit.
(c) "Average Contribution Percentage" means the average of the
Contribution Percentages of the Employees in a group who are eligible to
make Participant Voluntary Contributions, or Elective Deferrals (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions.
(d) "Contribution Percentage" means the ratio (expressed as a
percentage) of the Participating Employee's Contribution Percentage
Amounts to the Participating Employee's Compensation for the Plan Year
(whether or not the Employee was a Participating Employee for the entire
Plan Year).
(e) "Contribution Percentage Amounts" means the sum of the
Participant Voluntary Contributions, Matching Contributions, and Qualified
Matching Contributions (to the extent not taken into account for purposes
of the Actual Deferral Percentage test) made under the Plan on behalf of
the Participating Employee for the Plan Year. Such Contribution
Percentage Amounts shall include forfeitures of Excess Aggregate
Contributions or Matching Contributions allocated to the Participating
Employee's Accounts which shall be taken into account in the year in which
such forfeiture is allocated. The Employer may elect to include Qualified
Non-Elective Contributions in the Contribution Percentage Amounts. The
Employer also may elect to use all or part of the Elective Deferrals for
the Plan Year in the Contribution Percentage Amounts so long as the Actual
Deferral Percentage test is satisfied both including and excluding the
Elective Deferrals that are included in the Contribution Percentage
Amounts.
(f) "Excess Aggregate Contributions" means, with respect to any
Plan Year, the excess of:
(i) the aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage actually
made on behalf of Highly Compensated Employees for such Plan Year, over
(ii) the maximum Contribution Percentage Amounts permitted by
the Actual Contribution Percentage test (determined by reducing
contributions made on behalf of Highly Compensated Employees in order of
their Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 5.2(d) hereof and then determining Excess
Contributions pursuant to Section 5.2(f) hereof.
(g) "Excess Contributions" means, with respect to any Plan
Year, the excess of:
(i) the aggregate amount of Employer contributions actually
taken into account in computing the Actual Deferral Percentage of Highly
Compensated Employees for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the
Actual Deferral Percentage test (determined by reducing contributions made
on behalf of Highly Compensated Employees in order of the Actual Deferral
Percentages, beginning with the highest of such percentages).
(h) "Excess Elective Deferrals" means those Elective Deferrals
that are includible in a Participating Employee's gross income for a
taxable year under Code Section 402(g) because they exceed the limitation
specified in Section 5.2(d)(i) hereof. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan.
(i) "Family Member" means the spouse, lineal ascendants and
descendants of the employee or former employee and the spouses of such
lineal ascendants and descendants, all within the meaning of Code Section
414(q)(6).
(j) "Highly Compensated Employee" means both highly compensated
active employees and highly compensated former employees.
(i) A highly compensated active employee includes any Employee
who performs service for the Employer during the determination year and
who, during the look-back year: (i) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Code Section
415(d)); (ii) received compensation from the Employer in excess of $50,000
(as adjusted pursuant to Code Section 415(d)) and was a member of the
top-paid group for such year; or (iii) was an officer of the Employer and
received compensation during such year that is greater than 50 percent of
the dollar limitation in effect under Code Section 415(b)(1)(A). The term
Highly Compensated Employee also includes: (i) employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the employee is one of the
100 employees who received the most compensation from the Employer during
the determination year; and (ii) employees who are 5 percent owners at any
time during the look-back year or determination year. If no officer has
satisfied the compensation requirement of (iii) above during either a
determination year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Employee. For this purpose,
the determination year shall be the Plan Year. The look-back year shall
be the twelve-month period immediately preceding the determination year.
(ii) A highly compensated former employee includes any Employee
who separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the employee's fifty-fifth (55th) birthday.
(iii) If an employee is, during a determination year or
look-back year, a Family Member of either a five percent owner who is an
active or former employee or a Highly Compensated Employee who is one of
the ten (10) most highly compensated employees ranked on the basis of
Compensation paid by the Employer during such year, then the Family Member
and the five percent owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the Family Member and five percent owner or
top-ten Highly Compensated Employee shall be treated as a single employee
receiving Compensation and Plan contributions or benefits equal to the sum
of such Compensation and contributions or benefits of the Family Member
and five percent owner or top-ten Highly Compensated Employee.
(iv) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of employees in
the top-paid group, the top 100 employees, the number of employees treated
as officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q).
(k) "Participating Employee" means an Employee who is eligible
to make Elective Deferrals or Participant Voluntary Contributions (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions. If an Employee
contribution is required as a condition of participation in the Plan, any
Employee who would be a Participant in the Plan if such Employee made such
a contribution shall be treated as a Participating Employee on behalf of
whom no Employee contributions are made.
(l) "Qualified Matching Contributions" means Matching
Contributions which are one hundred percent (100%) vested and
nonforfeitable at all times and which are distributable only in accordance
with the distribution provisions applicable to Elective Deferrals.
(m) "Qualified Non-Elective Contributions" means contributions
(other than Matching Contributions or Qualified Matching Contributions)
made by the Employer and allocated to Participating Employees' Accounts
that the Participating Employees may not elect to receive in cash until
distributed from the Plan, are one hundred percent (100%) vested and
nonforfeitable when made, and are distributable only in accordance with
the distribution provisions applicable to Elective Deferrals.
ARTICLE VI. SECTION 415 LIMITATIONS
Section 6.1. Employers Maintaining Only this Plan.
(a) If the Participant does not participate in, and has never
participated in another qualified plan, a welfare benefit fund (as defined
in Code Section 419(e)) or an individual medical account (as defined in
Code Section 415(1)(2)) maintained by the Employer, the amount of Annual
Additions which may be credited to a Participant's Account under this Plan
for a Limitation Year shall not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If the
Employer's contribution that would otherwise be contributed or allocated
to the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for
the Limitation Year will equal the Maximum Permissible Amount.
(b) Prior to the determination of the Participant's actual
compensation for a Limitation Year, the Maximum Permissible Amount may be
determined on the basis of the Participant's estimated annual compensation
for such Limitation Year. Such estimated annual compensation shall be
determined on a reasonable basis and shall be uniformly determined for all
Participants similarly situated. Any Employer contributions based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(c) As soon as it is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
Compensation for such Limitation Year.
(d) If, pursuant to Section 6.1(c) and notwithstanding the
provisions of Section 6.1(a) hereof which require a reduction of
contributions so as not to exceed the limitations of this Article VI,
there is an Excess Amount with respect to a Participant for a Limitation
Year, such Excess Amount shall be disposed of as follows:
(i) Any Participant Voluntary Contributions, to the extent that
the return would reduce the Excess Amount, shall be returned to the
Participant.
(ii) In the event that the Participant is covered by this Plan
at the end of the Limitation Year, remaining Excess Amounts after the
application of clause (i) shall be applied to reduce future Employer
contributions (including any allocation of forfeitures) for such
Participant under this Plan in the next Limitation Year (and each
succeeding year, as necessary).
(iii) In the event that the Participant is not covered by
this Plan at the end of the Limitation Year, remaining Excess Amounts
after the application of clause (i) shall not be distributed to the
Participant, but shall be held unallocated in a suspense account and shall
be applied to reduce future Employer contributions (including any
allocation of forfeitures) for all remaining Participants in the next
Limitation Year (and each succeeding year, as necessary).
(iv) If a suspense account is in existence at any time during
the Limitation Year pursuant to this Section, it will not participate in
the allocation of any investment gains and losses, and all amounts in the
suspense account must be allocated and reallocated to Participants'
Accounts before any Employer or Employee contributions may be made to the
Plan for such Limitation Year. Excess amounts may not be distributed to
Participants or former Participants.
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans.
(a) If, in addition to this Plan, the Participant is covered
under another qualified defined contribution plan which qualifies as a
Master or Prototype Plan or a welfare benefit fund (as defined in Code
Section 419(e)) or an individual medical account (as defined in Code
Section 415(1)(2)) maintained by the Employer during any Limitation Year,
the amount of Annual Additions which may be allocated under this Plan on
the Participant's behalf for such Limitation Year, shall not exceed the
Maximum Permissible Amount reduced by the Annual Additions credited to a
Participant's account under such other plans, welfare benefit funds or
individual medical accounts for the same Limitation Year. If the Annual
Additions with respect to the Participant under other defined contribution
plans and welfare benefit funds maintained by the Employer are less than
the Maximum Permissible Amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account under
this Plan would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated will be
reduced so that the Annual Additions under all such plans and funds for
the Limitation Year will equal the Maximum Permissible Amount. If the
Annual Additions with respect to the Participant under such other defined
contribution plans and welfare benefit funds in the aggregate are equal to
or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for
the Limitation Year.
(b) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in
subsection (a) above may be determined on the Participant's estimated
annual compensation for such Limitation Year. Such estimated annual
compensation shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly situated. Any
Employer contribution based on estimated annual compensation shall be
reduced by any Excess Amounts carried over from prior years.
(c) As soon as it is administratively feasible after the end of
the Limitation Year, the amounts referred to in subsection (a) above shall
be determined on the basis of the Participant's actual Compensation for
such Limitation Year.
(d) If a Participant's Annual Additions under this Plan and all
such other plans result in an Excess Amount for a Limitation Year, such
Excess Amount shall be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a welfare benefit
fund or individual medical account will be deemed to have been allocated
first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the
product of:
(i) the total Excess Amount allocated as of such date
(including any amount which would have been allocated but for the
limitations of Code Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as
of such date under this Plan, divided by (B) the total amount allocated as
of such date under all qualified master or prototype defined contribution
plans (determined without regard to the limitations of Code Section 415).
(f) Any Excess Amounts attributed to this Plan shall be
disposed of as provided in Section 6.1(d).
Section 6.3. Employers Maintaining Other Defined Contribution
Plans. If the Participant is covered under another plan which is a
qualified defined contribution plan which is not a Master or Prototype
Plan maintained by the Employer, Annual Additions allocated under this
Plan on behalf of any Participant shall be limited in accordance with the
provisions of Section 6.2, as though the other plan were a Master or
Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
Section 6.4. Employers Maintaining Defined Benefit Plans. If
the Participant is covered or was covered at any time under a qualified
defined benefit plan maintained by the Employer, the projected annual
benefit thereunder and the Annual Additions credited to any such
Participant's Account under this Plan and any other qualified defined
contribution plan in any Limitation Year will be limited so that the sum
of the Defined Contribution Fraction and the Defined Benefit Fraction with
respect to such Participant will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with
the Adoption Agreement.
Section 6.5. Definitions. For purposes of this Article VI,
the following terms shall be defined as follows:
(a) Annual Additions -- The sum of the following amounts
allocated to a Participant's Account for a Limitation Year: (i) all
Employer contributions; (ii) all Participant contributions (other than a
qualified rollover contribution as described in Code Section 402(a)(5));
(iii) all forfeitures; (iv) all amounts allocated, after March 31, 1984,
to an individual medical account (as defined in Code Section 415(1)(2))
which is part of a defined benefit or annuity plan maintained by the
Employer are treated as Annual Additions to a defined contribution plan;
and (v) amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are attributable
to post-retirement medical benefits allocated to the separate account of a
"key employee" (as defined in Code Section 419A(d)(3)) under a welfare
benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For the purposes of this Article VI, amounts reapplied under Sections
6.1(d) and 6.2(f) of the Plan to reduce Employer contributions shall also
be included as Annual Additions.
(b) Compensation -- A Participant's wages as defined in Code
Section 3121(a), for purposes of calculating social security taxes, but
determined without regard to the wage base limitation in Code Section
3121(a)(1), the limitations on the exclusions from wages in Code Section
3121(a)(5)(C) and (D) for elective contributions and payments by reason of
salary reduction agreements, the special rules in Code Section 3121(v),
any rules that limit covered employment based on the type or location of
an employee's employer, and any rules that limit the remuneration included
in wages based on familial relationship or based on the nature or location
of the employment or the services performed (such as the exceptions to the
definition of employment in Code Section 3121(b)(1) through (20)). For
any Self-Employed Individual Compensation means Earned Income.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Article, Compensation for a
Limitation Year is the Compensation actually paid or includible in gross
income during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a participant in a defined contribution plan
who is permanently and totally disabled (as defined in Code Section
22(e)(3)) is the Compensation such participant would have received for the
Limitation Year if the participant had been paid at the rate of
Compensation paid immediately before becoming permanently and totally
disabled. Such imputed Compensation for a disabled participant may be
taken into account only if the participant is not a highly compensated
employee (as defined in Code Section 414(q)) and contributions made on
behalf of such participant are nonforfeitable when made.
(c) Defined Benefit Fraction -- A fraction, the numerator of
which is the sum of a Participant's Projected Annual Benefits under all
the qualified defined benefit plans whether or not terminated) maintained
by the Employer determined at the end of the Limitation Year, and the
denominator of which is the lesser of (i) one hundred and twenty-five
percent (125%) of the dollar limitation for such Limitation Year under
Code Sections 415(b) and (d) (or such higher amount determined by the
Commissioner of Internal Revenue applicable to the calendar year with
which or within which the Limitation Year ends) or (ii) one hundred and
forty percent (140%) of the Participant's average Compensation (or Earned
Income) for the three highest consecutive calendar years of service during
which the Participant was in the Plan including any adjustments under Code
Section 415(b). Notwithstanding the above, if the Participant was a
Participant as of the first limitation year beginning after December 31,
1986 in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will
not be less than the product of 1.25 times the sum of the annual benefits
under such plans which the Participant had accrued as of the close of the
last Limitation Year beginning after January 1, 1987, disregarding any
changes in the terms and conditions of the Plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually
and in the aggregate satisfied the requirements of Code Section 415 for
all Limitation Years beginning before January 1, 1987.
(d) Employer -- The Employer that adopts this Plan and in the
case of a group of employers which constitutes (i) a controlled group of
corporations (as defined in Code Section 414(b) as modified by Code
Section 415(h)); (ii) trades or businesses (whether or not incorporated)
which are under common control (as defined in Section 414(c) as modified
by Code Section 415(h)); (iii) an affiliated service group (as defined in
Code Section 414(m)); or (iv) a group of entities required to be
aggregated (pursuant to Code Section 414(o)) all such employers shall be
considered a single employer for purposes of applying the limitations of
this Article VI.
(e) Excess Amount -- The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(f) Limitation Year -- A calendar year or any other twelve (12)
consecutive month period adopted by the Employer in item 12 of the
Adoption Agreement (Profit Sharing Plan) or item 10 of the Adoption
Agreement (Pension Plan). All qualified plans maintained by the Employer
shall use the same Limitation Year. If the Limitation Year is amended to
a different twelve (12) consecutive month period, the new Limitation Year
shall begin on the date within the Limitation Year in which the amendment
is made.
(g) Master or Prototype Plan -- A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(h) Maximum Permissible Amount -- For a Limitation Year, the
Maximum Permissible Amount with respect to any Participant shall be the
lesser of (i) the Defined Contribution Dollar Limitation or (ii)
twenty-five percent (25%) of the Participant's Compensation for the
Limitation Year. The Compensation limitation described in (ii) shall not
apply to any contribution for medical benefits (within the meaning of Code
Sections 401(h) or 419A(f)(2)) which is otherwise treated as an Annual
Addition under Code Sections 415(1)(1) or 419A(d)(2). If a short
Limitation Year is created because of an amendment changing the Limitation
Year to a different twelve (12) consecutive month period, the Maximum
Permissible Amount shall not exceed the defined contribution dollar
limitation in Code Section 415(c)(1)(A) multiplied by a fraction, the
numerator of which is the number of months in the short Limitation Year
and the denominator of which is twelve (12).
(i) Projected Annual Benefit -- A Participant's annual
retirement benefit (adjusted to the actuarial equivalent of a straight
life annuity if expressed in a form other than a straight life or
qualified joint and survivor annuity) under the Plan, assuming that the
Participant will continue employment until the later of current age or
Normal Retirement Age, and that the Participant's Compensation for the
Limitation Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation Years.
(j) Defined Contribution Fraction -- A fraction, the numerator
of which is the sum of the Annual Additions credited to the Participant's
account under this and all other qualified defined contribution plans
(whether or not terminated) maintained by the Employer for the current and
all prior Limitation Years (including the Annual Additions attributable to
the Participant's non-deductible employee contributions to all qualified
defined benefit plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years and the Annual
Additions attributable to all welfare benefit funds (as defined in Code
Section 419(e)) and individual medical accounts (as defined in Code
Section 415(1)(2) maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior Limitation Years of service with the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The maximum
aggregate amount in any Limitation Year is the lesser of (i) one hundred
and twenty-five percent (125%) of the dollar limitation determined under
Code Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or
(ii) thirty-five percent (35%) of the Participant's Compensation for such
Limitation Year.
If the Employee was a participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 5, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of: (i) the excess of the sum of the
fractions over 1.0 times (ii) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The
annual addition for any Limitation Year beginning before January 1, 1987,
shall not be computed to treat all Employee contributions as Annual
Additions.
(k) Defined Contribution Dollar Limitation -- For a Limitation
Year, thirty thousand dollars ($30,000) or, if greater, one-fourth of the
defined benefit dollar limitation set forth in Code Section 415(b)(1) as
in effect for such Limitation Year.
(l) Highest Average Compensation -- The average Compensation
for the three consecutive Years of Service with the Employer which
produces the highest average.
ARTICLE VII. PARTICIPANTS' ACCOUNTS
Section 7.1. Separate Accounts. Separate Accounts will be
maintained for each Participant for each of the following types of
contributions, and the income, expenses, gains and losses attributable
thereto:
(a) Employer Profit Sharing Contributions pursuant to Section
4.1 hereof;
(b) Employer Pension Contributions pursuant to Section 4.2
hereof;
(c) Participant Voluntary Contributions pursuant to Section 4.3
hereof;
(d) Elective Deferrals pursuant to Section 5.2 hereof;
(e) Matching Contributions pursuant to Section 5.3 hereof;
(f) Rollover Contributions pursuant to Section 4.6 hereof.
The Custodian shall establish such other separate Accounts as may be
necessary under the Plan. These Accounts shall be for accounting purposes
only and the Custodian shall not be required to establish separate
Custodial Accounts for these contributions.
Section 7.2. Vesting. (a) A Participant shall at all times
have a fully vested and nonforfeitable interest in all his Accounts except
his Employer Profit Sharing Contributions Account and/or his Employer
Pension Contributions Account.
(b) A Participant shall have a vested interest in his Employer
Profit Sharing Contributions Account and/or his Employer Pension
Contributions Account as determined under the vesting schedule elected in
item 7 of the Adoption Agreement.
Section 7.3. Computation of Vesting Service. All of a
Participant's Years of Service with the Employer shall be counted to
determine the nonforfeitable percentage of his Employer Profit Sharing
Contributions Account and/or his Employer Pension Contributions Account
except those Years of Service excluded under item 7 of the Adoption
Agreement. A former Participant who had a nonforfeitable right to all or
a portion of his Account balance derived from Employer contributions at
the time of his termination shall receive credit for Years of Service
prior to his Break in Service upon completing a Year of Service after his
return to the employ of the Employer. A former Participant who did not
have a nonforfeitable right to any portion of his Account balance derived
from Employer contributions at the time of termination from service will
be considered a new employee for vesting purposes, if the number of
consecutive one year Breaks in Service equals or exceeds the greater of
(i) five (5) years or (ii) the aggregate number of Years of Service before
such Breaks in Service. If such a former Participant's Years of Service
before termination from service may not be disregarded pursuant to the
preceding sentence, such former Participant's prior Years of Service shall
not be cancelled hereunder.
Section 7.4. Allocation of Forfeitures.
(a) As of the end of the Plan Year, forfeitures derived from
Employer Profit Sharing Contributions Accounts which become available for
reallocation during such Plan Year because of the operation of the vesting
provisions of Section 7.2(b), shall be allocated to the Employer Profit
Sharing Contribution Accounts of the Participants who are eligible to
share in an Employer Profit Sharing Contributions for the Plan Year. Such
amounts shall be allocated according to the ratio that each such
Participant's Compensation or Earned Income for the Plan Year bears to the
total Compensation and Earned Income of all such Participants for the Plan
Year. Forfeitures under this subsection (a) will be allocated only for
the benefit of Participants of the Employer adopting this Plan.
(b) Forfeitures derived from Employer Pension Contributions
which become available for reallocation during a Plan Year shall be
applied to reduce the Employer Pension Contributions that would otherwise
be due for such Plan Year under Section 4.2. Forfeitures under this
subsection (b) will only be used to reduce the Employer Pension
Contributions of the Employer adopting this Plan.
(c) If a benefit is forfeited because a Participant or
Beneficiary cannot be found, such benefit will be reinstated if a claim is
made by the Participant or Beneficiary.
(d) No forfeiture will occur solely as a result of a
Participant's withdrawal of any Employee contributions.
ARTICLE VIII. PAYMENT OF BENEFITS
Section 8.1. Benefits Payable Under the Plan.
(a) Normal Retirement. A Participant's interest in all
Employer contributions allocated to his Accounts shall be fully vested and
nonforfeitable on and after his Normal Retirement Age. Such Participant
may retire at any time on or after that date and shall be entitled to
receive, in accordance with the provisions of Sections 8.2 and 8.3 hereof,
the total amount credited to his Accounts. Any Participant who is
employed beyond his Normal Retirement Age shall continue to share in
Employer contributions until his actual retirement.
(b) Death Benefits. Upon the death of a Participant while
employed by the Employer, the total amount credited to such Participant's
Accounts (plus such Participant's share of the Employer contributions for
the year of his death), shall be payable to such Participant's Beneficiary
in accordance with Sections 8.2 and 8.3 hereof. Upon the death of a
Participant following his termination of employment with the Employer, the
vested portion of his Accounts which has not been distributed shall be
payable to such Participant's Beneficiary in accordance with Sections 8.2
and 8.3 hereof.
(c) Other Termination of Employment. A Participant who
terminates employment with the Employer on account of Disability shall be
entitled to receive, in accordance with Sections 8.2 and 8.3 hereof, the
total amount credited to his Account. A Participant whose employment with
the Employer is terminated prior to his Normal Retirement Date for any
reason other than death or Disability shall be entitled to receive, in
accordance with the provisions of Sections 8.2 and 8.3 hereof, the
portions of his Accounts that have vested pursuant to Section 7.2 hereof.
(d) Forfeitures. Any amounts in a Participant's Accounts which
are not payable under subsection (c) above when his employment with the
Employer is terminated shall remain in such Accounts and shall continue to
share in profits or losses on investments under Section 9.3 hereof until
such former Participant incurs five (5) consecutive Breaks in Service,
whereupon they shall be forfeited and administered in accordance with
Section 7.4 hereof. In the event a former Participant is reemployed by
the Employer before incurring five (5) consecutive Breaks in Service his
Accounts shall continue to vest in accordance with the vesting schedule
specified in the applicable Adoption Agreement. Notwithstanding the
foregoing, if a terminated Participant receives a distribution on account
of termination of his participation in the Plan of his entire vested
interest in the Pension Plan or the Profit Sharing Plan, such
Participant's nonvested interest in the relevant plan shall be treated as
a forfeiture and administered in accordance with Section 7.4 hereof. If
the Participant elects to have distributed less than the entire vested
portion of his Account balance derived from Employer contributions, the
part of the nonvested portion that will be treated as a forfeiture is the
total nonvested portion multiplied by a fraction, the numerator of which
is the amount of the distribution attributable to Employer contributions
and the denominator of which is the total value of the vested Employer
derived Account balance. For purposes of this Section, if the value of an
employee's vested account balance is zero, the Employee shall be deemed to
have received a distribution of such vested account balance. A
Participant's vested account balance shall not include accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B) for plan years beginning prior to January 1, 1989. If a
Participant receives or is deemed to receive a distribution pursuant to
this subsection (d) and such Participant subsequently resumes employment
covered under the Plan, the forfeited amounts shall be restored from
current forfeitures, or if those are insufficient by a special Employer
contribution, provided that the Participant repays to the Plan the full
amount of the distribution attributable to Employer contributions prior to
the earlier of (i) five (5) years after the Participant is reemployed, or
(ii) the time the Participant incurs five (5) consecutive Breaks in
Service. In the event a former Participant is reemployed after incurring
five (5) consecutive Breaks in Service, separate Accounts will be
maintained for Employer contributions allocated before and after the Break
in Service, and Years of Service earned after his return to employment
shall be disregarded in determining the Participant's vested percentage in
his prebreak Employer contributions.
Section 8.2. Manner of Distributions.
(a) Distributions From Pension Plan. Distributions from the
Pension Plan shall be made as follows:
(i) A Participant's vested interest in the Plan shall be paid
by purchasing an annuity contract from a licensed insurance company,
unless the Participant elects to receive his interest in one of the
alternate forms of benefit described in subsection (c) below. If a
Participant is not married at his annuity starting date, the annuity
contract shall provide a monthly benefit for his life. If a Participant
is married at his annuity starting date, the annuity shall be in the form
of a qualified joint and survivor annuity. A "qualified joint and
survivor annuity" is an immediate annuity for the life of the Participant
with a survivor annuity for the life of the spouse which is equal to fifty
percent (50%) of the amount of the annuity which is payable during the
joint lives of the Participant and the spouse and which is the amount of
benefit which can be purchased with the Participant's vested Account
balance. The Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan. Any annuity
contract purchased hereunder and distributed in accordance with this
Section 8.2 shall be nontransferable and shall comply with the terms of
this Plan. For purposes of this Section, the earliest retirement age
shall be the Participant's age on the earliest date on which the
Participant could elect to receive retirement benefits.
(ii) Unless an optional form of benefit is selected in
accordance with subsection (c) below, if a Participant has a spouse and
dies prior to his annuity starting date (the date annuity payments
commence), the Participant's vested Account balance in the Plan shall be
applied toward the purchase of a life only annuity contract from a
licensed insurance company providing a benefit for the life of the
surviving spouse. The surviving spouse may elect to have such annuity
distributed within a reasonable period after the Participant's death.
(iii) For any distribution subject to the annuity
requirements in subsection (i) above, a Participant or Beneficiary may
elect in writing, within the ninety (90) day period ending on the annuity
starting date (the date annuity or any other form of benefit payments
commence), to receive his vested interest in the Plan in one of the
alternate forms of benefit set forth in subsection (c) below in lieu of
the form of benefit otherwise payable hereunder. Any waiver of the joint
and survivor annuity by a married Participant shall not be effective
unless: (A) the Participant's spouse consents in writing to the election;
(B) the election designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the spouse expressly permits designations by
the Participant without any further spousal consent); (C) the spouse's
consent acknowledges the effect of the election; and (D) the spouse's
consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the joint and survivor annuity
shall not be effective unless the election designates a form of benefit
payment which may not be changed without spousal consent (or the spouse
expressly permits designations by the Participant without any further
spousal consent). If it is established to the satisfaction of a Plan
representative that there is no spouse or that the spouse cannot be
located, a waiver will be deemed a qualified election. Any consent by a
spouse obtained under this provision (or establishment that the consent of
a spouse may not be obtained) shall be effective only with respect to such
spouse. A consent that permits designations by the Participant without
any requirement of further consent by such spouse must acknowledge that
the spouse has the right to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the spouse voluntarily
elects to relinquish either or both of such rights. A revocation of a
prior election may be made by a Participant without the consent of the
spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant and the spouse have
received notice as provided in subsection (v) below.
(iv) A Participant may elect in writing to waive the surviving
spouse benefit otherwise payable under subsection (ii) above. The benefit
may be waived at any time during the period which begins on the first day
of the Plan Year in which the Participant attains age 35 and ends on the
date of the Participant's death. A Participant and the spouse may waive
the pre-retirement survivor death benefit prior to age 35, provided that
such early waiver becomes invalid in the Plan Year the Participant attains
age 35 and a new waiver must be made pursuant to this subsection (iv). If
the Participant separates from service prior to the first day of the Plan
Year in which he attains age 35, the surviving spouse benefit may be
waived, with respect to the Participant's account balance as of the date
of separation, at any time during the period which begins on the date of
such separation and ends on the date of the Participant's death.
Notwithstanding the foregoing, any election by a Participant to waive the
surviving spouse benefit payable under subsection (ii) above shall not be
effective unless: (A) the Participant's spouse consents in writing to the
election; (B) the spouse's consent acknowledges the effect of the
election; and (C) the spouse's consent is witnessed by a Plan
representative or notary public. If it is established to the satisfaction
of a Plan representative that there is no spouse or that the spouse cannot
be located, a waiver will be deemed a qualified election. Any consent by
a spouse obtained under this provision (or establishment that the consent
of a spouse may not be obtained) shall be effective only with respect to
such spouse. A revocation of a prior election may be made by a
Participant without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be limited.
No consent obtained under this provision shall be valid unless the
Participant and the spouse have received notice as provided in subsection
(v) below.
(v) The Administrator shall provide the Participant and the
Spouse, as applicable, with a written explanation of: (A) the terms and
conditions of the annuity described in subsections (i) or (ii), as
applicable; (B) the Participant's or Spouse's, as applicable, right to
waive the payment of benefits in the form of an annuity; (C) the rights of
the Participant's spouse; and (D) the right to make, and the effect of,
the revocation of a previous election to waive the payment of benefits in
the form of an annuity described in subsections (i) or (ii) hereof. In
the case of the annuity described in subsection (i), such explanation
shall be provided no less than thirty (30) days and no more than ninety
(90) days prior to the annuity starting date. In the case of the annuity
described in subsection (ii), such explanation shall be provided within
the applicable period for such Participant. The applicable period for a
Participant is whichever of the following periods ends last: (A) the
period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35; (B) a
reasonable period ending after the individual becomes a Participant; (C) a
reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (B) and (C) is the end of
the two-year period beginning one year prior to the date the applicable
event occurs, and ending one year after that date. In the case of a
Participant who separates from service before the Plan Year in which age
35 is attained, notice shall be provided within the two-year period
beginning one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to employment with
the Employer, the applicable period for such Participant shall be
redetermined. A written explanation comparable to the notices described
above shall be provided to a Participant who is waiving the surviving
spouse benefit prior to attaining age 35.
(vi) The Administrator shall be responsible for the purchase of
any annuity contracts required to be purchased in accordance with the
terms of this Plan.
(b) Distributions from Profit Sharing Plan. Distributions from
the Profit Sharing Plan shall be made in the form elected by the
Participant (or Beneficiary) as described in subsection (c) below.
Notwithstanding the foregoing, if the Profit Sharing Plan is a direct or
indirect transferee of a defined benefit plan, a money purchase pension
plan (including a target benefit plan), or a stock bonus or profit sharing
plan or is an amendment of an original Plan which is (or was) subject to
the survivor annuity requirements of Code Sections 401(a)(11) or 417 then
distributions shall be made in accordance with the provisions of
subsection (a) above. This amendment is effective on the first day of the
first plan year beginning on or after December 12, 1994, or, if later, 90
days after December 12, 1994. Notwithstanding any provision of this plan
to the contrary, to the extent that any optional form of benefit under
this plan permits a distribution prior to the employee's retirement,
death, disability, or severance from employment, and prior to plan
termination, the optional form of benefit is not available with respect to
benefits attributable to assets (including the post-transfer earnings
thereon) and liabilities that are transferred, within the meaning of
section 414(l) of the Internal Revenue Code, to this plan from a money
purchase pension plan qualified under section 401(a) of the Internal
Revenue Code (other than any portion of those assets and liabilities
attributable to voluntary employee contributions).
(c) Optional Forms of Distribution. All distributions required
under this subsection shall be determined and made in accordance with the
Income Tax Regulations under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of
such Regulations.
(i) Amounts payable to a Participant shall be distributed in
one of the following forms as elected by the Participant, with spousal
consent, as applicable:
(A) a lump sum; or
(B) installments over a period certain not to
exceed the life expectancy of the
Participant or the joint life expectancy of
the Participant and his Beneficiary.
Such election shall be made in writing and in such form as shall be
acceptable to the Administrator. If the Participant fails to elect any of
the methods of distribution described above within the time specified for
such election, the Administrator shall distribute the Participant's
Account in the form of a single sum cash payment by the April 1 following
the calendar year in which the Participant attains age seventy and
one-half (70-1/2).
(ii) If a Participant's benefit is to be distributed in
installment payments under (B) above, the amount distributed for each
calendar year, beginning with distributions for the first distribution
calendar year, must at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy. The life
expectancy (or joint and last survivor expectancy) is calculated using the
attained age of the Participant (or Beneficiary) as of the Participant's
(or Beneficiary's) birthday in the applicable calendar year reduced by one
for each calendar year which has elapsed since the date life expectancy
was first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and, if life expectancy is being recalculated,
such succeeding calendar year.
Unless otherwise elected by the Participant (or the
Participant's spouse) by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Participant (or spouse) and shall apply to all
subsequent years. The life expectancy of a nonspouse Beneficiary may not
be recalculated. Life expectancy and joint life expectancy are computed
by use of the expected return multiples in Tables V and VI of Section
1.72-9 of the Income Tax Regulations.
Notwithstanding anything herein to the contrary, for calendar
years beginning before January 1, 1989, if the Participant's spouse is not
the designated Beneficiary, the method of distribution selected must
assure that at least fifty percent (50%) of the present value of the
amount available for distribution is paid within the life expectancy of
the Participant. For calendar years beginning after December 31, 1988,
the amount to be distributed each year shall not be less than the quotient
obtained by dividing the Participant's benefit by the lesser of (A) the
applicable life expectancy or (B) if the Participant's spouse is not the
designated Beneficiary, the applicable divisor determined from the table
set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant shall be distributed
using the applicable return multiple specified in Section 1.72-9 of the
Income Tax Regulations as the relevant divisor without regard to Section
1.401(a)(9)-2 of the Income Tax Regulations.
(iii) The minimum distribution required for the
Participant's first distribution calendar year must be made on or before
the Participant's required beginning date as described in Section 8.3(c)
hereof. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which such
required beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
(d) In any case where the Participant or Beneficiary has
determined payment to be on an installment basis, such Participant or
Beneficiary may by written request directed to the Administrator, at any
time following commencement of such installment payments, accelerate all
or any portion of the unpaid balance.
(e) For purposes of this Section a "spouse" shall include the
spouse or surviving spouse of a Participant, provided that a former spouse
shall be treated as the spouse or surviving spouse and a current spouse
will not be treated as a spouse or surviving spouse to the extent provided
under a qualified domestic relations order as described in Code Section
414(p).
(f) The payment of benefits in either a lump sum or in
installments under this Section 8.2 may be made in cash or in Investment
Company Shares.
Section 8.3. Commencement of Payments. (a) Subject to the
provisions of this Section 8.3, payment of benefits, under whichever
method is selected, shall be made or commence as soon as administratively
practicable after the Valuation Date immediately following the
Participant's retirement, death or other termination of employment.
(b) If the Participant's vested Account balance in the Pension
Plan or the Profit Sharing Plan exceeds (or at the time of any prior
distribution exceeded) three thousand five hundred dollars ($3,500), no
distribution of that interest shall be made prior to the time the
Participant's Account becomes immediately distributable without the
written consent of the Participant and, in the case of the Pension Plan,
the Participant's spouse (or where either the Participant or the spouse
has died, the survivor). The consent of the Participant and the
Participant's spouse shall be obtained in writing within the ninety (90)
day period ending on the annuity starting date. The annuity starting date
is the first day of the first period for which an amount is paid as an
annuity or any other form. The Administrator shall notify the Participant
and the Participant's spouse of the right to defer any distribution until
the Participant's Account balance is no longer immediately distributable.
Such notification shall include a general description of the material
features, and an explanation of the relative values of the optional forms
of benefit available under the Plan in a manner that would satisfy the
notice requirements of Code Section 417(a)(3), and shall be provided no
less than thirty (30) days and no more than ninety (90) days prior to the
annuity starting date; provided that if a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days after the notice required
under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(1) the Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified joint and
survivor annuity while the Account balance is immediately distributable.
(Furthermore, if payment in the form of a qualified joint and survivor
annuity is not required with respect to the Participant pursuant to
Section 8.2(b) of the Plan, only the Participant need consent to the
distribution of an Account balance that is immediately distributable.)
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Code
Sections 401(a)(9) or 415. In addition, upon termination of this Plan if
the Plan does not offer an annuity option (purchased from a commercial
insurance company), the Participant's Account balance may, without the
Participant's consent, be distributed to the Participant or transferred to
another defined contribution plan (other than an employee stock ownership
plan as defined in Code Section 4975(e)(7)) within the same controlled
group.
An Account balance is immediately distributable if any part of
the Account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains (or would have attained if not
deceased) the later of his Normal Retirement Age or age sixty-two (62).
For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after December 31, 1988, a Participant's vested
Account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B).
(c) Unless the Participant (or the Participant's Beneficiary,
if the Participant is dead) elects to defer commencement under (b) above,
distribution of benefits shall begin no later than the sixtieth (60th) day
after the close of the Plan Year in which occurs the latest of (i) the
Participant's attainment of age 65 (or normal retirement age, if earlier);
(ii) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or (iii) the date the Participant
terminates service with the Employer. Notwithstanding the foregoing, the
failure of a Participant and the spouse to consent to a distribution while
a benefit is immediately distributable, within the meaning of Section 8.1
of the Plan, shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this Section.
(d) Notwithstanding anything herein to the contrary, payment of
benefits to a Participant shall commence by the Participant's required
beginning date, even if the Participant is still employed. A
Participant's required beginning date is the April 1 of the calendar year
following the calendar year in which the Participant attains age seventy
and one-half (70-1/2); provided that the required beginning date of a
Participant who attains age 70-1/2 before January 1, 1988, shall be
determined in accordance with (i) or (ii) below:
(i) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year following
the calendar year in which the later of retirement or attainment of age
seventy and one-half (70-1/2) occurs.
(ii) The required beginning date of a Participant who is a
5-percent owner during any year beginning after December 31, 1979, is the
first day of April following the later of the calendar year in which the
Participant attains age seventy and one-half (70-1/2), or the earlier of
the calendar year with or within which ends the Plan Year in which the
Participant becomes a 5-percent owner, or the calendar year in which the
Participant retires.
The required beginning date of a Participant who is not a 5-percent owner
who attains age seventy and one-half (70-1/2) during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
A Participant is treated as a 5-percent owner for purposes of
this subsection (d) if such Participant is a 5-percent owner as defined in
Code Section 416(i) (determined in accordance with Code Section 416, but
without regard to whether the Plan is top-heavy) at any time during the
Plan Year ending with or within the calendar year in which such owner
attains age sixty-six and one-half (66-1/2) or any subsequent Plan Year.
Once distributions have begun to a 5-percent owner under this
subsection (d), they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
Distributions may be delayed pursuant to an election made prior
to January 1, 1984, under Section 242 of the Tax Equity and Fiscal
Responsibility Act of 1982; provided that the method of distribution
selected must be in accordance with the requirements of Code Section
401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of
1984. If such an election is revoked, any subsequent distribution must
satisfy the requirements of Code Section 401(a)(9). If a designation is
revoked subsequent to the date distributions are required to begin, the
Plan must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to
satisfy Code Section 401(a)(9), but for such Section 242(b)(2) election.
For calendar years beginning after December 31, 1988, such distributions
must meet the minimum distribution incidental benefit requirements in
Section 1.401(a)(9)-2 of the Income Tax Regulations. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another Beneficiary (one not
named in the designation) under the designation will not be considered to
be a revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by altering
the relevant measuring life).
(e)(i) If a Participant dies after benefit payments have
begun, the Participant's remaining interest in the Plan shall be
distributed to his designated Beneficiary at least as rapidly as under the
method of distribution being used prior to the Participant's death.
(ii) If the Participant dies before benefit payments have
commenced, distribution of the Participant's entire interest in the Plan
shall be completed by the December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death, except to the extent
that an election is made to receive distributions in accordance with the
following: (A) if any portion of the Participant's interest is payable to
a designated Beneficiary, distributions may be made over the life or over
a period certain not greater than the life expectancy of the designated
Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Participant died; (B)
if the designated Beneficiary is the Participant's surviving spouse, the
date distributions are required to begin in accordance with (A) above
shall not be earlier than the later of December 31 of the calendar year
immediately following the calendar year in which the Participant died and
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2).
If the Participant has not made an election pursuant to this
subsection (ii) by the time of his death, the designated Beneficiary must
elect the method of distribution no later than the earlier of December 31
of the calendar year in which distributions would be required to begin
under this subsection (e) or December 31 of the calendar year which
contains the fifth anniversary of the date of death of the Participant.
If the Participant has no designated Beneficiary, or if the designated
Beneficiary does not elect a method of distribution, distribution of the
Participant's entire interest in the Plan must be completed by December 31
of the calendar year containing the fifth anniversary of the Participant's
death.
For purposes of this subsection (ii), if the surviving spouse
dies after the Participant, but before payments to such spouse begin, the
provisions of this subsection (ii), with the exception of paragraph (B)
above, shall be applied as if the surviving spouse were the Participant.
Any amount paid to a child of the Participant will be treated as if it had
been paid to the surviving spouse if the amount becomes payable to the
surviving spouse when the child reaches the age of majority.
For the purposes of this subsection (e), distribution of a
Participant's interest is considered to begin on the Participant's
required beginning date (or the date distribution is required to begin to
the surviving spouse). If a distribution in the form of an annuity
irrevocably commences to the Participant before the required beginning
date, the date the distribution is considered to begin is the date
distribution actually commences.
(iii) A Participant's interest in the Plan is his Account
balance as of the last valuation date in the calendar year immediately
preceding the distribution calendar year (the valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to
the Account balance as of dates in the valuation calendar year after the
valuation date and decreased by distributions made in the valuation
calendar year after the valuation date. If any portion of the minimum
distribution for the first distribution calendar year is made in the
second distribution calendar year on or before the required beginning
date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
The distribution calendar year is a calendar year for which a
minimum distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the calendar
year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after
the Participant's death, the first distribution calendar year is the
calendar year in which distributions are required to begin pursuant to
subsection (ii) above.
For purposes of this subsection (e), the designated Beneficiary
is the individual who is designated as the Beneficiary under the Plan in
accordance with Code Section 401(a)(9) and the proposed regulations
thereunder.
Section 8.4. Payment of Small Amounts. Notwithstanding
anything herein to the contrary, if the present value of the Participant's
vested interest in the Pension Plan does not exceed (nor at the time of
any prior distribution exceeded) three thousand five hundred dollars
($3,500) as of the date the Participant's employment with the Employer
terminates, the Administrator shall distribute the present value of such
interest to the Participant in a lump sum as soon as administratively
practicable after the end of the Plan Year in which termination occurs.
Likewise, if the total present value of the Participant's vested interest
in the Profit Sharing Plan and Cash or Deferred Arrangement does not
exceed (nor at any time of any prior distribution exceeded) three thousand
five hundred dollars ($3,500) as of the date the Participant's employment
with the Employer terminates, the Administrator shall distribute the
present value of this interest to the Participant in a lump sum as soon as
administratively practicable after the end of the Plan Year in which
termination occurs. A Participant whose entire vested interest in the
Pension Plan and/or the Profit Sharing Plan has been distributed or who
has no vested interest in the Pension Plan and/or the Profit Sharing Plan
shall be deemed cashed out from the Pension Plan and/or the Profit Sharing
Plan, as applicable.
Section 8.5. Persons Under Legal or Other Disability. In the
event a Participant or Beneficiary is declared incompetent and a guardian
or other person legally charged with the care of his person or of his
property is appointed, any benefits to which such Participant or
Beneficiary is entitled shall be paid to such guardian or other person
legally charged with the care of his person or of his property.
Section 8.6. Withdrawals from Profit Sharing Plan. (a) If
elected in item 10 of the Adoption Agreement (Profit Sharing Plan), a
Participant shall be permitted to withdraw the specified percentage of his
vested Employer Profit Sharing Account while he is still employed after
attainment of age fifty-nine and one-half (59-1/2) or prior to attainment
of such age on account of a financial hardship; provided, that such
Participant has been an active Participant in the Plan for at least five
(5) years. A Participant may not make another withdrawal on account of
financial hardship under this Section 8.6 until he has been an active
Participant for at least an additional five (5) years from the date of his
last hardship withdrawal. For purposes of this Section 8.6, a financial
hardship shall mean a financial need or emergency which requires the
distribution of a Participant's Plan account in order to meet such need or
emergency. The determination of the existence of a financial hardship and
the amount required to be distributed to meet the hardship shall be made
by the Administrator in accordance with such uniform and nondiscriminatory
rules as may be established by the Administrator. A request for a
withdrawal shall be made in writing in a form prescribed by the
Administrator and shall be made in accordance with procedures and
limitations established by the Administrator. Notwithstanding the above,
no withdrawal under this Section 8.6 shall be permitted if the Integration
Formula is selected in item 6 of the Adoption Agreement (Profit Sharing
Plan).
(b) If a distribution is made pursuant to this Section 8.6 at a
time when the Participant has a nonforfeitable right to less than one
hundred percent (100%) of his Account balance derived from Employer
contributions and the Participant may increase the nonforfeitable
percentage in the Account:
(i) A separate Account will be established for the
Participant's interest in the Plan as of the time of the distribution; and
(ii) At any relevant time the Participant's nonforfeitable
portion of the separate Account will be equal to an amount ("X")
determined by the formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula above: P is the nonforfeitable
percentage at the relevant time, AB is the Account balance at the relevant
time, D is the amount of the distribution, and R is the ratio of the
Account balance at the relevant time to the Account balance after
distribution.
Section 8.7. Transfer of Benefits to Eligible Retirement Plan.
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article VIII, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover.
(b) An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the distributee, except
that an eligible rollover distribution does not include (i) any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (iii) the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities).
(c) An eligible retirement plan is an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described
in Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(d) A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to the interest
of the spouse or former spouse.
(e) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE IX. ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS
Section 9.1. Custodial Account. (a) Unless the Employer
elects otherwise in the Adoption Agreement, the Custodian shall open and
maintain separate Custodial Accounts for each individual that the Employer
shall from time to time certify to the Custodian as a Participant in the
Plan. Such Custodial Accounts shall reflect the various Participant
Accounts described at Section 7.1 hereof.
(b) If the Employer so elects in the Adoption Agreement the
Custodian shall open and maintain a single Custodial Account in the name
of the Employer. If only a single Custodial Account is established, the
Employer shall be responsible for maintaining the records for the
individual Participant accounts.
(c) In the event that separate balances are not maintained for
the portion of a Participant's Account balance derived from Employer
contributions and Participant Voluntary Contributions, the Account balance
derived from Participant Voluntary Contributions shall be the
Participant's total account balance multiplied by a fraction, the
numerator of which is the total amount of Participant Voluntary
Contributions (less any withdrawals) and the denominator of which is the
sum of the numerator and the total Employer contributions (including
Elective Deferrals) made on behalf of such Participant.
Section 9.2. Receipt of Contributions. The Custodian shall
accept such contributions of money on behalf of Participants as it may
receive from time to time from the Employer. The Custodian may, in its
sole discretion, also accept money or Investment Company Shares held under
a preceding plan of the Employer qualified under Code Section 401(a) or
which qualify as rollover contributions or transfers under Section 4.6 of
the Plan. All such contributions shall be accompanied by written
instructions, in a form acceptable to the Custodian, from the Employer
specifying the Participant Accounts to which they are to be credited.
Section 9.3. Investment of Account Assets. (a) Upon written
instructions given by the Employer on a uniform and nondiscriminatory
basis as between Participants, the Custodian shall invest and reinvest
contributions credited to a Participant Account(s) in Investment Company
Shares. All Participant Accounts shall share in the profits or losses of
the investments on a prorata basis (i.e., in the ratio that the
Participant's Account balance bears to all Account balances, other than
Accounts which are self-directed under subsection (b) below), subject to
adjustment by the Administrator on a fair and equitable basis for
contributions, distributions and/or withdrawals during the year. The
amount of each contribution credited to a Participant Account to be
applied to the purchase of Investment Company Shares shall be invested by
the Custodian at the applicable offering price. These purchases shall be
credited to such Account with notation as to cost. The Custodian shall
have no discretionary investment responsibility and in no event be liable
to any person for following investment instructions given by the Employer
or the Participant in the manner provided herein.
(b) Each Participant, through his separate Participant
Account(s), shall be the beneficial owner of all investments held in such
Account(s). The Employer however shall direct the Custodian (in a
nondiscriminatory manner) regarding the selection of specific Investment
Company Shares to be purchased for the Accounts of the Participants. The
Employer may permit (in a nondiscriminatory manner) the individual
Participants to select and direct the purchase of specific Investment
Company Shares for their own Account(s). In such a situation, the
Employer shall transmit all such directions to the Custodian.
Notwithstanding the foregoing, unless otherwise elected in the Adoption
Agreement the individual Participant may direct the investment of his
Account(s) and select the specific Investment Company Shares for purchase
for his individual Account(s) by directly communicating with the
Custodian.
(c) All income, dividends and capital gain distributions
received on the Investment Company Shares held in each Participant Account
shall be reinvested in such shares which shall be credited to such
Account. If any distribution on Investment Company Shares may be received
at the election of the Participant in additional shares or in cash or
other property, the Custodian shall elect to receive it in additional
shares. All investments acquired by the Custodian shall be registered in
the name of the Custodian or its registered nominee.
Section 9.4. Exclusive Benefit. The Custodial Account or
Accounts established hereby shall not be used or diverted to purposes
other than the exclusive benefit of Participants or their Beneficiaries.
Section 9.5. Expenses. All expenses and charges in respect of
the Plan and the Custodial Account, including, without limitation, the
Custodian's fees and commissions and taxes of any kind upon or with
respect to the Plan, shall be paid by the Employer; provided, however,
that the Custodian shall be authorized to pay such charges and expenses
from the Plan if the Employer shall fail to make payment within thirty
(30) days after it has been billed therefor by the Custodian or such
charges have otherwise become due.
Section 9.6. Voting. The Custodian shall deliver, or cause to
be executed and delivered, to the Employer all notices, prospectuses,
financial statements, proxies and proxy soliciting materials received by
the Custodian relating to investments held in Participants' Accounts. The
Custodian shall vote all proxies only in accordance with instructions
received from the Employer.
Section 9.7. Reports of the Custodian and Administrator. (a)
The Custodian shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions required to be performed
hereunder. Not later than sixty (60) days after the close of each
calendar year (or after the Custodian's resignation or removal), the
Custodian shall file with the Employer a written report reflecting the
receipts, disbursements and other transactions effected by it during such
year (or period ending with such resignation or removal) and the assets of
this Plan at its close. Such report shall be open to inspection by any
Participant for a period of thirty (30) days immediately following the
date on which it is filed with the Employer. Upon the expiration of such
thirty (30) day period, the Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to
its acts, transactions, duties, obligations or responsibilities as shown
in or reflected by such report, except with respect to any such acts or
transactions as to which the Employer shall have filed written objections
with the Custodian within such thirty (30) day period.
(b) Annual reports provided to the Employer by the Custodian
shall be, in the Custodian's discretion, on a calendar year basis unless
otherwise required by law. The Employer shall compute the valuation of
all Plan assets at least annually at the fair market value as of the last
day of each calendar year.
(c) The Custodian shall keep such records, make such
identifications and file such returns and other information concerning the
Plan as may be required of the Custodian under the Code or forms adopted
thereunder.
(d) The Administrator shall be solely responsible for the
filing of any reports or information required under the Code or forms
adopted thereunder.
Section 9.8. Limitation of Custodian's Duties and Liability.
(a) The Custodian's duties are limited to those set forth in this Plan,
and the Custodian shall have no other responsibility in the administration
of the Plan or for compliance by the Employer with any provision thereof.
The Custodian shall not be responsible for the collection of contributions
provided for under the Plan; the purpose or propriety of any distribution;
or any action or nonaction taken by the Employer or pursuant to the
Employer's request. The Custodian shall have no responsibility to
determine if instructions received by it from the Employer, or the
Employer's designated agent, comply with the provisions of the Plan. The
Custodian shall not have any obligation either to give advice to any
Participant on the taxability of any contributions or payments made in
connection with the Plan or to determine the amount of excess contribution
and net income attributable thereto. The Custodian may employ suitable
agents and counsel and pay their reasonable expenses and compensation, and
such agents or counsel may or may not be agent or counsel for the
Employer, and may be the Investment Advisor or an Investment Company.
(b) The Employer shall at all times fully indemnify and hold
harmless the Custodian, its agents, counsel, successors and assigns, from
any liability arising from distributions made or actions taken, and from
any and all other liability whatsoever which may arise in connection with
this Plan, except liability arising from the negligence or willful
misconduct of the Custodian. The Custodian shall be under no duty to take
any action other than as herein specified with respect to this Plan unless
the Employer shall furnish the Custodian with instructions in a form
acceptable to the Custodian; or to defend or engage in any suit with
respect to this Plan unless the Custodian shall have first agreed in
writing to do so and shall have been fully indemnified to the satisfaction
of the Custodian. The Custodian (and its agents) may conclusively rely
upon and shall be protected in acting upon any written order from the
Employer or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting to
take any other action. No amendment to the Plan shall place any greater
burden on the Custodian without its written consent. The Custodian shall
not be liable for interest on any cash balances maintained in the Plan.
(c) The Employer shall have the sole authority to enforce the
terms of the Plan on behalf of any and all persons having or claiming any
interest therein by virtue of the Plan.
(d) The Custodian, its agents, counsel, successors and assigns,
shall not be liable to the Employer, or to any Participants or Beneficiary
for any depreciation or loss of assets, or for the failure of this Plan to
produce any or larger net earnings. The Custodian further shall not be
liable for any act or failure to act of itself, its agents, employees, or
attorneys, so long as it exercises good faith, is not guilty of negligence
or willful misconduct, and has selected such agents, employees, and
attorneys with reasonable diligence. The Custodian shall have no
responsibility for the determination or verification of the offering or
redemption prices or net asset values of Investment Company Shares, and
shall be entitled to rely for such prices and net asset values upon
statements issued by or on behalf of the Investment Company issuing the
Investment Company Shares. The Custodian shall have no duty to inquire
into the investment practices of such Investment Company; such Investment
Company shall have the exclusive right to control the investment of its
funds in accordance with its stated policies, and the investments shall
not be restricted to securities of the character now or hereafter
authorized for trustees by law or rules of court. The Custodian shall not
be liable or responsible for any omissions, mistakes, acts or failures to
act of such Investment Company, or its successors, assigns or agents.
Notwithstanding the foregoing, nothing in this Plan shall relieve the
Custodian of any responsibility or liability under ERISA.
ARTICLE X. AMENDMENT AND TERMINATION
Section 10.1. Amendment. (a) The Employer reserves the right
at any time and from time to time to amend or terminate the Plan. No part
of the Plan shall by reason of any amendment or termination be used for or
diverted to purposes other than the exclusive benefit of Participants and
their Beneficiaries, and further that no amendment or termination may
retroactively change or deprive any Participant or Beneficiary of rights
already accrued under the Plan except insofar as such amendment is
necessary to preserve the qualification and tax exemption of the Plan
pursuant to Code Section 401. No amendment shall increase the duties of
the Custodian or otherwise adversely affect the Custodian unless the
Custodian expressly agrees thereto. However, if the Employer amends any
provision of this Plan (including a waiver of the minimum funding
requirements under Code Section 412(d)) other than by changing any
election made in the Adoption Agreement, adopting an amendment stated in
the Adoption Agreement which allows the Plan to satisfy Code Section 415,
to avoid duplication of minimum benefits under Code Section 416 or to add
certain model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan, such Employer shall no longer
participate under this prototype plan and the Employer's Plan shall be
deemed to be an individually designed plan. The Employer hereby
irrevocably delegates (retaining, however, the right and power to change
any election made in the Adoption Agreement) to the Investment Advisor the
right and power to amend the Plan at any time, and from time to time, and
the Employer by adopting the Plan shall be deemed to have consented
thereto. The Investment Advisor shall notify the Employer of any
amendment to the Plan. For purposes of any Investment Advisor amendments,
the mass submitter shall be recognized as the agent of the Investment
Advisor. If the Investment Advisor does not adopt the amendments made by
the mass submitter, it will no longer be identical to or a minor modifier
of the mass submitter plan.
(b) No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's accrued benefit
except to the extent permitted by Code Sections 412(c)(8) and 411(d)(6).
For purposes of this subsection, a Plan amendment which has the effect of
decreasing a Participant's Account balance or eliminating an optional form
of benefit, with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit. Furthermore,
if the vesting schedule of a Plan is amended, in the case of an Employee
who is a Participant as of the later of the date such amendment is adopted
or the date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
(c) Notwithstanding subsection (a) above, an Employer may amend
the Plan by adding overriding plan language to the Adoption Agreement
where such language is necessary to satisfy Code Sections 415 or 416
because of the required aggregation of multiple plans under such Code
Sections.
Section 10.2. Termination. Upon complete discontinuance of the
Employer's Profit Sharing Contributions (if the Employer has adopted a
Profit Sharing Plan by completing the appropriate Adoption Agreement) or
termination or partial termination of the Plan, each affected
Participant's Account shall become nonforfeitable. Upon termination or
partial termination of the Plan, the Employer shall instruct the Custodian
whether currently to distribute to each Participant the entire amount of
the Participant's Account, in such one or more of the methods described in
Article VIII, or whether to continue the Plan and to make distributions
therefrom as if the Plan had continued; provided that, in the event the
Plan is continued, the Plan must continue to satisfy the requirements of
Code Section 401(a). The Employer shall in all events exercise such
discretion in a nondiscriminatory manner. The Plan shall continue in
effect until the Custodian shall have completed the distribution of all of
the Plan asset and the accounts of the Custodian have been settled.
ARTICLE XI. FIDUCIARY RESPONSIBILITIES
Section 11.1. Administrator. The Administrator shall have the
power to allocate fiduciary responsibilities and to designate other
persons to carry out such fiduciary responsibilities; provided such
allocation is in writing and filed with the Plan records. The
Administrator may employ one or more persons to render advice to the
Administrator with regard to its responsibilities under the Plan, and
consult with counsel, who may be counsel to the Employer.
Section 11.2. Powers of Administrator. The Administrator shall
administer the Plan in accordance with its terms and shall have all powers
necessary to carry out its terms. The Administrator shall have
discretionary authority to determine eligibility for benefits and to
interpret and construe the terms of the Plan, and any such determination,
interpretation or construction shall be final and binding on all parties
unless arbitrary and capricious. Any such discretionary authority shall
be carried out in a uniform and nondiscriminatory manner.
Section 11.3. Records and Reports. The Administrator, or those
to whom it has delegated fiduciary duties, shall keep a record of all
proceedings and actions, and shall maintain all such books of account,
records and other data as shall be necessary for the proper administration
of the Plan. The Administrator, or those to whom it has delegated
fiduciary duties, shall have responsibility for compliance with the
provisions of ERISA relating to such office, including filing with the
Secretary of Labor and Internal Revenue Service of all reports required by
the Code and/or ERISA and furnishing Participants and Beneficiaries with
descriptions of the Plan and reports required by ERISA.
Section 11.4. Other Administrative Provisions.
(a) No bond or other security shall be required of the
Administrator, and/or any officer or Employee of the Employer to whom
fiduciary responsibilities are allocated, except as may be required by
ERISA.
(b) The Administrator or the Employer may shorten, extend or
waive the time (but not beyond sixty days) required by the Plan for filing
any notice or other form with the Administrator or the Employer, or taking
any other action under the Plan, except a response to an appeal under
Section 11.6, from a decision of the Administrator.
(c) The Administrator or the Employer may direct that such
reasonable expenses as may be incurred in the administration of the Plan
shall be paid out of the funds of the Plan, unless the Employer shall pay
them.
(d) The Administrator, the Custodian, and any other persons
performing fiduciary duties under the Plan shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims,
and no such person shall be liable, to the maximum extent permitted by
ERISA, for any act of commission or omission in accordance with the
foregoing standard.
Section 11.5. Claims Procedure. Any claim relating to benefits
under the Plan shall be filed with the Administrator on a form prescribed
by the Administrator. If a claim is denied in whole or in part, the
Administrator shall give the claimant written notice of such denial within
ninety (90) days after the filing of such claim, which notice shall
specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was
based;
(c) Any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is needed; and
(d) An explanation of the Plan's procedure for review of the
denial of the claim.
In the event that the claim is not granted and notice of denial of a claim
is not furnished by the ninetieth (90th) day after such claim was filed,
the claim shall be deemed to have been denied on that day for the purpose
of permitting the claimant to request review of the claim.
Section 11.6. Claims Review Procedure.
(a) Any person whose claim filed pursuant to Section 11.5 has
been denied in whole or in part by the Administrator may request review of
the claim by the Employer, by filing a written request with the
Administrator. The claimant shall file such request (including a
statement of his position) with the Employer no later than sixty (60) days
after the mailing or delivery of the written notice of denial provided for
in Section 11.5, or, if such notice is not provided, within sixty (60)
days after such be in writing and shall specifically set forth:
(i) The reasons for the decision; and
(ii) The pertinent Plan provisions on which the decision is
based.
Any such decision of the Employer shall bind the claimant and the
Employer, and the Administrator shall take appropriate action to carry out
such decision.
(b) Any person whose claim has been denied in whole or in part
must exhaust the administrative review procedures provided in subsection
(a) above prior to initiating any claim for judicial review.
ARTICLE XII. AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
Notwithstanding any of the foregoing provisions of the Plan to
the contrary, an employer that has previously established an Original Plan
may, in accordance with the provisions of the Original Plan, amend and
continue the Original Plan in the form of this Plan and become an Employer
hereunder, subject to the following:
(a) subject to the conditions and limitations of the Plan, each
person who is a Participant under the Original Plan immediately prior to
the effective date of the amendment and continuation thereof in the form
of this Plan will continue as a Participant in this Plan;
(b) no election may be made in the Adoption Agreement if such
election would reduce the benefits of a Participant under the Original
Plan to less than the benefits to which he would have been entitled if he
had resigned from the employ of the Employer on the date of the Amendment
and continuation of the Original Plan in the form of this Plan;
(c) the amounts, if any, of a Participant's or former
Participant's Accounts immediately prior to the effective date of the
amendment and continuation of the Original Plan in the form of this Plan
shall be reduced to cash, deposited with the Custodian and constitute the
opening balances in such Participant's Account under this Plan;
(d) amounts being paid to individuals in accordance with the
provisions of the Original Plan shall continue to be paid under this Plan,
but in the form that they were being paid under the Original Plan;
(e) any Beneficiary designation in effect under the Original
Plan immediately before its amendment and continuation in the form of this
Plan which effectively meets the requirements contained in Section 2.3
hereof shall be deemed to be a valid Beneficiary designation pursuant to
Section 2.3 of this Plan, unless and until the Participant or former
Participant revokes such Beneficiary designation or makes a new
Beneficiary designation under this Plan. If the Beneficiary designation
form does not meet the requirements of Section 2.3 hereunder, the
Participant's spouse shall be deemed to be his Beneficiary. If the
Participant is unmarried, or his spouse does not survive him, his estate
shall be deemed his Beneficiary.
(f) if the Original Plan's vesting schedule (or this Plan's
vesting schedule) or the Plan is amended or changed in any way that
directly or indirectly affects the computation of a Participant's
nonforfeitable interest in his Account derived from Employer
contributions, each such Participant with at least three (3) Years of
Service with the Employer may elect, within a reasonable period after the
adoption of the amendment or change, to have his nonforfeitable percentage
computed under the Plan without regard for the amendment or change. For
any Participant who does not have at least one (1) Hour of Service in any
Plan Year beginning after December 31, 1988, the preceding sentence shall
be applied by substituting "five (5) Years of Service" for "three (3)
Years of Service" where such language appears therein. Any such election
must be made during the period commencing on the date of the amendment or
change and ending on the latest of: (i) sixty (60) days after that date;
(ii) sixty (60) days after the effective date of the amendment or change;
or (iii) sixty (60) days after such Participant is issued written notice
of the amendment or change by the Plan Administrator or Employer.
ARTICLE XIII. TOP-HEAVY PROVISIONS
Section 13.1. Effect of Top-Heavy Status. The Plan shall be a
"Top-Heavy Plan" for any Plan Year commencing after December 31, 1983, if
any of the following conditions exist:
(a) If the Top-Heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group.
(b) If this Plan is a part of a Required Aggregation Group but
not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds sixty percent (60%).
If the Plan is a Top-Heavy Plan in any Plan Year beginning after December
31, 1983, the provisions of Sections 13.3 through 13.6 shall supersede any
conflicting provisions of the Plan or the Adoption Agreement.
Section 13.2. Additional Definitions. Solely for purposes of
this Article, the following terms shall have the meanings set forth below:
(a) "Key Employee" means any Employee or former Employee (and
the Beneficiaries of such Employee) who at any time during the
Determination Period was an officer of the Employer if such individual's
annual compensation exceeds 50 percent of the dollar limitation under Code
Section 415(b)(1) (A), an owner (or considered an owner under Code Section
318) of one of the ten largest interests in the Employer if such
individual's compensation exceeds 100 percent (100%) of the dollar
limitation under Code Section 415(c)(1)(A), a five percent (5%) owner of
the Employer, or one percent (1%) owner of the Employer who has an annual
compensation of more than $150,000. Annual compensation means
compensation as defined in Code Section 415(c)(3), of the Code, but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Employee's gross income
under Code Sections 125, 402(a)(8), 402(h) or 403(b). The determination
period is the plan year containing the Determination Date and the four (4)
preceding Plan Years.
The determination of who is a Key Employee will be made in accordance with
Code Section 416(i)(1) and the Regulations thereunder.
(b) "Determination Date" means the last day of the preceding
Plan Year. For the first Plan Year of the Plan Determination Date shall
mean the last day of that year.
(c) "Top-Heavy Ratio" means:
(i) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the five (5) year
period ending on the Determination Date(s) has or has had accrued
benefits, the Top-Heavy Ratio for this plan alone or for the Required or
Permissive Aggregation Group as appropriate is a fraction, the numerator
of which is the sum of the account balances of all Key Employees as of the
determination date(s) (including any part of any account balance
distributed in the five (5) year period ending on the Determination
Date(s)), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5)
year period ending on the Determination Date(s)), both computed in
accordance with Code Section 416 and the Regulations thereunder. Both the
numerator and denominator of the Top-Heavy Ratio are increased to reflect
any contribution not actually made as of the Determination Date, but which
is required to be taken into account on that date under Code Section 416
and the Regulations thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which during
the five (5) year period ending on the Determination Date(s) has or has
had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the numerator
of which is the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined in accordance
with (i) above, and the present value of accrued benefits under the
aggregated defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of the
account balances under the aggregated defined contribution plan or plans
for all participants, determined in accordance with (i) above, and the
present value of accrued benefits under the defined benefit plan or plans
for all participants as of the Determination Date(s), all determined in
accordance with Code Section 416 and the Regulations thereunder. The
accrued benefits under a defined benefit plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any distribution of
an accrued benefit made in the five (5) year period ending on the
Determination Date.
(iii) For purposes of (i) and (ii) above the value of
account balances and the present value of accrued Valuation Date that
falls within or ends with the twelve (12) month period ending on the
Determination Date, except as provided in Code Section 416 and the
Regulations thereunder for the first and second plan years of a defined
benefit plan. The account balances and accrued benefits of a participant
(A) who is not a Key Employee but who was a Key Employee in a prior year,
or (B) who has not been credited with at least one (1) hour of service
with any employer maintaining the plan at any time during the five (5)
year period ending on the Determination Date will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in accordance
with Code Section 416 and the Regulations thereunder. Deductible employee
contributions will not be taken into account for purposes of computing the
Top-Heavy Ratio. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
(iv) The accrued benefit of a participant other than a Key
Employee shall be determined under (i) the method, if any, that uniformly
applies for accrual purposes under all defined benefit plans maintained by
the employer, or (ii) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional rule of Code Section 411(b)(1)(C).
(d) "Permissive Aggregation Group" means the Required
Aggregation Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required Aggregation Group,
would continue to satisfy the requirements of Code Sections 401(a)(4) and
410.
(e) "Required Aggregation Group" means (i) each qualified plan
of the Employer in which at least one Key Employee participates or
participated at any time during the five (5) year period ending on the
Determination Date (regardless of whether the plan has terminated), and
(ii) any other qualified plan of the Employer which enables a plan
described in (i) to meet the requirements of Code Sections 401(a)(4) or
410.
(f) "Valuation Date" means (i) in the case of a defined
contribution plan, the Determination Date, and (ii) in the case of a
defined benefit plan, the date as of which funding calculations are
generally made within the twelve (12) month period ending on the
Determination Date.
(g) "Employer" means the employer or employers whose employees
are covered by this Plan and any other employer which must be aggregated
with any such employer under Code Sections 414(b), (c), (m) and (o).
(h) "Present Value" means the value based on an interest rate
of five percent (5%) and mortality assumptions based on the 1971 GAM
Mortality Table or such other interest rate or mortality assumptions as
may be specified in the Adoption Agreement.
Section 13.3. Minimum Allocations. (a) For any year in which
the Plan is a Top-Heavy Plan, each Participant who is not a Key Employee
and who is not separated from service at the end of the Plan Year shall
receive allocations of Employer contributions and forfeitures under this
Plan at least equal to three percent (3%) of Compensation (as defined in
Section 2.6) for such year or, if less, the largest percentage of the
first two hundred thousand dollars ($200,000) of compensation allocated on
behalf of the Key Employee for the Plan Year where the Employer has no
defined benefit plan which designates this Plan to satisfy Code Section
401. This minimum allocation shall be determined without regard for any
Social Security contribution and shall be provided even though under other
provisions the Participant would not otherwise be entitled to receive an
allocation or would have received a lesser allocation because of (i) the
Participant's failure to complete One Thousand (1,000) Hours of Service
(or any equivalent provided in the Plan), or (ii) the Participant's
failure to make mandatory Employee contributions to the Plan, or (iii)
Compensation less than a stated amount.
(b) The provision in (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan
or plans of the employer and the employer has provided in the Adoption
Agreement that the minimum allocation or benefit requirement applicable to
top-heavy plans will be met in the other plan or plans.
(c) The minimum allocation required (to the extent required to
be nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
(d) For purposes of subsection (a) above, neither Elective
Deferrals nor Employer Matching Contributions shall be taken into account
for the purposes of satisfying the minimum top-heavy benefits requirement.
Section 13.4. Benefit Limit Change. If the Employer maintains
both the Plan and a defined benefit plan which cover one or more of the
same Key Employees and the plans are Top-Heavy in a Plan Year, then
Section 6.5(c) and (j) hereof shall be amended to substitute "one hundred
percent (100%)" for the number "one hundred and twenty-five percent
(125%)" where the latter appears therein.
ARTICLE XIV. MISCELLANEOUS
Section 14.1. Rights of Employees and Participants. No
Employee or Participant shall have any right or claim to any benefit under
the Plan except in accordance with the provisions of the Plan, and then
only to the extent that there are funds available therefor in the hands of
the Custodian. The establishment of the Plan shall not be construed as
creating any contract of employment between the Employer and any Employee
or otherwise conferring upon any Employee or other person any legal right
to continuation of employment, nor as limiting or qualifying the right of
the Employer to discharge any Employee without regard to the effect that
such discharge might have upon his rights under the Plan.
Section 14.2. Merger With Other Plans. The Plan shall not be
merged or consolidated with, nor transfer its assets or liabilities to,
any other plan unless each Participant, Beneficiary and other person
entitled to benefits, would (if the Plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is
equal to or greater than the benefit he would have been entitled to
receive if the Plan had terminated immediately prior to the merger,
consolidation or transfer.
Section 14.3. Non-Alienation of Benefits. The right to receive
a benefit under the Plan shall not be subject in any manner to
anticipation, alienation, or assignment, nor shall such right be liable
for or subject to debts, contracts, liabilities or torts, either
voluntarily or involuntarily. Any attempt by the Participant, Beneficiary
or other person to anticipate, alienate or assign his interest in or right
to a benefit or any claim against him seeking to subject such interest or
right to legal or equitable process shall be null and void for all
purposes hereunder to the extent permitted by ERISA and the Code.
Notwithstanding the foregoing or any other provision of the Plan, the
Administrator shall recognize and give effect to a qualified domestic
relations order with respect to child support, alimony payments or marital
property rights if such order is determined by the Administrator to meet
the applicable requirements of Code Section 414(p). If any such order so
directs, distribution of benefits to the alternate payee may be made at
any time, even if the Participant is not then entitled to a distribution.
The Administrator shall establish reasonable procedures relating to notice
to the Participant and determinations respecting the qualified status of
any domestic relations order.
Section 14.4. Failure to Qualify. Notwithstanding anything in
this Plan to the contrary, all contributions under the Plan made prior to
the receipt by the Employer of a determination by the Internal Revenue
Service to the effect that the Plan is qualified under Code Section 401
shall be made on the express condition that such a determination will be
received, and in the event that the Internal Revenue Service determines
upon initial application for a determination that the Plan is not so
qualified or tax exempt, all contributions made by the Employer or
Participants prior to the date of determination must be returned within
one (1) year from the date of such determination, but only if the
application for qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan is
adopted or such later date as the Secretary of the Treasury may prescribe.
Section 14.5. Mistake of Fact; Disallowance of Deduction.
Notwithstanding anything in this Plan to the contrary, any contributions
made by the Employer which are conditioned on the deductibility of such
amount under Code Section 404, to the extent of the amount disallowed, or
which are made because of a mistake of fact must be returned to the
Employer within one year after such disallowance or such mistaken
contribution.
Section 14.6. Participation under Prototype Plan. If the Plan
as adopted by the Employer either fails to attain or maintain
qualification under the Code, such Plan will no longer participate in this
prototype plan and will be considered an individually designed plan.
Section 14.7. Gender. Where the context admits, words used in
the singular include the plural, words used in the plural include the
singular, and the masculine gender shall include the feminine and neuter
genders.
Section 14.8. Headings. The headings of Sections are included
solely for convenience of reference, and if there is any conflict between
such headings and the text of the Plan, the text shall control.
Section 14.9. Governing Law. Except to the extent governed by
ERISA and any other applicable federal law, the Plan shall be construed,
administered and enforced according to the laws of the state in which the
Employer has its principal place of business.
<PAGE>
EASTCLIFF\F11964 09/29/97 GHD/jem
EASTCLIFF FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
(PENSION PLAN)
The undersigned Employer hereby adopts and establishes the
Eastcliff Funds Prototype Defined Contribution Retirement Plan. This Plan
is subject to the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name:_________________________________________________________
Address:______________________________________________________
_______________________________________________________
Telephone Number: (___)_______________________________________
Employer Identification Number:_______________________________
Type of Entity: [_] Corporation
[_] Partnership
[_] Sole Proprietorship
[_] Other (please describe)
Employer's Taxable Year is [_] calendar year or [_] fiscal year
beginning ______________________
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Address:______________________________________________________
_______________________________________________________
Telephone Number: (___)_______________________________________
Plan Year is the [_] calendar year, [_] Employer's fiscal year, or
[_] year beginning ___________________
3. EFFECTIVE DATE
Execution of this Adoption Agreement (check one):
[_] Establishes a new plan.
[_] Is an amendment to an Original Plan. This amendment is
effective _____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a
"frozen plan"). This amendment is effective __________,
19__. (You need not complete items 4, 5 or 6 and
check item 7(A)(1)).
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting
period.
[_] In order to become a Participant, an employee must satisfy
the following Age and Service Requirements:
(1) An Employee must complete ____ (enter 1 or 2) Year(s)
of Employment. If more than 1 year is selected, you
must also check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive
month period beginning on the date an Employee first
performs an Hour of Service or an anniversary thereof
during which the Employee has completed ________
(insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of
the method elected below. Only one method may be
elected. The method elected shall be applied to all
Employees covered under the Plan.
[_] On the basis of actual hours for which an
Employee is paid or entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the week.
[_] On the basis of months worked:
An Employee shall be credited with 190 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the month.
(2) An Employee must attain age ____ (not greater than age
21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective
bargaining agreement between the Employer and employee
representatives under which retirement benefits were the
subject of good faith bargaining. The term "employee
representatives" does not include any organization more
than one-half of whose members are officers, executives or
owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PENSION CONTRIBUTIONS
(A) The Employer Pension Contribution (including forfeitures
available for allocation) for each Plan Year shall be ____% (not
more than 25%) of the aggregate Compensation and Earned Income
of eligible Participants.
(B) Allocation Formulas
The Employer Pension Contribution shall be allocated pursuant to
the following formula (check one):
[_] Compensation Formula
The Employer Pension Contribution shall be allocated based
on each eligible Participant's total Compensation for the
Plan Year.
Note: If the Integration Formula is elected under the
Profit Sharing Plan, the Compensation Formula must be
elected under this Plan.
[_] Integration Formula
The Employer Pension Contribution shall be allocated based
on each eligible Participant's Compensation in excess of
the Integration Level and total Compensation for the Plan
Year, subject to the limitations set forth in Section
4.2(b) of the Plan.
[_] The Integration Level shall be the taxable wage base
for FICA tax purposes.
[_] The Integration Level shall be $_________ (not to
exceed the FICA taxable wage base).
Note: If the Plan is top-heavy all eligible
Participants must first be allocated 3% of their total
Compensation and any remaining contribution may be
allocated pursuant to the Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Pension Contribution Account under the
following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable
and fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not
more than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with
the following schedule:
Vested
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(B) A "Year of Service" shall mean any Plan year in which an
Employee completes at least ____ (insert 1,000 or less) Hours of
Service. Years of Service shall include all Years of Service
with the Employer except as noted below (check one, both or
none):
(1) [_] All Years of Service prior to the effective date of
this Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for
non-highly compensated employees.
[_] Participant Voluntary Contributions are not permitted.
9. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ___ [insert an age not to
exceed 65].
10. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of
________________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Profit Sharing
Plan) which is either (i) a qualified defined contribution plan other
than a Master or Prototype Plan or (ii) a qualified defined benefit
plan in which any Participant in this Plan is (or was) a participant
or could become a participant, or if the Employer maintains a welfare
benefit fund or an individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and
6.4 of the Plan will automatically apply.
11. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of
the Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____%
Mortality Table: _____________________________
12. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Trustee shall establish individual
Trust Accounts for each Participant.
[_] The Trustee shall establish a single Trust Account in the
name of the Employer and the Employer shall keep all
records for the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
13. TRUSTEE
The undersigned as Employer hereby appoints the Firstar Trust Company
or its agents to invest all contributions received under the Plan in
Investment Company Shares designated by the Employer and in
accordance with the Plan.
14. FEES
The Trustee shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Trustee with advance notice
from time to time. Annual maintenance fees for each Participant's
Account and any fees directly related to activity in that
Participant's Account shall be deducted annually and activity fees
will be deducted at the time incurred. Sufficient Investment Company
Shares will be redeemed to cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to
such additional charges as will reasonably compensate the Trustee for
the services performed.
15. FUNDING WAIVER
In the event the Employer obtains a funding waiver under Code Section
412 from the Internal Revenue Service, the Employer shall amend the
Plan by adding language which will override the affected provisions
of the Plan and this Adoption Agreement (attach appropriate
overriding language to this Adoption Agreement to comply with the
Code).
Note: An Employer that amends the Plan because of a waiver of the
minimum funding requirements under Code Section 412 will no longer
participate in this prototype Plan and will be considered to have
adopted an individually designed plan.
16. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain
or maintain tax qualification of the Plan or if it amends the Plan
other than by a change in the Adoption Agreement. The Employer
agrees that whenever a Participant contribution is made, the Employer
will determine that the Participant has received the appropriate
current Investment Company prospectus. The Employer represents that
the Participant has received such prospectus by depositing
contributions with the Trustee.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 419A(d)(3) or an individual
medical account, as defined in Code Section 415(l)(2)) in addition to
this Plan (or the Profit Sharing Plan), it may not rely on an opinion
letter issued by the National Office of the Internal Revenue Service
as evidence that this Plan is qualified under Code Section 401. If
the Employer adopts or maintains multiple plans and wishes reliance
that the Plan is qualified, application for an individual
determination letter should be made to the appropriate District
Office of the Internal Revenue Service.
17. ADDITIONAL INFORMATION
This Plan is sponsored by:
Resource Capital Advisors, Inc.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
(612) 336-1444
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any
amendments made to this Plan or of the discontinuance or abandonment
of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer:________________________________________________
Name of person signing above (please print):__________________________
Date:_____________________________
TRUSTEE ACCEPTANCE
The undersigned hereby accepts appointment as Trustee under the
Plan.
FIRSTAR TRUST COMPANY
By:________________________________
Date:_____________________________
<PAGE>
EASTCLIFF\F11965 09/29/97 GHD/jem
EASTCLIFF FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
(PROFIT-SHARING PLAN)
The undersigned Employer hereby adopts and establishes the
Eastcliff Funds Prototype Defined Contribution Retirement Plan. This Plan
is subject to the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name:________________________________________________________
Address:______________________________________________________
_______________________________________________________
Telephone Number: (___)_______________________________________
Employer Identification Number:______________________________
Type of Entity: [_] Corporation
[_] Partnership
[_] Sole Proprietorship
[_] Other (please describe)
Employer's Taxable Year is [_] calendar year or [_] fiscal year
beginning ______________________
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name:_________________________________________________________
Address:______________________________________________________
_______________________________________________________
Telephone Number: (___)_______________________________________
Plan Year is the [_] calendar year, [_] Employer's fiscal year, or
[_] year beginning ___________________
3. EFFECTIVE DATE
Execution of this Adoption Agreement (check one):
[_] Establishes a new plan.
[_] Is an amendment to an Original Plan. This amendment is
effective ____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective ______________, 19__. (You
need not complete items 4, 5 or 6 and check item 7(A)(1).)
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an Employee must satisfy
the following Age and Service Requirements:
(1) An Employee must complete ____ (enter 1 or 2) Year(s)
of Employment. If more than 1 year is selected, you
must also check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive
month period beginning on the date an Employee first
performs an Hour of Service or an anniversary thereof
during which the Employee completed _________ (insert
1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of
the method elected below. Only one method may be
elected. The method elected shall be applied to all
Employees covered under the Plan.
[_] On the basis of actual hours for which an
Employee is paid or entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the week.
[_] On the basis of months worked:
An Employee shall be credited with 190 Hours of
Service if the Employee would be credited with at
least 1 Hour of Service during the month.
(2) An Employee must attain age _____ (not greater than
age 21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective
bargaining agreement between the Employer and employee
representatives under which retirement benefits were the
subject of good faith bargaining. The term "employee
representatives" does not include any organization more
than one-half of whose members are officers, executives or
owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in item 4 above.
(B) For any self-employed individual covered under the Plan,
Compensation means Earned Income.
6. EMPLOYER PROFIT SHARING CONTRIBUTIONS
(A) The Employer Profit Sharing Contributions for each Plan Year
shall be (check one):
[_] A discretionary amount determined by the Employer, but not
more than 15% of the aggregate Compensation and Earned
Income of Participants eligible to share in such
contribution for the Plan Year.
[_] An amount equal to _____% (not more than 15%) of the
aggregate Compensation and Earned Income of Participants
eligible to share in such contribution for the Plan Year.
(B) Employer Profit Sharing Contributions:
[_] Shall be made out of Net Profits.
[_] May be made without regard to Net Profits.
(C) Allocation Formulas
The Employer Profit Sharing Contributions (and forfeitures)
shall be allocated to the accounts of eligible Participants
pursuant to the following formula (elect one):
(1) [_] Compensation Formula
Employer Profit Sharing Contributions (and
forfeitures) shall be allocated based on each eligible
Participant's total Compensation for the Plan Year.
NOTE: If the Integration Formula is selected under
the Pension Plan, the Compensation Formula must be
selected under this Plan.
(2) [_] Integration Formula
Employer Profit Sharing Contributions (and
forfeitures) shall be allocated based on each eligible
Participant's Compensation in excess of the
Integration Level and total Compensation for the Plan
Year, subject to the limitation set forth in Section
4.1(b) of the Plan.
[_] The Integration Level shall be the taxable wage
base for FICA tax purposes.
[_] The Integration Level shall be $_______________
(not to exceed the FICA taxable wage base).
NOTE: If the Plan is top-heavy all eligible Participants
must first be allocated 3% of their total Compensation and
any remaining contributions may be allocated pursuant to
the Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Profit Sharing Contribution Account
under the following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable
and fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not
more than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with
the following schedule:
Vested
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(B) A "Year of Service" means any Plan Year in which an Employee
completes at least ____ (insert 1,000 or less) Hours of Service.
Years of Service shall include all Years of Service with the
Employer, except as noted below (check one, both or none).
(1) [_] All Years of Service prior to the effective date of
this Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. CASH OR DEFERRED ARRANGEMENT (Section 401(k))
Please check one:
[_] This Plan will include a cash or deferred arrangement (complete
the remainder of this Section). The Effective Date of this Cash
or Deferred Arrangement (Section 401(k)) is __________________,
19__.
[_] This Plan will not include a cash or deferred arrangement (do
not complete the remainder of this Section).
(A) Elective Deferrals.
(1) An Employee shall be eligible to make Elective Deferrals
under Article V of the Plan upon satisfying the following
eligibility requirements:
[_] An Employee must complete ____ (not greater than 1
year) Years of Employment.
[_] An Employee must attain age ____ (not greater than
21).
[_] Union Employees are excluded from making Elective
Deferrals.
[_] All Employees are eligible to make Elective Deferrals.
(2) An Employee may elect to make Elective Deferrals to the
Plan equal to a percentage of regular salary or wages for a
pay period as specified in a salary reduction agreement.
The maximum percentage of Elective Deferrals shall be
_____%.
[_] Elective Deferrals may be based on cash bonuses paid
to the Employee. The maximum percentage of such
Elective Deferrals shall be ______%.
(3) An Employee may change the rate of his Elective Deferrals:
[_] On the first day of each Plan Year.
[_] And on the following additional dates: _____________.
(B) Matching Contributions
(1) The percentage of Elective Deferral contributions which are
matched is:
[_] _____%
[_] _____ of the first _____% of Elective Deferrals.
[_] A percentage determined by the Employer, but will not
be more than 100%
(2) Matching Contributions are made:
[_] Each pay period in which Elective Deferrals are made.
[_] At the end of the Plan Year for Employees meeting the
requirements for annual contributions.
(3) Matching Contributions will vest under the following
schedule (elect one):
[_] Employee shall at all times have a nonforfeitable and
fully vested interest in any Matching Contributions.
NOTE: If this option is selected, Matching
Contributions may be used under the average deferral
tests for purposes of Elective Deferrals under the
Cash or Deferred Arrangement (Section 401(k)).
[_] An Employee shall be fully vested in any Matching
Contributions after ____ (not more than 3) Years of
Service.
[_] An Employee shall become vested in any Matching
Contributions in accordance with the following
schedule:
Nonforfeitable
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(C) Special Conditions
[_] The Employer may make Qualified Matching Contributions
subject to Section 5.4 of the Plan.
[_] The Employer may make Qualified Non-Elective
Contributions subject to Section 5.4 of the Plan.
Note: These special contributions are used to satisfy
the nondiscrimination tests which apply to elective
deferral and matching contributions.
(D) Hardship Withdrawals
[_] Withdrawals on account of financial hardship are
allowed in accordance with Section 5.5(a) of the Plan.
[_] Withdrawals on account of financial hardship are not
allowed.
9. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for non-
highly compensated employees.
[_] Participant Voluntary Contributions are not permitted.
10. WITHDRAWAL OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
[_] A Participant who has participated in the Plan for at least 5
years may withdraw up to ____% of his vested Employer Profit
Sharing Contribution Account after attaining age 59 1/2 or on
account of a financial hardship in accordance with Section 8.6
of the Plan.
Note: Withdrawals are not permitted if the Integration Formula
is selected in item 6(C)(2).
[_] Withdrawals are not permitted.
11. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ____ [insert an age not to
exceed 65].
12. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of
_________________________.
Follow these instructions only if you maintain (or have ever
maintained) another plan which is either (i) a qualified defined
contribution plan other than a Master or Prototype Plan, or (ii) a
qualified defined benefit plan in which any Participant in this Plan
is (or was) a participant or could become a participant, or if the
Employer maintains a welfare benefit fund or an individual medical
account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's account.
If you do not attach the appropriate provisions, Sections 6.3. and
6.4 of the Plan will automatically apply.
13. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of
the Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____%
Mortality Table: _____________________________
14. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Trustee shall establish individual
Trust Accounts for each Participant.
[_] The Trustee shall establish a single Trust Account in the
name of the Employer and the Employer shall keep all
records for the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
15. TRUSTEE
The undersigned as Employer hereby appoints the Firstar Trust Company
or its agents to invest all contributions received under the Plan in
Investment Company Shares designated by the Employer and in
accordance with the Plan.
16. FEES
The Trustee shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Trustee with advance notice.
Annual maintenance fees for each Participant's Account and any fees
directly related to activity in that Participant's Account shall be
deducted annually and activity fees will be deducted at the time
incurred. Sufficient Investment Company Shares will be redeemed to
cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to
such additional charges as will reasonably compensate the Trustee for
the services performed.
17. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain
or maintain tax qualification of the Plan or if it amends the Plan
other than by a change in the Adoption Agreement. The Employer
agrees that whenever a Participant Contribution is made, the Employer
will determine that the Participant has received the appropriate
current Investment Company prospectus. The Employer represents that
the Participant has received such prospectus by depositing
contributions with the Trustee.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 419A(d)(3) or an individual
medical account, as defined in Code Section 415(1)(2)) in addition to
this Plan (or the Pension Plan), it may not rely on an opinion letter
issued by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Code Section 401. If the
Employer adopts or maintains multiple plans and wishes reliance that
the Plan is qualified, application for an individual determination
letter should be made to the appropriate District Office of the
Internal Revenue Service.
18. ADDITIONAL INFORMATION
This Plan is sponsored by:
Resource Capital Advisors, Inc.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
(612) 336-1444
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any
amendments made to this Plan or of the discontinuance of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer:_______________________________________________
Name of person signing above (please print):_________________________
Date:__________________________
TRUSTEE ACCEPTANCE
The undersigned hereby accepts appointment as Trustee under the
Plan.
FIRSTAR TRUST COMPANY
By:_________________________________
Date:_______________________________
Exhibit 14.3
EASTCLIFF FUNDS SIMPLIFIED EMPLOYEE PENSION
Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benefits to all eligible employees under a SEP described in
section 408(k). Do not file this form with the IRS. See Pub. 560,
Retirement Plans for the Self-Employed, and Pub. 590, Individual
Retirement Arrangements (IRAs).
Instructions to the Employer
Simplified Employee Pension.-A SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your
employees' retirement income. Under a SEP, you can contribute to an
employee's individual retirement account or annuity (IRA). You make
contributions directly to an IRA set up by or for each employee with a
bank, insurance company, or other qualified financial institution. When
using Form 5305-SEP to establish a SEP, the IRA must be a Model IRA
established on an IRS form or a master or prototype IRA for which the IRS
has issued a favorable opinion letter. Making the agreement on Form 5305-
SEP does not establish an employer IRA described in section 408(c).
When Not To Use Form 5305-SEP.-Do not use this form if you:
1. Currently maintain any other qualified retirement plan. This
does not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section
414(n)).
5. Are a member of an affiliated service group (described in
section 414(m)), a controlled group of corporations (described in section
414(b)), or trades or businesses under common control (described in
sections 414(c) and 414(o)), unless all eligible employees of all the
members of such groups,trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even
if the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective
deferrals to a SEP.
Note: SEPs permitting elective deferrals cannot be established after
1996.
Eligible Employees.-All eligible employees must be allowed to participate
in the SEP. An eligible employee is any employee who: (1) is at least 21
years old, and (2) has performed "service" for you in at least 3 of the
immediately preceding 5 years.
Note: You can establish less restrictive eligibility requirements, but
not more restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations,or trades or businesses under common control,
service includes any work performed for any period of time for any other
member of such group,trades, or businesses.
Excludable Employees.-The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their
union, (2) nonresident alien employees who did not earn U.S.source income
from you, and (3) employees who received less than $400* in compensation
during the year.
__________
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Contribution Limits.-The SEP rules permit you to make an annual
contribution of up to 15% of the employee's compensation or $300,000*,
whichever is less. Compensation, for this purpose, does not include
employer contributions to the SEP or the employee's compensation in excess
of $160,000*. If you also maintain a Model Elective SEP or any other SEP
that permits employees to make elective deferrals, contributions to the
two SEPs together may not exceed the smaller of $300,000* or 15% of
compensation for any employee.
__________
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But
you must contribute to the SEP-IRAs of all of the eligible employees who
actually performed services during the year of the contribution. This
includes eligible employees who die or quit working before the
contribution is made.
You may also not integrate your SEP contributions with, or offset
them by, contributions made under the Federal Insurance Contributions Act
(FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who
participate in your elective SEP, then you must make minimum contributions
to IRAs established on behalf of those employees.
Deducting Contributions.--You may deduct contributions to a SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with
or within which the calendar year ends. Contributions made for a
particular tax year must be made by the due date of your income tax return
(including extensions) for that tax year.
Completing the Agreement.--This agreement is considered adopted when:
- IRAs have been established for all your eligible employees;
- You have completed all blanks on the agreement form without
modification; and
- You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which employer
SEP contributions will be made may provide different rates of return and
different terms concerning, among other things, transfers and withdrawals
of funds from the IRAs.
3. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate, the
administrator of the SEP must furnish each participant within 30 days of
the effective date of any amendment to the SEP, a copy of the amendment
and a written explanation of its effects.
4. A statement that the administrator will give written
notification to each participant of any employer contributions made under
the SEP to that participant's IRA by the later of January 31 of the year
following the year for which a contribution is made or 30 days after the
contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-
SEP and provided the other documents and disclosures described in
Instructions to the Employer and Information for the Employee, are not
required to file the annual information returns, Forms 5500, 5500-C/R, or
5500-EZ for the SEP. However, under Title I of ERISA, this relief from
the annual reporting requirements may not be available to an employer who
selects, recommends, or influences its employees to choose IRAs into which
contributions will be made under the SEP, if those IRAs are subject to
provisions that impose any limits on a participant's ability to withdraw
funds (other than restrictions imposed by the Code that apply to all
IRAs). For additional information on Title I requirements, see the
Department of Labor regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
Simplified Employee Pension.--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (IRA).
Contributions must be made to either a Model IRA executed on an IRS form
or a master or prototype IRA for which the IRS has issued a favorable
opinion letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible employee will be the same
percentage of compensation (excluding compensation higher than $160,000*)
for all employees.
__________
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Your employer will provide you with a copy of the agreement
containing participation rules and a description of how employer
contributions may be made to your IRA. Your employer must also provide
you with a copy of the completed Form 5305-SEP and a yearly statement
showing any contributions to your IRA.
All amounts contributed to your IRA by your employer belong to you
even after you stop working for that employer.
Contribution Limits.--Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is
limited to the smaller of $30,000* or 15% of your compensation (currently
limited to $160,000) for that year. Compensation does not include any
amount that is contributed by your employer to your IRA under the SEP.
Your employer is not required to make contributions every year or to
maintain a particular level of contributions.
__________
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Tax Treatment of Contributions.--Employer contributions to your SEP-IRA
are excluded from your income unless there are contributions in excess of
the applicable limit. Employer contributions within these limits will not
be included on your Form W-2.
Employee Contributions.--You may contribute the smaller of $2,000 or 100%
of your compensation to an IRA. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered
by an employer retirement plan.
SEP Participation.--If your employer does not require you to participate
in a SEP as a condition of employment, and you elect not to participate,
all other employees of your employer may be prohibited from participating.
If one or more eligible employees do not participate and the employer
tries to establish a SEP for the remaining employees, it could cause
adverse tax consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Elective SEP
or other SEP. However, if you work for several employers, you may be
covered by a SEP of one employer and a different SEP or pension or profit-
sharing plan of another employer.
SEP-IRA Amounts--Rollover or Transfer to Another IRA.--You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place
those funds in another IRA or SEP-IRA. This is called a "rollover" and
can be done without penalty only once in any 1-year period. However,
there are no restrictions on the number of times you may make "transfers"
if you arrange to have these funds transferred between the trustees or the
custodians so that you never have possession of the funds.
Withdrawals.--You may withdraw your employer's contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 59-1/2, you may be subject
to a tax on early withdrawal.
Excess SEP Contributions.--Contributions exceeding the yearly limitations
may be withdrawn without penalty by the due date (plus extensions) for
filing your tax return (normally April 15), but is includible in your
gross income. Excess contributions left in your SEP-IRA account after
that time may have adverse tax consequences. Withdrawals of those
contributions may be taxed as premature withdrawals.
Financial Institution Requirements.--The financial institution where your
IRA is maintained must provide you with a disclosure statement that
contains the following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility
of retirement savings.
4. Situations and procedures for revoking your IRA, including the
name, address, and telephone number of the person designated to receive
notice of revocation. (This information must be clearly displayed at the
beginning of the disclosure statement.)
5. A discussion of the penalties that may be assessed because of
prohibited activities concerning your IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of
determining annual earnings and charges that may be assessed.
b. Describes whether, and for when, the growth projections are
guaranteed, or a statement of the earnings rate and the terms on which the
projections are based.
c. States the sales commission for each year expressed as a
percentage of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
Exhibit 14.4
EASTCLIFF FUNDS SIMPLE PLAN
Article I Employee Requirements (Complete appropriate box(es) and
blanks-see instructions)
1 General Eligibility Requirements. The Employer agrees to permit
salary reduction contributions to be made in each calendar year to the
SIMPLE IRA established by each employee who meets the following
requirements (select either 1a or 1b):
a [_] Full Eligibility. All employees are eligible.
b [_] Limited Eligibility. Eligibility is limited to employees who
are described in both (i) and (ii) below:
(i) Current compensation. Employees who are reasonably
expected to receive at least $_____________ in compensation (not to exceed
$5,000) for the calendar year.
(ii) Prior compensation. Employees who have received at
least $___________ in compensation (not to exceed $5,000) during any
_______ calendar year(s) (insert 0, 1, or 2) preceding the calendar year.
2 Excludable Employees (OPTIONAL)
[_] The Employer elects to exclude employees covered under a
collective bargaining agreement for which retirement benefits were the
subject of good faith bargaining.
Article II-Salary Reduction Agreements (Complete the box and blank, if
appropriate-see instructions.)
1 Salary Reduction Election. An eligible employee may make a salary
reduction election to have his or her compensation for each pay period
reduced by a percentage. The total amount of the reduction in the
employee's compensation cannot exceed $6,000* for any calendar year.
__________
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
2 Timing of Salary Reduction Elections
a For a calendar year, an eligible employee may make or modify a salary
reduction election during the 60-day period immediately preceding January
1 of that year. However, of for the year in which the employee becomes
eligible to make salary reduction contributions, the period during which
the employee may make or modify the election is a 60-day period that
includes either the date the employee becomes eligible or the day before.
b In addition to the election in 2a, eligible employees may make salary
reduction elections or modify prior elections _______________ (If the
Employer chooses this option, insert a period or periods (e.g. semi-
annually, quarterly, monthly, or daily) that will apply uniformly to all
eligible employees.)
c No salary reduction election may apply to compensation that an
employee received, or had a right to immediately receive, before execution
of the salary reduction election.
d An employee may terminate a salary reduction election at any time
during the calendar year. [_] If this box is checked, an employee who
terminates a salary reduction election not in accordance with 2b may not
resume salary reduction contributions during the calendar year.
Article III-Contributions (Complete the blank, if appropriate-see
instructions.)
1 Salary Reduction Contributions. The amount by which an employee
agrees to reduce his or her compensation will be contributed by the
Employer to the employee's SIMPLE IRA.
2 Other Contributions
a Matching Contributions
(i) For each calendar year, the Employer will contribute a matching
contribution to each eligible employee's SIMPLE IRA equal to the
employee's salary education contributions up to a limit of 3% of the
employee's compensation for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in
(i) only if:
(1) The limit is not reduced below 1%; (2) The limit is not
reduced for more than 2 calendar years during the 5-year period ending
with the calendar year the reduction is effective; and (3) Each employee
is notified of the reduced limit within a reasonable period of time before
the employees' 60-day election period for the calendar year (described in
Article II, item 2a).
b Nonelective Contributions
(i) For any calendar year, instead of making matching contributions
the Employer may make nonelective contributions equal to 2% of
compensation for the calendar year to the SIMPLE IRA of each eligible
employee who has at least $______________ (not more than $5,000) in
compensation for the calendar year. No more than $160,000* in
compensation can be taken into account in determining the nonelective
contribution for each eligible employee.
__________
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
(ii) For any calendar year, the Employer may make 2% nonelective
contributions instead of matching contributions only if:
(1) Each eligible employee is notified that a 2% nonelective
contribution will be made instead of a matching contribution; and
(2) This notification is provided within a reasonable period of time
before the employees' 60-day election period for the calendar year
(described in Article II, item 2a).
Time and Manner of Contributions
a The Employer will make the salary reduction contributions
(described in 1 above) for each eligible employee to the SIMPLE IRA
established at the financial institution selected by that employee no
later than 30 days after the end of the month in which the money is
withheld from the employee's pay. See instructions.
b The Employer will make the matching or nonelective contributions
(described in 2a and 2b above) for each eligible employee to the SIMPLE
IRA established at the financial institution selected by that employee no
later than the due date for filing the Employer's tax return, including
extensions, for the taxable year that includes the last day of the
calendar year for which the contributions are made.
Article IV-Other Requirements and Provisions
1 Contributions in General. The Employer will make no contributions to
the SIMPLE IRAs other than salary reduction contributions (described in
Article III, item 1) and matching or nonelective contributions (described
in Article III, items 2a and 2b).
2 Vesting Requirements. All contributions made under this SIMPLE plan
are fully vested and nonforfeitable.
3 No Withdrawal Restrictions. The Employer may not require the
employee to retain any portion of the contributions in his or her SIMPLE
IRA or otherwise impose any withdrawal restrictions.
4 Selection of IRA Trustee. The employer must permit each eligible
employee to select the financial institution that will serve as the
trustee, custodian, or issuer of the SIMPLE IRA to which the employer will
make all contributions on behalf of that employee.
5 Amendments To This SIMPLE Plan. This SIMPLE plan may not be amended
except to modify the entries inserted in the blanks or boxes provided in
Articles I, II, III, VI, and VII.
6 Effects of Withdrawals and Rollovers
a An amount withdrawn from the SIMPLE IRA is generally includible
in gross income. However, a SIMPLE IRA balance may be rolled over or
transferred on a tax-free basis to another IRA designed solely to hold
funds under a SIMPLE plan. In addition, an individual may roll over or
transfer his or her SIMPLE IRA balance to any IRA on a tax-free basis
after a 2-year period has expired since the individual first participate
in a SIMPLE plan. Any rollover or transfer must comply with the
requirements under section 408.
b If an individual withdraws an amount from a SIMPLE IRA during
the 2-year period beginning when the individual first participate in a
SIMPLE plan and the amount is subject to the additional tax on early
distributions under section 72(t), this additional tax is increased from
10% to 25%.
Article V-Definitions
1 Compensation
a General Definition of Compensation. Compensation means the sum
of wages, tips, and other compensation from the Employer subject to
federal income tax withholding (as described in section 6051(a)(3)) and
the employee's salary reduction contributions made under this plan, and if
applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a
section 403(b) annuity contract and compensation deferred under a section
45 plan required to be reported by the Employer on Form W-2 (as described
in section 6051(a)(8)).
b Compensation for Self-Employed Individuals. For self-employed
individuals, compensation means that net earnings from self-employment
determined under section 1402(a) prior to subtracting any contributions
made pursuant to this plan on behalf of the individual.
2 Employee. Employee means a common-law employee of the Employer. The
term employee also includes a self-employed individual and a leased
employee described in section 414(n) but does not include a nonresident
alien who received no earned income from the Employer that constitutes
income from sources within the United States.
Eligible Employee. An eligible employee means an employee who satisfies
the conditions in Article I, item 1 and is not excluded under Article I,
item 2.
4 SIMPLE IRA. A SIMPLE IRA is an individual retirement account
described in section 408(a), or an individual retirement annuity described
in section 408(b), to which the only contributions that can be made are
contributions under SIMPLE plan and rollovers or transfers from another
SIMPLE IRA.
Article VI-Procedures for Withdrawal. (The employer will provide each
employee with the procedures for withdrawals of contributions received by
the financial institution selected by that employee, and that financial
institution's name and address (by attaching that information or inserting
it in the space below) unless: (1) that financial institution's
procedures are unavailable, or (2) that financial institution provides the
procedures directly to the employee. See Employee Notification section in
the instructions.
Article VII-Effective Date
This SIMPLE plan is effective _________________________________ (See
instructions.)
* * * *
____________________________ _____________________________
Name of Employer By: Signature Date
____________________________ _____________________________
Address of Employer Name and title
Model Notification to Eligible Employees
I. Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
___________ SIMPLE plan. This notice and the attached summary description
provide you with information that you should consider before you decide
whether to start, continue, or change your salary reduction agreement.
II. Employer Contribution Election
For the ______ calendar year, the employer elects to contribute to
your SIMPLE IRA (employer must select either (1), (2) or (3)):
[ ] (1) A matching contribution equal to your salary reduction
contributions up to a limit of 3% of your compensation for the
year.
[ ] (2) A matching contribution equal to your salary reduction
contributions up to a limit of ______% (employer must insert a
number from 1 to 3 and is subject to certain restrictions) of
your compensation for the year; or
(3) A nonelective contribution equal to 2% of your compensation for
the year (limited to $160,000*) if you are an employee who makes
at least $__________ (employer must insert an amount that is
$5,000 or less) in compensation for the year.
__________
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
III. Administrative Procedures
If you decide to start or change your salary reduction agreement, you
must complete the salary reduction agreement and return it to
___________________________________ (employer should designate a place or
individual) by _____________________ (employer should insert a date that
is not less than 60 days after notice is given).
IV. Employee Selection of Financial Institution
You must select the financial institution that will serve as the
trustee, custodian, issuer or your SIMPLE IRA and notify your employer of
your selection.
<PAGE>
Model Salary Reduction Agreement
I. Salary Reduction Election
Subject to the requirements of the SIMPLE plan of
___________________________ (name of employer) I authorize __________% or
$____________ (which equals ________% of my current rate of pay) to be
withheld from my pay for each pay period and contributed to my SIMPLE IRA
as a salary reduction contribution.
II. Maximum Salary Reduction
I understand that the total amount of my salary reduction
contributions in any calendar year cannot exceed $6,000.*
__________
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
III. Date Salary Reduction Begins
I understand that my salary reduction contributions will start as
soon as permitted under the SIMPLE plan and as soon as administratively
feasible or, if later, ____________. (Fill in the date you want the
salary reduction contributions to begin. The date must be after you sign
this agreement).
IV. Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee,
custodian, or issuer of my SIMPLE IRA.
____________________________________________
Name of financial institution
____________________________________________
Address of financial institution
____________________________________________
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any
contributions made on my behalf under this SIMPLE plan. If the
information regarding my SIMPLE IRA is incomplete when I first submit my
salary reduction agreement, I realize that it must be completed by the
date contributions must be made under the SIMPLE plan. If I fail to
update my agreement to provide this information by that date, I understand
that my employer may select a financial institution of my SIMPLE IRA.
V. Duration of Election
This salary reduction agreement replaces any earlier agreement and
will remain in effect as long as I remain an eligible employee under the
SIMPLE plan or until I provide my employer with a request to end my salary
reduction contributions or provide a new salary reduction agreement as
permitted under this SIMPLE plan.
Signature of employee ___________________________
Date ___________________________
Exhibit 14.5
FIDUCIARY\F11899A 09/26/97 GHD/jem
EASTCLIFF FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
<PAGE>
EASTCLIFF FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
<PAGE>
EASTCLIFF FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
Table of Contents
Page
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 7
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . 17
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . 18
PROHIBITED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 19
LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ADMINISTRATIVE INFORMATION . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
EASTCLIFF FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
PLAN DOCUMENT
Employees of certain exempt organizations and schools may have a
portion of their compensation set aside for their retirement years in a
mutual fund custodial account plan. The employee is not taxed on the
amount set aside or the earnings thereon until the accumulated funds are
withdrawn, normally at retirement.
Under the Eastcliff Funds Section 403(b)(7) Retirement Plan,
contributions are held by the authorized custodian (the "Custodian") and
are invested in the shares of one or more regulated investment companies
managed by Resource Capital Advisers, Inc. (the "Investment Advisor") or
otherwise designated by the Investment Advisor as being eligible for
investment under the Eastcliff Funds Section 403(b)(7) Retirement Plan
(the "Plan"). The Plan is designed to allow eligible employers described
in Article I to make employer contributions to the Plan and to allow
eligible employees to elect to have their employer make contributions to
the Plan on their behalf pursuant to a salary reduction agreement. This
Plan is intended to comply with the provisions of the Employee Retirement
Income Security Act of 1974 (the "Act"), where such Act is applicable, and
the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE I
ELIGIBILITY
A. Any person who performs services as an employee for an
employer which is an organization described in Section 501(c)(3) of the
Code and is exempt from tax under Section 501(a) of the Code, or who
performs services for an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or political subdivision of a State or an agency or
instrumentality of either, and who obtains the consent of such employer to
participate herein, is eligible to adopt this Plan.
B. Any employer which is an organization described in Section
501(c)(3) of the Code and is exempt from tax under Section 501(a) of the
Code, or is an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or a political subdivision of a State or an agency
or instrumentality of either (the "Employer") may, but is not required to,
adopt this Plan for some or all of its eligible employees. It is,
however, necessary for the Employer if it does not adopt this Plan to
cooperate to the extent of executing the proper documents allowing the
employee to establish a custodial account and to reduce the employee's
salary and apply the amount of the reduction to contributions for the
employee under this Plan.
C. An eligible individual shall not be entitled to elect to
have his Employer make contributions to the Plan pursuant to a salary
reduction agreement unless the Employer has established a plan or program
which allows all employees of the Employer (except as otherwise permitted
by the Code) the opportunity to have contributions made pursuant to such
an agreement. An Employer may exclude from participation employees who
are participants in an eligible deferred compensation plan under Section
457 of the Code, a qualified cash or deferred arrangement under Section
401(k) of the Code or another Section 403(b) annuity contract, and
nonresident aliens and certain students.
D. In lieu of or in addition to a salary reduction
arrangement, an Employer may make contributions on behalf of its
employees, but an Employer is not obligated to do so. If an Employer
makes contributions (other than contributions made pursuant to a salary
reduction agreement), this Plan as adopted by such Employer must satisfy
the nondiscrimination requirements as set forth in Section 403(b)(12) of
the Code, including the limitation under Section 401(a)(17) of the Code on
the amount of compensation that may be taken into account.
E. An eligible individual is not disqualified from
participation by reason of the fact that his Employer provides any other
retirement plan for its employees. However, the contributions under this
Plan or any other Section 403(b) plan will be affected by the Employer's
contributions to such other retirement plan.
ARTICLE II
PARTICIPATION
An eligible employee who wishes to establish this Plan (the
"Individual") may do so by completing the Section 403(b)(7) Application
and Salary Reduction Agreement or Transfer Form (as applicable), obtaining
the Employer's signature and returning all necessary forms to Eastcliff
Funds. An eligible Employer may adopt this Plan by either having the
Individual follow the procedure described in the preceding sentence or by
obtaining the Individual's signature on the Application and following the
procedure itself thereafter.
The Application and the Salary Reduction Agreement, if
applicable, are incorporated herein by reference as part of the Plan. The
Plan will be effective upon written acceptance by or on behalf of the
Custodian of the Application. If the Employer maintains a written Section
403(b) plan for which this Plan serves as a funding vehicle, the terms and
conditions of such plan shall take precedence over the provisions of this
Plan to the extent such provisions are inconsistent.
ARTICLE III
CONTRIBUTIONS
A. An Employer may contribute cash to the Plan in any taxable
year in any amount which (a) is not an "excess contribution" as defined in
Section 4973(c) of the Code and (b) if such contribution is made pursuant
to a Salary Reduction Agreement between the Employer and the Individual,
does not exceed the limitation on "elective deferrals" contained in
Section 402(g) of the Code. Neither the Investment Advisor nor the
Custodian shall be responsible for determining the amount an Employer may
contribute on behalf of the Individual, nor shall either be responsible to
recommend or compel Employer contributions under the Plan.
If during any taxable year the Employer contributes an amount
which is an "excess contribution", such excess contribution (plus any
income attributable thereto) shall, upon written request, be paid to the
Individual by the Custodian or applied towards a contribution for the next
subsequent year. In the event that an amount contributed during a
calendar year exceeds the limitation on "elective deferrals" contained in
Section 402(g) of the Code and the Individual notifies the Custodian, in
writing, of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Individual not later than the
following April 15. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining that an excess contribution
or excess elective deferral has been made or for distributing such excess
amount except in accordance with the specific written instructions of the
Individual.
B. In addition, the Individual or the Employer may (a)
transfer or cause to be transferred to the Plan the cash surrender or
redemption value of a Section 403(b) annuity or variable annuity or the
assets of another Section 403(b)(7) custodial account for which
contributions were previously made on the Individual's behalf or (b)
contribute to the Plan any amount distributed from a Section 403(b)
annuity or custodial account which qualifies as a "rollover contribution"
within the meaning of Section 403(b)(8) of the Code. Neither the
Investment Advisor nor the Custodian shall be responsible for the tax
treatment to the Individual of any transfer or rollover contribution or
for losses resulting from any acts, omissions or delays of any party
transferring or rolling over assets to the Individual's account.
C. Employer contributions to the Plan (including permissible
salary reduction contributions) are not taxable income in the taxable year
contributed. The maximum amount which may be contributed to the Plan on
an Individual's behalf may not exceed the lesser of:
(1) 25% of compensation (as defined in Section 415(c) of the
Code) or $30,000 whichever is less. For this purpose, "compensation"
generally means amounts included in your taxable income, but does not
include Section 403(b) contributions.
(2) The Individual's "exclusion allowance" under Section
403(b)(2) of the Code, which is calculated as 20% of Includible
Compensation times the number of years of service minus the aggregate
amount previously contributed by the Employer (including salary
reduction contributions), under a Section 403(b) plan and excluded
from the Individual's gross income for prior tax years. "Includible
Compensation" (as defined in Section 403(b)(3) of the Code) is
current taxable compensation from a school or other eligible
employer, but does not include amounts contributed by an eligible
employer to a qualified retirement plan which were not currently
taxed to the employee or Section 403(b) contributions. (A special
minimum exclusion allowance applies to certain church employees whose
adjusted gross income is $17,000 or less under Section 403(b)(2)(D)
of the Code.)
(3) For amounts contributed pursuant to a Salary Reduction
Agreement, $9,500, as adjusted for cost-of-living increases in
accordance with Sections 402(g)(5) and 415 of the Code, less any
salary reduction contributions made during the year under a qualified
cash or deferred arrangement under Section 401(k) of the Code, a
simplified employee pension under Section 408(k) of the Code or any
other Section 403(b) annuity or custodial account.
If employed by an educational institution, hospital, home health
service agency, health and welfare service agency or a church or
convention or association of churches, the Individual may elect to be
governed by one of three alternate limitations: (a) in lieu of the
limitation described in (1) above, an amount equal to the lesser of 25% of
Includible Compensation plus $4,000, or $15,000; (b) that the limitation
described in (2) above not apply; or (c) for the year in which the
Individual's employment terminates, replace the 25% of compensation (but
not the $30,000) limitation described in (1) above with an amount which is
equal to the contributions which could have been made, but were not, under
Code Section 403(b), during a ten-year period ending on the date of
termination. The final "catch-up" contribution in (c) cannot exceed
$30,000 and may only be used once. The alternate limitations available to
employees of educational institutions, hospitals, home health service
agencies, health and welfare service agencies or churches or conventions
or associations of churches are mutually exclusive and an election of one
of the alternatives is irrevocable.
In addition, any employee of such an employer who has completed
at least 15 years of service, may increase the amount described in (3)
above by the lesser of:
(a) $3,000;
(b) $15,000, less amounts excluded in prior
years under this special catch up election;
or
(c) the excess of $5,000 multiplied by the
number of years of service minus any salary
reduction contributions under a Section
403(b) annuity, a Section 401(k) plan or a
simplified employee pension made by the
employer on behalf of the employee for prior
taxable years.
D. The interest of the Individual in the Plan and the assets
in his custodial account shall be nonforfeitable at all times, may not be
assigned, and shall not be subject to alienation, assignment, trustee
process, garnishment, attachment, execution or levy of any kind, except
with regard to payment of the expenses of the Custodian as authorized by
the provisions of this Plan. Notwithstanding the foregoing or any other
provision herein to the contrary, the Custodian may recognize a qualified
domestic relations order with respect to child support, alimony payments
or marital property rights if such order contains sufficient information
for the Employer to determine that it meets the applicable requirements of
Section 414(p) of the Code. If any such order so directs, distribution of
benefits to the alternate payee may be made at any time even if the
Individual is not then entitled to a distribution.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
All contributions made to the Plan shall be used by the
Custodian to purchase shares of one or more of the regulated investment
companies managed by the Investment Advisor or otherwise designated by the
Investment Advisor as being eligible for investment under the Plan. Each
such regulated investment company will be referred to as the "Investment
Company," and the shares of an Investment Company will be referred to as
"Investment Company Shares". Unless otherwise directed by the Employer,
contributions shall be allocated to a separate custodial account
("Custodial Account") established for the Individual. The Individual (or
the Individual's beneficiary) may direct the Custodian to invest his
Custodial Account in the shares of the Investment Company or other
regulated investment companies as may be made available by the Investment
Advisor in the future. The Individual (or the Individual's beneficiary)
may direct the Custodian to transfer all or any part of his Custodial
Account assets from one Investment Company to another at any time. In
directing the Custodian to invest contributions and/or Custodial Account
assets, the Individual (or the Individual's beneficiary) shall designate a
percentage allocation to any or all of the then available Investment
Companies. Any changes in the allocation of future contributions or
current Custodial Account assets will be effective only when the Custodian
receives written authorization from the Individual (or the Individual's
beneficiary). All dividends and capital gains shall be reinvested in
additional Investment Company Shares.
ARTICLE V
DISTRIBUTIONS
A. The Individual, or his beneficiary or estate in the event
of his death, shall be entitled to distribution of the assets in his
Custodial Account upon the occurrence of one of the following events:
(a) The Individual's attainment of age 59-1/2.
(b) The Individual terminates his employment.
(c) The Individual becomes disabled.
(d) The Individual's death.
Note that distributions prior to age 59-1/2 may be subject to a 10%
additional tax under the Code.
For purposes of the Plan, the Individual shall be considered
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long continued and
indefinite duration.
B. In addition, an Individual may request distribution of the
assets in his Custodial Account (to the extent attributable to
contributions made pursuant to a Salary Reduction Agreement, not including
any earnings thereon) upon incurring a substantial financial hardship. A
substantial financial hardship shall exist if the Individual incurs
immediate and heavy financial need and that need cannot be met by other
resources reasonably available to the Individual.
The Individual shall be eligible to receive a hardship
distribution from his Custodial Account after the Custodian's receipt of
written notification from the Employer indicating: (a) that the
Individual has incurred a substantial financial hardship and (b) the
specific amount needed to meet the substantial financial hardship. The
amount distributed from the Custodial Account shall not exceed the amount
specified in the notification.
For purposes of this Plan, a substantial financial hardship
shall mean medical expenses incurred by the Individual, his spouse or a
dependent, purchase (excluding mortgage payments) of a principal residence
for the Individual, payment of tuition and related educational expenses
for the next 12 months of post-secondary education for the Individual, his
spouse or a dependent, the need to prevent the eviction of the Individual
from his principal residence or foreclosure on the mortgage of the
Individual's principal residence, or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
In determining whether the need cannot be met by other resources
reasonably available to the Individual, the Employer may rely on the
Individual's certification, executed in a form and manner specified by the
Employer, that the need cannot be relieved:
(a) through reimbursement or compensation by
insurance or otherwise;
(b) by reasonable liquidation of the Individual's
assets, to the extent such liquidation would not
itself cause an immediate and heavy financial
need;
(c) by cessation of elective deferrals under the
Plan; and
(d) by other distributions or nontaxable [at the time
of the loan] loans from plans maintained by the
Employer or by any other employer, or by
borrowing from commercial sources on reasonable
commercial terms.
In the event the Individual is unwilling or unable to provide
the certification described above, or in the event the Employer determines
that it cannot reasonably rely on the certification provided by an
Individual, then the requirements of this Paragraph B shall be deemed
satisfied only if all of the following conditions are satisfied:
(a) the distribution is not in excess of the amount
of the immediate and heavy financial need of the
Individual;
(b) the Individual has obtained all distributions,
other than hardship distributions, and all
nontaxable (at the time of the loan) loans from
plans maintained by the Employer;
(c) the Individual's elective deferrals under this
Plan and all other plans maintained by the
Employer shall be suspended for at least 12
months after receipt of the hardship
distribution; and
(d) under this Plan and all other plans maintained by
the Employer, the Individual may not make
elective deferrals for the Individual's taxable
year immediately following the taxable year of
the hardship distribution in excess of the
limitation on elective deferrals in effect for
such next taxable year under Section 402(g) of
the Code less the amount of such Individual's
elective deferrals for the taxable year of the
hardship distribution.
The Employer shall be responsible for:
(a) determining that a substantial financial
hardship exists;
(b) designating the amount necessary to meet such a
substantial financial hardship; and
(c) notifying the Custodian in writing of its
decisions.
If the Employer does not process hardship distributions in
accordance with the standards set forth under this Plan and applicable
law, the hardship distribution provisions under this Paragraph B shall be
ineffective. Neither the Custodian nor the Investment Advisor shall be
responsible for determining that a substantial financial hardship exists
or the amount necessary to satisfy such hardship and may rely on any
written notification from the Employer certifying the existence and the
amount of a substantial financial hardship.
Any determination under this Paragraph B is to be made in
accordance with uniform and nondiscriminatory standards established by the
Employer. The Individual has the responsibility of providing the Employer
with any and all documents, financial data or other information which the
Employer deems necessary in order to make the determination.
C. The Individual may elect a form of distribution from among
the following alternatives:
(a) A single sum payment in cash;
(b) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the life expectancy of the Individual; or
(c) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the joint and last survivor life
expectancy of the Individual and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After the later to occur of the Individual's
retirement or attainment of age 70 1/2 (the "Required Beginning Date"),
certain restrictions may apply to Individual's ability to change the
period over which payments are made. In no event shall the Custodian or
the Investment Advisor have any responsibility for determining, or giving
advice with respect to, life expectancies or minimum distribution
requirements.
If the Individual fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Individual's Custodial Account in the
form of a single sum cash payment by the April 1 following the calendar
year occurs the Required Beginning Date. If the Individual elects a mode
of distribution under subparagraphs (b) or (c) of this Paragraph C, except
as otherwise required by Section 403(b)(10) of the Code, the amount of the
monthly, quarterly or annual payments shall be determined by dividing the
entire interest of the Individual in the Custodial Account at the close of
the prior year by the number of years remaining in the period specified by
the Individual's election.
D. Unless the Individual (or his spouse) elects not to have
life expectancy recalculated, the Individual's life expectancy (and the
life expectancy of the Individual's spouse, if applicable) will be
recalculated annually using their attained ages as of their birthdays in
the year for which the minimum annual payment is being determined. The
life expectancy of the designated beneficiary (other than the spouse) will
not be recalculated. The minimum annual payment may be made in a series
of installments (e.g., monthly, quarterly, etc.) as long as the total
payments for the year made by the date required are not less than the
minimum amounts required.
E. The Individual must receive distributions from the Plan in
accordance with Regulations prescribed by the Secretary of the Treasury
pursuant to Section 403(b)(10) of the Code which are hereby incorporated
by reference, or in the absence of such regulations, in accordance with
Section 401(a)(9) of the Code. In general, these provisions require that
certain minimum distributions must commence not later than the April 1
following the calendar year in which the Individual retires or attains age
70-1/2.
F. If the Individual dies before his entire interest in the
Custodial Account is distributed to him, the remaining undistributed
balance of such interest shall be distributed to the beneficiary or
beneficiaries, if any, designated by the Individual. If no designation of
a beneficiary shall have been made, distribution shall be made to the
Individual's surviving spouse, or the Individual's estate, in that order.
If the Individual dies after installment payments have
commenced, the beneficiary shall continue to receive distributions in
accordance with the payment method specified by the Individual or may
elect, in writing, to receive a lump sum distribution.
If the Individual dies prior to the commencement of benefits,
the beneficiary may elect, in writing, to receive the distribution in one
of the following forms:
(a) A single sum payment in cash made by the
December 31 of the year containing the fifth
anniversary of the Individual's death; or
(b) Equal or substantially equal monthly,
quarterly, or annual payments commencing not
later than the December 31 following the
year of the Individual's death over a period
not to exceed the life expectancy of the
beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Individual's
spouse, distributions may be delayed until the December 31 of the year in
which the Individual would have attained age 70-1/2. A beneficiary must
receive distributions from the Plan in accordance with the regulations
prescribed by the Secretary of the Treasury pursuant to Section 403(b)(10)
of the Code, including the incidental death benefit requirements, which
are hereby incorporated by reference, or in the absence of such
Regulations, in accordance with Section 401(a)(9) of the Code.
G. The Individual may designate a beneficiary or
beneficiaries, and may, in addition, name a contingent beneficiary. Such
designation shall be made in writing in a form acceptable to the
Custodian. The Individual may, at any time, revoke his or her designation
of a beneficiary or change the beneficiary by filing notice of such
revocation or change with the Custodian. Notwithstanding the foregoing,
in the event that this program is adopted in connection with a plan that
constitutes a "pension benefit plan" for purposes of the Employee
Retirement Income Security Act of 1974 and the Individual is married at
the time of his death, the beneficiary shall be the Individual's surviving
spouse unless such spouse consented in writing to the designation of an
alternative beneficiary after notice of the spouse's rights and such
consent was witnessed by a notary public or representative of the
Employer. In the event no valid designation of beneficiary is on file
with the Employer or the Custodian at the date of death or no designated
beneficiary survives him, the Individual's spouse shall be deemed the
beneficiary; in the further event the Individual is unmarried or his
spouse does not survive him, the Individual's estate shall be deemed to be
his beneficiary.
H. In the case of any distribution constitutes an "eligible
rollover distribution" as defined in Section 402(c)(4) of the Code, the
Custodian shall provide the Individual or spousal beneficiary with the
option of (A) receiving the distribution directly, (B) having the
distribution transferred to an individual retirement account or eligible
403(b) program that accepts such "direct rollovers", or (C) to the extent
required under regulations issued by the Secretary of the Treasury, a
combination of (A) and (B).
If the Individual or spousal beneficiary timely elects the
transfer option and provides the Custodian with such information as the
Custodian may prescribe regarding the transferee plan or account,
including the name of the transferee plan or account and identity of the
trustee or custodian, the distribution amount shall be transferred to the
successor trustee or custodian in a "direct rollover" in accordance with
Sections 403(b)(10) and 401(a)(31) of the Code. The Custodian may elect
to accomplish the "direct rollover" by delivering to the Individual or
spousal beneficiary a check, for the full amount of the distribution, but
made payable to the trustee or custodian of the transferee plan or
account. The Individual or spousal beneficiary shall then be responsible
for delivering the check to the trustee or custodian or the transferee
plan.
If the Individual or spousal beneficiary elects payments made
directly to the Individual or spousal beneficiary, distribution shall be
accomplished by delivering to the Individual or spousal beneficiary a
check, for the amount of the distribution less applicable required
withholding, made payable to the Individual or spousal beneficiary.
If the Individual or spousal beneficiary fails to make a timely
election, or if the Individual or spousal beneficiary elects the transfer
option but fails to provide the Custodian with appropriate information to
enable the Custodian to implement the transfer, the Custodian shall,
subject to applicable consent requirements, cause the Individual's or
spousal beneficiary's distribution to be paid directly to the Individual
or spousal beneficiary, less applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Individual's or spousal beneficiary's election between
receiving a distribution directly or having the distribution transferred
to an individual retirement account or eligible 403(b) program in a
"direct rollover."
I. In the event that an Individual transfers funds to this
Plan from another plan or arrangement under Section 403(b) of the Code,
then to the extent required in order to comply with Rev. Rul. 90-24 or any
successor ruling promulgated by the Internal Revenue Service, the
distribution restrictions set forth in such transferor plan or arrangement
shall be adopted as part of this Plan.
ARTICLE VI
ADMINISTRATION
Except as otherwise provided in this Plan, the Custodian shall
perform solely the duties assigned to the Custodian hereunder as agent on
behalf of the Individual and any beneficiary. The Custodian shall not be
deemed to be a fiduciary in carrying out the following duties:
(a) Receiving contributions pursuant to the
provisions of this Plan.
(b) Holding, investing and reinvesting the
contributions in Investment Company Shares.
(c) Registering any property held by the Custodian in
its own name, or in nominee or bearer form that
will pass delivery.
(d) Making distributions from the Custodial Account
in cash.
The Custodian shall mail to the Individual all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Individual shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Code, the Custodian shall file with
the Individual a written report of the Custodian's transactions relating
to the Custodial Account during the period from the last previous
accounting, and shall file such other reports with the Internal Revenue
Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Individual shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Individual.
All written notices or communications to the Individual or the
Employer shall be effective when sent by first class mail to the last
known address of the Individual or the Employer on the Custodian's
records. All written notices or communications to the Custodian shall be
mailed or delivered to the Custodian at its designated mailing address,
and no such written notice of communications shall be effective until the
Custodian's actual receipt thereof. The Custodian shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken
by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives
and which appear to have been sent by the Individual, the Employer, or any
other person.
The Custodian shall make payments from the Custodial Account in
accordance with written directions received from the Individual, and it
need not make inquiry as to the rightfulness of such distribution. If the
Custodian has reason to believe that a distribution may be due, it may,
but shall not be required to make the distribution at the request of any
beneficiary who appears to be entitled thereto. The Custodian shall
properly withhold from any payment to the Individual or beneficiary such
amounts as may be required to satisfy any income or other tax withholding
requirements.
The Custodian shall use ordinary care and reasonable diligence
in the performance of its duties as Custodian. The Custodian shall have
no responsibilities other than those provided for herein or in the Act or
Code and shall not be liable for a mistake in judgment, for any action
taken in good faith, or for any loss that is not a result of its gross
negligence, except as provided for herein or in the Act or Code and shall
not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence,
except as provided by the Act or regulations promulgated thereunder.
The Individual and the Employer agree to indemnify and hold the
Custodian harmless from and against any liability that the Custodian may
incur in the administration of the Custodial Account, unless arising from
the Custodian's own negligence or willful misconduct or from a violation
of the provisions of the Act or Regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction
of the Individual with respect to the investment of contributions, or to
make suggestions to the Individual with respect to the investment,
retention or disposition of any contributions or assets held in the
Custodial Account.
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian, taxes, and its fees for maintaining the Custodial Account which
are set forth in the Application or in accordance with any schedule of
fees subsequently adopted by the Custodian. The Custodian may make
changes in the fee schedule at any time. The Custodian may sell
Investment Company Shares and use the proceeds of sale to pay the
foregoing expenses.
The Custodian will send account statements periodically, and
after all transactions. Statements will include any information as the
law may require, and in particular the amount of contributions, earnings,
distributions, and total account valuation at the end of the year. The
Custodian will also send a statement to the Internal Revenue Service as
required by law.
The Custodian may resign as Custodian of any Individual's
Custodial Account upon sixty (60) days' prior notice to the Investment
Advisor and thirty (30) days' prior notice to each Individual who will be
affected by such resignation.
To the extent required under Title I of ERISA, the Custodian
shall hold assets contributed to the Plan in trust (rather than under a
custodial account arrangement) and all references to the Custodian and the
custodial account hereunder shall be instead deemed to be references to
the Trustee and the trust fund, respectively.
ARTICLE VII
THE INVESTMENT ADVISOR
The Individual and the Employer delegate to the Investment
Advisor the following powers with respect to the Plan: to remove the
Custodian and select a successor Custodian; and to amend this Plan as
provided in Article VIII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time, and shall be exercised only when similarly exercised
with respect to all other Individuals adopting the Plan.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of the Plan except as provided in this
Article VII of the Plan, and none of them shall incur any liability of any
nature to the Individual or beneficiary or other person in connection with
any act done or omitted to be done in good faith in the exercise of any
power or authority herein delegated to the Investment Advisor.
The Individual and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Individual at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Individual and the Employer delegate to the Investment
Advisor the power to amend this Plan (including retroactive amendments).
The Individual or the Employer may amend the Application
(including retroactive amendment) by submitting to the Custodian a copy of
such amended Application, and evidence satisfactory to the Custodian that
the Plan, as amended by such amended Application, will continue to qualify
under the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Individual and his beneficiaries;
(b) the Individual to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to this Plan. The Individual also reserve the right to
terminate his adoption of the Plan in the event that he shall be unable to
secure a favorable ruling from the Internal Revenue Service with respect
to this Plan. In the event of such termination, the Custodian shall
distribute the Custodial Account to the Individual. The Individual also
reserves the right to transfer the assets of his Custodial Account to such
other form of Section 403(b)(7) retirement plan as he may determine, upon
written instructions to the Custodian in such form as the Custodian may
reasonably require.
ARTICLE IX
PROHIBITED TRANSACTIONS
Except as provided in Section 408 of the Act or Section 4975 of
the Code, the Custodian:
A. Shall not cause the Plan to engage in a transaction if it
knows or should know that such transaction constitutes a direct or
indirect:
(a) Sale or exchange or leasing of any property
between the Plan and a party in interest;
(b) lending of money or other extension of
credit between the Plan and a party in
interest;
(c) furnishing of goods, services, or facilities
between the Plan and a party in interest;
(d) transfer to, or use by or for the benefit
of, a party in interest, of any assets of
the Plan;
(e) acquisition, on behalf of the Plan, of any
employer security or employer real property
in violation of Section 407(a) of the Act.
B. Shall not permit the Plan to hold any employer security or
employer real property if it knows or should know that holding such
security or real property violates Section 407(a) of the Act.
C. Shall not deal with the assets of the Plan in its own
interest or for its own account.
D. Shall not in any capacity act in any transaction involving
the Plan on behalf of a party (or represent a party) whose interests are
adverse to the interests of the Plan or the interests of its participants
or beneficiaries.
E. Shall not receive any consideration for its own account
from any party dealing with the Plan in connection with a transaction
involving the assets of the Plan; provided that nothing in this Article IX
shall be construed to prohibit the payment to the Custodian of any fees
otherwise authorized under the terms of this Plan.
ARTICLE X
LEGAL COMPLIANCE
Section 403(b) of the Code requires that tax sheltered custodial
account arrangements (other than arrangements maintained by a church or
convention or association of churches) satisfy certain participation and
non-discrimination requirements.
In general, salary reduction contributions made pursuant to an
Individual's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make salary reduction contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Employer must satisfy the
and nondiscrimination requirements of Section 403(b)(12) of the Code.
It should be understood that neither the Investment Advisor nor
the Custodian is in a position to render legal or tax advice and that the
information contained in and the documents furnished with this description
merely represent the Investment Advisor's understanding of the statutes
and regulations affecting the establishment and qualification of a Section
403(b)(7) plan. Accordingly, an Individual is urged to consult his
attorney or tax advisor in connection with the adoption of the Plan
compliance with applicable legal requirements, and the submission of a
ruling request on his behalf.
ARTICLE XI
ERISA RIGHTS
If the program as adopted by the Employer constitutes an
"employee pension benefit plan" under the Employee Retirement Income
Security Act of 1974 ("ERISA"), as a participant in the Plan, you are
entitled to certain rights and protections. This law provides that all
Plan participants shall be entitled to:
Examine, without charge, at the office of the plan
administrator (and at other specified locations, if
appropriate), all Plan documents, including copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports.
Obtain copies of all Plan documents and other Plan
information upon written request to the plan administrator. The
plan administrator may make a reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The
plan administrator is required by law to furnish each
Participant with a copy of this summary annual report.
Obtain a statement telling you whether you have a current
vested interest in your account and whether, under the terms of
the Plan, you will be entitled to receive a retirement benefit
if you stop working under the Plan now. If you do not have a
current vested interest or right to a benefit at normal
retirement age, the statement will tell you how many more years
you have to work to obtain these rights. This statement must be
requested in writing and is not required to be given more than
once a year. The Plan must provide the statement free of
charge.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the operation of
the Plan. The people who operate your Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and other
Plan participants and beneficiaries.
No one, including your employer or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining your benefits or exercising your rights under ERISA. If your
claim for your benefit is denied in whole or in part you must receive a
written explanation of the reason for the denial. You have the right to
have the plan administrator review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the plan
administrator and do not receive them within 30 days, you may file suit in
a federal court. In such a case, the court may require the plan
administrator to provide the materials and pay you up to $100 a day until
you receive the materials, unless the materials were not sent because of
reasons beyond the control of the plan administrator. If you have a claim
for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that Plan
fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these
costs and fees. If you lose, the court may order you to pay these costs
and fees, for example, if it finds your claim is frivolous.
If you have any questions about your Plan, you should contact
the plan administrator. If you have any questions about this statement or
about your rights under ERISA, you should contact the nearest Area Office
of the U.S. Labor-Management Services Administration, Department of Labor.
ADMINISTRATIVE INFORMATION
Plan Name: _______________________________________
Employer: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: _________________________________
Administrator: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: _________________________________
The Administrator shall be the agent for service of
legal process.
Plan Number: ____
Type of Plan: Defined Contribution, Section 403(b)(7) Plan
Funding Medium: Custodial Accounts
Plan Year: _______________________________________
Exhibit 15.1
AMENDED AND RESTATED
SERVICE AND DISTRIBUTION PLAN
OF
EASTCLIFF FUNDS, INC.
WHEREAS, Eastcliff Funds, Inc. (the "Company") is registered
with the Securities and Exchange Commission as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the "Act") having multiple series (each series being hereinafter referred
to as a "Fund");
WHEREAS, the Company intends to act as a distributor of shares
of each Fund's Common Stock ("Common Stock"), as defined in Rule 12b-1
under the Act, and has adopted a distribution plan pursuant to such Rule,
and the Board of Directors has determined that there is a reasonable
likelihood that adoption of this Service and Distribution Plan will
benefit each Fund and its shareholders; and
WHEREAS, the Company on behalf of each Fund may enter into
agreements with dealers and other financial service organizations to
obtain various distribution-related and/or shareholder services for the
Funds, all as permitted and contemplated by Rule 12b-1 under the Act; it
being understood that to the extent any activity is one in which a Fund
may finance without a Rule 12b-1 plan, the Fund may also make payments to
finance such activity outside such a plan and not subject to its
limitations.
NOW, THEREFORE, the Company hereby adopts this Amended and
Restated Service and Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
1. Distribution and Service Fee. Each Fund may charge a
distribution expense and service fee on an annualized basis of 1.00% of
the Fund's average daily net assets. Such fee shall be calculated and
accrued daily and paid at such intervals as the Board of Directors of the
Company shall determine, subject to any applicable restriction imposed by
rules of the National Association of Securities Dealers, Inc.
2. Permitted Expenditures. The amount set forth in paragraph
1 of this Plan shall be paid for services or expenses primarily intended
to result in the sale of the applicable Fund's shares. Each Fund may pay
all or a portion of this fee to any securities dealer, financial
institution or any other person (the "Shareholder Organization(s)") who
renders personal service to shareholders, assists in the maintenance of
shareholder accounts or who renders assistance in distributing or
promoting the sale of the Fund's shares pursuant to a written agreement
approved by the Board of Directors (the "Related Agreement"). To the
extent such fee is not paid to such persons, the Fund may use the fee for
their expenses of distribution of its shares including, but not limited
to, payment by the Fund of the cost of preparing, printing and
distributing Prospectuses and Statements of Additional Information to
prospective investors and of implementing and operating the Plan as well
as payment of capital or other expenses of associated equipment, rent,
salaries, bonuses, interest and other overhead costs.
3. Effective Date of Plan. This Plan took effect when (a) it
was approved by a vote of at least a majority (as defined in the Act) of
the outstanding shares of Common Stock and (b) (together with any related
agreements) by votes of a majority of both (i) the Board of Directors of
the Company and (ii) those Directors of the Company who are not
"interested persons" of the Company (as defined in the Act) and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Rule 12b-1 Directors"), cast in person at a
meeting (or meetings) called for the purpose of voting on this Plan and
such related agreements.
4. Continuance. Unless otherwise terminated pursuant to
paragraph 6 below, this Plan shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 3(b).
5. Reports. Any person authorized to direct the disposition
of monies paid or payable by a Fund pursuant to this Plan or any related
agreement shall provide to the Company's Board of Directors and the Board
shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. Termination. This Plan may be terminated at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority
of the outstanding shares of Common Stock.
7. Amendments. This Plan may not be amended to increase
materially the amount of payments provided for in paragraph 1 hereof
unless such amendment is approved in the manner provided for initial
approval in paragraph 3 hereof. No other amendment to the Plan may be
made unless approved in the manner provided for approval of this Plan in
paragraph 3(b).
8. Selection of Directors. While this Plan is in effect, the
selection and nomination of Directors who are not interested persons (as
defined in the Act) of the Company shall be committed to the discretion of
the Directors who are not interested persons.
9. Records. The Fund shall preserve copies of this Plan and
any related agreements and all reports made pursuant to paragraph 6
hereof, for a period of not less than six years from the date of this
Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
Exhibit 15.2
SERVICING AND DISTRIBUTION AGREEMENT
Gentlemen:
We wish to enter into this Servicing and Distribution Agreement
("Agreement") with you concerning the provision of distribution services
(and, to the extent provided below, support services) to your clients
("Clients") who may from time to time acquire and beneficially own shares
("Shares") of Eastcliff Funds, Inc. (the "Fund").
The terms and conditions of this Agreement are as follows:
Section 1. You will provide reasonable assistance in connection
with the distribution of Shares to Clients as requested from time to time,
which assistance may include forwarding sales literature and advertising
provided by us for Clients. In addition, you agree to provide the
following support services to Clients who may from time to time acquire
and beneficially own Shares: (i) processing dividend and distribution
payments from us on behalf of Clients; (ii) providing information
periodically to Clients showing their positions in Shares; (iii) arranging
for bank wires; (iv) responding to Client inquiries relating to the
services performed by you; (v) providing subaccounting with respect to
Shares beneficially owned by Clients or the information to us necessary
for subaccounting; (vi) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax
notices) to Clients; (vii) assisting in processing purchase, exchange and
redemption requests from Clients and in placing such orders with our
service contractors; (viii) assisting Clients in changing dividend
options, account designations and addresses; and (ix) providing such other
similar services as we may reasonably request to the extent you are
permitted to do under applicable statutes, rules and regulations.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned assistance and services to Clients.
Section 3. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning us or the
Shares except those contained in our then current prospectus and statement
of additional information for Shares, copies of which will be supplied by
us to you, or in such supplemental literature or advertising as may be
authorized by us in writing.
Section 4. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority to act
as an agent for us in any matter or in any respect. By your written
acceptance of this Agreement, you agree to and do release, indemnify and
hold us harmless from and against any and all direct or indirect
liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees or agents regarding
your responsibilities hereunder or the purchase, redemption, transfer or
registration of Shares (or orders relating to the same) by or on behalf of
Clients. You and your employees will, upon request, be available during
normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will pay to you, and you will accept as full
payment therefor, a fee at the annual rate of ____% of the average daily
net asset value of the Shares beneficially owned by your Clients for whom
you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Shares"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable
under this Section 5, the average daily net asset value of the Clients'
Shares will be computed in the manner specified in our Registration
Statement (as the same is in effect from time to time) in connection with
the computation of the net asset value of Shares for purposes of purchases
and redemptions. The fee rate stated above may be prospectively increased
or decreased by us, in our sole discretion, at any time upon notice to
you. Furthermore, we may, in our discretion and without notice, suspend
or withdraw the sale of Shares, including the sale of Shares to you for
the account of any Client or Clients.
Section 6. Any person authorized to direct the disposition of
monies paid or payable by us pursuant to this Agreement will provide to
our Board of Directors, and our Directors will review, at least quarterly,
a written report of the amounts so expended and the purposes for which
such expenditures were made. In addition, you will furnish us or our
designees with such information as we or they may reasonably request
(including, without limitation, periodic certifications confirming the
provision to Clients of the services described herein), and will otherwise
cooperate with us and our designees (including, without limitation, any
auditors designated by us), in connection with the preparation of reports
to our Board of Directors concerning this Agreement and the monies paid or
payable by us pursuant hereto, as well as any other reports or filings
that may be required by law.
Section 7. We may enter into other similar Agreements with any
other person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) the compensation payable to you
hereunder, together with any other compensation you receive from Clients
for services contemplated by this Agreement, will not be excessive or
unreasonable under the laws and instruments governing your relationships
with Clients; and (ii) you will provide to Clients a schedule of any fees
that you may charge to them relating to the investment of their assets in
Shares. In addition, you understand that this Agreement has been entered
into pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Act"), and is subject to the provisions of said Rule, as well as any
other applicable rules or regulations promulgated by the Securities and
Exchange Commission.
Section 9. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our designee.
Unless sooner terminated, this Agreement will continue until
____________________, and thereafter will continue automatically for
successive annual periods provided such continuance is specifically
approved at least annually by us in the manner described in Section 12.
This Agreement is terminable, without penalty, at any time by us (which
termination may be a vote of a majority of the Disinterested Directors as
defined in Section 12 or by vote of the holders of a majority of the
outstanding Shares of the Fund) or by you upon notice to the other party
hereto. This Agreement will also terminate automatically in the event of
its assignment (as defined in the Act).
Section 10. All notices and other communications to either you
or us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address stated
herein.
Section 11. This Agreement will be construed in accordance with
the laws of the State of Minnesota.
Section 12. This Agreement has been approved by vote of a
majority (i) of our Board of Directors and (ii) those Directors who are
not "interested persons" (as defined in the Act) of us and have no direct
or indirect financial interest in the operation of the Service and
Distribution Plan adopted by us or in any agreement related thereto cast
in person at a meeting called for the purpose of voting on such approval
("Disinterested Directors").
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and
promptly return it to us at
_______________________________________________________________________.
Very truly yours,
EASTCLIFF FUNDS, INC.
Date: ___________________ By: _____________________________
Accepted and Agreed to:
[Shareholder Organization]
Date: ___________________ By: _____________________________
___________________________________
(address)
___________________________________
<TABLE> <S> <C>
<ARTICLE> 6
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<NUMBER> 1
<NAME> EASTCLIFF TOTAL RETURN FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> JUN-30-1997
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> EASTCLIFF GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
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<INVESTMENTS-AT-VALUE> 46,103
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<TOTAL-ASSETS> 46,563
<PAYABLE-FOR-SECURITIES> 102
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<OTHER-ITEMS-LIABILITIES> 72
<TOTAL-LIABILITIES> 174
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,141
<SHARES-COMMON-STOCK> 3,331
<SHARES-COMMON-PRIOR> 3,679
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,622)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,870
<NET-ASSETS> 46,389
<DIVIDEND-INCOME> 96
<INTEREST-INCOME> 58
<OTHER-INCOME> 0
<EXPENSES-NET> 591
<NET-INVESTMENT-INCOME> (437)
<REALIZED-GAINS-CURRENT> (70)
<APPREC-INCREASE-CURRENT> 5,204
<NET-CHANGE-FROM-OPS> 4,697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 517
<NUMBER-OF-SHARES-REDEEMED> 865
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 196
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 454
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<GROSS-EXPENSE> 605
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<PER-SHARE-NAV-BEGIN> 12.56
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 1.50
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 3
<NAME> EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
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<S> <C>
<PERIOD-TYPE> 10-MOS
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<PERIOD-START> SEP-16-1996
<PERIOD-END> JUN-30-1997
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<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 324
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,074
<SHARES-COMMON-STOCK> 2,390
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 14
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 163
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,980
<NET-ASSETS> 29,231
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<EXPENSES-NET> 188
<NET-INVESTMENT-INCOME> 39
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<NET-CHANGE-FROM-OPS> 4,182
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<DISTRIBUTIONS-OF-INCOME> 28
<DISTRIBUTIONS-OF-GAINS> 0
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</TABLE>
