Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
(414) 271-5885
July 15, 1996
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Re: Wasatch Funds, Inc.
(33-10451; 811-4920)
- --------------------------------------
Ladies and Gentlemen:
On behalf of Wasatch Funds, Inc. (the "Company"), transmitted for filing is
Post-Effective Amendment No. 14 to the Company's Registration Statement on Form
N1-A, pursuant to Rule 472 and 485. The Company is adding a series and requests
an effective date on or before October 1, 1996, pursuant to Rule 485(a)(2).
Questions regarding this filing may be directed to the undersigned at (414) 271-
5885.
Very Truly Yours,
/s/ Randy M. Pavlick
Randy M. Pavlick
Vice President - Legal and Compliance Services
cc: Venice Edwards
Michael J. Radmer, Esq.
As filed with the Securities and Exchange Commission on July , 1996
---
Securities Act Registration No. 33-10451
Investment Company Act Registration No. 811-4920
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Post-Effective Amendment No. 14 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 16 (X)
(Check appropriate box or boxes)
WASATCH FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
68 SOUTH MAIN STREET
SUITE 400
SALT LAKE CITY, UTAH 84101
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 708-7228
SAMUEL S. STEWART, JR. Copy to:
Wasatch Funds, Inc. Michael J. Radmer, Esq.
68 South Main Street, Suite 400 Dorsey & Whitney LLP
Salt Lake City, Utah 84101 220 South Sixth Street
(Name and Address of Agent for Service) Minneapolis, Minnesota 55402-1498
An indefinite number of shares of each Series of Wasatch Funds, Inc. has been
registered under the Securities Act of 1933 in accordance with the provisions of
Rule 24f-2 under the Investment Company Act of 1940. The Registrant's Rule
24f-2 Notice for the fiscal year ended September 30, 1995 was filed on November
6, 1995.
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b)
( ) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on (date) pursuant to paragraph (a)(i)
(X) 75 days after filing pursuant to paragraph (a)(ii)
( ) on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
( ) this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
WASATCH WORLD WIDE FUND
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 Annual Fund Expenses
3. Condensed Financial Information Performance Data
4. General Description of Registrant Management of the Company; Investment
Objective, Policies and Risks
5. Management of the Fund Management of the Company
6. Capital Stock and Other Securities Organization of the Company; Net
Asset Value and Days of Operation;
Dividends, Capital Gains,
Distributions and Taxes
7. Purchase of Securities Being Offered Purchase of Shares; Exchange
Privilege; Retirement Plans; Net
Asset Value and Days of Operation
8. Redemption or Repurchase Redemption of Shares; Exchange
Privilege; Net Asset Value and Days
of Operation
9. Legal Proceedings <F1>
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 General Information and History
13. Investment Objectives and Policies Investment Objective and Policies
14. Management of the Fund Management of the Company; Principal
Holders of Securities
15. Control Persons and Principal Principal Holders of Securities
Holders of Securities
16. Investment Advisory and Investment Advisory and Other
Other Services Services
17. Brokerage Allocation and Brokerage Allocation and Other
Other Policies Policies
18. Capital Stock and Other Securities Capital Stock and Other Securities
19. Purchase, Redemption and Pricing Purchase, Redemption and Pricing of
of Securities Being Offered Securities Being Offered
20. Tax Status Tax Status
21. Underwriters <F1>
22. Calculations of Yield <F1>
Quotations of Money Market Funds
23. Financial Statements <F1>
<F1> Answer negative or inapplicable.
<F2> Complete answer to the Item is contained in the Prospectus.
PROSPECTUS
October 1, 1996
Wasatch World Wide Fund
Wasatch Funds, Inc.
68 South Main Street
Salt Lake City, Utah 84101
1-800-551-1700
WASATCH FUNDS, INC. (the "Company" or "Wasatch Funds") is a no-load mutual
fund presently consisting of six separate series (the "Funds") which offer a
variety of investment opportunities. The Wasatch World Wide Fund (the "Fund")
the most recent addition to the Wasatch family of funds, is described in this
Prospectus. The other Wasatch Funds are described in a separate prospectus
which may be obtained by writing to the address or calling the telephone number
stated above.
WASATCH WORLD WIDE FUND seeks long-term growth of capital. The Fund seeks this
objective by investing primarily in equity securities of companies located
outside, as well as in, the United States, and believed by the Fund's manager,
Wasatch Advisors, Inc. (the "Manager"), to possess growth potential. Under
normal market conditions, the Fund will invest at least 65% of its net assets in
equity securities. Income is an incidental consideration. The Wasatch World
Wide Fund is a non-diversified fund, and consequently may be more heavily
weighted in securities of fewer issuers and may be subject to greater risk and
price fluctuations.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference.
A Statement of Additional Information dated October 1, 1996, which is part of
the Registration Statement, is incorporated herein by reference. A copy of the
Statement of Additional Information may be obtained, without charge, by writing
to the Fund at P.O. Box 2172, Milwaukee, Wisconsin 53202-2172, or by calling 1-
800-551-1700.
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.
TABLE OF CONTENTS
Annual Fund Expenses.................................
Performance Data.....................................
Investment Objectives, Policies and Risks............
Portfolio Turnover...................................
Management of the Company............................
Advisory and Other Agreements .....................
Expenses ..........................................
Organization of the Company..........................
Purchase of Shares...................................
Initial Investment ................................
Subsequent Investments ............................
General Information ...............................
Automatic Investment Plan .........................
Retirement Plans.....................................
Exchange Privilege...................................
Redemption of Shares.................................
Systematic Withdrawal Plan ........................
Net Asset Value and Days of Operation................
Shareholder Reports..................................
Dividends, Capital Gains Distributions and Taxes.....
Dividends .........................................
Capital Gains .....................................
Taxes .............................................
Additional Information...............................
ANNUAL FUND EXPENSES
The Fund is 100% no-load; there are no fees to purchase shares, nor any ongoing
marketing ("12b-1") expenses. Lower expenses benefit shareholders by increasing
the Fund's investment return.
WORLD WIDE
FUND
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases none
Sales Load Imposed on Reinvested Dividends none
Deferred Sales Load none
Redemption Fee <F3> none
Exchange Fees none
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees 1.5%<F4>
12b-1 Fees none
Other Expenses (after reimbursements) <F5> 0.5%
Total Fund Operating Expenses (after reimbursements) 2.0%
<F3> The Custodian charges a $7.50 fee for each wire redemption.
<F4> The Management Fee to be paid by the Fund is higher than that paid by most
other investment companies. The Board of Directors believes the Management
Fee is appropriate for the Fund in light of the Fund's investment objective
and policies.
<F5> The Fund's Manager has voluntarily agreed to limit the total operating
expense of the Fund (excluding interest, taxes, brokerage and extraordinary
expense) to an annual rate of 2.0% of the Fund's average net assets. The
Manager has voluntarily agreed to limit the total expenses of the Fund to
2.0% of the Fund's net assets computed on a daily basis. The Manager will
maintain such expense limitation at least through September 30, 1997. The
Fund estimates that absent the limitation, Other Expenses of the Fund would
initially be approximately 1.1%, and the Total Operating Expenses of the Fund
would initially be approximately 2.6%.
Example
You would pay the following expenses on a
$1,000 investment, assuming (i) 5% annual
return and (ii) redemption at the end of
each time period:
1 year $21
3 years 64
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Fund. For additional
information, see "Management of the Company," below.
The information contained in the table should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than those
shown. The Wasatch World Wide Fund is new and actual operating expenses and
investment return may be more or less than those shown.
PERFORMANCE DATA
From time to time, total return and yield data for a Fund may be quoted in
advertisements or in communications to shareholders. A Fund's total return will
be calculated on an average annual (compound) total return basis and may also be
calculated on a cumulative total return basis for various periods from the date
it commences operations. Average annual total return reflects the average
annual percentage change in value of an investment in a Fund over the measuring
period. Cumulative total return reflects the total percentage change in value
over the measuring period. Both methods of calculating total return assume that
dividends and capital gain distributions made by a Fund during the period are
reinvested in Fund shares.
Yield is computed based on the net income of a Fund during a 30-day (or one-
month) period, which will be identified in connection with the particular yield
quotation. More specifically, the yield is computed by dividing a Fund's net
income per share during a 30-day (or one-month) period by the net asset value
per share on the last day of the period and annualizing the result on a semi-
annual basis.
The total return and yield of a Fund may be compared to those of other mutual
funds including those with similar investment objectives and to stock, bond and
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the total return and yield of a Fund's shares may be compared to
data prepared by Lipper Analytical Services, Inc. In addition, the total return
of a Fund may be compared to the S&P 500 Stock Index, the Nasdaq Composite
Index, an index of unmanaged groups of common stocks of domestic companies that
are quoted on the National Association of Securities Dealers Quotation System,
the Dow Jones Industrial Average, a recognized unmanaged index of common stocks
of 30 industrial companies listed on the New York Stock Exchange (the
"Exchange"), the Consumer Price Index, the EAFE (World Index) and [insert any
other indexes and/or publications to be compared against.] Total return and
yield data as reported in national publications such AS MONEY MAGAZINE, FORBES,
BARRON'S, THE WALL STREET JOURNAL and THE NEW YORK TIMES, or in publications of
a local or regional nature, may also be used in comparing the performance of a
Fund.
Performance quotations of a Fund represent the Fund's past performance and
should not be considered as representative of future results. The investment
return and principal value of an investment in a Fund will fluctuate so an
investor's shares, when redeemed, may be worth more or less than their original
cost. The methods used to compute a Fund's total return and yield are described
in more detail in the Statement of Additional Information.
Information about the Fund's actual performance will be contained in the Fund's
future annual report to shareholders, which may be obtained without charge when
it becomes available.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Investment Objective presented below cannot be changed without shareholder
approval. Since all investments are subject to inherent market risks there is
no assurance these objectives will be achieved. The Investment Policies and
Techniques employed in pursuit of the Fund's objectives may be changed without
shareholder approval.
WORLD WIDE FUND
INVESTMENT OBJECTIVE - The primary investment objective of the World Wide Fund
is long-term growth of capital. The Fund seeks this objective by investing in
securities of companies located throughout the world, as well as the United
States, and believed by the Manager to possess growth potential. Income is an
incidental consideration. The Wasatch World Wide Fund will invest at least 65%
of its total assets under normal market conditions in equity securities of
issuers in not less than three different countries, including the United States.
Ordinarily, the Fund will invest in common stocks, but it may also invest in
convertible securities, preferred stocks, bonds and corporate obligations
believed by the Manager to be consistent with the investment objective. The
World Wide Fund is a non-diversified fund, and consequently may be more heavily
weighted in securities of fewer issuers and may be subject to greater risk and
price fluctuations.
INVESTMENT POLICIES AND RISKS
FOREIGN SECURITIES - The Fund may invest without limitation in foreign
securities. For investment purposes, an issuer is considered as domiciled in a
country if its main corporate offices are located in the particular country.
Foreign securities include securities denominated in currencies other than the
U.S. dollar, and sponsored and unsponsored American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs"). ADRs typically are issued by a U.S. bank or trust company
and evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe, typically by foreign banks and trust
companies, that evidence ownership of either foreign or domestic underlying
securities while GDRs are issued by a depository. Unsponsored ADRs, EDRs and
GDRs differ from sponsored ADRs, EDRs and GDRs in that the establishment of
unsponsored ADRs, EDRs, and GDRs 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 information for sponsored ADRs, EDRs and
GDRs, and the price of unsponsored ADRs, EDRs and GDRs may be more volatile.
Investments in foreign securities involve special risks in addition to those
ordinarily associated with investing in domestic securities. Political,
economic or social instability of the issuer or the country of the issuer, the
possibility of expropriation or confiscatory taxation, limitations on the
removal of assets, diplomatic developments, and the possibility of adverse
changes in investment or exchange control regulations are among the inherent
risks. Foreign companies are not subject to the same regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Foreign economies may differ
favorably or unfavorably from the U.S. economy in various respects, and many
foreign securities are less liquid and their prices more volatile than
comparable U.S. securities. Although the Fund generally invests in securities
that are regularly traded on recognized exchanges or in over-the-counter
markets, from time to time foreign securities may be difficult to liquidate
rapidly without adverse price effects. Certain costs attributable to foreign
investing, such as custody charges and brokerage costs, are higher than those
associated with domestic investing.
Dividends and interest payable on a Fund's foreign portfolio securities may be
subject to foreign withholding taxes. To the extent such taxes are not offset
by credits or deductions allowed to investors under U.S. federal income tax law,
such taxes may reduce the net return to shareholders.
Fluctuations in the relative rates of exchange between the currencies of
different nations will affect the value of the Fund's investments. Changes in
foreign currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and thereby
impact upon the Fund's total return on such assets. Foreign currency exchange
rates are determined by forces of supply and demand on the foreign exchange
markets. These forces are themselves affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. Moreover, foreign currency exchange rates may be
affected by the regulatory control of the exchanges on which the currencies
trade. To the extent that the Fund's total assets, adjusted to reflect the
Fund's net position after giving effect to currency transactions, are
denominated in the currencies of foreign countries, the Fund will be more
susceptible to risk of adverse economic and political developments within those
countries. In addition, the respective net currency positions of the Fund may
expose it to risks independent of its securities position. To the extent that
the Fund is fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater risk than it would have if it did not
maintain the currency positions. The Fund is also subject to the possible
imposition of exchange control regulations or freezes on convertibility of
currency. Because of these and other factors, securities of foreign companies
acquired by the Fund may be subject to greater fluctuation than securities of
domestic companies. The Fund may enter into forward currency exchange contracts
or options and futures on foreign currencies. See "Forward Currency Exchange
Contracts" and "Options and Futures Contracts" below.
SMALLER CAPITALIZATION COMPANIES - The Fund may invest without limitation in
small capitalization companies. While small capitalization companies generally
have potential for rapid growth, they often involve higher risks because they
lack the management experience, financial resources, product diversification and
competitive strengths of larger companies. 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 may be subject to
wider price fluctuations. The spreads between the bid and asked prices of the
securities of these companies are typically larger than the spreads for more
actively traded securities. As a result, the Fund could incur a loss if it
determined to sell such a security shortly after its acquisition. When making
large sales, the Fund may have to sell portfolio holdings at a discount 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.
CONVERTIBLE SECURITIES - The Fund may invest in convertible securities. A
convertible security may be converted either at a stated price or rate within a
specified period of time into a specified number of shares of common stock. By
investing in convertible securities, the Fund seeks the opportunity, through the
conversion feature, to participate in a portion of the capital appreciation of
the common stock into which the securities are convertible, while earning higher
current income than is available from the common stock.
NON-INVESTMENT GRADE DEBT SECURITIES - The Fund may invest up to 5% of its net
assets in convertible securities and debt securities rated lower than Baa by
Moody's or BBB by S&P, or unrated but of equivalent quality as determined by the
Manager ("low-rated securities"). These low rated securities are commonly
referred to as "junk bonds". This limitation does not apply to unrated
convertible securities and debt securities that in the opinion of the Manager
are rated Baa or BBB or better. The lowest grade of debt security in which the
Fund will invest is B as rated by Moody's and S&P, or unrated but of equivalent
quality as determined by the Manager.
Low-rated securities generally offer a higher-yield than that available from
higher rated securities. However, low-rated securities involve higher risks, in
that they are especially subject to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuation in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default.
The market for low-rated securities is generally thinner and less active than
that for higher quality securities, which would limit the Fund's ability to sell
such securities at fair value in response to changes in the economy or the
financial markets. While such securities may have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions. The Manager will seek to reduce the risks
associated with investing in such securities by limiting the Fund's holdings in
such securities and by its own credit analyses. For additional information
about the risks of investing in low-rated securities and for additional
information on securities ratings, see the Statement of Additional Information.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum rating required for purchase by
the Fund. The Manager will consider such an event in determining whether the
Fund should continue to hold the security. The Fund expects, however to sell
promptly any securities that fall below the minimum as a result of these events
that exceed 5% of the Fund's net assets. However, nothing herein shall require
the Manager to sell any securities at a loss.
NON-DIVERSIFIED STATUS - The Fund is a non-diversified investment company. This
means that the Fund is not restricted by the provisions of the Investment
Company Act of 1940 with respect to the diversification of its investments. The
Investment Company Act of 1940 requires that as to 50% of the Fund's total
assets, the Fund will not purchase additional securities of individual companies
in which the Fund has invested 5% of the Fund's total assets or has acquired
more than 10% of the outstanding voting securities of such company, measured at
the time of each such investment. Because the Fund's "non-diversified status"
permits the investment of a greater portion of the Fund's assets in the
securities of individual companies than would be permissible under a
"diversified status," the Fund's "non-diversified status" is considered to
subject the Fund to a greater degree of risk.
FORWARD CURRENCY EXCHANGE CONTRACTS - The Fund may enter into forward contracts
to "lock in" the U.S. dollar price of a security denominated in a foreign
currency when it enters into a contract to purchase or sell the security, or to
hedge against an anticipated decline in the currency of a particular foreign
country in which some of the Fund's portfolio securities are denominated. The
Fund may also enter into forward contracts to attempt to hedge interest or
dividend payments payable in a foreign currency. The Fund may also conduct
currency transactions on a spot (cash) basis.
The Fund may also hedge a maximum of 10% of the value of its investment
portfolio by establishing the value of such securities in another foreign
currency or currencies which the Manager believes to be more stable than the
currencies in which such securities are denominated.
A forward currency exchange contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of contract. Although the contracts may be used to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain that might be realized should the value of such
currency increase. In addition, the use of forward contracts does not eliminate
fluctuations in the underlying prices of the securities, but it does establish a
rate of exchange that can be achieved in the future. In connection with its
forward currency exchange contracts, the Fund will create a segregated account
of liquid assets, such as cash, U.S. government securities or other liquid high
quality debt obligations, or will otherwise cover its position in accordance
with applicable requirements of the Commission.
EMERGING MARKET SECURITIES - The Fund may invest without limitation in
securities of emerging markets. The risks of investing in foreign securities
may be intensified in the case of investments in issuers domiciled or doing
substantial business in emerging markets or countries with limited or developing
capital markets. Security prices in emerging markets can be significantly more
volatile than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets or economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of sudden adverse government action and even
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging
markets may be predominately based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Transaction settlement
and dividend collection procedures may be less reliable in emerging markets than
in developed markets. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.
INVESTMENT CONCENTRATION - Because the securities markets in the United States,
Germany, Canada, Japan, France, Great Britain and Switzerland are highly
developed, liquid and subject to extensive regulation, the Fund may invest more
than 25% of its total assets in the securities of issuers located in each of
these countries. Although the countries listed above have developed economies,
they are not immune from risks. For example, efforts by the member countries of
the European Community to eliminate internal barriers to the free movement of
goods, persons, services and capital have encountered opposition arising from
the conflicting economic, political and cultural interests and traditions of the
member countries and their citizens. The reunification of the former German
Democratic Republic (East Germany) with the Federal Democratic Republic of
Germany (West Germany) and other political and social events in Europe have
caused considerable economic and social dislocations. Similarly, events in the
Japanese economy as well as social developments have affected Japanese
securities and currency markets, and have disrupted the relationship of the
Japanese yen with other currencies and with the U.S. dollar. Future political,
economic and social developments can be expected to produce continuing effects
on securities and currency markets. Investment in a particular country of 25%
or more of a Fund's total assets will make the Fund's performance more dependent
upon the political and economic circumstances of a particular country than a
mutual fund that is more widely diversified among issuers in different
countries.
OPTIONS AND FUTURES CONTRACTS - To the extent consistent with its investment
objective, the Fund may purchase and sell put and call options for the purpose
of hedging or earning additional income. These options may relate to
particular securities, financial instruments, foreign currencies, stock or bond
indices, and may or may not be listed on a securities exchange and may or may
not be issued by the Options Clearing Corporation. The Fund will not purchase
put and call options where the aggregate premiums on outstanding options exceeds
5% of its total assets at the time of purchase, and will not write put options
if the aggregate value of securities underlying the put options would exceed 25%
of the Fund's net assets (measured at the time the put option is written).
Options trading is a highly specialized activity that entails greater than
ordinary investment risks. In addition, unlisted options are not subject to the
protections afforded purchasers of listed options issued by the Options Clearing
Corporation, which performs the obligations of its members if they default.
To the extent consistent with its investment objective, the Fund may also
purchase and sell futures contracts and options on futures contracts for hedging
purposes or to maintain liquidity by using the futures contract or option as a
substitute for holding the designated securities underlying the futures
contract. A futures contract is an agreement to purchase or sell a specified
amount of designated securities for a set price at a specified future time. At
the time it enters into a futures contract or writing an option on a futures
contract, the Fund is required to make a performance deposit ("initial
margin") of cash or liquid securities. Subsequent payments of "variation
margin" are then made on a daily basis, depending on the value of the futures
or options position which is continually marked to market.
The Fund may sell stock index futures contracts and may purchase put options or
write call options on such futures contracts to protect against a general stock
market decline that could adversely affect the Fund's portfolio. The Fund also
may buy stock index futures contracts and purchase call options or write put
options on such contracts to hedge against a general stock market or market
sector advance and thereby attempt to lessen the cost of future securities
acquisitions.
The primary risks associated with the use of futures contracts and options are:
(a) the imperfect correlation between the change in market value of the
instruments hedged by a Fund and the price of the futures contract or option;
(b) possible lack of a liquid secondary market for a futures contract or option
and the inability to close a futures contract or option when desired; (c) losses
caused by unanticipated market movements, which are potentially unlimited; and
(d) the Manager's ability to correctly predict the direction of the securities
prices, interest rates, currency exchange rates and other economic factors. A
further discussion is included in the Statement of Additional Information. To
the extent the Fund enters into futures contracts, options on futures contracts
or options on foreign currencies that are traded on an exchange regulated by the
Commodity Futures Trading Commission ("CFTC"), in each case that are not for
bona fide hedging purposes (as defined by the CFTC), the Fund's aggregate
initial margin and premiums required to establish those positions may not exceed
5% of the liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any such positions it is entered
into. To the extent a Fund purchases or sells futures, options on futures
contracts or foreign currencies traded on a CFTC regulated exchange, the Manager
intends to comply with the regulations of the CFTC exempting the Fund from
registration as a "commodity pool operator." When required, the Fund will
segregate cash, U.S. government securities or other high-quality debt securities
in an amount sufficient to meet its obligation under the transactions.
SECURITIES LENDING AND BORROWING BY THE FUND. The Fund has the right to lend
its securities and to borrow from banks for temporary or emergency purposes or
through reverse repurchase agreements, but has no present intention to do so.
Please see the Statement of Additional Information for further information.
CLOSED-END INVESTMENT COMPANIES. A number of countries have authorized the
formation of closed-end investment companies to facilitate indirect foreign
investment in their capital markets. The Fund may invest up to 10% of its total
assets in securities of closed-end investment companies. Shares of certain
closed-end investment companies may at times be acquired only at market prices
representing premiums to their net asset values. In the event that shares
acquired at a premium subsequently decline in price relative to their net asset
value or the value of portfolio investments held by such closed-end companies
declines, the Fund and its shareholders may experience a loss. If the Fund
acquires shares of closed-end investment companies, Fund shareholders would bear
both their proportionate share of expenses in the Fund (including management and
advisory fees) and, indirectly, the expenses of such closed-end companies.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities that are considered illiquid. This illiquidity may be due to the
absence of a readily available market or due to legal or contractual
restrictions. Difficulty in selling securities may result in a loss or may be
costly to the Fund.
MONEY MARKET INSTRUMENTS - When economic conditions or general levels of common
stock prices are such that the Manager deems it prudent to adopt a temporary
defensive position by reducing or curtailing investment in common stocks, a
larger proportion than usual of the Fund's assets may be invested in money
market instruments. The Fund may also invest in such instruments pending
investment, to meet anticipated redemption requests, and/or to retain the
flexibility to respond promptly to changes in market and economic conditions.
The Fund may invest in cash, Treasury Bills, certificates of deposit, commercial
paper and master demand notes rated in the top two categories by a nationally
recognized statistical rating organization or unrated and deemed by the Manager
to be of comparable quality.
In addition to the foregoing, the Fund may invest in repurchase agreements.
Repurchase agreements are transactions in which a Fund purchases a security from
a bank or recognized securities dealer and simultaneously commits to resell that
security to the bank or dealer at an agreed-upon price, date and market rate of
interest unrelated to the coupon rate or maturity of the purchased security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered as a loan collateralized by the
security purchased. The Fund's risk is the ability of the seller to pay the
agreed-upon price on the delivery date. If the seller defaults, the Fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the Fund could experience a loss.
Any investment restriction or limitation, fundamental or otherwise, that
involves a maximum percentage of securities or assets shall not be considered to
be violated (except in the case of the limitation on illiquid investments),
unless an excess over the percentage occurs immediately after an acquisition of
securities or utilization of assets, and such excess results therefrom.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Fund is calculated by dividing the lesser of
purchases or sales by such Fund of investment securities for the particular
fiscal year by the monthly average value of investment securities owned by the
Fund during the same fiscal year. "Investment securities" for the purposes of
this calculation do not include securities with a maturity date less than 12
months from the date of investment.
The rate of portfolio turnover will not be a limiting factor when the Manager
deems changes in the Fund appropriate in view of the Fund's investment
objective. As a result, while the Fund will not purchase or sell securities
solely to achieve short-term trading profits, the Fund may sell portfolio
securities without regard to the length of time they have been held if
continuing to hold them is no longer consistent with the Fund's investment
objective. High turnover (over 100%) in any year will result in the payment by
the Fund of above-average amounts of transaction-related charges and could
result in the payment by shareholders of above-average amounts of taxes on
realized investment gains.
Although the Fund cannot accurately predict its annual portfolio turnover rate,
the Manager expects that, under normal circumstances, the annual portfolio
turnover rate of the Fund will generally not exceed 150%, but may be as high as
300%. The turnover rate should not be considered as a limiting factor.
MANAGEMENT OF THE COMPANY
Wasatch Funds is a management investment company incorporated in Utah on
November 18, 1986 and presently consists of six separate Funds. Wasatch Funds
changed its name to Wasatch Funds, Inc. from Wasatch Advisors Funds, Inc. in
January 1996. The World Wide Fund is an open-end non-diversified management
investment company. The Manager, Wasatch Advisors, Inc., retains proprietary
rights to the Company's name.
The business and affairs of Wasatch Funds are subject to the supervision of its
Board of Directors. The Board consists of five directors who are elected each
year and serve for one-year terms and/or until their successors are elected and
qualified.
The Manager determines the investment of the Fund assets, provides certain
administrative services and manages the Fund business and affairs. The Manager
has been in the investment advisory business since 1975 and currently has assets
under management of approximately $924 million. Dr. Samuel S. Stewart, Jr. is
President and a Director of the Fund and also Chairman of the Board and
President of the Manager. Dr. Stewart is the only owner of the Manager who owns
more than 25% of the Manager and is thus deemed to control the Manager. All
interested directors of the Company are also officers and directors of the
Manager.
Samuel S. Stewart Jr., Ph.D., is the portfolio manager of the World Wide Fund
and as such is responsible for the day-to-day management of the World Wide
Fund's portfolio. Dr. Stewart is President of the Manager and has served in
such capacity since 1975 when he founded the Manager.
The Manager has offices at 68 South Main Street, Salt Lake City, UT 84101,
which also houses the offices of Wasatch Funds.
ADVISORY AND OTHER AGREEMENTS
The Company retains the Manager to manage the investment of its assets and to
place orders for the purchases and sales of its portfolio securities. Under
investment advisory and service contracts, the World Wide Fund pays the Manager
a monthly fee computed on the average daily net assets of the Fund at the annual
rate of 1.5%.
The Manager is responsible for the placement of orders for the purchase and sale
of portfolio securities for the Fund and the negotiation of brokerage
commissions on such transactions. Brokerage firms are selected on the basis of
their professional capability for the type of transaction and the value and
quality of execution services rendered on a continuing basis. The Manager is
authorized to place portfolio transactions with brokerage firms participating in
the distribution of shares of the Fund if it reasonably believes that the
quality of the execution and the commission are comparable to that available
from other qualified brokerage firms. The Manager is authorized to pay higher
commissions to brokerage firms that provide it with investment and research
information than to firms which do not provide such services if the Manager
determines that such commissions are reasonable in relation to the overall
services provided. The information received may be used by the Manager in
managing the assets of other advisory accounts as well as in the management of
the assets of the Fund.
Pursuant to an Administration and Fund Accounting Agreement (the "Administration
Agreement"), Sunstone Financial Group, Inc. (the "Administrator"), 207 East
Buffalo Street, Suite 400, Milwaukee, WI 53202-5712, acts as administrator and
fund accountant for the Fund and the other Wasatch Funds. As compensation for
its administrative services (which include clerical, compliance, regulatory and
other services), the Administrator is entitled to a fee on the combined value
of the Wasatch Funds' Family assets, computed daily and payable monthly, at the
annual rate of twenty-eight one-hundredths of one percent (0.28%) on the first
$50 million of the average daily net assets, eighteen one-hundredths of one
percent (0.18%) on the next $50 million of the average daily net assets and
thirteen one-hundredths of one percent (0.13%) on the average daily net assets
in excess of $100 million, [subject to a minimum fee of $35,000 for the World
Wide Fund.]
Sunstone Financial Group, Inc. also acts as transfer agent for the Fund (the
"Transfer Agent"). UMB Bank, n.a. acts as Custodian of the assets of the
Fund. The Company, on behalf of the Fund, has also entered into service
agreements with various brokerage firms pursuant to which the brokers provide
certain administrative services with respect to their customers who are
beneficial owners of shares of the Fund. Pursuant to these service agreements,
the Fund compensates the brokers for the administrative services provided which
compensation is based on the aggregate assets of their customers that are
invested in the Fund.
EXPENSES
The Fund pays all of its own expenses, including, without limitation, the cost
of preparing and printing its registration statements required under the
Securities Act of 1933 and the Investment Company Act of 1940 and any amendments
thereto, the expense of registering its 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 (as defined in the Investment Company Act of 1940), interest
charges, taxes, legal expenses, association membership dues, auditing services,
insurance premiums, brokerage commissions and expenses in connection with Fund
transactions, fees and expenses of the Custodian of the Fund assets, printing
and mailing expenses, charges and expenses of dividend disbursing agents,
accounting services agents, registrars and stock transfer agents, travel
expenses, salaries and related compensation of all non-officer employees, and
extraordinary and nonrecurring expenses.
The advisory and service contracts provide that the Manager shall reimburse the
Fund if Fund expenses excluding interest, taxes, extraordinary expenses,
brokerage commissions and transactions costs exceed those set forth in any
statutory or regulatory formula prescribed by any state in which Fund shares are
registered at such time. The Manager has voluntarily agreed to limit the
expenses of the World Wide Fund to 2.0% of average net assets computed on a
daily basis and will pay all expenses excluding interest, taxes, extraordinary
expenses, brokerage commissions and transactions costs in excess of such
limitations. The Manager will maintain such expense limitation at least through
September 30, 1997.
ORGANIZATION OF THE COMPANY
The Company is comprised of six separate series, each of which consists of a
separate portfolio or fund which issues a separate class of shares. The Board
of Directors is authorized to create new funds in addition to those already
existing without the approval of the shareholders of the Company. All shares
have equal voting rights; each share is entitled to one vote per share (with
proportionate voting for fractional shares), except that only shares of the
respective series are entitled to vote on matters concerning only that series.
The assets received by the Company upon the sale of shares of each Fund and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are specifically allocated to such Fund. They constitute the
underlying assets of each Fund, are required to be segregated on the books of
account, and are to be charged with the expenses of such Fund. Any general
expenses of the Company not readily identifiable as belonging to a particular
Fund will be allocated on the basis of each Fund's relative net assets during
the fiscal year.
Each share of a series of the Company has equal dividend, distribution,
liquidation and voting rights with other shares of that series. Each issued and
outstanding share of a series is entitled to one vote and to participate equally
in dividends and distributions declared by the Fund out of that series and upon
liquidation or dissolution of the series in the net assets remaining after
satisfaction of outstanding liabilities.
The shares of each Fund, when issued, will be fully paid and non-assessable,
have no preference, preemptive, conversion, exchange or similar rights, and will
be freely transferable.
PURCHASE OF SHARES
Shares of the Fund are sold on a continuous basis at the net asset value next
determined after receipt of a New Account Application by the Fund. The Board of
Directors of the Fund have established $2,000 as the minimum initial purchase
and $100 as the minimum for any subsequent purchase. The minimum purchase
requirements do not apply to reinvested dividends or investments pursuant to an
Automatic Investment Plan or Individual Retirement Account.
INITIAL INVESTMENT (MINIMUM $2,000)
New Account Applications may be obtained from the Fund. Completed applications
should be mailed directly to: Wasatch Funds, P.O. Box 2172, Milwaukee, WI
53201-2172. All applications must be accompanied by payment in the form of a
check made payable to Wasatch Funds. All purchases must be made in U.S. dollars
and checks must be drawn on U.S. banks. No cash will be accepted. The Fund
will charge a $15 fee against an investor's account for any payment check
returned for insufficient funds. The investor will also be responsible for any
losses suffered by the Fund as a result. When a purchase is made by check and a
redemption is made shortly thereafter, the Fund may delay the mailing of a
redemption check until it is satisfied that the check used to purchase Fund
shares has cleared.
To avoid redemption delays, purchases may be made by direct wire transfers. The
establishment of a new account by wire transfer should be preceded by a
telephone call to the Fund at 1-800-551-1700. The investor will be asked to
provide his or her name, address, Social Security or Tax Identification Number,
the name of the Fund, the amount of his or her investment and the name and
address of the bank that will be wiring the investment. The Fund will inform
the investor of his or her assigned investor account number at that time. Funds
should be wired through the Federal Reserve System as follows:
UMB Bank, n.a.
ABA Number 101000695
For further credit to Wasatch Funds
Account Number 987-060-9800
For further credit to:
(investor account number)
(name or account registration)
(Social Security or Tax Identification Number)
(Identify which account to purchase)
You must promptly complete a New Account Application and mail it to the Fund at
the following address: Wasatch Funds, P.O. Box 2172, Milwaukee, WI 53202-2172.
If you wish to send it via overnight delivery, you may send it to Wasatch Funds,
207 East Buffalo Street, Suite 315, Milwaukee, WI 53202-5712. Shares will not
be redeemed until the Fund receives a properly completed and executed New
Account Application. The Fund reserves the right to refuse a telephone
transaction if they believe it advisable to do so.
Inquiries concerning the Fund or the New Account Application may be directed to
the Transfer Agent. For telephone assistance, call 1-800-551-1700.
SUBSEQUENT INVESTMENTS (MINIMUM $100)
Additions to an investor's account may be made by mail or by wire ($100
minimum). When adding to an account by mail, the investor should send to the
Fund his or her remittance, together with the detachable form sent with the most
recent statement from the Fund. If this form is unavailable, the investor
should send a note giving the full name of the account and the account number.
For additional investments made by wire transfer, the investor should use the
wiring instructions mentioned above. The investor should notify the Fund at 1-
800-551-1700 prior to wiring funds. The required minimum investments are waived
in the case of reinvestment of dividends and distributions and may be waived for
plans involving automatic periodic investments.
GENERAL INFORMATION
All applications to purchase Fund shares are subject to acceptance by the Fund
and are not binding until so accepted. The Fund does not, except as indicated
in the following sentence, accept telephone orders for the purchase of shares
and reserves the right to reject applications in whole or in part. The Fund may
accept telephone orders from broker/dealers who have been previously approved by
the Fund. It is the responsibility of such broker/dealers promptly to forward
purchase or redemption orders to the Fund. Although there is no sales charge
levied directly by the Fund, broker/dealers may charge the investor a
transaction-based fee or other fee for their services. Such charges may vary
among broker/dealers but in all cases will be retained by the broker/dealer and
not remitted to the Fund or the Manager.
In order to relieve the investor of responsibility for safekeeping and delivery
of stock certificates, the Fund will not issue certificates. Instead, shares
purchased are automatically credited to an account maintained for the investor
on the books of the Fund. The investor will receive a statement showing the
details of each transaction.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan in which an investor may
automatically make purchases of shares of the Fund on a regular, convenient
basis ($50 minimum per transaction monthly/$100 quarterly). Under the Automatic
Investment Plan, an investor's designated bank or other financial institution
debits a preauthorized amount on the investor's account each month and applies
the amount to the purchase of Fund shares. The Automatic Investment Plan must
be implemented with a financial institution that is a member of the Automated
Clearing House ("ACH"). No service fee is currently charged by the Fund for
participating in the Automatic Investment Plan. A $15 fee will be imposed by
the Fund if sufficient funds are not available in the investor's account at the
time of the automatic transaction. Applications to establish the Automatic
Investment Plan are available from the Fund. A $1,000 minimum initial
investment must be met before the Automatic Investment Plan may be established.
RETIREMENT PLANS
IRA Plan
Individuals who receive compensation or earned income, even if they are active
participants in a qualified retirement plan (or certain similar retirement
plans), may establish their own tax-sheltered Individual Retirement Account
("IRA"). The Fund offers a prototype IRA plan which may be adopted by
individuals. There is currently no charge for establishing an account, although
there is an annual maintenance fee. A $1,000 minimum initial investment ($250
for a spousal IRA) is required.
Earnings on amounts held in an IRA are not taxed until withdrawn. However, the
amount of deduction, if any, allowed for IRA contributions is limited for
individuals who are active participants in an employer-maintained retirement
plan and whose incomes exceed specific limits.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as an application form, are available
from the Fund upon request. The IRA kit contains a Disclosure Statement which
the Internal Revenue Service requires to be furnished to individuals who are
considering adopting the IRA. Premature withdrawals from an IRA will result in
adverse tax consequences. Consultation with a competent financial and tax
adviser is recommended.
Section 403(b)(7) Plan
The Fund also offers a tax-sheltered custodial account designed to qualify under
Section 403(b)(7) of the Internal Revenue Code which is available for use by
employees of certain educational, non-profit, hospital and charitable
organizations.
A complete description of the Plans, as well as a description of the various
applicable service fees, are available from the Fund upon request.
EXCHANGE PRIVILEGE
Shares of any Wasatch Fund may be exchanged for shares of another Wasatch Fund
at any time. This exchange offer is available only in states where shares of
such other Fund may be legally sold. Each exchange is subject to the minimum
initial investment required for each Fund. You may make additional exchanges
for $500 or more. You may open a new account or purchase additional shares by
making an exchange from an existing Wasatch Fund account. New accounts will
have the same registration as the existing accounts. Exchanges may be made
either in writing or by telephone. To exchange by telephone, you must follow
the instructions below under "How to Redeem by Telephone." Exchanges for
shares in the Aggressive Equity Fund may only be made by shareholders with an
existing Aggressive Equity Fund account.
In addition to the ability to exchange among Wasatch Funds, shareholders may
exchange all or a portion of their investment from the Wasatch World Wide Fund
to the Northern U.S. Government Money Market Fund (the "U.S. Government Money
Market Fund"). This expanded exchange feature is subject to the minimum
purchase and redemption amounts set forth in this Prospectus ($2,000 minimum,
$100 subsequent). You must obtain a copy of the U.S. Government Money Market
Fund prospectus from the Fund, and you are advised to read it carefully, before
authorizing any investment in shares of the U.S. Government Money Market Fund.
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 the Fund or its investors. Investors 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: Wasatch Funds, P.O. Box
2172, Milwaukee, WI 53201-2172. The Fund currently limits exchanges to four
per year. There is no fee for a written exchange request. The responsibility
of the Fund and its Transfer Agent for the authenticity of telephone exchange
transactions may be limited as described under "Redemption of Shares."
Exchanges into the Aggressive Equity Fund from other Wasatch Funds or from the
U.S. Government Money Market Fund are permitted only for shareholders with an
existing Aggressive Equity Fund account.
The Fund also allows investors to make regular automatic monthly investments in
an existing account in the World Wide Fund by redemption of shares from their
U.S. Government Money Market Fund. There is no fee charged for this service.
These transactions must meet the minimum purchase amounts described. Any
changes to the automatic exchange must be made prior to the end of the preceding
month to be effective in the current month. Please call the Fund at 1-800-551-
1700 for an application form.
An exchange involves a redemption of all or a portion of the shares in a Fund
and the investment of the redemption proceeds in shares of another of the Funds
or the U.S. Government Money Market Fund. All exchanges will be made at the per
share net asset value of the shares to be redeemed, and the per share net asset
value of the shares to be purchased, in both cases as next determined after
receipt and acceptance of proper instructions for the exchange. Generally,
exchange requests received in proper order and accepted by the Funds by 3:00
p.m. Central time on a day during which each fund's net asset value is
determined will be effective that day for both the fund being purchased and the
fund being redeemed. Please note that when exchanging from a Wasatch Fund to
the Money Market Fund, you will begin accruing income from the Money Market Fund
the day following the exchange. When exchanging from the Money Market Fund to a
Wasatch Fund, your exchange proceeds will include income from the Money Market
Fund through the date of the exchange. An exchange from one Fund to another or
to the U.S. Government Money Market Fund is treated the same as an ordinary sale
and purchase for federal income tax purposes.
For federal income tax purposes, an exchange of shares is a taxable event and,
accordingly, the investor may realize a capital gain or loss. Before making an
exchange request, the investor should consult a tax or other financial adviser
to determine the tax consequences of a particular exchange.
If you buy shares by check, you may not exchange those shares for up to ten
calendar days to ensure your check has cleared. If you intend to exchange
shares soon after their purchase, you should purchase shares by wire or contact
the Fund at 1-800-551-1700.
Additional documentation may be required for exchange requests if shares are
registered in the name of a corporation, partnership or fiduciary. Contact the
Fund for additional information concerning the exchange privilege.
REDEMPTION OF SHARES
Investors may request redemption of part or all of their shares in the Fund
whenever they wish. For most redemption requests, an investor need only deliver
to the Fund a written, unconditional request to redeem his or her shares at net
asset value. A request for redemption must be signed exactly as the shares are
registered, including the signature of each joint owner, and must specify the
Fund and either the number of shares or the dollar amount of shares that are to
be redeemed. In certain situations, such as where corporations, executors,
administrators, trustees and guardians are involved, additional documentation
and signature guarantees may be required. Redemptions are effected only by the
Fund. In case of any questions concerning the nature of such additional
requirements, the Fund should be contacted in advance by calling 1-800-551-1700.
Redemption requests may be submitted directly to the Fund at no cost to the
investor. They may also be submitted through broker/dealers, in which case a
service fee may be charged by such broker/dealer. If shares are purchased
through a broker/dealer and are held in the name of the broker/dealer,
redemption requests will only be accepted by the Fund if made by the
broker/dealer. If a redemption request is not sent directly to the Fund, it
will be forwarded to the Fund, and the effective date of redemption will be
delayed until the request is received by the Transfer Agent. THUS, TO AVOID
DELAY, PLEASE SUBMIT REDEMPTION REQUESTS DIRECTLY TO THE TRANSFER AGENT.
Except in certain situations, such as where corporations, executors,
administrators, trustees and guardians are involved, signatures need not be
guaranteed unless (a) the redemption request exceeds $25,000, or (b) the
proceeds of the 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 such cases, each signature on
any stock certificate, stock power or redemption request must be guaranteed by a
commercial bank or trust company in the United States, a member firm of the
Exchange or other eligible guarantor institution.
The redemption price per share is the next determined net asset value per Fund
share after receipt by the Fund of the written request containing the
information set forth above, accompanied by all required documentation. The
amount received will depend on the market value of the investments in the 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. A check in payment for shares
redeemed will be mailed to the holder typically within one or two days, but no
later than the seventh day after receipt of the redemption request in proper
form and of all required documentation (except as indicated below for certain
redemptions of shares purchased by check).
Investors may redeem Fund shares by telephone. To redeem shares by telephone,
an investor must check the appropriate box on the New Account Application. Once
this feature has been requested, shares may be redeemed by phoning the Fund at
1-800-551-1700 and giving the Fund name, account number and either the number of
shares or the dollar amount to be redeemed. Proceeds redeemed by telephone will
be mailed or wired only to an investor's address or bank of record as shown on
the Fund's records. Telephone redemptions must be in amounts of $1,000 or more,
not exceeding $50,000. This maximum amount may be waived for broker/dealers.
Payment of the redemption proceeds for Fund shares redeemed by telephone where
an investor requests wire payment will normally be made in federal funds on the
next business day. As stated above, the Fund will wire redemption proceeds only
to the bank and account designated on the New Account Application or in written
instructions subsequently received by the Fund, and only if the bank is a
commercial bank located within the United States. The Fund currently charges a
$7.50 fee for each payment made by wire of redemption proceeds, which fee will
be deducted from the investor's account.
In order to arrange for telephone redemptions after a Fund account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, a written request must be sent to the Fund. The request
must be signed by each registered holder of the account with the signatures
guaranteed by a commercial bank or trust company in the United States, a member
firm of the Exchange or other eligible guarantor institution. Further
documentation may be requested from corporations, executors, administrators,
trustees and guardians.
The Fund reserves the right to refuse a telephone redemption if it is believed
advisable to do so. Procedures for redeeming Fund shares by telephone may be
modified or terminated by the Fund at any time. In an effort to prevent
unauthorized or fraudulent redemption or exchange requests by telephone, the
Fund and the Transfer Agent have implemented procedures designed to reasonably
assure that telephone instructions are genuine. These procedures include
requesting verification of various pieces of personal information, recording
telephone transactions, confirming transactions in writing and restricting
transmittal of redemption proceeds to pre-authorized designations. Other
procedures may be implemented from time to time. If reasonable procedures are
not implemented, the Fund and/or the Transfer Agent may be liable for any loss
due to unauthorized or fraudulent transactions. In all other cases, the
shareholder is liable for any loss for unauthorized transactions. Investors
should be aware that during periods of substantial economic or market change,
telephone or wire redemptions may be difficult to implement. If an investor is
unable to contact the Fund by telephone, shares may also be redeemed by
delivering the redemption request to the Fund by mail as described above.
The Fund will mail payment for redemption within seven days after it receives
proper instructions for redemption. However, the Fund will delay payment for
ten calendar days on redemptions of recent purchases made by check. This allows
the Fund to verify that the check will not be returned due to insufficient funds
and is intended to protect the remaining investors from loss.
To relieve the Fund of the cost of maintaining uneconomical accounts, the Fund
reserves the right to redeem the shares held in any account if, at the time of
any redemption of shares in the account, the net asset value of the remaining
shares in the account falls below $500. Before such involuntary redemption
would occur, the investor would be given at least 60 days' written notice and,
during that period, the investor could make an additional investment to restore
the account to at least the minimum amount, in which case there would be no such
redemption. Involuntary redemptions will not be made because the value of
shares in an account falls below the minimum amount solely because of a decline
in a Fund's net asset value. Any such involuntary redemption would be at net
asset value.
The right to redeem Fund shares will be suspended for any period during which
the 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 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 Fund to dispose of portfolio
securities or fairly to determine the net asset value.
For further information on the right to redeem Fund shares, see the section of
the Statement of Additional Information entitled "Purchase, Redemption and
Pricing of Securities Being Offered.'
SYSTEMATIC WITHDRAWAL PLAN
As another convenience for its shareholders, the Fund offers a Systematic
Withdrawal Plan whereby investors may request that a check drawn in a
predetermined amount be sent to them each month. An investor's account must own
shares in a Fund worth at least $5,000 in order to start a Systematic Withdrawal
Plan with respect to such Fund, and the minimum amount that may be withdrawn
monthly under the plan is $50. Currently there is no separate charge to an
investor for this plan. The Systematic Withdrawal Plan may be terminated at any
time without charge or penalty, and the Fund reserves the right to terminate or
modify the Systematic Withdrawal Plan upon 60 days' written notice to each
investor prior to the modification or termination taking effect.
Withdrawals involve redemption of Fund shares and may result in a gain or loss
for federal income tax purposes. Purchases of additional shares concurrent with
withdrawals may be disadvantageous to investors because of certain tax
consequences. If the amount withdrawn under the Systematic Withdrawal Plan
exceeds the dividends credited to an investor's account, the account may
ultimately be depleted. An application for participation in the Systematic
Withdrawal Plan can be obtained from the Fund.
NET ASSET VALUE AND DAYS OF OPERATION
The net asset value of the Fund for purposes of pricing purchase and redemption
orders is determined as of the close of regular trading hours (currently 4:00
p.m. Eastern time) on the Exchange on each day the Exchange is open for trading.
As a result, shares of the Fund will not be priced on the holidays which the
Exchange observes: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset
value per share is calculated by dividing the value of all securities and other
assets owned by the Fund, less the liabilities charged to the Fund, by the
number of the Fund's outstanding shares.
Securities which are traded on a recognized stock exchange are valued at the
last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded on only over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Short-term
securities are valued at either original cost or amortized cost, both of which
approximate current market value. Restricted securities, securities for which
market quotations are not readily available, and other assets are valued at fair
value determined in good faith by the Manager under the supervision of the Board
of Directors.
Generally, trading in foreign securities, as well as United States Government
securities and certain cash equivalents, and repurchase agreements is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in computing the net
asset value of the shares of the Fund are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
New York Stock Exchange. Occasionally, events affecting the value of such
securities and such exchange rates may occur between the times at which they are
determined and the close of the New York Stock Exchange, which will not be
reflected in the computation of net asset value. If during such periods, events
occur which materially affect the value of such securities, the securities will
be valued at their fair market value as determined by management and approved in
good faith by the Board of Directors.
Any securities initially expressed in terms of foreign currencies are translated
into U.S. dollars at the official exchange rate or, alternatively, at the mean
of the current bid and asked prices of such currencies against the U.S. dollar
last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such banks. If neither of these alternatives is
available nor provides a suitable methodology for converting a foreign currency
into U.S. dollars, the Manager in good faith under the supervision of the Board
of Directors will establish a conversion rate for such currency.
European or Far Eastern securities trading may not take place on all days on
which the Exchange is open. Further, trading takes place in Japanese markets on
certain Saturdays and in various foreign markets on days on which the Exchange
is not open and therefore the Fund's net asset value is not calculated. The
calculation of the Fund's net asset value therefore may not take place
contemporaneously with the determination of the prices of securities held by the
Fund. Events affecting the values of portfolio securities that occur between
the time their prices are determined and the close of the Exchange will not be
reflected in the Fund's net asset value unless management, under the supervision
of the Board of Directors, determines that the particular event would materially
affect net asset value. As a result, the Fund's net asset value may be
significantly affected by such trading on days when the Fund is not open for
shareholder purchases and redemptions.
SHAREHOLDER REPORTS
Investors will be provided with a report showing the Fund portfolio and other
information at least semi-annually; and annually, after the close of the Fund's
fiscal year, which ends September 30, with a report containing audited financial
statements. Except for Automatic Investment and Systematic Withdrawal
transactions, an individual account statement will be sent to the investor by
the Fund after each purchase, including reinvestment of dividends, or redemption
of Fund shares. Participants in the Automatic Investment and Systematic
Withdrawal Plans will receive quarterly confirmations of all automatic
transactions. Each investor will also receive an annual statement after the end
of the calendar year listing all transactions in shares of the Fund during such
year.
Investors who have questions about their account(s), have general questions
about the Fund, or desire additional information should call the Fund at 1-800-
551-1700.
DIVIDENDS, CAPITAL GAINS, DISTRIBUTIONS AND TAXES
In addition to any increase in the value of shares which a Fund may achieve,
shareholders may receive two kinds of returns from the Fund: dividends and
capital gains distributions.
DIVIDENDS
Dividends from stocks and interest earned from other investments are the Fund's
main source of ordinary income. Substantially all of the income, less expenses,
of the Fund is distributed annually as dividends to shareholders.
CAPITAL GAINS
Net realized capital gains represent the total profit from sales of securities,
minus total losses from sales of securities, including any losses carried
forward from prior years. Any net realized capital gains resulting from the
operations of the Fund will be distributed annually.
Dividends and capital gains distributions from the Fund are automatically
applied to purchase additional shares of the Fund at the net asset value per
share on the payable date unless the shareholder has requested in writing to the
Transfer Agent that payment be made in cash. This option may be changed at any
time by written request to the Transfer Agent; the election is effective for
distributions with a dividend record date on or after the date that the Transfer
Agent receives notice of the election.
TAXES
The Fund intends to qualify annually for and elect tax treatment applicable to a
"regulated investment company" under Subchapter M of the Code. Because the Fund
intends to distribute substantially all of its net investment income and capital
gains to shareholders, it is not expected that the Fund will be required to pay
any federal income taxes. Should the Fund fail to distribute the amount
required by the Tax Reform Act of 1986, as amended, during any calendar year,
the Fund would be required to pay a 4% nondeductible excise tax on the amount of
the underdistribution. Shareholders will normally have to pay federal income
taxes and any state and local income taxes on the dividends and distributions
they receive from the Fund. Shareholders not subject to tax on their income will
not be required to pay tax on amounts distributed to them. Shareholders are
advised to consult their own tax advisers with respect to these matters.
At the end of each calendar year, shareholders are sent full information on
dividends and long-term capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion taxable
as long-term capital gains.
Prior to purchasing shares of the Fund, prospective shareholders (except for tax
qualified retirement plans) should consider the impact of dividends or capital
gains distributions which are expected to be announced, or have been announced
but not paid. Any such dividends or capital gains distributions paid shortly
after a purchase of shares by an investor prior to the record date will have the
effect of reducing the per share net asset value by the amount of the dividends
or distributions. All or a portion of such dividends or distributions, although
in effect a return of capital, is subject to taxation.
Dividends and certain interest income earned by the Fund from foreign securities
may be subject to foreign withholding taxes or other taxes. So long as more
than 50% of the value of the Fund's total assets at the closed of any taxable
year consists of stock or securities of foreign corporations, the Fund may
elect, for U.S. federal income tax purposes, to treat certain foreign taxes paid
by it, including generally any withholding taxes and other foreign income taxes,
as paid by its shareholders. Net loss, if any from certain foreign currency
transactions or instruments that is otherwise taken into account with respect to
the Fund in calculating net investment income or net realized capital gains for
accounting purposes may not be taken into account in determining the amount of
dividends to be declared and paid, with the result that a portion of the Fund's
dividends may be treated as a return of capital, nontaxable to the extent of a
shareholder's tax basis in his shares. It is possible that the Fund will make
this election in certain years. Should the Fund make the election, the amount
of such foreign taxes paid by the Fund will be included in its shareholders'
income pro rata (in addition to taxable distributions actually received by
them), and each shareholder will be entitled either (a) to credit his or her
proportionate amounts of such taxes against his U.S. federal income tax
liabilities, or (b) if he or she itemizes deductions, to deduct such
proportionate amounts from his U.S. taxable income.
If the Fund invests in certain "passive foreign investment companies"
("PFICs"), it would be subject to federal income tax (and possibly additional
interest charges) on a portion of any "excess distribution" or gain from the
disposition of such investments even if it distributes the income to its
shareholders. If a Fund elects to treat the PFIC as a "qualified electing
fund" ("QEF") and the PFIC furnishes certain financial information in the
required form the Fund instead would be required to include in income each year
its allocable share of the ordinary earnings and net capital gains of the QEF,
whether or not received, and such amounts would be subject to the various
distribution requirements described above. In addition, a Fund could, as an
alternative, treat unrealized gains as though they were realized for tax
purposes.
The Fund is required to withhold and remit to the U.S. Treasury 31% of dividend
payments, capital gains distributions, and redemption proceeds for any account
on which the owner provides an incorrect Taxpayer Identification Number or no
number on a new account.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. There may be
other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors are therefore urged to consult their
tax adviser.
ADDITIONAL INFORMATION
DIRECTORS
Samuel S. Stewart, Jr., Ph.D., Chairman of the Board
Jeff S. Cardon
James U. Jensen
Roy S. Jespersen
William R. Swinyard
INVESTMENT ADVISER
Wasatch Advisors, Inc.
68 South Main Street
Salt Lake City, UT 84101
ADMINISTRATOR AND TRANSFER AGENT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, WI 53202
CUSTODIAN
UMB Bank, n.a.
928 Grand Avenue
Kansas City, Missouri 64141
LEGAL COUNSEL
Michael J. Radmer
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402-1498
INDEPENDENT AUDITORS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
WASATCH FUNDS
68 South Main Street
Salt Lake City, UT 84101
FOR FUND INFORMATION AND SHAREHOLDER SERVICES
1-800-551-1700
HOW TO OPEN YOUR ACCOUNT
1. Carefully read the attached prospectus which contains more complete
information about the Fund.
2. Complete the enclosed application form.
3. Mail the completed form along with your check payable to Wasatch Funds, in
the postage-paid envelope. Or call us for instructions on how to arrange
for a bank wire.
MINIMUM TO OPEN AN ACCOUNT
Regular Account $2,000
- ----------------------------------------------------------------------
Automatic Investment Plan $1,000
Automatic Investment Plan allows for investments
directly from your bank directly to the Fund on a
monthly or quarterly basis (subsequent automatic
investment minimum is $50 per transaction monthly /
$100 quarterly.)
- ----------------------------------------------------------------------
IRA Account $1,000
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
WASATCH WORLD WIDE FUND
68 South Main, Suite 400
Salt Lake City, UT 84101
October 1, 1996
WASATCH FUNDS, INC. ( "Wasatch Funds" or the "Company") is an open-end
management investment company issuing shares of Common Stock in separate series
or "Funds". The Company presently consists of six Funds which offer a variety
of investment opportunities. The Wasatch World Wide Fund (the "Fund") is the
most recent addition to the Wasatch family of funds and is described in this
Statement of Additional Information.
This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus. A Prospectus
may be obtained without charge by calling or writing Wasatch Funds at P.O. Box
2172, Milwaukee, Wisconsin 53202-2172 at (800) 551-1700. The Statement of
Additional Information and the related Prospectus are both dated October 1,
1996. Capitalized terms used herein and not defined have the same meanings as
used in the Prospectus.
TABLE OF CONTENTS
General Information and History.................................. 2
Investment Objectives and Policies............................... 2
Description of Corporate Bond Ratings............................ 3
Investment Restrictions.......................................... 13
Management of the Company........................................ 15
Principal Holders of Securities.................................. 16
Investment Advisory and Other Services........................... 16
Brokerage Allocation and Other Practices......................... 17
Capital Stock and Other Securities............................... 18
Purchase, Redemption and Pricing of Securities Being Offered..... 18
Tax Status....................................................... 19
Calculation of Performance Data.................................. 20
Financial Statements............................................. 22
GENERAL INFORMATION AND HISTORY
Wasatch Funds, Inc. ("Wasatch Funds" or the "Company") was incorporated under
Utah law on November 18, 1986. It is an open-end management investment company
composed of six separate Funds. The Growth Fund and Income Fund are each
diversified funds; the Aggressive Equity Fund, the Micro-Cap Fund, Mid-Cap Fund
and World Wide Fund are each non-diversified funds. The Growth Fund, Income
Fund and Aggressive Equity Fund commenced operations on December 6, 1986, the
Mid-Cap Fund on August 16, 1992, the Micro-Cap Fund on June 19, 1995, and the
World Wide Fund on October 1, 1996.
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the investment objective and policies of the Fund as
set forth in the Prospectus:
WASATCH WORLD WIDE FUND seeks long term growth of capital. The Fund seeks this
objective by investing primarily in equity securities of companies located
outside, as well as in the United States, and believed by the Manager, Wasatch
Advisors, Inc. (the "Manager"), to possess growth potential. Under normal
market conditions, the Fund will invest at least 65% of its net assets in equity
securities. Income is an incidental consideration. The Wasatch World Wide
Fund is a non-diversified fund, and consequently may be more heavily weighted in
securities of fewer issuers and may be subject to greater risk and price
fluctuations.
RISKS RELATED TO LOWER-RATED SECURITIES. While any investment carries some
risk, certain risks associated with lower-rated securities are different than
those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of
these securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wide fluctuations of the Fund's net asset value per
share.
There remains some uncertainty about the performance level of the market for
lower-rated securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the markets for lower-rated securities (resulting in a greater number of
bond defaults) and the value of lower-rated securities.
The economy and interest rates can affect lower-rated securities differently
than higher-rated securities. For example, the prices of lower-rated securities
are more sensitive to adverse economic changes or individual corporate
developments than are the prices of higher-rated investments. In addition,
during an economic downturn or period in which interest rates are rising
significantly, highly leveraged issuers may experience financial difficulties,
which in turn, would adversely affect their ability to service their principal
and interest payment obligations, meet projected business goals and obtain
additional financing.
If an issuer of a security defaults, the Fund may incur additional expenses to
seek recovery. In addition, periods of economic uncertainty would likely result
in increased volatility for the market prices of lower-rated securities as well
as the Fund's net asset value. In general, both the prices and yields of lower-
rated securities will fluctuate. In certain circumstances it may be difficult
to determine a security's fair value due to a lack of reliable objective
information. Such instances occur where there is not an established secondary
market for the security or the security is lightly traded. As a result the
Fund's valuation of a security and the price it is actually able to obtain when
it sells the security could differ.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of lower-rated securities held by
the Fund, especially in a thinly traded market. Illiquid or restricted
securities held by the Fund may involve special registration responsibilities,
liabilities and costs, and could involve other liquidity and valuation
difficulties. Current laws, such as those requiring federally-insured savings
and loan associations to remove investments in lower-rated securities from their
portfolios, as well as other pending proposals, may have a material impact on
the market for lower-rated securities.
The rating assigned by a rating agency evaluates the safety of a lower-rated
security's principal and interest payments, but does not address market value
risk. Because the ratings of the rating agencies may not always reflect current
conditions and events, in addition to using recognized rating agencies and other
sources, the Manager performs its own analysis of the issuers whose lower-rated
securities the Fund holds. Because of this, the Fund's performance may depend
more on its Manager's credit analysis than is the case of mutual funds investing
in higher-rated securities.
DESCRIPTION OF CORPORATE BOND RATINGS
Commercial Paper Ratings
Standard & Poor's Corporation. A Standard & Poor's commercial paper rating is a
current assessment of the likelihood of timely payment of debt having an
original maturity of no more than 365 days. Ratings are graded into categories
ranging from "A" for the highest quality obligations to "D" for the lowest.
"A" Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1,2 and 3 to indicate the relative degree
of safety.
"A-1" This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted
with a (+) sign designation.
"A-2" Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1."
"A-3" Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
Moody's Investors Service, Inc. Moody's short-term debt ratings are opinions of
the ability of the issuers to repay punctually senior debt obligations which
have an original maturity not exceeding one year. Moody's makes no
representation that such obligations are exempt from registration under the
Securities Act of 1933, nor does it represent that any specific note is a valid
obligation of a rated issuer or issued in conformity with any applicable law.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers:
"Prime-1" Superior ability for repayment of senior short-term debt
obligations.
"Prime-2" Strong ability for repayment of senior short-term debt
obligations.
"Prime-3" Acceptable ability for repayment of senior short-term debt
obligations.
Corporate Bond Ratings
Standard & Poor's Corporation. Its ratings for corporate bonds have the
following definitions:
Debt rated "AAA" has the highest rating assigned by Standard & Poor's Capacity
to pay interest and repay principal is extremely strong.
Debt rated "AA" has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in a small degree.
Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
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.
Debt rated "BB," "B," "CCC," "CC" and "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" rating.
Debt rated "CCC" has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
The rating "CC" is typically applied to debt subordinated to senior debt that
is assigned an actual or implied "CCC" rating.
The rating "C" is typically applied to debt subordinated to senior debt which
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating "CI" is reserved for income bonds on which no interest is being
paid.
Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major categories.
"NR" indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
Moody's Investors Service, Inc. Its ratings for corporate bonds include the
following:
Bonds which are rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated "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 risk appear somewhat larger than in Aaa securities.
Bonds which are rated "A" possess many favorable 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.
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.
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.
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.
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.
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.
Bonds which are rated "C" are the lowest rated class of bonds and issues and
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (Moody's ratings, Aaa, Aa, A and Baa, and Standard & Poor's ratings
AAA, AA, A and BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states impose certain rating or other standards for
obligations eligible for investment by savings banks, trust companies, insurance
companies and fiduciaries generally.
Preferred Stock Rating
Standard & Poor's Corporation. Its ratings for preferred stock have the
following definitions:
An issue rated "AAA" has 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.
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."
An issue 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.
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.
Moody's Investors Service, Inc. Its ratings for preferred stock include the
following:
An issue which is rated "Aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
An issue which is rate "Aa" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are never-the-
less expected to be maintained at adequate levels.
An issue which is rated "Baa" is considered to be medium grade, neither highly
protected nor poorly secured. Earnings and asset protection appear adequate at
present but may be questionable over any great length of time.
OPTIONS
The Fund may purchase and sell put and call options. Such options may relate to
particular securities, stock indices, financial instruments and foreign
currencies, and may or may not be listed on a domestic or foreign securities
exchange and may or may not be issued by the Options Clearing Corporation.
Options trading is a highly specialized activity that entails greater than
ordinary investment risk. Options may be more volatile than the underlying
instruments, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
instruments themselves.
A call option for a particular security gives the purchaser of the option the
right to buy, and a writer (seller) the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price of the security. The premium paid to the
writer is in consideration for undertaking the obligation under the option
contract. A put option for a particular security gives the purchaser the right
to sell the security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
Options on indices and yield curve options provide the holder with the right to
make or receive a cash settlement upon exercise of the option. With respect to
options on indices, the amount of the settlement will equal the difference
between the closing price of the index at the time of exercise and the exercise
price of the option expressed in dollars, times a specified multiple.
The Fund's obligation to sell an instrument subject to a call option written by
it, or to purchase an instrument subject to a put option written by it, may be
terminated prior to the expiration date of the option by the Fund's execution of
a closing purchase transaction, which is effected by purchasing on an exchange
an option of the same series (i.e., same underlying instrument, execise price
and expiration date) as the option previously written. A closing purchase
transaction will ordinarily be effected to realize a profit on an outstanding
option, to prevent an underlying instrument from being called, to permit the
sale of the underlying instrument or to permit the writing of a new option
containing different terms on such underlying instrument. The cost of such a
liquidation purchase plus transactions costs may be greater than the premium
received upon the original option, in which event the Fund will have incurred a
loss in the transaction. There is no assurance that a liquid secondary market
will exist for any particular option. An option writer, unable to effect a
closing purchase transaction, will not be able to sell the underlying instrument
or liquidate the assets held in the segregated account until the option expires
or the optioned instrument or currency is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline or appreciation in the instrument during such period.
If an option purchased by the Fund expires unexercised, the Fund realizes a loss
equal to the premium paid. If the Fund enters into a closing sale transaction
on an option purchased by it, the Fund will realize a gain if the premium
received by the Fund on the closing transaction is more than the premium paid to
purchase the option, or a loss if it is less. If an option written by the Fund
expires on the stipulated expiration date or if the Fund enters into a closing
purchase transaction, it will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the net premium received when the option is sold).
If an option written by the Fund is exercised, the proceeds of the sale will be
increased by the net premium originally received and the Fund will realize a
gain or loss.
FEDERAL TAX TREATMENT OF OPTIONS. Certain option transactions have special tax
results for the Fund. Expiration of a call option written by the Fund will
result in short-term capital gain. If the call option is exercised, the Fund
will realize a gain or loss from the sale of the security covering the call
option and, in determining such gain or loss, the option premium will be
included in the proceeds of the sale.
If the Fund writes options other than "qualified covered call options," as
defined in Section 1092 of the Internal Revenue Code of 1986, as amended (the
"Code"), or purchases puts, any losses on such options transactions, to the
extent they do not exceed the unrealized gains on the securities covering the
options, may be subject to deferral until the securities covering the options
have been sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Fund will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40% short-term
capital gain or loss as required by Section 1256 of the Code. In addition, such
positions must be marked-to-market as of the last business day of the year, and
gain or loss must be recognized for federal income tax purposes in accordance
with the 60%/40% rule discussed above even though the position has not been
terminated. A "nonequity option" includes options in options involving stock
indexes such as the Standard & Poor's 500 and 100 indexes.
CERTAIN RISKS REGARDING OPTIONS. There are several risks associated with
transactions in options. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for particular options,
whether traded over-the-counter or on an exchange, may be absent for reasons
which include the following: there may be insufficient trading interest in
certain options; restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options or underlying securities or currencies; unusual or unforeseen
circumstances may interrupt normal operations on an exchange; the facilities of
an exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
Successful use by the Fund of options on stock indexes will be subject to the
ability of the Manager to correctly predict movements in the directions of the
stock market. This requires different skills and techniques than predicting
changes in the prices of individual securities. In addition, the Fund's ability
to effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline, through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements of the securities held by
the Fund. Inasmuch as the Fund's securities will not duplicate the components
of an index, the correlation will not be perfect. Consequently, the Fund will
bear the risk that the prices of its securities being hedged will not move in
the same amount as the prices of its put options on the stock indexes. It is
also possible that there may be a negative correlation between the index and the
Fund's securities which would result in a loss on both such securities and the
options on stock indexes acquired by the Fund.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The purchase of stock index
options involves the risk that the premium and transaction costs paid by the
Fund in purchasing an option will be lost as a result of unanticipated movements
in prices of the securities comprising the stock index on which the option is
based.
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time, and for some options
no secondary market on an exchange or elsewhere may exist. If the Fund is
unable to close out a call option on securities that it has written before the
option is exercised, the Fund may be required to purchase the optioned
securities in order to satisfy its obligation under the option to deliver such
securities. If the Fund is unable to effect a closing sale transaction with
respect to options on securities that it has purchased, it would have to
exercise the option in order to realize any profit and would incur transaction
costs upon the purchase and sale of the underlying securities.
COVER FOR OPTIONS POSITIONS. Transactions using options (other than options that
the Fund has purchased) expose the Fund to an obligation to another party. The
Fund will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options or (2) cash,
receivables and short-term debt securities with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Fund will comply with Securities and Exchange Commission (the "SEC")
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash, U.S. government securities or other liquid, high-grade
debt securities in a segregated account with its Custodian in the prescribed
amount. Under current SEC guidelines, the Fund will segregate assets to cover
transactions in which the Fund writes or sells options.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding option is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of the Fund's
assets to cover or segregated accounts could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.
FORWARD CURRENCY EXCHANGE CONTRACTS.
The Fund may enter into forward currency exchange contracts with respect to
specific transactions. For example, when the Fund anticipates purchasing or
selling a security denominated in a foreign currency, or when it anticipates the
receipt in a foreign currency of dividend or interest payments on a security
that it holds, the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such payment, as the case may be, by
entering into a forward contract for the purchase or sale, for a fixed amount of
U.S. dollars or foreign currency, of the amount of foreign currency involved in
the underlying transaction. The Fund will thereby attempt to protect itself
against a possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.
The Fund also may use forward currency exchange contracts to lock in the U.S.
dollar value of its portfolio positions, to increase the Fund's exposure to
foreign currencies that the Manager believes may rise in value relative to the
U.S. dollar or to shift the Fund's exposure to foreign currency fluctuations
from one country to another. For example, when the Manager believes that the
currency of a particular foreign country may suffer a substantial decline
relative to the U.S. dollar or another currency, it may enter into a forward
contract to sell the amount of the former foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. These investment practices generally are referred to as "cross-
currency hedging" when two foreign currencies are involved.
At or before the maturity date of a forward contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting forward contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The precise matching of the forward contract amount and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Fund is obligated to
deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transaction costs. Under normal circumstances,
consideration of the prospect for currency parties will be incorporated into the
longer-term investment decisions made with regard to overall diversification
strategies. However, the Fund's Manager believes that it is important to have
the flexibility to enter into such forward contracts when it determines that the
best interest of the Fund will be served.
The cost to the Fund of engaging in forward contracts varies with factors such
as the currencies involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts are usually entered into
on a principal basis, no fees or commissions are involved. The use of forward
contracts does not eliminate fluctuations in the prices of the underlying
securities the Fund owns or intends to acquire, but it does fix a rate of
exchange in advance. In addition, although forward contracts limit the risk of
loss due to a decline in the value of the hedged currencies, at the same time
they limit any potential gain that might result should the value of the
currencies increase.
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
EMERGING MARKET SECURITIES - RUSSIA.
Investing in Russian companies involves a high degree of risk and special
considerations not typically associated with investing in the United States
securities markets, and should be considered highly speculative. Such risks
include: (1) delays in settling portfolio transactions and risk of loss arising
out of Russia's system of share registration and custody; (2) the risk that it
may be impossible or more difficult than in other countries to obtain and/or
enforce a judgment; (3) pervasiveness of corruption and crime in the Russian
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation); (6) controls on
foreign investment and local practices disfavoring foreign investors and
limitations on repatriation of invested capital, profits and dividends, and on
the Fund's ability to exchange local currencies for U.S. dollars; (7) the risk
that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including non-
market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (8) the
financial condition of Russian companies, including large amounts of inter-
company debt which may create a payments crisis on a national scale; (9)
dependency on exports and the corresponding importance of international trade;
(10) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (11) possible
difficulty in identifying a purchaser of securities held by a Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. Because of the recent
formation of the securities markets as well as the underdeveloped state of the
banking and telecommunications systems, settlement, clearing and registration of
securities transactions are subject to significant risks. Ownership of shares
(except where shares are held through depositories that meet the requirements of
the 1940 Act) is defined according to entries in the company's share register
and normally evidenced by extracts from the register or by formal share
certificates. However, there is no central registration system for shareholders
and these services are carried out by the companies themselves or by registrars
located throughout Russia. These registrars are not necessarily subject to
effective state supervision and it is possible for the Fund to lose its
registration through fraud, negligence or even mere oversight. While the Fund
will endeavor to ensure that its interest continues to be appropriately recorded
either itself or through a custodian or other agent inspecting the share
register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for the Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent the Fund from
investing in the securities of certain Russian companies deemed suitable by the
Manager. Further, this also could cause a delay in the sale of Russian company
securities by the Fund if the potential purchaser is deemed unsuitable, which
may expose the Fund to potential loss on the investment.
LENDING OF PORTFOLIO SECURITIES.
Consistent with applicable regulatory requirements the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 33 1/3% of the value of
the Fund's total assets and provided that such loans are callable at any time by
the Fund and are at all times secured by cash or equivalent collateral that is
at least equal to the market value, determined daily, of the loaned securities.
The advantage of such loans is that the Fund continues to receive interest and
dividends of the loaned securities, while at the same time earning interest
either directly from the borrower or on the collateral which will be invested in
short-term obligations.
A loan may be terminated by the borrower on one business day's notice or by the
Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors. On
termination of the loan, the borrower is required to return the securities to
the Fund and any gain or loss in the market price during the loan would be borne
by the Fund.
Since voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan. The Fund will pay reasonable finders',
administrative and custodial fees in connection with a loan of its securities or
may share the interest earned on collateral with the borrower.
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWING.
The Fund may borrow for temporary and emergency purposes, which borrowing may be
unsecured. The amount of such borrowing will not exceed 10% of the Fund's total
assets.
Borrowing may exaggerate the effect on net asset value of any increase or
decrease in the market value of the portfolio. To avoid the potential
leveraging effects of the Fund's borrowings, the Fund will not make investments
while borrowings are in excess of 5% of the Fund's total assets. Money borrowed
will be subject to interest costs which may or may not be recovered by income on
or by appreciation of the securities purchased. The Fund also may be required
to maintain minimum average balances in connection with such borrowing or to pay
a commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
For purposes of its borrowing limitation and policies, the Fund considers
reverse repurchase agreements to constitute borrowing. A reverse repurchase
agreement is an arrangement under which the Fund sells securities and agrees to
repurchase the securities at a specific time and price.
ILLIQUID SECURITIES.
The Fund may invest up to 15% of its assets in illiquid securities (i.e.,
securities that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which the Fund has valued the
securities). The Board of Directors or its delegate has the ultimate authority
to determine which securities are liquid or illiquid for purposes of this
limitation. Certain securities exempt from registration or issued in
transactions exempt from registration ("restricted securities") under the
Securities Act of 1933, as amended ("Securities Act") that may be resold
pursuant to Rule 144A or Regulation S under the Securities Act, may be
considered liquid. The Board has delegated to the Manager the day-to-day
determination of the liquidity of a security, although it has retained oversight
and ultimate responsibility for such determinations. Although no definite
criteria are used, the Board has directed the Manager to look to such factors as
(i) the nature of the market for a security (including the institutional private
or international resale market), (ii) the terms of these securities or other
instruments allowing for the disposition to a third party or the issuer thereof
(e.g., certain repurchase obligations and demand instruments), (iii) the
availability of market quotations, and (iv) other permissible relevant factors.
Certain securities, such as repurchase obligations maturing in more than seven
days, are currently considered illiquid.
Restricted securities may be sold in privately negotiated or other exempt
transactions, qualified non-U.S. transactions, such as under Regulation S, or in
a public offering with respect to which a registration statement is in effect
under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
time may elapse between the decision to sell and the sale date. If, during such
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair value as determined in good faith by the Board.
If through the appreciation of illiquid securities or the depreciation of liquid
securities, the Fund should be in a position where more than 15% of the value of
its assets are invested in illiquid assets, including restricted securities
which are not readily marketable, the Fund will take such steps as it deems
advisable, if any, to reduce the percentage of such securities to 15% or less of
the value of its net assets.
Reference is made to "Investment Objective, Policies and Risks" in the
Prospectus for a more complete discussion of the investment objective, policies
and associated risks of the Fund.
INVESTMENT RESTRICTIONS.
The Company has adopted the following restrictions and policies relating to the
investment of assets of the Fund and its activities. These are fundamental
policies and may not be changed without the approval of the holders of a
majority of the outstanding voting shares of the Fund (which for this purpose
and under the Investment Company Act of 1940 means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares).
The Fund may not:
1. Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein. The Fund has
no current intention to invest in securities of this nature.
2. Purchase or sell physical commodities (including, by way of example and not
by way of limitation, grains, oilseeds, livestock, meat, food, fiber,
metals, petroleum-based products or natural gas) or futures or options
contracts with respect to physical commodities. This restriction shall not
restrict the Fund from purchasing or selling any financial contracts or
instruments which may be deemed commodities (including, by way of example
and not by way of limitation, options, futures, and options on futures with
respect, in each case, to interest rates, currencies, stock indices, bond
indices or interest indices) or any security which is collateralized or
otherwise backed by physical commodities.
3. Purchase any security on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of transactions.
4. Make short sales of securities.
5. Make loans to other persons, except that it may lend portfolio securities
representing up to one-third of the value of its total assets. (The Fund,
however, may purchase and hold debt instruments and enter into repurchase
agreements in accordance with its investment objective and policies as, in
the opinion of the Manager, these investments do not constitute the making
of loans.)
6. Issue any senior securities (as defined in the 1940 Act), other than as set
forth in restriction number 7 below and except to the extent that using
options may be deemed to constitute issuing a senior security.
7. Borrow money, except for temporary or emergency purposes. The amount of
such borrowing may not exceed 10% of the Fund's total assets. The Fund
will not borrow money for leverage purposes. For the purpose of this
investment restriction, the use of options and futures transactions shall
not be deemed the borrowing of money. (As a non-fundamental policy, the
Fund will not make additional investments while its borrowing exceeds 5% of
total assets.)
8. Underwrite securities of other issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in selling portfolio
securities.
9. Invest more than 25% of its total assets (taken at market value at the time
of each investment) in the securities of issuers in any particular
industry.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors without shareholder vote. The Fund will not:
1. Make investments for the purpose of exercising control or management.
2. Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations.
3. Purchase or sell interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers
which invest or sponsor such programs.
4. Invest more than 5% of its total assets (taken at market value at the time
of each investment) in warrants of which no more than 2% will be invested
in non-listed issues that have warrants.
5. Invest more than 5% of its total assets (taken at market value at the time
of each investment) in the securities of new issuers, who with predecessors
have operating records of three (3) years or less.
6. Invest more than 5% of its total assets (taken at market value at the time
of each investment) in "Special Situations", i.e., companies in the process
of reorganization or buy-out.
7. Purchase securities of any other registered investment company (as defined
in the 1940 Act), except, subject to 1940 Act limitations, (a) the Fund
may, as part of its investment in cash items, invest in securities of other
mutual funds which invest primarily in debt obligations with remaining
maturities of 13 months or less, (b) the Fund may purchase securities as
part of a merger, consolidation reorganization or acquisition of assets,
and (c) the Fund may invest in securities of other registered investment
companies to the extent permitted by applicable Securities and Exchange
Commission exemptive relief, no-action letters, or rules pursuant to the
1940 Act.
Any investment restriction or limitation, fundamental or otherwise, appearing in
the Prospectus or Statement of Additional Information, which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or utilization of assets, and such excess results therefrom.
MANAGEMENT OF THE COMPANY
The Directors and executive officers of the Fund and their principal occupations
for at least the last five years are set forth below. Unless otherwise noted,
the address of each executive officer and Director is 68 South Main, Salt Lake
City, Utah 84101.
* Samuel S. Stewart, Jr., Ph.D., CFA - President and Director
President and Director of the Company; President and Director of
Research for the Manager since 1975; Professor of Finance at the
University of Utah since 1975.
* Roy S. Jespersen, MBA - Vice President and Director
Vice President and Director of the Company; Vice President and
Portfolio Manager for the Manager since 1983.
* Venice Edwards, CFA - Secretary/Treasurer
Secretary/Treasurer of the Company; Compliance Manager for the Manager
since 1995; Portfolio Manager for the Manager since 1983.
* Jeff S. Cardon, CFA - Vice President and Director
Vice President and Director of the Company; Vice President and Director
of the Manager since 1985; Security Analyst for the Manager since 1980.
James U. Jensen - Director
NPS Pharmaceuticals, Inc.
420 Chipeta Way
Salt Lake City, Utah 84108
Director of the Company; Vice President of Corporate Development and
Legal Affairs, NPS Pharmaceuticals, Inc.; previously Chairman and a
partner at Woodbury, Jensen, Kesler & Swinton, P.C. from 1986 to 1991.
William R. Swinyard - Director
Management Office
660 Tanner Building
Brigham Young University
Provo, Utah 84602
Director of the Company; Professor of Business Management, Brigham
Young University since 1985; Vice President for Struman and Associates,
Inc., a management consulting firm since 1983.
* Interested person, as defined in the Investment Company Act of 1940, of
the Company.
The Board of Directors has appointed the officers of the Company to be
responsible for the overall management and day to day operations of the
Company's business affairs between board meetings.
The Fund's standard method of compensating directors is to pay each
disinterested director an annual fee of $6,000 for services rendered, including
attending meetings of the Board of Directors. The Fund also may reimburse its
disinterested directors for travel expenses incurred in order to attend meetings
of the Board of Directors. Officers serve in that capacity without compensation
from the Company.
PRINCIPAL HOLDERS OF SECURITIES
As of October 1, 1996, the Manager owned all of the outstanding shares of the
Fund. Shareholders with a controlling interest could effect the outcome of the
proxy voting or the direction of management of the Company.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectus, Wasatch Advisors, Inc. is the Company's manager
and investment advisor, providing services under the advisory and service
contracts. The Manager was organized in September 1975, has been in the
business of investment management since November 1975, and currently has total
assets under management including the assets of the Funds, of approximately $924
million as of .
---------------
The principal executive officers and directors of the Manager are Samuel S.
Stewart, Jr., Ph.D., President and Director; Roy S. Jespersen, Vice President
and Director; Mark E. Bailey, Vice President and Director; Jeff S. Cardon, Vice
President and Director; Luana Buhler, Secretary; Karolyn Barker, Director;
Robert Gardiner, Director and James Milligan, Director. Dr. Samuel S. Stewart,
Jr. is the only owner of the Manager who owns more than 25% of the Manger's
outstanding equity and is deemed to control the Manager.
Under Advisory and Service Contracts, the Fund pays the Manager a monthly fee
computed on average daily net assets at the annual rate of 1.5%. The fee is
higher than those paid by other investment companies. The management fee is
computed and accrued daily and is payable monthly.
The Manager provides an investment program for, and carries out the investment
policy and manages the portfolio assets of, the Fund. The Manager is authorized,
subject to the control of the Board of Directors of the Company, to determine
the selection, quantities and time to buy or sell securities for the Fund. In
addition to providing investment services, the Manager pays for office space and
facilities for the Company. Among other expenses, the Fund pays taxes (if any),
brokerage commissions on portfolio transactions, expenses of issuance and
redemption of shares, charges of custodians and dividend disbursing agents,
proxy material and costs of printing and engraving stock certificates, auditing
and legal expenses, certain expenses of registering and qualifying shares for
sale, fees of directors who are not "interested persons" of the Manager, costs
of typesetting, printing and mailing the Prospectus, Statement of Additional
Information and periodic reports to existing shareholders, and any other charges
or fees not specifically enumerated.
The Advisory and Service Contract provides that the Manager shall reimburse the
Fund for expenses in excess of the most restrictive expense limitation required
by state regulation. At the current time, the lowest applicable expense
limitation is 2 1/2% of the first $30 million of the average net assets, 2% of
the next $70 million of the average net assets, and 1 1/2% of the remaining net
assets of the investment company.
The Manager has voluntarily agreed to limit the Fund expenses to 2.0% of average
net assets calculated on a daily basis and will pay all expenses excluding
interest, taxes, extraordinary expenses, brokerage commissions and transactions
costs in excess of such limitation. The Manager will maintain such expense
limitation at least through September 30, 1997.
GENERAL INFORMATION
Custodian and Transfer Agent
UMB Bank, n.a. serves as the Fund's Custodian. The Custodian is responsible for,
among other things, safeguarding and controlling the Company's cash and
securities. The Fund pays a monthly fee at the annual rate of .75 basis points
on combined net assets up to $500,000,000, plus .50 basis points on the combined
net assets in excess of $500,000,000. There are additional charges associated
with custody of foreign securities. Sunstone Financial Group, Inc., 207 East
Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202-2172, is the Company's
Transfer Agent. The Transfer Agent keeps records of all shareholder accounts and
transactions. The Fund pays Sunstone Financial Group, Inc. a Transfer Agent fee
based on the number of shareholder accounts subject to a minimum annual fee.
Counsel
Michael J. Radmer, Dorsey & Whitney, LLP, 220 South Sixth Street, Minneapolis,
Minnesota 55402-1498, acts as legal counsel to the Company and reviews certain
legal matters for the Company in connection with the shares offered by the
Prospectus.
Independent Auditors
Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee, WI 53202 are the
Company's independent Certified Public Accountants. In this capacity the firm
is responsible for auditing the financial statements of the Company and
reporting thereon.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities for the
Company and for the placement of its portfolio business and the negotiation of
the commissions paid on such transactions. It is the policy of the Manager to
seek the best security price available with respect to each transaction. Except
to the extent that the Company may pay higher brokerage commissions for
brokerage and research services (as described below) on a portion of its
transactions executed on securities exchanges, the Manager seeks the best
security price at the most favorable commission rate. In selecting dealers and
in negotiating commissions, the Manager considers the firm's reliability, the
quality of its execution services on a continuing basis and its financial
condition. When more than one firm are believed to meet these criteria,
preference may be given to firms which also provide research services to the
Company or the Manager.
Pursuant to provisions of the investment advisory agreement, the Company's Board
of Directors has authorized the Manager to cause the Company to incur brokerage
commissions in an amount higher than the lowest available rate in return for the
opinion that the continued receipt of supplemental investment research services
from dealers is essential to its provision of high quality portfolio management
services to the Company. The Manager undertakes that such higher commissions
will not be paid by the Company unless (a) the Manager determines in good faith
that the amount is reasonable in relation to the services in terms of the
particular transaction or in terms of the Manager's overall responsibilities
with respect to the accounts as to which it exercises investment discretion, (b)
such payment is made in compliance with the provisions of Section 28(e) of the
Securities and Exchange Act of 1934 and other applicable state and federal laws,
and (c) in the opinion of the Manager the total commissions paid by the Company
are reasonable in relation to the expected benefits to the Company over the long
term. The investment advisory fee paid by the Fund under the investment
advisory agreement is not reduced as a result of the Manager's receipt of
research services.
Consistent with both the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such policies as the Board of Directors may
determine, and subject to seeking best execution, the Manager may consider sales
of shares of the Company as a factor in the selection of dealers to execute
portfolio transactions for the Company.
The Manager places portfolio transactions for other advisory accounts.
Research services furnished by firms through which the Company effects its
securities transactions may be used by the Manager in servicing all of its
accounts; not all of such services may be used by the Manager in connection with
the Company. In the opinion of the Manager, the benefits from research services
to each of the accounts (including the Company) managed by the Manager cannot be
measured separately. Because the volume and nature of the trading activities of
the accounts are not uniform, the amount of commissions in excess of the lowest
available rate paid by each account for brokerage and research services will
vary. However, in the opinion of the Manager, such costs to the Company will
not be disproportionate to the benefits received by the Company on a continuing
basis.
The Manager's brokerage practices are monitored on at least an annual basis by
the Board of Directors including the disinterested persons (as defined in the
Investment Company Act of 1940) of the Manager.
CAPITAL STOCK AND OTHER SECURITIES
The Company is authorized to issue shares in separate series, or "Funds." Six
such Funds have been established:
Series A Common - Aggressive Equity Fund
Series B Common - Growth Fund
Series C Common - Income Fund
Series D Common - Mid-Cap Fund
Series E Common - Micro-Cap Fund
Series F Common - World Wide Fund
See "Organization of the Company" in the Prospectus, for a discussion of the
relative rights and characteristics of the shares.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
The procedures to be followed in the purchase and redemption of shares as well
as the method of determining the net asset value are fully disclosed in the
Prospectus. As indicated in the Prospectus, the net asset value is calculated
each day the New York Stock Exchange is open for trading. The New York Stock
Exchange is closed on the following national holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Investors may exchange their shares of the Fund for the U.S. Government Money
Market Fund as provided in the prospectus. Sunstone, in its capacity as
transfer agent for the Fund, receives a service fee from the U.S. Government
Money Market Fund at the annual rate of 0.25% of 1% of the average daily net
asset value of the shares exchanged from the Fund into the U.S. Government Money
Market Fund.
The Company has filed a notification of election under Rule 18f-1 of the
Investment Company Act committing itself to pay in cash all requests for
redemption by any shareholder of record, limited in amount with respect to each
shareholder of record during any 90-day period to the lesser of :
(1) $250,000 or
(2) 1% of the net asset value of each Fund at the beginning of such
election period.
The Fund intends to also pay redemption proceeds in excess of such lesser amount
in cash, but reserves the right to pay such excess amount in kind, if it is
deemed in the best interest of the Fund to do so. In making a redemption in
kind, the Fund reserves the right to make a selection from each portfolio
holding of a number of shares which will reflect the portfolio make-up and the
value will approximate as closely as possible the value of the Fund's shares
being redeemed; any shortfall will be made up in cash. Investors receiving an
in kind distribution are advised that they will likely incur a brokerage charge
on the sale of such securities through a broker. The values of portfolio
securities distributed in kind will be the values used for the purpose of
calculating the per share net asset value used in valuing the Fund's shares
tendered for redemption.
TAX STATUS
Reference is made to "Dividends, Capital Gain Distributions and Taxes" in the
Prospectus.
The Fund will be treated as a separate entity for Federal income tax purposes
since The Tax Reform Act of 1986 requires that all portfolios of a series fund
be treated as separate taxpayers. The Fund intends to qualify each year as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). By so qualifying, the Fund will not be subject to Federal
income taxes to the extent that it distributes its net investment income and
realized net capital gains.
For Federal income tax purposes, distributions paid from net investment income
and from any realized net short-term capital gain are taxable to shareholders as
ordinary income, whether received in cash or in additional shares. Dividends
are taxable as ordinary income, whereas capital gain distributions are taxable
as long-term capital gains. The 70% dividends-received deduction for
corporations will apply only to the proportionate share of the dividend
attributable to dividends received by the Fund from domestic corporations.
Any dividend or capital gain distribution paid shortly after a purchase of
shares of the Fund will have the effect of reducing the per share net asset
value of such shares by the amount of the dividend or distribution.
Furthermore, even if the net asset value of the shares of the Fund immediately
after a dividend or distribution is less than the cost of such shares to the
investor, the dividend or distribution will be taxable to the investor.
Redemption of shares will generally result in a capital gain or loss for income
tax purposes. Such capital gain or loss will be long-term or short-term,
depending upon the holding period. However, if a loss is realized on shares
held for six months or less, and the investor received a capital gain
distribution during that period, then such loss is treated as a long-term
capital loss to the extent of the capital gain distribution received. Investors
may also be subject to state and local taxes
The Fund may be subject to foreign withholding taxes on income and gains derived
from its investments outside the United States. Such taxes would reduce the
yield on the Fund's investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. If more than 50% of the value
of the Fund's total assets at the close of any taxable year consists of stocks
or securities of foreign corporations, the Fund may elect, for U.S. federal
income tax purposes to treat any foreign country income or withholding taxes
paid by the Fund that can be treated as income taxes under U.S. income tax
principles, as paid by its shareholders. For any year that the Fund makes such
an election, each of its shareholders will be required to include in his or her
income (in addition to taxable dividends actually received) his or her allocable
share of such taxes paid by the Fund, and will be entitled, subject to certain
limitations, to credit his portion of these foreign taxes against his or her
U.S. federal income tax due, if any, or to deduct it (as an itemized deduction)
from his or her U.S. taxable income, if any.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to his foreign source taxable
income. If the pass through election described above is made, the source of the
Fund's income flows through to its shareholders. Certain gains from the sale of
securities and certain currency fluctuation gains will not be treated as foreign
source taxable income. In addition, this foreign tax credit limitation must be
applied separately to certain categories of foreign source income, one of which
is foreign source "passive income." For this purpose, foreign "passive
income" includes dividends, interest, capital gains and certain foreign
currency gains. As a consequence, certain shareholders may not be able to claim
a foreign tax credit for the full amount of their proportionate share of foreign
taxes paid by the Fund. The foreign tax credit can be used to offset only 90%
of the alternative minimum tax ( as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not
eligible to make the pass-through election described above, the foreign taxes it
pays will reduce income, and distributions by the Fund will be treated as U.S.
source income.
The Fund is required to withhold federal income tax at a rate of 31% ("backup
withholding") from dividend payments and redemption and exchange proceeds if an
investor fails to furnish the Fund with his social security number or other tax
identification number or fails to certify under penalty of perjury that such
number is correct or that he is not subject to backup withholding due to the
underreporting of income. The certification form is included as part of the
share purchase application and should be completed when the account is opened.
Under the Code, each fund will be subject to a 4% excise tax on a portion of its
undistributed income if it fails to meet certain distribution requirements by
the end of the calendar year. Each fund intends to make distributions in a
timely manner and accordingly does not expect to be subject to the excise tax.
Under the Code, any dividend declared by a regulated investment company in
December of any calendar year and payable to shareholders of record on a
specified date in such month shall be deemed to have been received by each
shareholder on such date, and to have been paid by such company on such date if
such dividend is actually paid by the company before February 1 of the following
calendar year. The Company intends to pay all dividends during the month of
December so that they will not be impacted by this rule.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on an investor. Investors
are urged to consult with their respective tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
CALCULATION OF PERFORMANCE DATA
The Fund may occasionally advertise performance data such as total return or
yield. To facilitate the comparability of these statistics from one mutual fund
to another, the Securities and Exchange Commission has developed guidelines for
the calculation of these statistics. The Fund will calculate its performance
data in accordance with these guidelines. The total return for a mutual fund
represents the average annual compounded rate of return over a specified period
of time that would equate the initial amount invested to the value of the
investment at the end of the period of time. This is done by dividing the
ending redeemable value of a hypothetical $1,000 initial payment by $1,000 and
raising the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:
ERV 1/n
T=[(------)-1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of
years.
The Fund computes its aggregate total returns by determining the aggregate
rates of return during specified periods that likewise equate the initial amount
invested to the ending redeemable value of such investment. The formula for
calculating aggregate total return is as follows:
ERV
T=[(------)-1]
P
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value is determined
by assuming complete redemption of the hypothetical investment and the deduction
of all nonrecurring charges at the end of the period covered by the
computations.
A yield quotation is based upon a 30 day period and is computed by dividing
the net investment income per share earned during a 30-day (or one-month) period
by the net asset value per share on the last day of the period and annualizing
the result on a semiannual basis by adding one to the quotient, raising the sum
to the power of six, subtracting one from the result and then doubling the
difference. The Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements.
This calculation can be expressed as follows:
a-b
Yield=2[(----+1)6 -1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Units outstanding during the
period that were entitled to receive dividends.
d = net asset value per share on the last day of the period.
FINANCIAL STATEMENTS
PART C
------
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
The following audited financial statements for the fiscal year ended
September 30, 1995 are included in Parts A and B:
1. Independent Auditors Report
2. Statement of Assets and Liabilities
3. Statements of Operations
4. Schedule of Investments
5. Statements of Changes in Net Assets
6. Financial Highlights
7. Notes to Financial Statements
b. Exhibits:
1a. Articles of Incorporation<F6> - Updated September 1988<F7>
1b. Articles of Correction<F8>
1c. Articles of Restatement of Articles of Incorporation<F16>
1d. Articles of Amendment of Articles of Incorporation<F14>
1e. Articles of Amendment dated April 1995 of Articles of
Incorporation<F16>
1f. Articles of Amendment dated January 1996 of Articles of
Incorporation<F16>
1g. Articles of Amendment dated July 1996 of Articles of
Incorporation <F11>
2a. Bylaws of Registrant<F6> - Updated January 1988<F7>, September
1988<F7> and August 1991<F9>
2b. Bylaws of Registrant - Updated March 1993<F8>
2c. Bylaws of Registrant - Updated May 1995<F13>
2d. Bylaws of Registrant - Updated May 1996<F16>
3. None
4. Specimen<F11>
5. Advisory Service Contract between Wasatch Funds, Inc. and Wasatch
Advisors, Inc. <F10>
5a. Corporate Resolution - Appendix to the Investment Advisory
Agreements<F9>
5b. Advisory Service Contract between Wasatch Micro-Cap Fund and
Wasatch Advisors, Inc. <F13>
5c. Advisory Service Contract between Wasatch World Wide Fund and
Wasatch Advisors, Inc. <F16>
6. None
7. None
8. Custodian Agreement between Wasatch Mid-Cap Fund and First
Security Bank of Utah, N.A. <F10>
8a. Custodian Agreement between Firstar Trust Company and Wasatch
Funds, Inc. <F13>
8b. Custodian Agreement between Wasatch Funds, Inc. and UMB Bank, n.a.
<F16>
8c. Amendment to Custodian Agreement between Wasatch Funds, Inc. and
UMB Bank, n.a. <F16>
9. Shareholder Servicing Agent Agreement between Wasatch Advisors
Funds, Inc. and Firstar Trust Company<F11>
9a. Administration Agreement between Wasatch Funds, Inc. and Sunstone
Financial Group, Inc. <F11>
9b. Transfer Agent Agreement between Wasatch Micro-Cap Fund and
Firstar Trust Company<F13>
9c. Administration Agreement between Wasatch Micro-Cap Fund and
Sunstone Financial Group, Inc. <F13>
9d. Services Agreement between Wasatch Funds, Inc. and Fidelity
Brokerage Services, Inc. <F13>
9e. Operating Agreement between Wasatch Funds, Inc. and Charles Schwab
& Co., Inc. <F13>
9f. Amendment to Administration Agreement between Wasatch Funds, Inc.
and Sunstone Financial Group, Inc. <F16>
9g. Transfer Agent Agreement between Wasatch Funds, Inc. and Sunstone
Financial Group, Inc. <F16>
9h. Amendment to Transfer Agent Agreement between Wasatch Funds, Inc.
and Sunstone Financial Group, Inc. <F16>
10. Opinion of Counsel<F16>
11. Consent of Arthur Andersen LLP<F16>
12. None
13. None
14. None
15. None
16. Schedule of Computation of Performance Quotation - Aggressive
Equity Fund<F14>
16a. Schedule of Computation of Performance Quotation - Growth
Fund<F14>
16b. Schedule of Computation of Performance Quotation - Income
Fund<F14>
16c. Schedule of Computation of Performance Quotation - Mid-Cap
Fund<F14>
16d. Schedule of Computation of Performance Quotation - Micro-Cap
Fund<F14>
16e. Schedule of Computation of Performance Quotation - World Wide
Fund<F16>
17. Financial Data Schedules<F14>
18. None
<F6> Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Pre-Effective Amendment No. 2 to the
Company's Registration Statement on Form N-1A.
<F7> Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to Exhibit 1 to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N-1A.
<F8> Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 8 to the
Company's Registration Statement on Form N-1A.
<F9> Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 5 to the
Company's Registration Statement on Form N-1A.
<F10>Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 6 to the
Company's Registration Statement on Form N-1A.
<F11>Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 7 to the
Company's Registration Statement on Form N-1A.
<F12>Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the Company's Rule 24f-2 Notice filed on November 6, 1995.
<F13>Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 11 to the
Company's Registration Statement on Form N-1A.
<F14>Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post-Effective Amendment No. 12 to the
Company's Registration Statement on Form N1-A.
<F15>Incorporated by reference pursuant to Rule 411 under the Securities Act of
1933 to the same exhibit number in Post Effective Amendment No. 13 to the
Company's registration Statement on Form N1-A.
<F16>Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Directors. Registrant neither
controls any person or is under common control with any other person.
ITEM 26. NUMBERS OF HOLDERS OF SECURITIES
Title of Class
-------------- Number of Record
Common Stock, par Holders
value $0.001 per share as of June 30, 1996
Series A - Aggressive Equity Fund 15,469
Series B - Growth Fund 2,934
Series C - Income Fund 203
Series D - Mid-Cap Fund 9,118
Series E - Micro-Cap Fun 7,219
Series F - World Wide Fund 0
ITEM 27. INDEMNIFICATION
Officers and directors of the corporation are indemnified to the full extent
permitted by Utah Corporation Law. However, Article XIII of Registrant's
Articles of Incorporation and Article IX of Registrant's Bylaws preclude the
indemnification of any director or officer for any liability arising by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Indemnification shall only be made when (1) a final decision on the merits by a
court or other body before whom the proceeding was brought that the person to be
indemnified ("indemnitee") was not liable by reason of disabling conduct or,
(2) in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by reason of disabling
conduct, by (a) the vote of a majority of a quorum of directors who are neither
"interested persons" of the company as defined in section 2(a)(19) of the 1940
Act nor parties to the proceeding ("disinterested, non-party directors"), or
(b) an independent legal counsel in a written opinion.
Insofar as the conditional advancing of indemnification monies for actions based
upon the Investment Company Act of 1940 may be concerned, such payments will be
made only on the following conditions: (1) the indemnitee shall provide a
security for his undertaking, (2) the investment company shall be insured
against losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the disinterested, non-party directors of the investment company, or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in 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, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
As of September 30, 1995, Wasatch Advisors, Inc. (the "Manager" of the
Registrant) acted as the investment advisor for employee benefit plans, other
tax free plans including individual retirement accounts, Keoghs, endowments and
foundations, and taxable accounts in addition to the five series of Wasatch
Advisors Funds, Inc. The total assets under management were approximately
$1.158 billion (including the Funds) as of April 30, 1996.
Certain information regarding each officer and director of the Manager including
each business, profession, vocation or employment of a substantial nature in
which each such person is or has been engaged at any time during the past two
fiscal years is set forth below.
Other Substantial
Position Business, Profession,
Name with Manager Vocation or Employment
- ------------------- --------------- ----------------------
Samuel S. Stewart, Jr., Ph.D. President, Chairman of Professor of Finance,
the Board, Director and University of Utah
Director of Research
Roy S. Jespersen Vice President, Director, --
and Portfolio Manager
Jeff S. Cardon Vice President, Director, --
and Securities Analyst
Mark E. Bailey Vice President, Director, --
and Portfolio Manager
Luana Buhler Secretary, Equities Trader --
Karolyn Barker Director and Research Analyst
Robert Gardiner Director and Research Analyst
James Milligan Director and Marketing Manager
ITEM 29. PRINCIPAL UNDERWRITERS
None
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
1. Wasatch Advisors, Inc., 68 South Main Street, Salt Lake City, Utah 84101
(records relating to its function as investment advisor).
2. UMB Bank, n.a., 928 Grand Avenue, Kansas City, MO 64141 (records
relating to its function as custodian).
3. Sunstone Financial Group, Inc. 207 East Buffalo Street, Suite 400,
Milwaukee, WI 53202 (records relating to its function as transfer agent,
shareholder servicing agent, administrator and fund accounting servicing
agent).
ITEM 31. MANAGEMENT SERVICES
Other than as set forth under the caption "Management of the Company" in the
Prospectus constituting Part A of the Registration Statement and under the
captions "Management of the Fund" and "Investment Advisory and Other
Services" in the Statement of Additional Information constituting Part B of the
Registration Statement, Registrant is not a party to any management-related
service contract.
ITEM 32. UNDERTAKINGS
The Company undertakes to furnish each person to whom a current prospectus is
delivered with a copy of the Company's latest annual report to shareholders,
upon request and without charge. The Company undertakes further to file a post-
effective amendment, using financial statements which need not be certified,
within four to six months from the effective date of the Company's Registration
Statement.
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Amended Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Salt Lake City, and the State of Utah on
the day of July, 1996.
----
WASATCH FUNDS, INC.
By: /s/ Samuel S. Stewart, Jr.
- -------------------------------
Samuel S. Stewart, Jr., Ph.D.,
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.
Signature Title Date
- --------- ----- ----
/s/ Samuel S. Stewart, Jr.
- ---------------------------
Samuel S. Stewart, Jr., Ph.D. President and Director
(principal executive officer) July , 1996
--
/s/ Venice Edwards
- ---------------------------
Venice Edwards Secretary and Treasurer
(principal financial and
accounting officer) July , 1996
--
/s/ Roy S. Jespersen
- ---------------------------
Roy S. Jespersen Vice President and Director July , 1996
--
/s/ Jeff S. Cardon
- --------------------------
Jeff S. Cardon Vice President and Director July , 1996
--
- ---------------------------
James U. Jensen, Esquire Director
- ---------------------------
William R. Swinyard Director
EXHIBIT INDEX
a. Financial Statements
The following audited financial statements for the fiscal year ended
September 30, 1995 are included in Parts A and B:
1. Independent Auditors Report
2. Statement of Assets and Liabilities
3. Statements of Operations
4. Schedule of Investments
5. Statements of Changes in Net Assets
6. Financial Highlights
7. Notes to Financial Statements
1a. Articles of Incorporation<F17> - Updated September 1988<F18>
1b. Articles of Correction<F19>
1c. Articles of Restatement of Articles of Incorporation<F27>
1d. Articles of Amendment of Articles of Incorporation<F25>
1e. Articles of Amendment dated April 1995 of Articles of
Incorporation<F27>
1f. Articles of Amendment dated January 1996 of Articles of
Incorporation<F16>
1g. Articles of Amendment dated July 1996 of Articles of
Incorporation <F11>
2a. Bylaws of Registrant<F17> - Updated January 1988<F18>, September
1988<F18> and August 1991<F20>
2b. Bylaws of Registrant - Updated March 1993<F19>
2c. Bylaws of Registrant - Updated May 1995<F24>
2d. Bylaws of Registrant - Updated May 1996<F27>
3. None
4. Specimen<F22>
5. Advisory Service Contract between Wasatch Funds, Inc. and Wasatch
Advisors, Inc. <F21>
5a. Corporate Resolution - Appendix to the Investment Advisory
Agreements<F20>
5b. Advisory Service Contract between Wasatch Micro-Cap Fund and
Wasatch Advisors, Inc. <F24>
5c. Advisory Service Contract between Wasatch World Wide Fund and
Wasatch Advisors, Inc. <F27>
6. None
7. None
8. Custodian Agreement between Wasatch Mid-Cap Fund and First
Security Bank of Utah, N.A. <F21>
8a. Custodian Agreement between Firstar Trust Company and Wasatch
Funds, Inc. <F24>
8b. Custodian Agreement between Wasatch Funds, Inc., and UMB Bank,
n.a. <F27>
8c. Amendment to Custodian Agreement between Wasatch Funds, Inc. and
UMB Bank, n.a. <F27>
9. Shareholder Servicing Agent Agreement between Wasatch Funds, Inc.
and Firstar Trust Company<F22>
9a. Administration Agreement between Wasatch Funds, Inc. and Sunstone
Financial Group, Inc. <F22>
9b. Transfer Agent Agreement between Wasatch Micro-Cap Fund and
Firstar Trust Company<F24>
9c. Administration Agreement between Wasatch Micro-Cap Fund and
Sunstone Financial Group, Inc. <F24>
9d. Services Agreement between Wasatch Funds, Inc. and Fidelity
Brokerage Services, Inc. <F24>
9e. Operating Agreement between Wasatch Funds, Inc. and Charles
Schwab & Co., Inc. <F24>
9f. Amendment to Administration Agreement between Wasatch Funds, Inc.
and Sunstone Financial Group, Inc. <F27>
9g. Transfer Agent Agreement between Wasatch Funds, Inc. and Sunstone
Financial Group, Inc. <F27>
9h. Amendment to Transfer Agent Agreement between Wasatch Funds, Inc.
and Sunstone Financial Group, Inc. <F27>
10. Opinion of Counsel<F27>
11. Consent of Arthur Andersen LLP<F27>
12. None
13. None
14. None
15. None
16. Schedule of Computation of Performance Quotation - Aggressive
Equity Fund<F25>
16a. Schedule of Computation of Performance Quotation - Growth
Fund<F25>
16b. Schedule of Computation of Performance Quotation - Income
Fund<F25>
16c. Schedule of Computation of Performance Quotation - Mid-Cap
Fund<F25>
16d. Schedule of Computation of Performance Quotation - Micro-Cap
Fund<F25>
16e. Schedule of Computation of Performance Quotation - World Wide
Fund<F27>
17. Financial Data Schedules<F25>
18. None
<F17> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Pre-Effective Amendment No. 2 to
the Company's Registration Statement on Form N-1A.
<F18> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to Exhibit 1 to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N-1A.
<F19> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 8 to
the Company's Registration Statement on Form N-1A.
<F20> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 5 to
the Company's Registration Statement on Form N-1A.
<F21> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 6 to
the Company's Registration Statement on Form N-1A.
<F22> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 7 to
the Company's Registration Statement on Form N-1A.
<F23> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the Company's Rule 24f-2 Notice filed on November 6, 1995.
<F24> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 11 to
the Company's Registration Statement to Form N-1A.
<F25> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 12 to
the Company's Registration Statement to Form N-1A.
<F26> Incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933 to the same exhibit number in Post-Effective Amendment No. 13 to
the Company's Registration Statement to Form N-1A.
<F27> Filed herewith.
ARTICLES OF AMENDMENT AND RESTATEMENT
OF THE
ARTICLES OF INCORPORATION
OF
WASATCH ADVISORS FUNDS, INC.
1. The name of this Corporation is Wasatch Advisors Funds, Inc.
2. The Articles of Incorporation of this Corporation, as previously filed
with the Utah Division of Corporations and Commercial Code on January 26, 1993,
are restated to read in their entirety as follows:
ARTICLE I
The name of the Corporation is Wasatch Advisors Funds, Inc. (hereinafter
called the "Corporation").
ARTICLE II
The period of duration of the Corporation is perpetual.
ARTICLE III
The nature of the business and the objects and purposes to be transacted,
promoted or carried on are to engage in the business of an incorporated
investment company of the management type investing and reinvesting its assets
in accordance with the provisions of these articles or incorporation. The
general nature of its business shall be to buy, hold, sell, exchange, pledge and
otherwise deal in notes, stock, bonds, options or other securities of whatsoever
nature; to do any and all acts and things necessary or incidental thereto to the
extent permitted business corporations under the provisions of the laws of the
State of Utah as from time to time amended; to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Corporation; and to sell, hold, purchase and reissue
the shares of its own capital stock.
ARTICLE IV
a. The Corporation is authorized to issue a total of one billion shares
of Common Stock, with a par value of $.001 per share. Four hundred million of
these shares have been authorized by the Board of Directors to be issued in four
separate series: one hundred million shares designated as Series A Common Stock
of Wasatch Aggressive Equity Fund, one hundred million shares designated as
Series B Common Stock of Wasatch Growth Fund, one hundred million shares
designated as Series C Common Stock of Wasatch Income Fund and one hundred
million shares designated as Series D Common Stock of Wasatch Mid-Cap Fund.
There are no restrictions on the transfer of shares.
b. All shares have equal voting rights; each share is entitled to one
vote per share (with proportionate voting for fractional shares). Only shares
of the respective Series are entitled to vote on matters concerning only that
Series. Shareholders of a particular Series are not entitled to vote on any
matter which does not affect that particular Series but which requires a
separate vote of another Series.
c. All consideration received by the Corporation for the issue or sale of
shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors and except as may otherwise be required by applicable tax laws, and
shall be so recorded upon the books of account of the Corporation. In the event
that there are any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to any
particular Series, the Board of Directors shall allocate them among any one or
more of the Series established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and equitable.
Each such allocation by the Board of Directors shall be conclusive and binding
upon the shareholders of all Series for all purposes.
d. The assets belonging to each particular Series shall be charged with
the liabilities of the Corporation in respect of that Series and all expenses,
costs, charges and reserves attributable to that Series, and any general
liabilities, expenses, costs, charges or reserves of the Corporation which are
not readily identifiable as belonging to any particular Series shall be
allocated and charged by the Board of Directors to and among any one or more of
the Series established and designated from time to time in such manner and on
such basis as the Board of Directors in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Board of Directors shall be conclusive and binding upon the
holders of all Series for all purposes. The Board of Directors shall have full
discretion, to the extent not inconsistent with the Investment Company Act of
1940, to determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the shareholders.
e. The power of the Board of Directors to pay dividends and make
distributions with respect to any one or more Series shall be governed by
Article XI of these Articles of Incorporation. Dividends and distributions on
shares of a particular Series may be paid with such frequency as the Board of
Directors may determine to the holders of shares of that Series, from such of
the income and capital gains, accrued or realized, from the assets belonging to
that Series, as the Board of Directors may determine, after providing from
actual and accrued liabilities belonging to that Series. All dividends and
distributions on shares of a particular Series shall be distributed pro rata to
the holders of that Series in proportion to the number of shares of that Series
held by such holders at the date and time of record established for the payment
of such dividends or distributions.
f. Each share of a Series of the Corporation has equal dividend,
distribution, liquidation and voting rights with other shares of that Series.
Each issued and outstanding share of a Series is entitled to one vote and to
participate equally in dividends and distributions declared by the Corporation
out of that Series and in net assets of the Series upon liquidation or
dissolution remaining after satisfaction of outstanding liabilities.
g. The Board of Directors is authorized to establish new Series in
addition to those already existing without the approval of the shareholders of
the Corporation by executing a resolution setting forth such establishment and
designation and the relative rights and preference of such Series. At any time
that there are no shares outstanding of any particular Series previously
established and designated, the Board of Directors may by a resolution executed
by a majority of their number abolish that Series and the establishment and
designation thereof.
h. The Board of Directors may from time to time issue and sell or provide
for the issuance and sale of the authorized but unissued shares of the
Corporation. All shares of the Corporation sold shall be sold for cash, except
as otherwise provided in this Article, which shall in each case be paid prior to
the delivery of any certificate of the Corporation for such shares.
i. The Corporation may issue and sell fractions of shares having pro rata
all the rights of full shares, including, without limitation, the right to vote
and receive dividends; and wherever the words "share" or "shares" are used in
these articles or in the bylaws they shall be deemed to include fractions of
shares where the context does not clearly indicate that only full shares are
intended.
j. The shareholders have no preemptive right to acquire additional shares
of the Corporation. No shares need be offered to existing shareholders before
being offered to others. In connection with the acquisition of all or
substantially all the assets of another entity, the Board of Directors may issue
or cause to be issued shares of the Corporation and accept in payment thereof in
lieu of cash such assets of such entity at market value, provided such assets
are of the character in which the Board of Directors are authorized to invest
the funds of the Corporation. No shares shall be sold by the Corporation during
any period when the determination of net asset value is suspended.
k. Any shareholder of record in the Corporation desiring to dispose of
his shares may deposit his certificate or certificates for such shares with the
Corporation or its agent, duly endorsed or accompanied by a proper instrument of
transfer, with a request that the Corporation redeem the shares represented
thereby. Upon any such deposit being made, the Corporation shall be required to
redeem said shares but only at the net asset value of such shares next
determined following their deposit. Payment for such shares shall be made by
the Corporation within seven (7) days after the date upon which the shares are
deposited. Whenever the Board of Directors, by declaration or resolution, has
suspended the determination of net asset value pursuant to the provisions of
these articles of incorporation, the right of any shareholder to require the
Corporation to redeem his shares shall be likewise suspended. At any time such
suspension is in effect any shareholder may withdraw his certificate or
certificates from deposit or may leave the same on deposit, in which case the
redemption price shall be the net asset value next determined after the
suspension is terminated. The Corporation may by agreement with any shareholder
purchase shares of the Corporation at a price not exceeding the net asset value
in effect at the time when such purchase or contract to purchase is made or the
net asset value next to be determined. Any share of its stock purchased or
redeemed by the Corporation pursuant to the provisions of the Article shall be
deemed retired and shall thereafter have the status of authorized but unissued
stock.
l. The holders of 25% of the shares of Common Stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided by
statute. If such quorum shall not be present or represented at any meeting of
the shareholders, the shareholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time (provided no adjournment shall be for more than three (3) months) without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified.
ARTICLE V
The Corporation shall not commence business until consideration of the
value of at least $1,000.00 has been received for the issuance of shares.
ARTICLE VI
The majority of the directors may adopt Bylaws for the Corporation which
are consistent with these Articles and the laws of the State of Utah, and such
Bylaws may be altered, amended or repealed, in whole or in part, to the extent
that such Bylaws do not reserve that right to the shareholders, and new Bylaws
may be adopted, by the Board of Directors, at any regular or special meeting of
the Board of Directors.
ARTICLE VII
a. The net asset value of each share of the Corporation outstanding shall
be determined in accordance with the Corporation's current prospectus.
b. The Board of Directors may suspend the determination of net asset
value for all or any part of any period during which the New York Stock Exchange
is normally closed, or during which trading on the New York Stock Exchange or in
the markets normally utilized by the Corporation is restricted by governmental
order, or during emergency exists such would make disposal by the Corporation of
securities owned by the Corporation unreasonable or impracticable, or would make
determination of the net asset value of the assets of the Corporation
impracticable. The determination of whether trading on the New York Stock
Exchange or in the markets normally utilized by the Corporation is restricted or
whether such an emergency, as herein provided, exists shall be by applicable
rules and regulations of the Securities and Exchange Commission or other
governmental authority. The suspension shall become effective at such time as
the Board of Directors shall specify in their declaration or resolution, but not
later than the close of business on the next succeeding business day following
the declaration or resolution. After such suspension becomes effective, there
shall be no determination of net asset value until the Board of Directors shall
declare the suspension terminated. The suspension shall terminate in any event
on the first day on which the New York Stock Exchange is open, the restricted
trading on the New York Stock Exchange or in the markets utilized by the
Corporation has ended or the emergency shall have expired in accordance with the
official ruling of the Securities and Exchange Commission or other governmental
authority or, in the absence of such ruling, upon the determination of the Board
of Directors.
c. The Board of Directors may delegate any of its powers and duties under
this article with respect to appraisal of assets and liabilities and
determination of net asset value or with respect to suspension of the
determination of net asset value to an officer or officers or agent or agents of
the Corporation designated from time to time by the Board of Directors.
ARTICLE VIII
a. The Corporation may employ a custodian, which meets the qualifications
for custodians contained in the Investment Company Act of 1940, pursuant to such
terms and conditions as the Board of Directors may direct and as contained in
the bylaws.
b. The Corporation may also employ such custodian as its agent to keep
the books and accounts of the Corporation, and to furnish clerical and
accounting services. The compensation to be paid to the custodian for such
services as it may render to the Corporation shall be in such amount as may be
agreed upon by the Corporation and the custodian. When so directed by the Board
of Directors, the custodian shall deliver and pay over all property of the
Corporation held by it as specified in such direction.
c. The Board of Directors in its discretion may employ a transfer agent,
registrar or dividend disbursing agent for the Corporation under such terms and
conditions as the board shall deem advisable.
ARTICLE IX
a. The Board of Directors may in its discretion from time to time enter
into a contract or contracts with any one or more parties as an underwriter,
providing for the sale of the shares of this Corporation. Such contract or
contracts may also provide for the repurchase of shares of this Corporation by
such underwriter as agent of the Corporation. The Board of Directors may in its
discretion enter into a plan of distribution pursuant to Rule 12b-1 of the
Investment Company Act of 1940, as amended.
b. The Board of Directors may in its discretion from time to time enter
into an investment advisory or management contract with any other person, firm
or Corporation, hereinafter called the "investment adviser" to furnish advice
to the Corporation with respect to the desirability of investing in, purchasing
or selling securities, or other property, or to determine what securities or
other property shall be purchased or sold by the Corporation, and to furnish the
Board of Directors such management, investment advisory, statistical and
research facilities and such other services and facilities, if any, as the Board
of Directors may deem desirable upon such terms and conditions as the Board of
Directors may determine. The compensation to be paid under the terms of such
contract or contracts shall be subject to the limitations contained in Article X
of these Articles of Incorporation.
c. The Board of Directors, subject to the provisions of this article, may
in its discretion enter into any contract with any person, firm or Corporation,
irrespective of whether or not one or more of the directors or officers of this
Corporation may also be an officer, director, shareholder or member of such
other person, firm or Corporation, and such contract shall not be invalidated or
rendered voidable by reason of any such relationship. No person holding such
relationship shall be liable because of such relationship for any loss or
expense to the Corporation under or by reason of such contract, or accountable
for any profit realized directly or indirectly therefrom, provided that such
contract when executed was reasonable and fair, consistent with the provisions
of these articles of incorporation and approved by a majority of the Board of
Directors of this Corporation who are not so related, or by the vote of a
majority of the outstanding shares of this Corporation.
d. Any contract entered into pursuant to the terms of this article shall
be consistent with and subject to the requirements of the Investment Company Act
of 1940, including any amendment thereto or other applicable act of Congress
hereafter enacted, with respect to its duration, termination, authorization,
approval, assignment, amendment or renewal.
ARTICLE X
a. Subject to the limitations contained in this article, the directors
shall be entitled to reasonable remuneration from the Corporation for their
services as directors in such amount as may from time to time be fixed by vote
of the Board of Directors.
b. The Corporation may incur such expenses as are necessary to perform
its functions and such expenses may include but are not limited to the
following: compensation to be paid to any other party to an investment advisory
contract with the Corporation entered into pursuant to Article IX; the
compensation to be paid to the officers, consultants and employees of the
Corporation; office hire; ordinary office expenses; investment advisory,
statistical and research facilities; directors' fees; legal and accounting
expenses; taxes and governmental fees; Federal and state registration and
qualification fees; cost of stock certificates; cost of reports and notices to
shareholders; association dues; brokers commissions; transaction costs; fees and
expenses of any custodian; expenses of computing the net asset value; and fees
and expenses of any transfer agent, registrar and dividend disbursing agent.
During any period during which the determination of net asset value is
suspended, as provided in these articles of incorporation, the net asset value
as last determined and effective shall for the purposes of this article be
deemed to be the net asset value as of the close of business on each business
day until a new net asset value is again determined and made effective as
provided herein.
c. The provisions of this article shall not preclude the payment of
reasonable fees for legal or accounting services to any firm of which a director
or officer of the Corporation may be a member, nor of customary brokerage
charges in connection with the purchase or sale of securities to any firm in the
brokerage business of which a director or officer of the Corporation may be a
member, officer or director; and no part of any such fee, charge or compensation
shall be deemed compensation to such officer or director within the purview of
this article. No compensation, commission, fee or profit which may be received
by the other party to a contract entered into pursuant to Article IX shall be
deemed compensation to any officer or director of the Corporation simply because
such officer or director is also an officer, director, shareholder or member of
such other party.
ARTICLE XI
a. The Board of Directors may from time to time declare and pay dividends
on shares of a particular Series to the holders of shares of the Series with the
amount, source and payment thereof to be within their discretion and calculated
on the basis of generally accepted accounting principles.
b. The Board of Directors may also declare dividends out of accumulated
and undistributed net realized capital gains.
c. The Board of Directors has the power, in its discretion, to distribute
for any year as ordinary dividends and as capital gains distributions,
respectively, amounts sufficient to enable the Corporation as a regulated
investment company to avoid any liability for federal income tax in respect to
that year. The Board of Directors may at any time declare and distribute pro
rata among the shareholders of any particular Series a stock dividend out of
authorized but unissued shares of the Corporation. All dividends declared
except as provided above, shall be deemed liquidating dividends and the
shareholders shall be advised accordingly. In the case of a dividend payable in
shares of stock or cash at the election of a shareholder, the Board of Directors
may prescribe whether a shareholder failing to express his election before a
given time shall be deemed to have elected to take cash rather than shares, or
to take shares rather than cash, or to take shares with cash adjustment of
fractions.
ARTICLE XII
a. The Board of Directors shall submit to the shareholders at least
semiannually a written financial report of the transactions of the Corporation,
including financial statements. The financial statements in such reports shall
be certified to at least annually by independent public accountants.
b. In the event holders of two-thirds of the outstanding shares of the
Corporation shall vote at any time to wind up and liquidate the Corporation or
in the event holders of two-thirds of the outstanding shares of a particular
Series shall vote at any time to wind up and liquidate that particular Series,
no further shares of the Corporation or such Series shall be issued, sold or
purchased by the Corporation or such Series and the directors shall immediately
proceed to wind up the Corporation's or such Series' affairs, liquidate the
assets, pay all liabilities and expenses of the Corporation or such Series and
distribute the remaining assets, if any, among the shareholders of the
Corporation or such Series in proportion to their holding of shares. The Board
of Directors shall also do any other acts necessary to secure and complete the
dissolution of the Corporation or such Series.
c. When the dissolution and liquidation of the Corporation has been
directed by vote of the shareholders, the directors then holding office shall
continue in office until the liquidation and dissolution of the Corporation has
been completed. During the period of liquidation and until final distribution
to the shareholders has been made, the compensation of the directors and all
other parties shall be determined on the same basis as if the computation of the
net asset value of the shares had been suspended, as provided in these articles
of incorporation.
ARTICLE XIII
No director of the Corporation shall have any personal liability to the
Corporation or its shareholders for monetary damages, for any breach of
fiduciary duty, except to the extent the elimination of personal liability of a
director is restricted by the provisions of 16-10-49.1, Utah Code (1953, as
amended) and by the provisions of Section 17(h) of the Investment Company Act of
1940. Section 17(h) prohibits the inclusion of any provision to protect any
director or officer of an investment company against liability to the company or
to its security holders to which such director 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 XIV
The address of the initial registered office of the Corporation in this
State is 68 South Main Street, Suite 400, Salt Lake City, Utah, 84101. The
initial registered agent of the Corporation at such address is Samuel S.
Stewart, Jr.
ARTICLE XV
The number of directors constituting the initial Board of Directors is
three (3). The number of directors may be increased or decreased by amendment
of the Bylaws, but the number of directors shall not be less than three.
Cumulative voting shall not be permitted.
ARTICLE XVI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these articles of incorporation, in the manner now or
hereafter prescribed by the Utah Revised Business Corporation Act upon the
affirmative vote of a majority of the outstanding shares of the Corporation; and
all rights conferred upon shareholders herein are granted subject to this
reservation.
3. The foregoing amendments to the Articles of Incorporation were adopted
on March 29, 1993, in accordance with the requirements of Sections 16-10a-1003
and 16-10a-1006 of the Utah Revised Business Corporation Act.
4. At the time of the adoption of the foregoing amendments to the
Articles of Incorporation, the Corporation had one class of Common Stock
outstanding, which was divided into four series designated as follows: Series A
Common Stock, Series B Common Stock, Series C Common Stock and Series D Common
Stock.
5. The outstanding shares of Series A, Series B, Series C and Series D
Common Stock were each entitled to one vote on the amendments so that the number
of shares entitled to vote on the amendments by each series of Common Stock were
as follows: Series A Common Stock - 970,808 votes; Series B Common Stock -
1,113,770 votes; Series C Common Stock 474,737 votes and Series D Common Stock
- - 176,915 votes.
6. At the shareholders meeting held on March 29, 1993, at which the
amendments were adopted, the following shares of each series of Common Stock
were represented: Series A Common Stock 536,241 shares, Series B Common Stock -
727,718 shares, Series C Common Stock - 313,638 shares and Series D Common Stock
- - 158,658 shares.
7. The total number of shares voting for the amendments to paragraph (a)
of Article IV by each series of Common Stock was as follows:
Series A Common Stock - 503,228 shares;
Series B Common Stock - 696,998 shares;
Series C Common Stock - 304,634 shares; and
Series D Common Stock - 158,473 shares.
The number of shares voting for the amendments to paragraph (a) of Article
IV by each series of Common Stock entitled to vote separately on said amendments
was sufficient for approval by that series of Common Stock.
8. The total number of shares of Common Stock voted in favor of the
amendments to Article IV with respect to the addition of a new paragraph 1 was
1,695,513. The number of shares voting for the amendments to Article IV with
respect to the addition of a new paragraph 1 by the holders of Common Stock
entitled to vote on said amendments was sufficient for approval by that voting
group.
IN WITNESS WHEREOF, these Articles of Amendment and Restatement of the
Articles of Incorporation are hereby executed, effective as of this 29th day of
March, 1993.
WASATCH ADVISORS FUNDS, INC.
/s/ Samuel S. Stewart, Jr.
--------------------------
Samuel S. Stewart, Jr.
President
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
WASATCH ADVISORS FUNDS, INC.
1. The name of this Corporation is Wasatch Advisors Funds, Inc.
2. Paragraph (a) of Article IV of the Articles of Incorporation of this
Corporation, as previously filed with the Utah Division of Corporations and
Commercial Code on April 21, 1993 is amended to read as follows:
ARTICLE IV
a. The Corporation is authorized to issue a total of one billion shares
of Common Stock, with a par value of $.001 per share. Five hundred
million of these shares have been authorized by the Board of Directors
to be issued in five separate series: one hundred million shares
designated as Series A Common Stock of Wasatch Aggressive Equity Fund,
one hundred million shares designated as Series B Common Stock of
Wasatch Growth Fund, one hundred million shares designated as Series C
Common Stock of Wasatch Income Fund, one hundred million shares
designated as Series D Common Stock of Wasatch Mid-Cap Fund and one
hundred million shares designated as Series E Common Stock of Wasatch
Micro-Cap Fund. There are no restrictions on the transfer of shares.
3. The foregoing amendment to the Articles of Incorporation was adopted on
December 9, 1994, in accordance with the requirements of Sections 16-10a-1001
and 16-10a-1006 of the Utah Revised Business Corporation Act.
4. The foregoing amendment to the Articles of Incorporation has been adopted
by the Corporation's Board of Directors without shareholder action, inasmuch as
shareholder approval is not required for adoption of the amendment pursuant to
Sections 16-10a-601, 16-10a-602, and 16-10a-1002 of the Utah Revised Business
Corporation Act and the Corporation's Articles of Incorporation.
IN WITNESS WHEREOF, these Articles of Amendment of the Articles of
Incorporation are hereby executed, effective as of the 20 day of April, 1995.
WASATCH ADVISORS FUNDS, INC.
/s/ Samuel S. Stewart, Jr.
--------------------------
Samuel S. Stewart, Jr.
President
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
WASATCH ADVISORS FUNDS, INC.
1. The name of this Corporation is Wasatch Advisors Funds, Inc.
2. Article I of the Articles of Incorporation of this Corporation, as
previously filed with the Utah Division of Corporations and Commercial Code on
April 21, 1993 is amended to read as follows:
ARTICLE I
The name of the Corporation is Wasatch Funds, Inc. (hereinafter called the
"Corporation").
3. The foregoing amendment to the Corporation's Articles of Incorporation was
adopted by the shareholders of the Company on January 26, 1996, in accordance
with the requirements of Sections 16-10a-1001 and 16-10a-1003 of the Utah
Revised Business Corporation Act. As of December 8, 1995, the record date for
such meeting, there were 37,441,162 shares of Common Stock of the Company
outstanding and each such share was entitled to cast one vote with respect to
the amendment. Of such shares, 28,872,995 shares were represented at the
meeting held on January 26, 1996 at which the amendment was adopted, and
28,503,841 shares were voted in favor of the amendment, such number of votes
being sufficient to approve the amendment.
IN WITNESS WHEREOF, these Articles of Amendment of the Articles of
Incorporation are hereby executed, effective as of the 26 day of January, 1996.
WASATCH ADVISORS FUNDS, INC.
/s/ Samuel S. Stewart, Jr.
--------------------------
Samuel S. Stewart, Jr.
President
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
WASATCH FUNDS, INC.
1. The name of this Corporation is Wasatch Funds, Inc.
2. Paragraph (a) of Article IV of the Articles of Incorporation of this
Corporation, as previously filed with the Utah Division of Corporations and
Commercial Code on April 21, 1993, and as amended on April 20, 1995 and January
26, 1996, is amended to read as follows:
ARTICLE IV
a. The Corporation is authorized to issue a total of one billion shares of
Common Stock, with a par value of $.001 per share. Six hundred million of these
shares have been authorized by the Board of Directors to be issued in six
separate series: one hundred million shares designated as Series A Common Stock
of Wasatch Aggressive Equity Fund, one hundred million shares designated as
Series B Common Stock of Wasatch Growth Fund, one hundred million shares
designated as Series C Common Stock of Wasatch-Hoisington U.S. Treasury Fund,
one hundred million shares designated as Series D Common Stock of Wasatch Mid-
Cap Fund, one hundred million shares designated as Series E Common Stock of
Wasatch Micro-Cap Fund, and one hundred million shares designated as Series F
Common Stock of Wasatch World Wide Fund. There are no restrictions on the
transfer of shares.
3. The foregoing amendment to the Articles of Incorporation was adopted
on May 17, 1996, in accordance with the requirements of Sections 16-10a-1001 and
16-10a-1006 of the Utah Revised Business Corporation Act.
4. The foregoing amendment to the Articles of Incorporation has been
adopted by the Corporation's Board of Directors without shareholder action,
inasmuch as shareholder approval is not required for adoption of the amendment
pursuant to Sections 16-10a-601, 16-10a-602 and 16-10a-1002 of the Utah Revised
Business Corporation Act and the Corporation's Articles of Incorporation.
IN WITNESS WHEREOF, these Articles of Amendment of the Articles of
Incorporation are hereby executed, effective as of this 3rd day of July, 1996.
WASATCH FUNDS, INC.
/s/ Venice F. Edwards
----------------------
Venice F. Edwards
Secretary/Treasurer
BYLAWS
OF
WASATCH ADVISORS FUNDS, INC.
Note: All citations referred to herein are to the Utah Revised Business
Corporation Act.
BYLAWS OF
WASATCH ADVISORS FUNDS, INC.
Table of Contents
Page
ARTICLE 1 CORPORATE OFFICES ...............................
1.1 Name ............................................
1.2 Business Office .................................
1.3 Registered Office ...............................
ARTICLE 2 SHAREHOLDERS ....................................
2.1 Annual Meeting ..................................
2.2 Special Meetings ................................
2.3 Place of Meetings ...............................
2.4 Notice of Meetings ..............................
2.5 Fixing of Record Date ...........................
2.6 Voting List .....................................
2.7 Meetings by Telecommunication ...................
2.8 Shareholder Quorum and Voting Requirements ......
2.9 Proxies .........................................
2.10 Voting Shares ...................................
2.11 Corporation's Acceptance of Votes ...............
2.12 Shareholder Action Without a Meeting ............
2.13 Shareholder's Rights to Inspect Corporate Records
ARTICLE 3 BOARD OF DIRECTORS ..............................
3.1 General Powers ..................................
3.2 Number of Directors and Qualification ...........
3.3 Election and Term of Office .....................
3.4 Regular Meetings ................................
3.5 Special Meetings ................................
3.6 Notice ..........................................
3.7 Quorum ..........................................
3.8 Manner of Acting ................................
3.9 Vacancies and Newly Created Directorships .......
3.10 Committees ......................................
3.11 Fees and Compensation ...........................
3.12 Presumption of Assent ...........................
3.13 Resignations ....................................
3.14 Action by Written Consent .......................
3.15 Meetings by Telephone Conference Call ...........
3.16 Removal of Directors ............................
3.17 Power to Declare Dividends ......................
ARTICLE 4 COMMITTEES OF DIRECTORS .........................
4.1 How Constituted .................................
4.2 Powers ..........................................
4.3 Proceedings .....................................
4.4 Quorum and Manner of Acting .....................
4.5 Meetings by Telephone Conference Call, Consent ..
4.6 Resignations ....................................
4.7 Removal .........................................
4.8 Vacancies .......................................
4.9 Compensation ....................................
ARTICLE 5 OFFICERS ........................................
5.1. Officers ........................................
5.2 Appointment, Term of Office and Qualification ...
5.3 Resignations ....................................
5.4 Removal .........................................
5.5 Vacancies and Newly Created Offices .............
5.6 Chairman of the Board ...........................
5.7 President .......................................
5.8 Vice Presidents .................................
5.9 Secretary .......................................
5.10 Treasurer .......................................
5.11 Assistant Secretaries and Treasurers ............
5.12 Salaries ........................................
5.13 Surety Bonds ....................................
ARTICLE 6 EXECUTION OF INSTRUMENTS ........................
6.1 Instruments .....................................
6.2 Proxies .........................................
ARTICLE 7 CAPITAL STOCK ...................................
7.1 Stock Certificates ..............................
7.2 Shares Without Certificates .....................
7.3 Transfer of Stock ...............................
7.4 Regulations .....................................
7.5 Transfer Agents and Registrars ..................
7.6 Lost or Destroyed Certificates ..................
7.7 Issuance of Shares ..............................
7.7 Redemption of Shares ............................
ARTICLE 8 MAINTENANCE AND INSPECTION OF BOOKS AND
RECORDS .........................................
ARTICLE 9 INDEMNIFICATION .................................
9.1 Indemnification .................................
9.2 Certain Restrictions on Indemnification .........
9.3 Mandatory Indemnification .......................
9.4 Determination ...................................
9.5 General Indemnification .........................
9.6 Advances ........................................
9.7 Scope of Indemnification ........................
9.8 Insurance .......................................
ARTICLE 10 AUDIT, ACCOUNTANT, FISCAL YEAR ..................
10.1 Fiscal Year .....................................
10.2 Audit, Accountant ...............................
ARTICLE 11 DIVIDENDS .......................................
ARTICLE 12 VALUATION OF NET ASSET VALUE ....................
ARTICLE 13 AMENDMENTS ......................................
BYLAWS
OF
WASATCH FUNDS, INC.
(as amended by the Board of Directors on May 17, 1996)
ARTICLE 1
NAME AND CORPORATE OFFICES
1.1 NAME. The name of the corporation is "Wasatch Advisors Funds, Inc."
The name of the series represented by Series A Common Shares shall be "Wasatch
Aggressive Equity Fund;" the name of the series represented by Series B Common
Shares shall be "Wasatch Growth Fund;" the name of the series represented by
Series C Common Shares shall be "Wasatch-Hoisington U.S. Treasury Fund;" the
name of the series represented by Series D Common Shares shall be "Wasatch
Mid-Cap Fund;" the name of the series represented by Series E Common Shares
shall be "Wasatch Micro-Cap Fund;" and the name of the series represented by
Series F Common Shares shall be "Wasatch World Wide Fund."
1.2 BUSINESS OFFICE. The principal office of the corporation shall be
located at any place either within or outside the State of Utah, as designated
from time to time by the Board of Directors. The corporation may have such
other offices, either within or without the State of Utah as the Board of
Directors may designate or as the business of the corporation may require from
time to time. The corporation shall maintain at its principal office a copy of
certain records, as specified in Section S13 of Article 2.
1.3 REGISTERED OFFICE. The registered office of the corporation shall be
located within the State of Utah and may be, but need not be, identical with the
principal office (if located within the State of Utah). The address of the
registered office may be changed from time to time. (16-10a-501)*/
ARTICLE 2
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of shareholders shall be held each
year on a date and at a time designated by the Board of Directors. In the
absence of such designation, the annual meeting of shareholders shall be held on
the first Wednesday of April. However, if such date falls on a legal holiday,
then the meeting shall be held on the next succeeding business day. At the
meeting, directors shall be elected and any other proper business may be
transacted. If the election of directors shall not be held on the day
designated herein for the annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as may be
convenient. (16-10a-701)
2.2 SPECIAL MEETINGS. Special meetings of the shareholders may be called
at any time by the Chairman of the Board, or by the President, or by the Board
of Directors. Special meetings of the shareholders may also be called by the
holders of not less than one-tenth of all the shares issued and outstanding and
entitled to vote on any issue proposed to be considered at the proposed special
meeting by delivery of one or more signed and dated written demands for the
meeting stating the purpose for which it is to be held to the corporation's
Secretary or other designated officer. (16-10a-702)
2.3 PLACE OF MEETINGS. Meetings of shareholders may be held at any place
within or outside the State of Utah as designated by the Board of Directors. In
the absence of any such designation, meetings shall be held at the principal
office of the corporation. (16-10a-701; 16-10a-702)
2.4 NOTICE OF MEETINGS. Written or printed notice stating the place, date
and hour of the meeting, and in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting or to any other shareholder entitled by the Utah Revised Business
Corporation Act or the articles of incorporation to receive notice of the
meeting. Notice shall be deemed to be effective at the earlier of: (1) when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid; (2) on the date shown on the return receipt if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee; (3) when received; or (4) five days
after deposit in the United States mail, if mailed postage prepaid and correctly
addressed to an address other than that shown in the corporation's current
record of shareholders. (16-10a-705)
If any shareholder meeting is adjourned to a different date, time, or
place, notice need not be given of the new date, time, and place, if the new
date, time, and place is announced at the meeting before adjournment and if the
meeting is to take place within 30 days. But if a new record date for the
adjourned meeting is, or must be fixed (see Section 2.5 of this Article 2) the
notice must be given pursuant to the requirements of the first paragraph of this
Section 2.4, to those persons who are shareholders as of the new record date.
A shareholder may waive notice of the meeting (or any notice required by
the Utah Revised Business Corporation Act, the articles of incorporation, or
these bylaws), by a writing signed by the shareholder entitled to the notice,
which is delivered to the corporation (either before or after the date and time
stated in the notice) for inclusion in the minutes or filing with the
corporation records. (16-10a-706)
A shareholder's attendance at a meeting:
(a) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting;
(b) waives objection to consideration of a particular matter at the
meeting that is not within the purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.
If a purpose of any shareholder meeting is to consider either: (1) a
proposed amendment to the articles of incorporation (including any restated
articles requiring shareholder approval); (2) a plan of merger or share
exchange; (3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the dissolution of the
corporation; or (5) the removal of a director, the notice must so state and be
accompanied by, respectively, a copy or summary of the: (1) articles of
amendment; (2) plan of merger or share exchange; and (3) transaction for
disposition of all or substantially all of the corporation's property. If the
proposed corporate action creates dissenters' rights, the notice must state that
shareholders are, or may be entitled to assert dissenter's rights, and must be
accompanied by a copy of Part 13 of the Utah Revised Business Corporation Act.
2.5 FIXING OF RECORD DATE. For the purpose of determining shareholders of
any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to take action without a meeting, or
shareholders entitled to receive payment of any distribution or dividend, or in
order to make a determination of shareholders for any other proper purpose, the
board of directors may fix in advance a date as the record date. Such record
date shall not be more than 70 days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken. If no
record date is so fixed by the board, the record date for determination of such
shareholders shall be at the close of business on:
(a) with respect to an annual shareholder meeting or any special
shareholder meeting called by the Board of Directors or any person specifically
authorized by the Board of Directors or these bylaws to call a meeting, the day
before the first notice is delivered to shareholders;
(b) with respect to a special shareholders' meeting demanded by the
shareholders, the date the first shareholder signs the demand;
(c) with respect to the payment of a share dividend, the date the
Board of Directors authorizes the share dividend;
(d) with respect to actions taken in writing without a meeting
(pursuant to Article 2, Section 2.12), the date the first shareholder delivers
to the corporation a writing upon which the action is to be taken; and
(e) with respect to a distribution to shareholders (other than one
involving a repurchase or reacquisition of shares), the date the Board of
Directors authorizes the distribution.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof unless the board of directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting. (16-lOa-707; 16-lOa-
704)
2.6 VOTING LIST. The officers of the corporation shall prepare a list of
the names of all of the shareholders who are entitled to be given notice of the
meeting. The list must be arranged by voting group, and within each voting group
by class or series of shares. The list must be alphabetical within each class
or series and must show the address of, and the number of shares held by, each
shareholder.
The shareholders' list must be available for inspection by any shareholder,
beginning on the earlier of 10 days before the meeting for which the list was
prepared or two business days after notice of the meeting is given and
continuing throughout the meeting and any meeting adjournments, at the
corporation's principal office or the place identified in the meeting notice in
the city where the meeting will be held. A shareholder or shareholder's agent
or attorney is entitled on written demand to the corporation and, subject to
requirement of any other section of these bylaws or by any applicable sections
of the Utah Revised Business Corporation Act to inspect and copy the list,
during regular business hours and during the period it is available for
inspection. The officer shall make the shareholders' list available at the
meeting, and any shareholder, or any shareholders agent or attorney is entitled
to inspect the list at any time during the meeting or any adjournment, for any
purposes germane to the meeting. (16-lOa-720)
2.7 MEETINGS BY TELECOMMUNICATION. Any or all of the shareholders may
participate in an annual or special meeting of the shareholders by, or the
meeting may be conducted through the use of, any means of communication by which
all persons participating in the meeting can hear each other during the meeting.
(1610a-708)
2.8 SHAREHOLDER QUORUM AND VOTING REQUIREMENTS. If the articles of
incorporation or the Utah Revised Business Corporation Act provides for voting
by a single voting group on a matter, action on that matter is taken when voted
upon by that voting group.
If the articles of incorporation or the Utah Revised Business Corporation
Act provide for voting by two or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately. Action may be taken by one voting group on a matter even though no
action is taken by another voting group entitled to vote on the matter.
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. A quorum shall constitute 25% of the votes entitled to be cast on the
matter by the voting group, present in person or represented by proxy, for
action on that matter, except as otherwise provided by statute. If such quorum
shall not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time (provided no
adjournment shall be for more than three (3) months) without notice other than
announcement at the meeting, until a quorum shall be present or represented. 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.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
articles of incorporation, these bylaws or the Utah Revised Business Corporation
Act require a greater number of affirmative votes. (16-lOa-725; 16-lOa-726)
2.9 PROXIES. At all meetings of shareholders, a shareholder may vote in
person, or vote by proxy which is executed in writing by the shareholder or
which is executed by his duly authorized attorney-in-fact, or by a written
statement of the appointment transmitted by telegram, teletype, or other
electronic transmission along with written evidence from which it can be
determined that the shareholder transmitted or authorized the transmission of
the appointment. Such proxy shall be filed with the Secretary of the
corporation or other person authorized to tabulate votes before or at the time
of the meeting. No proxy shall be valid after 11 months from the date of its
execution unless otherwise provided in the proxy. (16-lOa-722)
2.10 VOTING SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote, and each fractional share is entitled to a
corresponding fractional vote, on each matter submitted to vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the articles of incorporation of this
corporation as permitted by the Utah Revised Business Corporation Act. (16-lOa-
721)
Unless the articles of incorporation of this corporation otherwise provide,
at each election for directors, every shareholder entitled to vote at such
election shall have the right to cast, in person or by proxy, all of the votes
to which the shareholder's shares are entitled for as many persons as there are
directors to be elected and for whose election such shareholder has a right to
vote. Each holder of shares of each class or series of the corporation shall be
entitled to vote for directors and shall have equal voting power for each share
of each class or series of the corporation. (16-lOa-728)
2.11 CORPORATION'S ACCEPTANCE OF VOTES. 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, is entitled to accept the vote,
consent, waiver, or proxy appointment and give it effect as the act of the
shareholder.
If the name signed on a vote, consent, waiver, or proxy appointment does
not correspond to the name of its shareholder, the corporation, if acting in
good faith, is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if:
(a) the shareholder is an entity as defined in the Utah Revised
Business Corporation Act and the name signed purports to be that of an officer
or agent of the entity;
(b) the name signed purports to be that of an administrator,
executor, guardian, or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the corporation
has been 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 has been 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 has been presented with respect to the vote, consent, waiver, or
proxy appointment; or
(e) two or more persons are the shareholder as co-owners 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 the co-
owners.
The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the Secretary or other officer or agent 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.
The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in accordance with
the standards of this Section are not liable in damages to the shareholder for
the consequences of the acceptance or rejection.
Corporate action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this Section is valid unless a court
of competent jurisdiction determines otherwise. (16-lOa-724)
2.12 SHAREHOLDER ACTION WITHOUT A MEETING. Unless otherwise provided in
the articles of incorporation any action which may be taken at any annual or
special meeting of the shareholders may be taken without a meeting and without
prior notice, if one or more consents in writing, setting forth the actions so
taken, shall be signed by the holders of outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Unless the written consents of all of the shareholders entitled to vote
have been obtained, notice of any shareholder approval without a meeting shall
be given at least 10 days before the consummation of the action authorized by
the approval to: (i) those shareholders entitled to vote who have not consented
in writing, and (ii) those shareholders not entitled to vote and to whom the
Utah Revised Business Corporation Act requires a notice of the above action be
given. The notice must contain or be accompanied by the same material that
would have been required to be sent in a notice of a meeting at which the
proposed action would have been submitted to the shareholders for action.
Directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors. (16-lOa-
704)
2.13 SHAREHOLDER'S RIGHTS TO INSPECT CORPORATE RECORDS. The corporation
shall keep as permanent records minutes of all meetings of its shareholders and
Board of Directors, a record of all actions taken by the shareholders or Board
of Directors without a meeting, a record of all actions taken by a committee of
the Board of Directors in place of the Board of Directors on behalf of the
corporation and records of all waivers of notice of meetings of shareholders,
the Board of Directors and committees of directors. The corporation shall
maintain appropriate accounting records.
If a shareholder gives the corporation written notice of his or her demand
at least five business days before the date on which he or she wishes to inspect
and copy the below listed records, the shareholder (or his agent or attorney)
has the right to inspect and copy, during regular business hours, any of the
following records, all of which the corporation is required to keep at its
principal office:
(a) the articles of incorporation or restated articles of
incorporation and all amendments to them currently in effect;
(b) the bylaws or restated bylaws and all amendments to them currently
in effect;
(c) the minutes of all shareholders' meetings, and records of all
action taken by shareholders without a meeting, for the past three years;
(d) all written communications to shareholders generally within the
past three years, including the financial statement furnished for the past three
years to the shareholders;
(e) a list of the names and business addresses of its current
directors and officers; and
(f) the most recent annual report delivered to the Utah Division of
Commerce and Commercial Code.
In addition, if a shareholder gives the corporation a written demand made
in good faith and for a proper purpose at least five business days before the
date on which he or she wishes to inspect and copy the below described records,
and describes with reasonable particularity his or her purpose and the records
the shareholder desires to inspect, and the records are directly connected with
his or her purpose, the shareholder of the corporation (or his agent or
attorney) is entitled to inspect and copy, during regular business hours at a
reasonable location specified by the corporation, any of the following records
of the corporation:
(a) Excerpts from minutes of any meeting of the Board of Directors,
records of any action of a committee of the Board of Directors on behalf of the
corporation, minutes of any meeting of the shareholders, and records of action
taken by the shareholders or Board of Directors without a meeting, to the extent
not subject to inspection under the first paragraph (a), above, of this Section
2.13;
(b) accounting records of the corporation; and
(c) the record of shareholders (compiled no earlier than the date of the
shareholder's demand).
The right to copy records includes, if reasonable, the right to receive
copies made by photographic, xerographic, or other means. The corporation may
impose a reasonable charge, covering the costs of labor and material, for copies
of any documents provided to the shareholder. The charge may not exceed the
estimated cost of production or reproduction of the records.
For purposes of this Section 2.13, the term "shareholder" shall include a
beneficial owner whose shares are held in a voting trust or by a nominee on his
behalf. (16-lOa-1601; 16-lOa-1602)
ARTICLE 3
BOARD OF DIRECTORS
3.1 GENERAL POWERS. 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, subject to any limitation set forth in
the articles of incorporation or in a shareholder's agreement authorized under
the Utah Revised Business Corporation Act.
3.2 NUMBER OF DIRECTORS AND QUALIFICATION. The authorized number of
directors shall be specified from time to time by resolution of the Board of
Directors, but shall not be less than three unless the number of shareholders of
the corporation is less than three, in which case the corporation may have a
number of directors equal to or greater than the number of shareholders.
Directors need not be residents of the State of Utah or shareholders of the
corporation. The number of directors initially authorized by the Board of
Directors shall be five (5). (16-lOa-802; 16-lOa-803)
3.3 ELECTION AND TERM OF OFFICE. Directors shall be elected at each
annual meeting of shareholders to hold office until the next succeeding annual
meeting. Each director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected and until a
successor has been elected and qualified. No decrease in the authorized number
of directors shall have the effect of shortening the term of any incumbent
director. (16-lOa-805)
3.4 REGULAR MEETINGS. The Board of Directors may provide by resolution
the time and place, either within or without the State of Utah, for the holding
of regular meetings without notice other than such resolution.
3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors for any
purpose or purposes may be called at any time by or at the request of the
Chairman of the Board, the President, or any two directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Utah, as the place for holding
any special meeting of the Board of Directors.
3.6 NOTICE: WAIVER OF NOTICE. Notice of the date, time and place of any
special meeting shall be delivered personally or by telephone to each director
or sent by first-class mail or telegram or telecopy, charges prepaid, addressed
to each director at that director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in the United
States mail at least four (4) days before the time of the holding of the
meeting. If the notice is delivered personally or by telephone, telegram or
telecopy, it shall be delivered personally or by telephone or to the telegraph
company or telecopied, at least forty-eight (48) hours before the meeting
begins. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving notice has reason to believe will promptly communicate it to the
director. Any director may waive notice of any meeting by delivering written
waiver with the corporation to file in its corporate records, and attendance of
a director at a meeting shall constitute a waiver of notice of such meeting,
except where the director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened and does not thereafter vote for or consent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors needs to be specified in
the notice or waiver of notice of such meeting. (16-lOa-822; 16-lOa-823)
3.7 QUORUM. A majority of the authorized number of directors as fixed in
accordance with these bylaws shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than a majority
is present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice. (16-lOa-824)
3.8 MANNER OF ACTING. The act of a majority of the directors present at a
meting at which a quorum is present shall, unless the act of a greater number of
directors is required by the articles of incorporation of the corporation or
these bylaws, be the act of the Board of Directors. (16-lOa-824)
3.9 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancy occurring in
the Board of Directors may be filled by the affirmative vote of a majority of
the remaining directors, through less than a quorum or by the affirmative vote
of the majority of shares entitled to vote for directors. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. If the vacant director's position was held by a director elected by a
voting group of shareholders, that vacant director's position shall be filled by
the affirmative vote of one or more directors who are elected by the same voting
group, or by the affirmative vote of the holders of shares of that voting group.
(16-lOa-810)
3.10 COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the number of directors, may designate one or more committees
consisting of not less than two directors, which committee or committees, to the
extent provided in such resolution or in the articles of incorporation or these
bylaws, shall have and may exercise all the authority so provided; except that
the designation of such committee and the delegation thereto of authority shall
not operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him or her by law. (16-lOa-825)
3.11 FEES AND COMPENSATION. Directors may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section shall not be
construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services. (16-lOa-811)
3.12 PRESUMPTION OF ASSENT. A director who is present at a meeting of the
Board of Directors when corporate action is taken is considered to have
consented to the action taken at the meeting unless the director objects at the
beginning of the meeting, or promptly upon arrival, to holding the meeting or
transacting business at the meeting and does not thereafter vote for or consent
to any action taken at the meeting, or the director contemporaneously requests
his dissent or abstention as to any specific action to be entered into the
minutes of the meeting, or the director causes written notice of a dissent or
abstention as to a specific action to be received by the presiding officer of
the meeting before adjournment of the meeting or by the corporation promptly
after adjournment of the meeting. (16-lOa-824)
3.13 RESIGNATIONS. A director may resign at any time by giving a written
notice of resignation to either the Chairman of the Board of Directors, the
President, a Vice-President, or the Secretary or Assistant Secretary, if any.
Unless otherwise provided in the resignation, the resignation shall become
effective when the notice is received by an officer or director of the
corporation. If the resignation is effective at a future time, the Board of
Directors may elect a successor to take office when the resignation becomes
effective. (16-lOa-807)
3.14 ACTION BY WRITTEN CONSENT. Any action required to be taken at a
meeting of the Board of Directors of the corporation or any other action which
may be taken at a meeting of the Board of Directors or of a committee, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors, or all of the members of the
committee, as the case may be. Such consent shall have the same legal effect as
a unanimous vote of all the directors or members of the committee and may be
described as such in any document.
Action taken under this Section is effective at the time the last director
signs a writing describing the action taken, unless the Board of Directors
establishes a different effective date. (16-lOa-821; 16-lOa-825)
3.15 MEETINGS BY TELEPHONE CONFERENCE CALL. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or committee by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other. Participation in such a
meeting shall constitute presence in person at such meeting. (16-lOa-820(2))
3.16 REMOVAL OF DIRECTORS. The shareholders may remove one or more
directors at a meeting called for that purpose if notice has been given that a
purpose of the meeting is such removal. The removal may be with or without
cause unless the articles of incorporation provide that directors may only be
removed with cause. A director may be removed only if the number of votes cast
to remove him exceeds the number of votes cast not to remove him. (16-lOa-808)
3.17 POWER TO DECLARE DIVIDENDS. The Board of Directors, from time to time
as it may deem advisable, may declare and pay dividends in cash or other
property of the corporation, out of any source available for dividends, to the
shareholders of each class or series of stock of the corporation according to
their respective rights and interests in the investment portfolio of the
corporation issuing such class or series of stock.
The Board of Directors shall cause to be accompanied by a written statement
any dividend payment wholly or partly from any source other than:
(a) the accumulated and accrued undistributed net income of each class
or series (determined in accordance with generally accepted accounting
principles and the rules and regulations of the Securities and Exchange
Commission then in effect) and not including profits or losses realized upon the
sale of securities or other properties; or
(b) the net income of each class or series so determined for the
current or preceding fiscal year.
Such statement shall adequately dispose the source or sources of such payment
and the basis of calculation and shall be in such form as the Securities and
Exchange Commission may prescribe.
Notwithstanding the above provisions of this Section 3.17, the Board of
Directors may at any time declare and distribute pro rata among the shareholders
of each class or series a "stock dividend" out of the authorized but unissued
shares of stock of each class or series, including any shares previously
purchased by a class or series of the corporation. (16-lOa-302; 16-lOa-623)
ARTICLE 4
COMMITTEES OF DIRECTORS
4.1 HOW CONSTITUTED. The Board of Directors may, by resolution adopted by
a majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the pleasure
of the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. (16-lOa-825)
4.2 POWERS. Each committee shall have and may exercise all powers
relating to the business and affairs of the corporation as may be granted to it
by the Board of Directors, except for such power as by law may not be delegated
by the Board of Directors to a committee.
4.3 PROCEEDINGS. Each committee as may be designated hereunder by the
Board of Directors may fix its own presiding and recording officer or officers,
and may meet at such place or places, at such time or times and upon such notice
(or without notice) as it shall determine from time to time. It shall keep a
record of its proceedings and shall report such proceedings to the Board of
Directors at the meeting of the Board of Directors next following.
4.4 QUORUM AND MANNER OF ACTING. At all meetings of each committee as may
be designated hereunder by the Board of Directors, the presence of members
constituting a majority of the total authorized membership of the committee
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of the members present at any meeting at
which a quorum is present shall be the act of such committee. The members of
each committee as may be designated hereunder by the Board of Directors, shall
act only as a committee and the individual members thereof shall have no powers
as such.
4.5 MEETINGS BY TELEPHONE CONFERENCE CALL; CONSENT. Members of each
committee as may be designated hereunder by the Board of Directors may
participate in a meeting of the committee by means of conference telephone or
similar communication equipment by means of which all persons participating in
the meeting can hear each other. Participation in such a meeting shall
constitute presence in person at such a meeting.
Action may be taken by any committee without a meeting if all members
thereof consent in writing, and the writing or writings are filed with the
minutes of the proceedings of such committee.
4.6 RESIGNATIONS. Any member of any committee as may be designated
hereunder by the Board of Directors may resign at any time by delivering a
written resignation to either the Chairman of the Board of Directors, if any,
the President, the Secretary or Assistant Secretary, if any, or to the presiding
officer of the committee of which he or she is a member, if any shall have been
appointed and shall be in office. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
4.7 REMOVAL. The Board of Directors may at any time remove any member of
any committee designated by it hereunder either with or without cause.
4.8 VACANCIES. If any vacancy shall occur in any committee designated by
the Board of Directors hereunder, by reason of disqualification, death,
resignation, removal, or otherwise, the remaining members shall, until the
filling of such vacancy, constitute the then total authorized membership of the
committee and, provided that two or more members are remaining, shall continue
to act. Such vacancy may be filled at any meeting of the Board of Directors.
4.9 COMPENSATION. The Board of Directors may allow a fixed sum and
expenses of attendance to any member of any committee designated by it hereunder
who is not an active salaried employee of the corporation for attendance at each
meeting of such committee.
ARTICLE 5
OFFICERS
5.1 OFFICERS. Except as provided otherwise by a resolution of the
Board of Directors, the officers of the corporation shall be a President, one or
more Vice Presidents, as may be determined by resolution of the Board of
Directors, a Secretary, and a Treasurer. Any two or more offices may be held by
the same person. The corporation may also have, at the discretion of the Board
of Directors, a Chairman of the Board of Directors, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers as may be
appointed by the Board of Directors in accordance with the provisions of these
bylaws. (16-lOa-830)
5.2 APPOINTMENT, TERM OF OFFICE AND QUALIFICATION. The officers of the
corporation shall be appointed by, and serve at the pleasure of, the Board of
Directors, subject to any rights of any officer under any contract of
employment. Appointment of officers shall take place annually or at such other
intervals as the Board of Directors may determine, and may take place at regular
or special meetings of the Board of Directors or by the written consent of the
directors. Each officer shall hold office until his or her successor shall have
been duly appointed and qualified or until such officer's death, resignation or
removal in the manner provided in these bylaws. The Chairman of the Board of
Directors, if any, shall be and remain a director of the corporation during the
term of his or her office. No other officer need be a director of the
corporation.
5.3 RESIGNATIONS. Any officer may resign at any time by delivering a
written resignation to the Board of Directors, the President, or the Secretary.
Unless otherwise specified therein, such resignation shall take effect upon such
delivery of the resignation; and, unless otherwise specified in the resignation,
the acceptance of the resignation shall not be necessary to make it effective.
Any resignation is without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. (16-lOa-832)
5.4 REMOVAL. Any officer may be removed by the Board of Directors or by a
committee, if any, by a majority vote, if so authorized by the Board of
Directors, whenever in its judgment the best interests of the corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. (16-lOa-832; 16-lOa-833)
5.5 VACANCIES AND NEWLY CREATED OFFICES. A vacancy in any office by
reason of death, resignation, removal, disqualification, the creation of a new
office or otherwise, may be filled by the Board of Directors at any regular or
special meeting or by the unanimous written consent of the directors.
5.6 CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an officer
be elected, shall, if present, preside at meetings of the Board of Directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the Board of Directors or as may be prescribed by these
bylaws. If there is no President, then the Chairman of the Board shall also
have the powers and duties prescribed in these bylaws for the President.
5.7 PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, and unless the Board of Directors shall otherwise determine, the
President shall be the chief executive officer of the corporation, and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business, officers, employees and agents of the
corporation. The President shall, when present, preside at meetings of the
shareholders and, in the absence or non-existence of a Chairman of the Board, at
all meetings of the Board of Directors. The President shall have the general
powers and duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these bylaws.
5.8 VICE PRESIDENTS. In the absence or disability of the President, the
Vice Presidents, in order of their rank as fixed by the Board of Directors or,
if not ranked, a Vice President designated by the Board of Directors, shall
perform all the duties of the President and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as may
from time to time be prescribed for them by the Board of Directors, these
bylaws, the President or the Chairman of the Board and, unless otherwise so
prescribed, the powers and duties customarily vested in the office of Vice
President of a corporation.
5.9 SECRETARY. The Secretary shall keep or cause to be kept, at the
principal executive office of the corporation or such other place as the Board
of Directors may direct, a book of minutes of the proceedings of all meetings
of, and a record of all actions taken by, the Board of Directors, committees of
directors and shareholders of the corporation.
The Secretary shall cause all notices of meetings to be duly given in
accordance with the provisions of these bylaws and as required by statute.
The Secretary shall be the custodian of the corporate records and of the
seal of the corporation, and shall cause such seal (or a facsimile thereof) to
be affixed to all certificates representing stock of the corporation prior to
the issuance thereof and to all instruments the execution of which on behalf of
the corporation under its seal shall have been duly authorized in accordance
with these bylaws, and when so affixed the Secretary may attest the same.
The Secretary shall see that the books, reports, statements, certificates,
and other documents and records required by statute are properly kept and filed.
The Secretary shall have charge of the stock books of the corporation and
cause the stock and transfer books to be kept in such manner as to show at any
time the amount of the stock of the corporation of each class issued and
outstanding, the manner in which and the time when such stock was paid for, the
alphabetically arranged names and the addresses of the holders of record
thereof, the number of shares held by each holder, and the time when each became
a holder of record; and shall exhibit at all reasonable times to any director,
upon application, the original or duplicate stock register. The Secretary shall
cause the stock book to be kept and exhibited at the principal office of the
corporation in the manner and for the purposes provided by law and these bylaws.
The Secretary shall perform all duties incident to the office of Secretary
and such other duties as are given to him or her by law or these bylaws or as
from time to time may be assigned by the Board of Directors.
5.10 TREASURER. The Treasurer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of
transactions taken as Treasurer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these bylaws.
5.11 ASSISTANT SECRETARIES AND TREASURERS. Any Assistant Secretaries or
Assistant Treasurers elected by the Board of Directors shall perform such of the
duties of the Secretary or the Treasurer, respectively, as may be assigned to
them by the officers they are elected to assist, or as may otherwise be
specifically prescribed for them by the Board of Directors.
5.12 SALARIES. The salaries or other compensation of the officers of the
corporation shall be fixed from time to time by the Board of Directors, EXCEPT
THAT THE Board of Directors may delegate to any person or group of persons the
power to fix the salaries or other compensation of any officers. No officer
shall be prevented from receiving any such salary or compensation by reason of
the fact that he is also a director of the corporation.
5.13 SURETY BONDS. In the event the Board of Directors shall so require,
any officer or agent of the corporation shall provide the corporation with a
bond (including, without limitation, any bond required by the Investment Company
Act of 1940, as amended, and the rules and regulations of the Securities and
Exchange Commission), in such sums and with such surety or sureties as the Board
of Directors may direct, conditioned upon the faithful performance of his duties
to the corporation, including responsibility for negligence and for the
accounting of all property, monies, or securities of the corporation which may
come under his responsibility.
ARTICLE 6
EXECUTION OF INSTRUMENTS
6.1 INSTRUMENTS. The Board of Directors may authorize any officer, agent,
or agents, to enter into any contract or execute and deliver any instrument in
the name of, and on behalf of, the corporation, and such authority may be
general or confined to specific instances.
6.2 PROXIES. Proxies to vote with respect to shares of stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the President or any
Vice-President and the Secretary of the corporation or by any officer or agent
thereunto authorized by the Board of Directors.
ARTICLE 7
CAPITAL STOCK
7.1 STOCK CERTIFICATES. The shares of the corporation may, but need not
be, represented by certificates. If the shares are represented by certificates,
the certificates shall be signed by two of the following officers: the
President, Vice-President, Secretary or Assistant Secretary of the corporation.
The certificates may be sealed with the seal of the corporation or a facsimile
thereof. The signatures of the designated officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he or she were such officer at the date of its issue.
(16-l Oa-625; 1 6-l Oa-626)
The corporation is authorized to issue different classes or series of
shares and the designations, preferences, limitations, and relative rights
applicable to each class, the variations in preferences, limitations, and
relative rights determined for each series, and the authority of the Board of
Directors to determine variations for any existing or future class or series,
must be summarized on the front or back of each share certificate.
Alternatively, each certificate may state conspicuously on its front or back
that the corporation will furnish the shareholder this information on request in
writing, without charge.
Each certificate representing shares shall also state upon the face thereof:
(a) the name of the issuing corporation and that it is organized under
the laws of the State of Utah.
(b) the name of the person to whom the certificate is issued.
(c) the number and class of shares, and the designation of the series
which such certificate represents.
There shall be entered upon the stock transfer books of the corporation at
the time of issuance of each share, the number of the certificate issued, the
name and address of the person owning the shares represented thereby, the number
and kind, class or series of such shares, and the date of issuance thereof.
Every certificate exchanged or returned to the corporation shall be marked
"Canceled" with the date of cancellation. (16-lOa-625)
7.2 SHARES WITHOUT CERTIFICATES. The Board of Directors may authorize the
issuance of some or all of the shares of any or all of the classes or series of
the corporation without certificates. The authorization does not affect shares
already represented by certificates until they are surrendered to the
corporation.
Within a reasonable time after the issuance or transfer of shares without
certificate, the corporation shall send the shareholder a written statement of
the information required on certificates as stated in Section 7.1. (16-lOa-626)
7.3 TRANSFER OF STOCK. Transfers of stock shall be made only upon the
stock transfer books of the corporation kept at an office of the corporation or
by transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in replacement of a lost or
destroyed certificate as provided in these bylaws, an outstanding certificate
for the number of shares involved shall be surrendered for cancellation before a
new certificate is issued therefor. Except as otherwise provided by law, the
corporation and transfer agents and registrars, if any, shall be entitled to
treat the holder of record of any share or shares of stock as the absolute owner
thereof for all purposes, and accordingly shall not be bound to recognize any
legal, equitable or other claim to or interest in such share or shares on the
part of any other person whether or not it or they shall have express or other
notice thereof.
7.4 REGULATIONS. Subject to the provisions of these bylaws and of the
articles of incorporation, the Board of Directors may make such rules and
regulations as it may deem expedient concerning the issuance, transfer,
redemption, and registration of certificates for shares of the stock of the
corporation.
7.5 TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint
one or more transfer agents and one or more registrars with respect to the
certificates representing shares of stock of the corporation, and may require
all such certificates to bear the signature of either or both. The Board of
Directors may from time to time define the respective duties of such transfer
agents and registrars.
7.6 LOST OR DESTROYED CERTIFICATES. In the event of the loss or
destruction of any certificate of stock, another may be issued in its place
pursuant to such regulations as the Board of Directors may establish concerning
proof of such loss, theft or destruction and concerning the giving of a
satisfactory bond or bonds of indemnity.
7.7 ISSUANCE OF SHARES. The Board of Directors is authorized to cause to
be issued shares of the corporation up to the full amount authorized by the
articles of incorporation in such classes or series and in such amounts as may
be determined by the Board of Directors and as may be permitted by law. No
shares shall be allotted except in consideration of cash or other property,
tangible or intangible, received or to be received by the corporation under a
written agreement, of services rendered or to be rendered to the corporation
under a written agreement, or of an amount transferred from surplus to stated
capital upon a share dividend. At the time of such allotment of shares, the
Board of Directors making such allotments shall state, by resolution, its
determination of the fair value to the corporation in monetary terms of any
consideration other than cash for which shares are allotted. No shares of stock
issued by the corporation shall be issued, sold or exchanged by or on behalf of
the corporation for any amount less than the net asset value per share of the
shares outstanding as determined pursuant to Article 12 hereunder. (16-lOa-620)
7.8 REDEMPTION OF SHARES. Upon the demand of any shareholder, the
corporation shall redeem any share of stock issued by it held and owned by such
shareholder at the net asset value thereof as determined pursuant to Article 12
hereunder. The Board of Directors may suspend the right of redemption or
postpone the date of payment during any period when: (a) trading on the New York
Stock Exchange is restricted or such Exchange is closed for other than weekends
or holidays; (b) the Securities and Exchange Commission has by order permitted
such suspension; or (c) an emergency as defined by rules of the Securities and
Exchange Commission exists, making disposal of portfolio securities or valuation
of net assets of the corporation not reasonably practicable.
ARTICLE 8
MAINTENANCE AND INSPECTION OF BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors; and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of the shares held by each. Any shareholder shall have the right to
examine in person the corporation's books and records as provided for in these
bylaws.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION. Except as provided in Section 9.2 below, the
corporation may, to the maximum extent and in the manner permitted by the Utah
Revised Business Corporation Act, indemnify an individual made party to a
proceeding because he or she is or was a director, against liability incurred in
the proceeding if his conduct was unlawful, he reasonably believed that his
conduct was in, or not opposed to, the corporation's best interest, and in the
case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful. Termination of the proceeding by judgment, order,
settlement, conviction, upon a plea of nolo contendere or its equivalent is not,
of itself, determinative that the director did not meet the standard of conduct
described in this Section. (16-lOa902(1), (2) and (3))
9.2 CERTAIN RESTRICTIONS ON INDEMNIFICATION. The corporation may not
indemnify a director under Section 9.1, above, in connection with a proceeding
by or in the right of a corporation in which the director was adjudged liable to
the corporation, or in connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not involving action
in his official capacity, in which proceeding he was adjudged liable on the
basis he derived an improper personal benefit unless ordered by a court of
competent jurisdiction. (16-lOa-902(4))
9.3 MANDATORY INDEMNIFICATION. The corporation shall indemnify a director
who was successful, on the merits or otherwise, in the defense of any
proceeding, or the defense of any claim, issue, or matter in the proceeding, to
which he was a party because he is or was a director of the corporation, against
reasonable expenses incurred by him in connection with the proceeding or claims
with respect to which he has been successful. (16-lOa-903)
9.4 DETERMINATION. The corporation may not indemnify a director under
Section 9.1, above, unless authorized and a determination has been made in a
specific case that indemnification of the director is permissible in the
circumstances because the director has met the applicable standard of conduct
set forth in Section 9.1. Such determination shall be made either (1) by the
Board of Directors by majority vote of those present at a meeting at which a
quorum is present, and only those directors not parties to the proceedings shall
be counted in satisfying the quorum, (2) if a quorum cannot be attained, by
majority vote of a committee of the Board of Directors designated by the Board
of Directors, which committee shall consist of two or more directors not parties
to the proceeding, except that the directors who are not parties to the
proceeding may participate in the designation of directors for the committee,
(3) by special legal counsel selected by the Board of Directors or its committee
in the manner prescribed by the Utah Revised Business Corporation Act, or (4) by
the shareholders, by a majority of the votes entitled to be cast by holders of
qualified shares that are present in person or by proxy at a meeting. The
majority of the votes entitled to be cast by the holders of all qualified shares
constitutes a quorum for purposes of action that complies with this Section.
Shareholders' action that otherwise complies with this Section is not affected
by the presence of holders, or the voting, of shares that are not qualified
shares. (16-lOa906t2) and (3))
9.5 GENERAL INDEMNIFICATION. The indemnification and advancement of
expenses provided by this Article 9 shall not be construed to be exclusive of
any other rights to which a person seeking indemnification or advancement of
expenses may be entitled under the articles of incorporation, these bylaws, any
agreement, vote of shareholders or disinterested directors, or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office.
9.6 ADVANCES. The corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if (1) the director furnishes the
corporation a written affirmation of his good faith belief that he has met the
applicable standard of conduct described in Section 9.1, (2) the director
furnishes to the corporation a written undertaking, executed personally or on
his behalf, to repay the advance if it is ultimately determined that he did not
meet the standard of conduct, and (3) a determination is made that the facts
then known to those making a determination would not preclude indemnification
under this part. (16-lOa-904)
9.7 SCOPE OF INDEMNIFICATION. The indemnification and advancement of
expenses authorized by this Article 9 is intended to permit the corporation to
indemnify to the fullest extent permitted by the laws of the State of Utah, any
and all persons whom it shall have power to indemnify under such laws from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by such laws. Any indemnification or advancement of expenses
hereunder shall, unless otherwise provided when the indemnification or
advancement of expenses is authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators.
9.8 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
or her and incurred by him or her in any such capacity or arising out of his or
her status in any such capacity, whether or not the corporation would have the
power to indemnify him or her against the liability under the provisions of this
Article 9 or the laws of the State of Utah, as the same may hereafter be amended
or modified. (16-lOa-908)
ARTICLE 10
AUDIT ACCOUNTANT, FISCAL YEAR
10.1 FISCAL YEAR. Except as may otherwise be provided by the Board of
Directors, the fiscal year of the corporation shall end on September 30.
10.2 AUDIT, ACCOUNTANT. The Board of Directors shall cause the records and
books of account of the corporation to be audited at least once in each fiscal
year and at such other times as it may deem necessary or appropriate.
The corporation shall employ an independent public accountant or firm of
independent public accountants to examine the accounts of the corporation and to
sign and certify financial statements filed by the corporation. The independent
accountant's certificates and reports shall be addressed both to the Board of
Directors and to the shareholders.
ARTICLE 11
DIVIDENDS
The net investment income of each class or series of the corporation will
be determined, and its dividends shall be declared and made payable at such
time(s) as the Board of Directors shall determine; dividends shall be payable to
shareholders of record as of the date of declaration.
It shall be the policy of each class or series of the corporation to
qualify for and elect the tax treatment applicable to regulated investment
companies under the Internal Revenue Code, so that such class or series will not
be subjected to federal income tax on such part of its income or capital gains
that it distributes to shareholders.
ARTICLE 12
VALUATION OF NET ASSET VALUE
The net asset value per share of each class or series of the corporation
shall be determined in good faith by or under supervision of the officers of the
corporation as authorized by the Board of Directors as often and on such days
and at such time(s) as the Board of Directors shall determine, or as otherwise
may be required by law, rule, regulation or order of the Securities and Exchange
Commission.
ARTICLE 13
AMENDMENTS
These bylaws may be amended by a majority vote of the Board of Directors at
any meeting or by the shareholders at any meeting.
ADVISORY AND SERVICE CONTRACT
BETWEEN
WASATCH FUNDS, INC. FOR
THE WASATCH WORLD WIDE FUND
AND
WASATCH ADVISORS, INC.
AGREEMENT made October 1, 1996 by and between Wasatch World Wide Fund (the
"Fund"), one of six separate funds of Wasatch Funds, Inc., a Utah corporation
(the "Corporation"), and Wasatch Advisors, Inc., a Utah corporation (the
"Adviser").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for
and to manage the investment and reinvestment of the assets of the fund in
accordance with the Fund's investment objective and policies and limitations,
and to administer its affairs to the extent requested by and subject to the
supervision of the Board of Directors of the Corporation for the period and upon
the terms herein set forth. The investment of funds shall be subject to all
applicable restrictions of the Articles of Incorporation and Bylaws of the
Corporation as may from time to time be in force.
The Adviser accepts such employment and agrees during such period to render
such services, to furnish office facilities and simple business equipment, to
permit any of its officers to serve without compensation as directors or
officers of the Corporation if elected to such positions and to assume the
obligations herein set forth for the compensation herein provided. The Adviser
shall for all purposes herein provided be deemed to be an independent
contractor, and, unless otherwise expressly provided or authorized, shall have
no authority to act for or represent the Corporation in any way or otherwise be
deemed an agent of the Corporation. It is understood and agreed that the
Adviser, by separate agreement with the Corporation, may also act as Distributor
for Fund.
2. For the services and facilities described in Section 1, the Fund will
pay to the Adviser at the end of each calendar month, an investment management
fee computed at the annual rate of 1.50% of the average daily net assets of the
Fund.
If expenses borne by the Fund in any fiscal year (including the Adviser's
fee, but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities and, to the extent permitted, extraordinary expenses),
exceed those set forth in any statutory or regulatory formula prescribed by any
state in which Fund shares are registered at such time, Wasatch Advisors, Inc.
will reimburse the Fund for any excess.
The net asset value of the Fund shall be calculated as of the close of the
New York Stock Exchange on each day the Exchange is open for trading or as of
such other time or times as the directors may determine in accordance with the
provisions of the Investment Company Act of 1940. On each day when net asset
value is not calculated, the net asset value of a share of common stock of the
Fund shall be deemed to be the net asset value of such a share as of the close
of business on the last day on which such calculation was made for the purpose
of the foregoing computations.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
The services of the Adviser to the Fund under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services or
other services to others so long as its services hereunder are not impaired
thereby.
3. In addition to the fee of the Adviser, the Fund shall assume and pay any
expenses for services rendered by a custodian for the safekeeping of the Fund's
securities or other property and for any other charges of the custodian. The
Adviser shall not be required to pay and the Fund shall assume and pay the
charges and expenses of its operations, including compensation of the directors
(other than those affiliated with the Adviser), charges and expenses of
independent auditors, of legal counsel, of any transfer or dividend disbursing
agent or any registrar of the Fund, costs of acquiring and disposing of
portfolio securities, interest, if any, on obligations incurred by the Fund,
costs of share certificates and of reports, costs for keeping its books of
account, costs for calculating the net asset value of the Fund as provided in
Articles of Incorporation of Corporation, membership dues in the Investment
Company Institute or any similar organization, costs of reports and notices to
shareholders, other like miscellaneous expenses and all taxes and fees payable
to federal, state or other governmental agencies on account of the registration
of securities issued by the Fund, filing of corporate documents or otherwise.
The Fund shall not pay or incur any obligation for any management or
administrative expenses for which the Fund intends to seek reimbursement from
the Adviser as herein provided without first obtaining the writen approval of
the Adviser. The Adviser shall arrange, if desired by the Fund, for officers of
the Adviser to serve, without compensation from the Fund, as directors, officers
or agents of the Fund if duly elected or appointed to such positions and subject
to their individual consent and to any limitations imposed by law.
4. Subject to applicable statutes and regulations, it is understood that
directors, officers, or agents of the corporation are or may be interested in
the Adviser as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Adviser may be
interested in the Corporation otherwise than as a director, officer or agent.
5. The Adviser shall not be liable for any error of judgment or of law, or
for any loss suffered by the Fund in connection with the matters to which this
agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. The Adviser has proprietary rights in the Fund's name and the
Corporation's name. The Adviser may withdraw from the Fund or the Corporation
the use of their names. In addition the Adviser reserves the right to grant the
use of a similar name to another investment company or business enterprise.
However, in doing so, the adviser agrees to submit the question of continuing
this investment advisory contract to a vote of the Fund's shareholders at the
time.
7. This Agreement shall become effective on the date hereof and shall
remain in full force until December 31, 1997 unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only as long as such continuance is specifically approved at
least annually in the manner required by the Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its assignment,
and may be terminated at any time without the payment of any penalty by the Fund
or by the Adviser on sixty (60) days' written notice to the other party. The
Fund may effect termination by action of the Board of Directors or by a vote of
a majority of the outstanding shares of common stock of the Fund, accompanied by
appropriate notice.
This Agreement may be terminated at any time without the payment of any
penalty by the Board of Directors or by vote of a majority of the outstanding
shares of common stock of the Fund in the event that it shall have been
established by a court of competent jurisdiction that the Adviser or any officer
or director of the Adviser has taken any action which results in a breach of the
covenants of the adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
2 earned prior to such termination.
8. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
9. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year first above written.
Wasatch Funds, Inc. for
the Wasatch World Wide Fund
By:
---------------------------
Attest
---------------------------
Wasatch Advisors, Inc.
By:
---------------------------
Attest
---------------------------
CUSTODY AGREEMENT
DATED , 1996
------------------
BETWEEN
UMB BANK, N.A.
AND
WASATCH FUNDS, INC.
ON BEHALF OF THE
WATSATCH AGGRESSIVE EQUITY FUND
WASATCH GROWTH FUND
WASATCH INCOME FUND
WASATCH MIDCAP FUND
WASATCH MICROCAP FUND
TABLE OF CONTENTS
SECTION PAGE
1. Appointment of Custodian 1
2. DEFINITIONS 1
(a) Securities 1
(b) Assets 2
(c) Instructions and Special Instructions 2
3. DELIVERY OF CORPORATE DOCUMENTS 2
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN 3
(a) Safekeeping 3
(b) Manner of Holding Securities 4
(c) Free Delivery of Assets 5
(d) Exchange of Securities 6
(e) Purchases of Assets 6
(f) Sales of Assets 7
(g) Options 7
(h) Futures Contracts 8
(i) Segregated Accounts 8
(j) Depositary Receipts 9
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 9
(l) Interest Bearing Deposits 10
(m) Foreign Exchange Transactions 10
(n) Pledges or Loans of Securities 11
(o) Stock Dividends, Rights, Etc. 12
(p) Routine Dealings 12
(q) Collections 12
(r) Bank Accounts 12
(s) Dividends, Distributions and Redemptions 13
(t) Proceeds from Shares Sold 13
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 13
(v) Books and Records 14
(w) Opinion of Fund's Independent Certified Public
Accountants 14
(x) Reports by Independent Certified Public Accountants 14
(y) Bills and Others Disbursements 14
5. SUBCUSTODIANS 14
(a) Domestic Subcustodians 15
(b) Foreign Subcustodians 15
(c) Interim Subcustodians 16
(d) Special Subcustodians 17
(e) Termination of a Subcustodian 17
(f) Certification Regarding Foreign Subcustodians 17
6. STANDARD OF CARE 17
(a) General Standard of Care 17
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign
Risk, Etc. 17
(c) Liability for Past Records 18
(d) Advice of Counsel 18
(e) Advice of the Fund and Others 18
(f) Instructions Appearing to be Genuine 18
(g) Exceptions from Liability 19
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS 19
(a) Domestic Subcustodians 19
(b) Liability for Acts and Omissions of Foreign
Subcustodians 19
(c) Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities Depositories and
Clearing Agencies 19
(d) Defaults or Insolvencies of Brokers, Banks, Etc. 20
(e) Reimbursement of Expenses 20
8. INDEMNIFICATION 20
(a) Indemnification by Fund 20
(b) Indemnification by Custodian 20
9. ADVANCES 21
10. LIENS 21
11. COMPENSATION 22
12. POWERS OF ATTORNEY 22
13. TERMINATION AND ASSIGNMENT 22
14. ADDITIONAL FUNDS 22
15. NOTICES 23
16. MISCELLANEOUS 23
CUSTODY AGREEMENT
This agreement made as of this day of , 1996,
-------- -------------------
between UMB Bank, n.a., a national banking association with its principal place
of business located at Kansas City, Missouri (hereinafter "Custodian"), and each
of the Funds which have executed the signature page hereof together with such
additional Funds which shall be made parties to this Agreement by the execution
of a separate signature page hereto (individually, a "Fund" and collectively,
the "Funds").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the meanings
so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills,
rights, script, warrants, interim certificates and all negotiable or
nonnegotiable paper commonly known as Securities and other instruments or
obligations.
(b) "Assets" shall mean Securities, monies and other property held by
the Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested
telex, a written (including, without limitation, facsimile transmission)
request, direction, instruction or certification signed or initialed by or on
behalf of a Fund by an Authorized Person; (ii) a telephonic or other oral
communication from a person the Custodian reasonably believes to be an
Authorized Person; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) on behalf of a Fund. Instructions in the form of oral
communications shall be confirmed by the appropriate Fund by tested telex or in
writing in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral Instructions prior to the Custodian's receipt of such
confirmation. Each Fund authorizes the Custodian to record any and all
telephonic or other oral Instructions communicated to the Custodian.
(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(4) Where appropriate, Instructions and Special Instructions shall be
continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund
as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
Each Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, each Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of each such Fund who will have
continuing authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Instructions
or any other notice, request, direction, instruction, certificate or instrument
on behalf of each Fund, and (b) the names, titles and signatures of those
persons authorized to countersign or confirm Special Instructions on behalf of
each Fund (in both cases collectively, the "Authorized Persons" and
individually, an "Authorized Person"). Such Resolutions and certificates may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar Resolution or certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Instructions or to countersign
or confirm Special Instructions, such persons shall no longer be considered an
Authorized Person authorized to give Instructions or to countersign or confirm
Special Instructions. Unless the certificate specifically requires that the
approval of anyone else will first have been obtained, the Custodian will be
under no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding any of the
foregoing, no Instructions or Special Instructions received by the Custodian
from a Fund will be deemed to authorize or permit any director, trustee,
officer, employee, or agent of such Fund to withdraw any of the Assets of such
Fund upon the mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of each Fund which are
delivered to it from time to time. The Custodian shall not be responsible for
any property of a Fund held or received by such Fund and not delivered to the
Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of each Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities which
have been delivered to it in physical form, by registering the same in the name
of the appropriate Fund or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Fund and Custodian, respectively, shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the
contrary, the Custodian will register all such portfolio Securities in the name
of the Custodian's authorized nominee. All such Securities shall be held in an
account of the Custodian containing only assets of the appropriate Fund or only
assets held by the Custodian as a fiduciary, provided that the records of the
Custodian shall indicate at all times the Fund or other customer for which such
Securities are held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities
owned by a Fund in, and each Fund hereby approves use of: (a) The Depository
Trust Company; (b) The Participants Trust Company; and (c) any book-entry system
as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through one
or more agents or Subcustodians which are also qualified to act as custodians
for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities in a
Securities System, provided that such Securities are represented in an account
("Account") of the Custodian in the Securities System that includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the account
of a Fund only upon (a) receipt of advice from the Securities System that such
Securities have been transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
such Fund. The Custodian shall transfer Securities sold for the account of a
Fund only upon (a) receipt of advice from the Securities System that payment for
such Securities has been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of such Fund. Copies of all advices from the Securities System
relating to transfers of Securities for the account of a Fund shall be
maintained for such Fund by the Custodian. The Custodian shall deliver to a
Fund on the next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the account of such
Fund. Such transaction reports shall be delivered to such Fund or any agent
designated by such Fund pursuant to Instructions, by computer or in such other
manner as such Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund pursuant to
Instructions, provide such Fund with reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Fund for other Securities or cash paid in connection
with any reorganization, recapitalization, merger, consolidation, or conversion
of convertible Securities, and will deposit any such Securities in accordance
with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has
received Special Instructions to the contrary, such payment will be made only
upon receipt of Securities by the Custodian, a clearing corporation of a
national Securities exchange of which the Custodian is a member, or a Securities
System in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, upon receipt of Instructions: (i) in connection
with a repurchase agreement, the Custodian may release funds to a Securities
System prior to the receipt of advice from the Securities System that the
Securities underlying such repurchase agreement have been transferred by
book-entry into the Account maintained with such Securities System by the
Custodian, provided that the Custodian's instructions to the Securities System
require that the Securities System may make payment of such funds to the other
party to the repurchase agreement only upon transfer by book-entry of the
Securities underlying the repurchase agreement into such Account; (ii) in the
case of Interest Bearing Deposits, currency deposits, and other deposits,
foreign exchange transactions, futures contracts or options, pursuant to
Sections 4(g), 4(h), 4(l), and 4(m) hereof, the Custodian may make payment
therefor before receipt of an advice of transaction; and (iii) in the case of
Securities as to which payment for the Security and receipt of the instrument
evidencing the Security are under generally accepted trade practice or the terms
of the instrument representing the Security expected to take place in different
locations or through separate parties, such as commercial paper which is indexed
to foreign currency exchange rates, derivatives and similar Securities, the
Custodian may make payment for such Securities prior to delivery thereof in
accordance with such generally accepted trade practice or the terms of the
instrument representing such Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except
as otherwise provided herein, the Custodian shall pay for and receive other
Assets for the account of a Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of a Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an
option or sale of a covered call option, the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of the option by a Fund; (b) if the transaction involves the sale of a
covered call option, deposit and maintain in a segregated account the Securities
(either physically or by book-entry in a Securities System) subject to the
covered call option written on behalf of such Fund; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any notices or
other communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked
option (including stock index and commodity options), the Custodian, the
appropriate Fund and the broker-dealer shall enter into an agreement to comply
with the rules of the OCC or of any registered national securities exchange or
similar organization(s). Pursuant to that agreement and such Fund's
Instructions, the Custodian shall: (a) receive and retain confirmations or
other documents, if any, evidencing the writing of the option; (b) deposit and
maintain in a segregated account, Securities (either physically or by book-entry
in a Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The appropriate Fund and the broker-dealer shall be
responsible for determining the quality and quantity of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements and the performance of other terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the appropriate Fund, the Custodian and the
designated futures commission merchant (a "Procedural Agreement"). Under the
Procedural Agreement the Custodian shall: (a) receive and retain confirmations,
if any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by such Fund; (b) deposit and maintain in a segregated account
cash, Securities and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements.
The appropriate Fund and such futures commission merchant shall be responsible
for determining the type and amount of Assets held in the segregated account or
paid to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and
maintain on its books a segregated account or accounts for and on behalf of a
Fund, into which account or accounts may be transferred Assets of such Fund,
including Securities maintained by the Custodian in a Securities System
pursuant to Paragraph (b)(3) of this Section 4, said account or accounts to be
maintained (i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and
(ii) for the purpose of compliance by such Fund with the procedures required by
the SEC Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the appropriate Fund of such action in writing by
facsimile transmission or in such other manner as such Fund and Custodian may
agree in writing.
The Fund agrees that if it gives an Instruction for the performance of an
act on the last permissible date of a period established by any optional offer
or on the last permissible date for the performance of such act, the Fund shall
hold the Bank harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
(l) Each Fund hereby appoints the Custodian as its agent in the
execution of all currency exchange transactions. The Custodian agrees to
provide exchange rate and U.S. Dollar information, in writing, to the Funds.
Such information shall be supplied by the Custodian at least by the business day
prior to the value date of the foreign exchange transaction, provided that the
Custodian receives the request for such information at least two business days
prior to the value date of the transaction.
(2) Upon receipt of Instructions, the Custodian shall settle
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery on behalf of and for the account of a Fund with
such currency brokers or Banking Institutions as such Fund may determine and
direct pursuant to Instructions. If, in its Instructions, a Fund does not
direct the Custodian to utilize a particular currency broker or Banking
Institution, the Custodian is authorized to select such currency broker or
Banking Institution as it deems appropriate to execute the Fund's foreign
currency transaction.
(3) Each Fund accepts full responsibility for its use of third
party foreign exchange brokers and for execution of said foreign exchange
contracts and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred as a result of the failure or
delay of its third party broker to deliver foreign exchange. The Custodian
shall have no responsibility or liability with respect to the selection of the
currency brokers or Banking Institutions with which a Fund deals or the
performance of such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein,
upon receipt of Instructions the Custodian may, in connection with a foreign
exchange contract, make free outgoing payments of cash in the form of U.S.
Dollars or foreign currency prior to receipt of confirmation of such foreign
exchange contract or confirmation that the countervalue currency completing such
contract has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign
exchange transactions as principal. However, if the Custodian has made
available to a Fund its services as a principal in foreign exchange transactions
and subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund, with the Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by such Fund with various lenders including but not limited to
UMB Bank, n.a.; provided, however, that the Securities shall be released only
upon payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions,
the Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing. The Custodian
shall have no responsibility or liability for any loss arising from the delivery
of Securities prior to the receipt of collateral. Upon receipt of Instructions
and the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends, rights,
and other items of like nature and, upon receipt of Instructions, take action
with respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of each Fund except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from any particular
Fund. The Custodian may also make payments to itself or others from the Assets
for disbursements and out-of-pocket expenses incidental to handling Securities
or other similar items relating to its duties under this Agreement, provided
that all such payments shall be accounted for to the appropriate Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to each
Fund with respect to portfolio Securities and other Assets; (b) promptly credit
to the account of each Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and any particular Fund; (c) promptly endorse and deliver any
instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Fund. The Custodian
shall notify a Fund in writing by facsimile transmission or in such other manner
as such Fund and Custodian may agree in writing if any amount payable with
respect to portfolio Securities or other Assets is not received by the Custodian
when due. The Custodian shall not be responsible for the collection of amounts
due and payable with respect to portfolio Securities or other Assets that are in
default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account
or accounts on the books of the Custodian; provided that such bank account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
one or more Funds, and shall be subject only to draft or order of the Custodian.
The responsibilities of the Custodian to any one or more such Funds for deposits
accepted on the Custodian's books shall be that of a U.S. bank for a similar
deposit.
(s) Dividends, Distributions and Redemptions.
To enable each Fund to pay dividends or other distributions to
shareholders of each such Fund and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such Fund
(collectively, the "Shares"), the Custodian shall release cash or Securities
insofar as available. In the case of cash, the Custodian shall, upon the
receipt of Instructions, transfer such funds by check or wire transfer to any
account at any bank or trust company designated by each such Fund in such
Instructions. In the case of Securities, the Custodian shall, upon the receipt
of Special Instructions, make such transfer to any entity or account designated
by each such Fund in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received
for shares issued or sold from time to time by each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued by
such Fund by facsimile transmission or in such other manner as such Fund and the
Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for shares as may
be set forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to a Fund as of
specified times agreed upon from time to time by such Fund and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985.
The Custodian shall deliver or cause to be delivered to the
appropriate Fund all forms of proxies, all notices of meetings, and any other
notices or announcements affecting or relating to Securities owned by such Fund
that are received by the Custodian, any Subcustodian, or any nominee of either
of them, and, upon receipt of Instructions, the Custodian shall execute and
deliver, or cause such Subcustodian or nominee to execute and deliver, such
proxies or other authorizations as may be required. Except as directed pursuant
to Instructions, neither the Custodian nor any Subcustodian or nominee shall
vote upon any such Securities, or execute any proxy to vote thereon, or give any
consent or take any other action with respect thereto.
The Custodian will not release the identity of any Fund to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific purpose of direct communications between such issuer
and any such Fund unless a particular Fund directs the Custodian otherwise in
writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities
under this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be
open for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the appropriate Fund during normal business
hours of the Custodian.
The Custodian shall provide accountings relating to its activities
under this Agreement as shall be agreed upon by each Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as each Fund may
request to obtain from year to year favorable opinions from each such Fund's
independent certified public accountants with respect to the Custodian's
activities hereunder and in connection with the preparation of each such Fund's
periodic reports to the SEC and with respect to any other requirements of the
SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
such Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of a Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Funds. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank
as defined in Section 2(a)(5) of the 1940 Act or any trust company or other
entity, any of which meet the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act for the Custodian
on behalf of any one or more Funds as a subcustodian for purposes of holding
Assets of such Fund(s) and performing other functions of the Custodian within
the United States (a "Domestic Subcustodian"). Each Fund shall approve in
writing the appointment of the proposed Domestic Subcustodian; and the
Custodian's appointment of any such Domestic Subcustodian shall not be effective
without such prior written approval of the Fund(s). Each such duly approved
Domestic Subcustodian shall be listed on Appendix A attached hereto, as it may
be amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Fund(s) and performing other
functions of the Custodian in countries other than the United States of America
(hereinafter referred to as a "Foreign Subcustodian" in the context of either a
subcustodian or a sub-subcustodian); provided that the Custodian shall have
obtained written confirmation from each Fund of the approval of the Board of
Directors or other governing body of each such Fund (which approval may be
withheld in the sole discretion of such Board of Directors or other governing
body or entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or countries in
which, and the securities depositories or clearing agencies (hereinafter
"Securities Depositories and Clearing Agencies"), if any, through which, the
Custodian or any proposed Foreign Subcustodian is authorized to hold Securities
and other Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed Foreign
Subcustodian. Each such duly approved Foreign Subcustodian and the countries
where and the Securities Depositories and Clearing Agencies through which they
may hold Securities and other Assets of the Fund(s) shall be listed on Appendix
A attached hereto, as it may be amended, from time to time. Each Fund shall be
responsible for informing the Custodian sufficiently in advance of a proposed
investment which is to be held in a country in which no Foreign Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the appropriate arrangements
with a proposed Foreign Subcustodian, including obtaining approval as provided
in this Section 5(b). In connection with the appointment of any Foreign
Subcustodian, the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian in form and
substance approved by each such Fund. The Custodian shall not consent to the
amendment of, and shall cause any Domestic Subcustodian not to consent to the
amendment of, any agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except upon prior
written approval of such Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Fund shall invest
in an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify such Fund in writing by facsimile
transmission or in such other manner as such Fund and the Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from such Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an "Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf
of a Fund, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act for the Custodian on behalf of
such Fund as a subcustodian for purposes of: (i) effecting third-party
repurchase transactions with banks, brokers, dealers or other entities through
the use of a common custodian or subcustodian; (ii) providing depository and
clearing agency services with respect to certain variable rate demand note
Securities, (iii) providing depository and clearing agency services with respect
to dollar denominated Securities, and (iv) effecting any other transactions
designated by such Fund in such Special Instructions. Each such designated
subcustodian (hereinafter referred to as a "Special Subcustodian") shall be
listed on Appendix A attached hereto, as it may be amended from time to time.
In connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in form
and substance approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or waive any rights under such agreement, except upon prior
approval pursuant to Special Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to
the appropriate Fund(s), terminate any Subcustodian of such Fund(s) in
accordance with the termination provisions under the applicable subcustodian
agreement, and upon the receipt of Special Instructions, the Custodian will
terminate any Subcustodian in accordance with the termination provisions under
the applicable subcustodian agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of such Fund; and (iii) such
other information as may be requested by such Fund, and as the Custodian shall
be reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, Securities System, Securities Depository or
Clearing Agency utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a "Person") is
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of: (a) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or of
any foreign country, or political subdivision thereof or of any court of
competent jurisdiction (and neither the Custodian nor any other Person shall be
obligated to take any action contrary thereto); or (b) any event beyond the
control of the Custodian or other Person such as armed conflict, riots, strikes,
lockouts, labor disputes, equipment or transmission failures, natural disasters,
or failure of the mails, transportation, communications or power supply; or (ii)
for any loss, damage, cost or expense resulting from "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Fund, insofar
as such loss, damage or expense arises from the performance of the Custodian or
any Domestic Subcustodian in reliance upon records that were maintained for such
Fund by entities other than the Custodian or any Domestic Subcustodian prior to
the Custodian's employment hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled to
receive and act upon advice of counsel of its own choosing on all matters. The
Custodian and all Domestic Subcustodians shall be without liability for any
actions taken or omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice
of any Fund and upon statements of such Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected
and indemnified in acting as a custodian hereunder upon any Resolutions of the
Board of Directors or Trustees, Instructions, Special Instructions, advice,
notice, request, consent, certificate, instrument or paper appearing to it to be
genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from any Fund hereunder a certificate
signed by any officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions hereof,
neither the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
any Fund, the legality of the purchase thereof or evidence of ownership required
to be received by any such Fund, or the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Fund, or
the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities,
borrowings or similar actions with respect to any Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund, or any such
Fund's currently effective Registration Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any
Domestic Subcustodian to the same extent as if such actions or omissions were
performed by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
The Custodian shall be liable to a Fund for any loss or damage to such
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
Securities Depositories and Clearing Agencies.
The Custodian shall not be liable to any Fund for any loss, damage or
expense suffered or incurred by such Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.
(d) Defaults or Insolvencies of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense
suffered or incurred by any Fund resulting from or occasioned by the actions,
omissions, neglects, defaults or insolvency of any broker, bank, trust company
or any other person with whom the Custodian may deal (other than any of such
entities acting as a Subcustodian, Securities System or Securities Depository
and Clearing Agency, for whose actions the liability of the Custodian is set out
elsewhere in this Agreement) unless such loss, damage or expense is caused by,
or results from, the negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
Each Fund agrees to reimburse the Custodian for all out-of-pocket
expenses incurred by the Custodian in connection with this Agreement, but
excluding salaries and usual overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, each Fund
agrees to indemnify and hold harmless the Custodian and its nominees from all
losses, damages and expenses (including attorneys' fees) suffered or incurred by
the Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If any Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to
such Fund being liable for the payment of money or incurring liability of some
other form, such Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition
to the obligations provided in Sections 6 and 7, the Custodian agrees to
indemnify and hold harmless each Fund from all losses, damages and expenses
suffered or incurred by each such Fund caused by the negligence or willful
misfeasance of the Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of any Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Fund, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Fund as
to which it is subsequently determined that such Fund has overdrawn its cash
account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable by the Fund on behalf of which the Advance was made on demand
by Custodian, unless otherwise agreed by such Fund and the Custodian, and shall
accrue interest from the date of the Advance to the date of payment by such Fund
to the Custodian at a rate agreed upon in writing from time to time by the
Custodian and such Fund. It is understood that any transaction in respect of
which the Custodian shall have made an Advance, including but not limited to a
foreign exchange contract or transaction in respect of which the Custodian is
not acting as a principal, is for the account of and at the risk of the Fund on
behalf of which the Advance was made, and not, by reason of such Advance, deemed
to be a transaction undertaken by the Custodian for its own account and risk.
The Custodian and each of the Funds which are parties to this Agreement
acknowledge that the purpose of Advances is to finance temporarily the purchase
or sale of Securities for prompt delivery in accordance with the settlement
terms of such transactions or to meet emergency expenses not reasonably
foreseeable by a Fund. The Custodian shall promptly notify the appropriate Fund
of any Advance. Such notification shall be sent by facsimile transmission or in
such other manner as such Fund and the Custodian may agree.
10. LIENS.
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants a security interest therein to the Bank. The Fund
shall promptly reimburse the Bank for any such advance of cash or securities or
any such taxes, charges, expenses, assessments, claims or liabilities upon
request for payment, but should the Fund fail to so reimburse the Bank, the Bank
shall be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
Each Fund will pay to the Custodian such compensation as is agreed to
in writing by the Custodian and each such Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
Upon request, each Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
Any Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the
appropriate Fund shall pay to the Custodian such fees as may be due the
Custodian hereunder as well as its reimbursable disbursements, costs and
expenses paid or incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets held by it
hereunder to the appropriate Fund or as otherwise designated by such Fund by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any Fund without the
respective consent of the other, duly authorized by a resolution by its Board of
Directors or Trustees.
14. ADDITIONAL FUNDS. An additional Fund or Funds may become a party to
this Agreement after the date hereof by an instrument in writing to such effect
signed by such Fund or Funds and the Custodian. If this Agreement is terminated
as to one or more of the Funds (but less than all of the Funds) or if an
additional Fund or Funds shall become a party to this Agreement, there shall be
delivered to each party an Appendix B or an amended Appendix B, signed by each
of the additional Funds (if any) and each of the remaining Funds as well as the
Custodian, deleting or adding such Fund or Funds, as the case may be. The
termination of this Agreement as to less than all of the Funds shall not affect
the obligations of the Custodian and the remaining Funds hereunder as set forth
on the signature page hereto and in Appendix B as revised from time to time.
15. NOTICES.
As to each Fund, notices, requests, instructions and other writings
delivered to Wasatch Funds, Inc., 68 South Main Street, Salt Lake City, Utah
84101-9984, postage prepaid, or to such other address as any particular Fund may
have designated to the Custodian in writing, shall be deemed to have been
properly delivered or given to a Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration Department of the Custodian at its office at 928 Grand
Boulevard, Kansas City, Missouri 64106, or mailed postage prepaid, to the
Custodian's Securities Administration Department, Post Office Box 419226, Kansas
City, Missouri 64141, or to such other addresses as the Custodian may have
designated to each Fund in writing, shall be deemed to have been properly
delivered or given to the Custodian hereunder; provided, however, that
procedures for the delivery of Instructions and Special Instructions shall be
governed by Section 2(c) hereof.
16. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of Missouri
and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or
waived, in any manner except in writing, properly executed by both parties
hereto; provided, however, Appendix A may be amended from time to time as
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians, and
Securities Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of execution
hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
----- --------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liability 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(c)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their respective duly authorized officers.
ATTEST:
--------------- By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
--------------------------
UMB BANK, N.A.
ATTEST:
--------------- By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
--------------------------
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
- --------- ----------------------- -----------------
Euroclear
- --------------- UMB Bank, n.a.
By: By:
----------------------------- -----------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
----------------------------- -----------------------------
APPENDIX B
CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are hereby
made parties to the Custody Agreement dated , 1996, with
-----------------------
UMB Bank, n.a. ("Custodian")and Wasatch Funds, Inc., and agree to be bound by
all the terms and conditions contained in said Agreement:
on behalf of the
Wasatch Aggressive Equity Fund
Wasatch Growth Fund
Wasatch Income Fund
Wasatch Midcap Fund
Wasatch Microcap Fund
Wasatch Funds, Inc.
ATTEST:
---------------------- By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
--------------------------
ATTEST:
---------------------- UMB BANK, N.A.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
--------------------------
APPENDIX B
CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are hereby
made parties to the Custody Agreement dated February 16, 1996, with UMB Bank,
n.a. ("Custodian")and Wasatch Funds, Inc., and agree to be bound by all the
terms and conditions contained in said Agreement:
on behalf of the
Wasatch Aggressive Equity Fund
Wasatch Growth Fund
Wasatch Income Fund
Wasatch Midcap Fund
Wasatch Microcap Fund
Wasatch Worldwide Fund
ATTEST:
- ----------------------- By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
--------------------------
ATTEST:
- ----------------------- UMB BANK, N.A.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Date:
--------------------------
AMENDED AND RESTATED
SCHEDULE A
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
WASATCH FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
Intending to be legally bound, the undersigned hereby amend and restate Schedule
A to the aforesaid Agreement to include the following investment portfolios:
MICRO-CAP FUND
AGGRESSIVE EQUITY FUND
MID-CAP FUND
GROWTH FUND
WASATCH-HOISINGTON U.S. TREASURY FUND
WORLD WIDE FUND
Dated: October 1, 1996
WASATCH FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC.
By: By:
------------------------------ ------------------------------
Samuel S. Stewart, Jr. Miriam M. Allison
President President
AMENDED AND RESTATED
SCHEDULE B
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
WASATCH FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
Intending to be legally bound, the undersigned hereby amend and restate Schedule
B to the aforesaid Agreement to include the following fees for the following
investment portfolios.
MINIMUM
ANNUAL FEE
NAME OF FUND PER PORTFOLIO ANNUAL FEES
- ------------ --------------------------- -----------
Micro-Cap Up to $50 Million 28.0 basis points
Aggressive Equity $50 Million to $100 Million 18.0 basis points
Mid-Cap $100 Million to $250 Million 13.0 basis points
Growth
Wasatch-Hoisington
U.S. Treasury
World Wide $35,000
The annual fee schedule shall be applied against the combined assets of the six
portfolios. Minimum annual fees per portfolio shall be applicable to each
portfolio as indicated above irrespective of the total fees paid by the six
portfolios. Fees for additional portfolios will be separately determined and
agreed upon by the parties hereto and described in an amended Schedule B.
Wasatch shall also pay/reimburse the Administrator's out-of-pocket expenses as
described in the Agreement.
Dated: October 1, 1996
WASATCH FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC.
By: By:
----------------------------- --------------------------------
Samuel S. Stewart, Jr. Miriam M. Allison
President President
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT made as of the 17th day of February, 1996, by and between
Wasatch Funds, Inc., a Utah corporation having its principal place of business
at 68 South Main Street, Salt Lake City, Utah 84101 (the "Corporation"), and
SUNSTONE FINANCIAL GROUP, INC., a Wisconsin corporation, having its principal
place of business at 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin
53202 (the "Sunstone"):
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company and is authorized to issue shares of common stock ("Shares") in
separate series with each such series representing the interests in a separate
portfolio of securities and other assets;
WHEREAS, the Corporation desires to retain Sunstone to render the transfer
agency and other services contemplated hereby with respect to each of the
investment portfolios of the Corporation as are listed on Schedule A hereto and
any additional investment portfolios the Corporation and Sunstone may agree upon
and include on Schedule A as such Schedule may be amended from time to time
(such investment portfolios and any additional investment portfolios are
individually referred to as a "Fund" and collectively the "Funds"), and
Sunstone is willing to render such services.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE I
APPOINTMENT OF TRANSFER AGENT
A. APPOINTMENT. The Corporation hereby constitutes and appoints Sunstone
as transfer agent and dividend disbursing agent of all the Shares of the Funds
during the period of this Agreement, and Sunstone hereby accepts such
appointment as transfer agent and dividend disbursing agent and agrees to
perform the duties thereof as hereinafter set forth.
2. Sunstone shall perform the transfer agent and dividend disbursing
agent services described on Schedule B hereto. To the extent that a Fund
requests Sunstone to perform any additional services in a manner not consistent
with Sunstone's then current utilization of the System or Sunstone's usual
processing procedures, Sunstone and the Fund shall mutually agree as to the
services to be accomplished, the manner of accomplishment and the compensation
to which Sunstone shall be entitled with respect thereto.
3. Sunstone may, in its discretion, appoint in writing other parties
qualified to perform transfer agency and shareholder services reasonably
acceptable to the Funds (individually, a "Sub-transfer Agent") to carry out
some or all of its responsibilities under this Agreement with respect to a Fund;
provided, however, that unless the Fund shall enter into a written agreement
with such Sub-transfer Agent, the Sub-transfer Agent shall be the agent of
Sunstone and not the agent of the Corporation or such Fund and, in such event
Sunstone shall be fully responsible for the acts or omissions of such Sub-
transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
4. Sunstone shall have no duties or responsibilities whatsoever
hereunder except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against Sunstone.
B. DOCUMENTS/RECORDS.
1. In connection with such appointment, the Corporation shall deliver
or cause to be delivered the following documents to Sunstone:
a) A copy of the Articles of Incorporation and By-laws of the
Corporation and all amendments thereto certified by the Secretary of the
Corporation;
b) A copy of the resolutions of the Board of Directors of the
Corporation certified by the Secretary of the Corporation appointing Sunstone
and authorizing the execution of this Transfer Agency Agreement on behalf of the
Funds and designating certain persons to sign stock certificates, if any, and
give written or oral instructions and requests on behalf of the Funds;
c) A certificate signed by the Secretary of the Corporation
specifying: the number of authorized Shares and the number of such authorized
Shares issued and currently outstanding; the names and specimen signatures of
the officers of the Corporation authorized to sign written stock certificates
and the individuals authorized to provide oral instructions and to sign written
instructions and requests; and the name and address of the legal counsel for the
Corporation;
d) In the event the Corporation issues Share certificates, specimen
Share certificates for each Fund in the form approved by the Board of Directors
of the Corporation (and in a format compatible with Sunstone's operating
system), together with a Certificate signed by the Secretary of the Corporation
as to such approval;
e) Copies of the Corporation's Registration Statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto, filed by the
Corporation with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "1933 Act"), and under the 1940 Act, as amended,
together with any applications filed in connection therewith; and
f) Opinion of counsel for the Corporation with respect to the
Corporation's organization and existence under the laws of its state of
organization, the validity of the authorized and outstanding Shares, whether
such Shares are fully paid and non-assessable and the status of such Shares
under the Securities Act of 1933, as amended, and any other applicable federal
law or regulation (i.e., if subject to registration, that they have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor.)
2. The Corporation agrees to deliver or to cause to be delivered to
Sunstone in Milwaukee, Wisconsin, at the Corporation's expense, all of its
shareholder account records relating to the Funds in a format acceptable to
Sunstone and all such other documents, records and information as Sunstone may
reasonably request in order for Sunstone to perform its services hereunder.
ARTICLE II
COMPENSATION & EXPENSES
A. COMPENSATION. In consideration for its services hereunder as transfer
agent and dividend disbursing agent, each Fund will pay to Sunstone such
compensation as shall be set forth in a separate fee schedule to be agreed to by
each Fund and Sunstone from time to time. A copy of the initial fee schedule is
attached hereto as Schedule C.
B. EXPENSES. The Corporation on behalf of each Fund also agrees to
promptly reimburse Sunstone for all reasonable out-of-pocket expenses or
disbursements incurred by Sunstone in connection with the performance of
services under this Agreement including, but not limited to, expenses for
postage, express delivery services, freight charges, envelopes, checks, drafts,
forms (continuous or otherwise), specially requested reports and statements,
bank account service fees and charges, telephone calls, telegraphs, stationery
supplies, counsel fees, outside printing and mailing firms, magnetic tapes,
reels or cartridges (if sent to a Fund or to a third party at a Fund's request)
and magnetic tape handling charges, on-site and off-site record storage, media
for storage of records (e.g., microfilm, microfiche, optical platters, computer
tapes and disks), computer equipment installed at a Fund's request at a Fund's
or a third party's premises, telecommunications equipment, telephone/
telecommunication lines between a Fund and its agents, on one hand, and Sunstone
on the other, proxy soliciting, processing and/or tabulating costs, second site
backup computer facility, transmission of statement data for remote printing or
processing, and transaction fees to the extent any of the foregoing are paid by
Sunstone. Postage is payable in advance and is due at least seven days prior
to the anticipated mail date. Other out-of-pocket expenses are payable in
advance is so requested by Sunstone. In the event Sunstone requests advance
payment, Sunstone shall not be obligated to incur such expenses or perform
the related service(s) until payment is received. In addition to the foregoing,
any other expenses incurred by Sunstone at the request or with the
consent of a Fund will be promptly reimbursed by the respective Fund.
C. PAYMENT PROCEDURES.
1. Amounts due hereunder shall be due and paid by the respective Fund
on or before the thirtieth (30th) day after the date of the statement therefor
(the "Due Date"). Service fees are billed monthly, and out-of-pocket expenses
are billed as incurred (unless prepayment is requested by Sunstone). Sunstone
may, at its option, arrange to have various service providers submit invoices
directly to the Funds for payment of out-of-pocket expenses reimbursable
hereunder. The Corporation is aware that its failure to pay all amounts in a
timely fashion so that they will be received by Sunstone on or before the Due
Date will give rise to costs to Sunstone not contemplated by this Agreement,
including but not limited to carrying, processing and accounting charges.
Accordingly, in the event that any amounts due hereunder are not received by
Sunstone by the Due Date, a Fund shall pay a late charge equal to one and one-
half percent (1.5%) per month or the maximum amount permitted by law, whichever
is less. In addition, the Fund shall pay reasonable attorney's fees and court
costs of Sunstone if any amounts due Sunstone are collected by or through an
attorney. The parties hereby agree that such late charge represents a fair and
reasonable computation of the costs incurred by reason of late payment or
payment of amounts not properly due. Acceptance of such late charge shall in no
event constitute a waiver of the Fund's default or prevent the non-defaulting
party from exercising any other rights and remedies available to it.
2. In the event that any charges are disputed, the Fund shall, on or
before the Due Date, pay all undisputed amounts due hereunder and notify
Sunstone in writing of any disputed charges for out-of-pocket expenses which it
is disputing in good faith. Payment for such disputed charges shall be due on
or before the close of the fifth (5th) business day after the day on which
Sunstone provides to the Fund documentation which an objective observer would
agree reasonably supports the disputed charges (the "Revised Due Date"). Late
charges shall not begin to accrue as to charges disputed in good faith until the
first day after the Revised Due Date.
ARTICLE III
PROCESSING AND PROCEDURES
A. ISSUANCE, REDEMPTION AND TRANSFER OF SHARES
1. Sunstone acknowledges that it has received a copy of the Fund's
Prospectus (as hereinafter defined), which Prospectus describes how sales and
redemptions of shares of each Fund shall be made and Sunstone agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. "Fund Business Day" shall be
deemed to be each day on which the New York Stock Exchange is open for trading,
and "Prospectus" shall mean the last Fund prospectus actually received by
Sunstone from the Fund with respect to which the Fund has indicated a
registration statement under the 1933 Act has become effective, including the
Statement of Additional Information, incorporated by reference therein.
2. On each Fund Business Day Sunstone shall, as of the time at which
the net asset value of the Fund is computed, issue to and redeem from the
accounts specified in a purchase order or redemption request, which in
accordance with the Prospectus is effective on such day, the appropriate number
of full and fractional Shares based on the net asset value per Share of such
Fund specified in an advice received on such Fund Business Day from or on behalf
of the Fund.
3. Upon the issuance of any Shares in accordance with this Agreement,
Sunstone shall not be responsible for the payment of any original issue or other
taxes required to be paid by the Fund in connection with such issuance of any
Shares.
4. Sunstone shall not be required to issue any Shares after it has
received from an Officer (as herein defined) of the Fund or from an appropriate
federal or state authority written notification that the sale of Shares has been
suspended or discontinued, and Sunstone shall be entitled to rely upon such
written notification. "Officer" shall be deemed to be the Corporation's
President, any Vice President, Secretary, Treasurer, Controller, any Assistant
Controller, any Assistant Treasurer and any Assistant Secretary of the
Corporation, and any other person duly authorized by the Board of Directors of
the Corporation to execute any certificate, instruction, notice or other
instrument or provide oral instructions on behalf of the Corporation, and
disclosed to Sunstone, as such individuals may be amended from time to time and
disclosed in writing to Sunstone, and any person reasonably believed by Sunstone
to be such a person.
5. Upon receipt of a proper redemption request and monies paid to it by
the Custodian in connection with a redemption of Shares, Sunstone shall cancel
the redeemed Shares and after making appropriate deduction for any withholding
of taxes required of it by applicable law, make payment in accordance with the
Fund's redemption and payment procedures described in the Prospectus.
6. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph, Shares will be transferred or redeemed upon presentation to Sunstone
of Share certificates, if any, or instructions properly endorsed for transfer or
redemption, accompanied by such documents as Sunstone deems necessary to
evidence the authority of the person making such transfer or redemption, and
bearing satisfactory evidence of the payment of stock transfer taxes. Sunstone
reserves the right to refuse to transfer or redeem Shares until it is satisfied
that the endorsement on the stock certificate, if any, or instructions is valid
and genuine, and for that purpose it will require, unless otherwise instructed
by an authorized officer of the Fund or except as provided in sub-paragraph (b)
of this paragraph, a guarantee of signature by an "Eligible Guarantor
Institution" as that term is defined by SEC Rule 17Ad-15. Sunstone also
reserves the right to refuse to transfer or redeem Shares until it is satisfied
that the requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers or
redemptions which Sunstone, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no basis to any claims adverse to such
transfer or redemption. Sunstone may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Corporation shall indemnify Sunstone for any act done or omitted by it in good
faith in reliance upon such laws.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, Sunstone shall be fully protected by each Fund
in not requiring any instruments, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, or transfer, of Shares whenever Sunstone
reasonably believes that requiring the same would be inconsistent with the
transfer and redemption procedures as described in the Prospectus.
7. Notwithstanding any provision contained in this Agreement to the
contrary, Sunstone shall not be required or expected to require, as a condition
to any transfer or redemption of any Shares pursuant to a computer tape or
electronic data transmission, any documents to evidence the authority of the
person requesting the transfer or redemption and/or the payment of any stock
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Article.
8. In connection with each purchase and each redemption of Shares,
Sunstone shall send such statements as are prescribed by the Federal securities
laws applicable to transfer agents or as described in the Prospectus. If the
Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, Sunstone will countersign, issue and mail to such shareholder at the
address set forth in the records of Sunstone a Share certificate for any full
Share requested.
9. On each Fund Business Day Sunstone shall supply the Fund with a
statement specifying with respect to the immediately preceding Fund Business
Day: the total number of Shares of the Fund (including fractional Shares)
issued and outstanding at the opening of business on such day; the total number
of Shares of the Fund sold on such day; the total number of Shares of the Fund
and the dollar amount redeemed from Shareholders by Sunstone on such day; and
the total number of Shares of the Fund issued and outstanding.
10. Procedures for effecting purchase, redemption or transfer
transactions accepted from investors by telephone or other methods shall be
established by mutual agreement between the Funds and Sunstone consistent with
the terms of the Prospectus. Sunstone upon notice to a Fund may establish such
additional procedures, rules and regulations governing the transfer or
registration of Share certificates, if any, or the purchase, redemption or
transfer of Shares, as it may deem advisable and consistent with the Prospectus
and such rules and regulations generally adopted by mutual fund transfer agents.
Sunstone shall not be liable, and shall be held harmless by the Funds, for its
actions or omissions which are consistent with the foregoing procedures.
B. DIVIDENDS AND DISTRIBUTIONS.
1. The Corporation shall furnish to Sunstone a copy of a resolution of
its Board of Directors, certified by the Secretary or any Assistant Secretary,
either (i) setting forth the date of the declaration of a dividend or
distribution, the date of accrual or payment, as the case may be, thereof, the
record date as of which shareholders entitled to payment, or accrual, as the
case may be, shall be determined, the amount per Share of such dividend or
distribution, the payment date on which all previously accrued and unpaid
dividends are to be paid, and the total amount, if any, payable to Sunstone on
such payment date, or (ii) authorizing the declaration of dividends and
distributions on a daily or other periodic basis and authorizing Sunstone to
rely on a certificate of an Officer setting forth the information described in
subsection (i) of this paragraph.
2. In connection with a reinvestment of a dividend or distribution of
Shares of a Fund, Sunstone shall as of each Fund Business Day, as specified in a
certificate or resolution described in paragraph 1, issue Shares of the Fund
based on the net asset value per Share of such Fund specified in an advice
received from or on behalf of the Fund on such Fund Business Day.
3. Upon the mail date specified in such certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of Sunstone on behalf
of the Fund, an amount of cash, if any, sufficient for Sunstone to make the
payment, as of the mail date, specified in such Certificate or resolution, as
the case may be, to the Shareholders who were of record on the record date.
Sunstone will, upon receipt of any such cash, make payment of such cash
dividends or distributions to the shareholders of record as of the record date.
Sunstone shall not be liable for any improper payments made in good faith and in
accordance with a certificate or resolution described in the preceding
paragraph. If Sunstone shall not receive from the Custodian sufficient cash to
make payments of any cash dividend or distribution to all shareholders of the
Fund as of the record date, Sunstone shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to Sunstone.
4. It is understood that Sunstone in its capacity as transfer agent and
dividend disbursing agent shall in no way be responsible for the determination
of the rate or form of dividends or capital gain distributions due to the
shareholders pursuant to the terms of this Agreement. It is further understood
that Sunstone shall file such appropriate information returns concerning the
payment of dividend and capital gain distributions with the proper federal
authorities as are required by law to be filed by the Funds but shall in no way
be responsible for the collection or withholding of taxes due on such dividends
or distributions due to shareholders, except and only to the extent, required by
applicable law. Sunstone shall file applicable state reports concerning the
payment of dividend and capital gains distributions upon receipt from or on
behalf of the Funds of all information regarding the state filing requirements
in each applicable state (including without limitation the forms required, due
dates, filing procedures and reporting thresholds), and upon receipt of such
compensation as Sunstone and the Funds may mutually agree.
C. AUTHORIZATION AND ISSUANCE OF SHARES; RECAPITALIZATION OR CAPITAL
ADJUSTMENT.
1. Prior to the effective date of any increase or decrease in the total
number of Shares authorized to be issued, or the issuance of any additional
Shares of a Fund pursuant to stock dividends, stock splits or similar
transactions, the Corporation agrees to deliver to Sunstone such documents,
certificates, reports and legal opinions as Sunstone may reasonably request.
2. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates,
Sunstone will issue Share certificates in the new form in exchange for, or upon
transfer of, outstanding Share certificates in the old form, upon receiving:
(a) A certificate of an Officer authorizing the issuance of the Share
certificates in the new form, a certified copy of any amendment to the Articles
of Incorporation with respect to the change, and such other documents and
information as Sunstone may reasonably request.
(b) In the event the Funds issue Share certificates, specimen Share
certificates for each Fund in the new form approved by the Board of Directors,
with a certificate signed by the Secretary of the Corporation as to such
approval.
3. In the event a Fund issues Share certificates, the Fund at its
expense shall furnish Sunstone with a sufficient supply of blank Share
certificates in the new form and from time to time will replenish such supply
upon the request of Sunstone. Such blank Share certificates shall be compatible
with Sunstone's system and shall be properly signed by facsimile or otherwise by
Officers of the Corporation authorized by law or by the By-Laws to sign Share
certificates and, if required shall bear the corporate Seal or facsimile
thereof. Each Fund agrees to indemnify and exonerate, save and hold Sunstone
harmless, from and against any and all claims or demands that may be asserted
against Sunstone with respect to the genuineness of any Share certificate
supplied to Sunstone.
4. In the event a Fund issues Share certificates, Sunstone may issue
new Share certificates in place of certificates represented to have been lost,
stolen, or destroyed upon receiving written instructions from the shareholder
accompanied by proof of an indemnity or surety bond issued by a recognized
insurance institution specified by the Fund or Sunstone. If Sunstone receives
written notification from the shareholder or broker dealer that the certificate
issued was never received, and such notification is made within 30 days of the
date of issuance, Sunstone may reissue the certificate without requiring a
surety bond. Sunstone may also reissue certificates which are represented as
lost, stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing,
Sunstone will reissue a certificate upon written authorization from an Officer
of the Fund.
D. RECORDS.
1. Sunstone shall keep such records as are specified in Schedule D
hereto in the form and manner, and for such period, as it may deem advisable but
not inconsistent with the rules and regulations of appropriate government
authorities, in particular Rules 31a-2 and 31a-3 under the 1940 Act. Sunstone
may deliver to the Funds from time to time at its discretion, for safekeeping or
disposition by a Fund in accordance with law, such records, papers and documents
accumulated in the execution of its duties as such transfer agent, as Sunstone
may deem expedient, other than those which Sunstone is itself required to
maintain pursuant to applicable laws and regulations. The Funds shall assume
all responsibility for any failure thereafter to produce any record, paper,
cancelled Share certificate, or other document so returned, if and when
required. To the extent required by Section 31 of the 1940 Act and the rules
and regulations thereunder, the records specified in Schedule D hereto
maintained by Sunstone, which have not been previously delivered to a Fund
pursuant to the foregoing provisions of this paragraph, shall be considered to
be the property of the Fund, shall be made available upon request for inspection
by the officers, employees, and auditors of the Fund, and shall be delivered to
the Fund promptly upon request and in any event upon the date of termination of
this Agreement, in the form and manner kept by Sunstone on such date of
termination or such earlier date as may be requested by the Fund.
2. Sunstone agrees to keep all records and other information relative
to the Funds and their shareholders confidential. In case of any requests or
demands for the inspection of the shareholder records of a Fund, Sunstone will
endeavor to notify the Fund promptly and to secure instructions from an Officer
as to such inspection. Sunstone reserves the right, however, to exhibit the
shareholder records to any person whenever it receives advice from its counsel
that there is a reasonable likelihood that Sunstone will be held liable for the
failure to exhibit the shareholder records to such person; provided, however,
that in connection with any such disclosure Sunstone shall promptly notify the
Fund that such disclosure has been made or is to be made. Notwithstanding the
foregoing, Sunstone may disclose information when requested by a shareholder
concerning an account as to which such shareholder claims a legal or beneficial
interest or when requested by the Funds, the shareholder or the dealer of record
as to such account.
3. Sunstone shall only be responsible for the safekeeping and
maintenance of transfer agency records, cancelled certificates, if any, and
correspondence of a Fund created or produced prior to the time of conversion
which are under its control and acknowledged in a writing to the Fund to be in
its possession. Any expenses or liabilities incurred by Sunstone as a result of
shareholder inquiries, regulatory compliance or audits related to such records
shall be the responsibility of the Funds.
ARTICLE IV
CONCERNING THE CORPORATION
A. REPRESENTATIONS. The Corporation represents and warrants to Sunstone
that:
(a) It is a corporation duly organized and existing under the laws of
the State of Maryland, it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement, and all
requisite corporate proceedings have been taken to authorize it to enter into
and perform this Agreement.
(b) It is an investment company registered under the 1940 Act.
(c) A registration statement under the 1933 Act with respect to the
Shares is effective. The Corporation shall notify Sunstone if such registration
statement or any state securities registrations have been terminated, lapse or a
stop order has been entered with respect to the Shares.
B. COVENANTS.
1. The Corporation will file with Sunstone copies of all material
amendments to its Articles of Incorporation and By-laws made after the date of
this Agreement. Each copy of the Articles of Incorporation of the Funds and
copies of all amendments thereto shall be certified by the Secretary of the
Corporation. Each copy of the By-Laws and copies of all amendments thereto, and
copies of resolutions of the Board of Directors, shall be certified by the
Secretary of the Corporation.
2. The Corporation shall promptly deliver to Sunstone written notice of
any change in the Officers authorized to sign Share certificates, if any,
notifications or requests, or provide oral instructions, together with a
specimen signature of each new Officer. In the event any Officer who shall have
signed manually or whose facsimile signature shall have been affixed to blank
Share certificates shall die, resign or be removed prior to issuance of such
Share certificates, Sunstone may issue such Share certificates of the Fund
notwithstanding such death, resignation or removal, and the Funds shall promptly
deliver to Sunstone such approval, adoption or ratification as may be required
by law.
3. The Corporation shall deliver to Sunstone the Fund's currently
effective Prospectus and, for purposes of this Agreement, Sunstone shall not be
deemed to have notice of any information contained in such Prospectus until a
reasonable time after it is actually received by Sunstone.
4. All requisite steps will be taken by the Corporation from time to
time when and as necessary to register the Funds' shares for sale in all states
in which Funds' shares shall at the time be offered for sale and require
registration. If at any time a Fund receives notice of any stop order or other
proceeding in any such state affecting such registration or the sale of Fund's
shares, or of any stop order or other proceeding under the federal securities
laws affecting the sale of the Fund's shares, the Fund will give prompt notice
thereof to Sunstone.
5. The Corporation will comply with all applicable requirements of the
1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, blue
sky laws, and any other applicable laws, rules and regulations.
6. The Corporation agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of Sunstone
hereunder, it shall advise Sunstone of such proposed change at least 30 days
prior to the intended date of the same, and shall proceed with such change only
if it shall have received the written consent of Sunstone thereto, which shall
not be unreasonably withheld.
ARTICLE V
CONCERNING THE TRANSFER AGENT
A. REPRESENTATIONS. Sunstone represents and warrants to the Fund that:
(a) It is a corporation duly organized and existing under the laws of
the State of Wisconsin, is empowered under applicable law and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement, and all
requisite corporate proceedings have been taken to authorize it to enter into
and perform this Agreement.
(b) It is duly registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended, to the extent required.
B. LIMITATION OF LIABILITY; INDEMNIFICATION.
1. Sunstone shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable for any loss or
damage, including counsel fees, resulting from its actions or omissions to act
or otherwise, in the absence of its bad faith, willful misfeasance, gross
negligence or reckless disregard of its duties under this agreement.
2. The Corporation, on behalf of the Funds, agrees to indemnify and
hold harmless Sunstone, its employees, agents, directors, officers and nominees
from and against any and all claims, demands, actions and suits, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way relating to Sunstone's
actions taken or nonactions with respect to the performance of services under
this Agreement or based, if applicable, upon reliance on information, records,
instructions (oral or written) or requests given or made to Sunstone by the
Funds, its officers, directors, agents or representatives; provided that this
indemnification shall not apply to actions or omissions of Sunstone in cases of
its own willful misfeasance or gross negligence, and further provided that prior
to confessing any claim against it which may be the subject of this
indemnification, Sunstone shall give the Funds written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
Sunstone. The indemnity and defense provisions provided hereunder shall
indefinitely survive the termination of this Agreement.
3. Sunstone assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, errors, delay or any other loss whatsoever
caused by events beyond its reasonable control. Sunstone will, however, take
all reasonable steps to minimize service interruptions for any period that such
interruption continues beyond Sunstone's control.
4. Sunstone shall not be liable and shall be indemnified in acting upon
any writing or document reasonably believed by it to be genuine and to have been
signed or made by an Officer or verbal instructions which the individual
receiving the instructions on behalf of Sunstone reasonably believes in good
faith to have been given by an Officer, and Sunstone shall not be held to have
any notice of any change of authority of any person until receipt of written
notice thereof from a Fund or such person. Sunstone shall not be liable to a
Fund with respect to any redemption draft on which the signature of the drawer
is forged nor shall Sunstone be liable for any alteration or absence or forgery
of any endorsement, it being understood that Sunstone's sole responsibility with
respect to inspecting redemption drafts is to use reasonable care to verify the
drawer's signature against signatures on file. It shall also be protected in
processing Share certificates, if any, which bear the proper countersignature of
Sunstone and which it reasonably believes to bear the proper manual or facsimile
signature of the Officers.
5. In no event, and under no circumstances shall either party to this
Agreement be liable to anyone, including, without limitation to the other party,
for punitive damages for any act or failure to act under any provision of the
Agreement even if advised of the possibility thereof.
6. At any time Sunstone may request instructions and/or receive directions from
an Officer with respect to any matter arising in connection with Sunstone's
duties and obligations under this Agreement, and Sunstone shall not be liable
for any action taken or permitted by it in good faith in accordance with such
instructions or directions. Such request for instructions by Sunstone may set
forth any action proposed to be taken or omitted by Sunstone with respect to its
duties or obligations under this Agreement and the date on and/or which such
action shall be taken. Sunstone shall not be liable for any action taken or
omitted in accordance with a proposal included in any such request on or after
the date specified therein unless, prior to taking or omitting any such action,
Sunstone has received instructions in response to such application specifying
the action to be taken or omitted. Sunstone may consult counsel of the
Corporation, or upon notice to the Corporation, its own counsel, at the expense
of the Corporation and shall be fully protected with respect to anything done or
omitted by it in good faith in accordance with the advice or opinion of counsel
to the Corporation or its own counsel.
7. Notwithstanding any of the provisions of this Agreement, Sunstone
shall be under no duty or obligation under this Agreement to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of a Fund, as the case
may be, to request such sale or issuance;
(b) The legality of a transfer of Shares, or of a redemption of any
Shares, the propriety of the amount to be paid therefor, or the authority of a
Fund, as the case may be, to request such transfer or redemption;
(c) The legality of the declaration of any dividend by a Fund, or the
legality of the issue of any Shares in payment of any stock dividend, or the
legality of any recapitalization or readjustment of Shares.
ARTICLE V
TERM
1. This Agreement shall be effective as of February 19, 1996 and remain
in full force and effect for a period of one year from such date, the initial
term, and thereafter shall automatically extend for additional, successive
twelve (12) month terms unless earlier terminated as provided below.
2. Either of the parties hereto may terminate this Agreement after the
initial term by giving to the other party a notice in writing specifying the
date of such termination, which shall be not less than ninety (90) days after
the date of receipt of such notice. In the event such notice is given by a
Fund, it shall be accompanied by a copy of a resolution of the Board of
Directors of the Corporation, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating the successor
transfer agent or transfer agents. In the event such notice is given by
Sunstone, the Fund shall on or before the termination date, deliver to Sunstone
a copy of a resolution of its Board of Directors certified by the Secretary or
any Assistant Secretary designating a successor transfer agent or transfer
agents. In the absence of such designation by the Fund, the Fund shall upon the
date specified in the notice of termination of this Agreement and delivery of
the records maintained hereunder, be deemed to be its own transfer agent and
Sunstone shall thereby be relieved of all duties and responsibilities pursuant
to this Agreement. Fees and out-of-pocket expenses incurred by Sunstone, but
unpaid by a Fund upon such termination, shall be immediately due and payable
upon and notwithstanding such termination.
3. In the event this Agreement is terminated as provided herein,
Sunstone, upon the written request of a Fund, shall deliver the records of the
Fund to the Fund or its successor transfer agent in the form maintained by
Sunstone. The Fund shall be responsible to Sunstone for all out-of-pocket
expenses and for the reasonable costs and expenses associated with the
preparation and delivery of such media, including: (a) any custom programming
requested by a Fund in connection with the preparation of such media; (b)
transportation of forms and other Fund materials used in connection with the
processing of Fund transactions by Sunstone; and (c) transportation of Fund
records and files in the possession of Sunstone. Sunstone shall not reduce the
level of service provided to the Fund following notice of termination by the
Fund.
ARTICLE VI
MISCELLANEOUS
A. NOTICES. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to a Fund or the Corporation shall be
sufficiently given if addressed to the Corporation and mailed and delivered to
the President at 68 South Main Street, Salt Lake City, Utah 84101, or at such
other place as a Fund or the Corporation may from time to time designate in
writing. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to Sunstone shall be sufficiently given if addressed
to Sunstone and mailed or delivered to the President at 207 East Buffalo Street,
Suite 400, Milwaukee, Wisconsin 53202, or at such other place as Sunstone may
from time to time designate in writing.
B. AMENDMENTS/ASSIGNMENTS.
1. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement.
2. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not
be assignable by either party without the written consent of the other party
except that Sunstone may assign this Agreement to an affiliate with advance
written notice to the Corporation.
C. WISCONSIN LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin. If any part, term or
provision of this Agreement is determined by the courts or any regulatory
authority having jurisdiction over the issue to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of the parties
shall be construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid.
D. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
E. BACK-UP FACILITY. During the terms of this Agreement, Sunstone shall
provide a facility capable of safeguarding the transfer agency and dividend
disbursing records of the Fund in case of damage to the primary facility
providing those services (the "Back-Up Facility"). Transfer of the transfer
agency and dividend records of the Fund to the Back-Up Facility shall commence
as soon as practicable after damage to the primary facility results in an
inability to provide the transfer agency and dividend disbursing services.
After the primary facility has recovered, Sunstone shall again utilize it to
provide the transfer agency and dividend disbursing services to the Fund.
Sunstone shall use reasonable efforts to provide the services described in this
Agreement from the Back-Up Facility.
F. PRIOR TRANSFER AGENT(S). Sunstone will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Fund. Any such inquiries or errors which
cannot be expediently resolved by Sunstone will be referred to the Fund.
G. NON-EXCLUSIVE; OTHER AGREEMENTS. The services of Sunstone hereunder are
not deemed exclusive and Sunstone shall be free to render similar services to
others. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto and any
actions taken or omitted by any party hereunder shall not affect any rights or
obligations of any other party hereunder.
H. CAPTIONS. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
SUNSTONE FINANCIAL GROUP, INC. WASATCH FUNDS, INC.
By: /s/Miriam M. Allison By: /s/Samuel S. Stewart, Jr.
---------------------------- ------------------------------
(Signature) (Signature)
Miriam M. Allison Samuel S. Stewart, Jr.
- ---------------------------- ------------------------------
(Name) (Name)
President President
- ---------------------------- ------------------------------
(Title) (Title)
February 17, 1996 February 15, 1996
- ---------------------------- ------------------------------
(Date Signed) (Date Signed)
SCHEDULE A
WASATCH AGGRESSIVE EQUITY FUND
WASATCH MICRO-CAP FUND
WASATCH GROWTH FUND
WASATCH MID-CAP FUND
WASATCH INCOME FUND
SCHEDULE B
SERVICES
- - MAINTENANCE OF SHAREHOLDER ACCOUNTS
- Maintain records for each shareholder account;
- Scan account documents for electronic storage;
- Issue customer statements;
- Record changes to shareholder account information;
- Maintain account documentation files for each shareholder; and
- Establish and maintain IRA accounts.
- - SHAREHOLDER SERVICING AND SHAREHOLDER TRANSACTIONS
- Respond to written and telephone (recorded lines) inquiries from
shareholders for information about their accounts;
- Process shareholder purchase and redemption orders, including those of
automatic investment and systematic withdrawal plans;
- Set up account information, including address, dividend options, taxpayer
identification numbers and wire instructions;
- Issue transaction confirmations;
- Process transfers and exchanges; and
- Process dividend payments by check, wire or ACH or purchase new shares
through dividend reinvestment.
- - COMPLIANCE REPORTING AND PROXY PROCESSING
- Provide required reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the states in which each
fund is registered;
- Prepare and distribute required Internal Revenue Service forms relating
to earned income and capital gains to fund and shareholders;
- Issue tax withholding reports to the Internal Revenue Service; and
- Mail, process and tabulate proxies.
- - DEALER/LOAD PROCESSING (IF APPLICABLE)
- Provide dealer access through NSCC's FundSERV;
- Provide reports for tracking Rights of Accumulation and purchases made
under Letters of Intent;
- Account for separation of shareholder investments from transaction sale
charges for purchases of fund shares;
- Calculate fees due under 12b-1 plans for distribution and marketing
expenses; and
- Track sales and commissions by dealer and provide for payment of
commissions on direct shareholder purchases in load funds.
- TELEPHONE SERVICE REPRESENTATIVES ON-LINE ACCESS
- Respond to shareholder or dealer inquiries related to:
- Account registration;
- Share balances;
- Account options;
- Dividend and capital gain distribution status;
- Withholding status;
- Transaction dates and types;
- Shares traded;
- Social security number/tax ID number;
- External account number;
- Address;
- Customer or account type;
- Dealer, branch and rep information;
- Dollars available/not available in the account;
- Shares purchased/redeemed today;
- Dividend accrual, current dividend period; and
- Market value of shares.
- - STANDARD REPORTS
- Shareholder base analysis (monthly)
- New account listing (weekly)
- Purchases, redemptions, exchanges (monthly)
- Servicing summary (monthly)
- Commission and 12b-1 reports for load funds (monthly)
OTHER AVAILABLE SERVICE FEATURES
In addition to the standard features listed above, Sunstone's system offers
additional features to meet specialized needs.
- - SPECIALIZED NEEDS
- Front-end load calculations<F28>
- Back-end load calculations<F28>
- 12b-1 fee calculations<F28>
- LOI/ROA processing<F28>
- Asset allocation and re-allocation processing in real time<F28>
- Multiple account look-up options
- Cross-fund account queries
- Cross-account queries
- On-line transaction list
- Comprehensive reporting by various criteria<F28>
- Consolidated statements
- Duplicate statements to third parties
- Multiple address option
- Labels to all shareholders or selected groups<F28>
- Proxy generation and tabulation<F28>
- Broker-dealer reporting
- Remote system access<F28>
- Cross-fund dividend reinvestment
- User-defined transaction descriptions
- User-defined transaction rules
- Fund-level processing options
- Systematic withdrawals
- Automatic periodic purchases and automatic investment plans
- Correspondence system capabilities
<F28> available at additional cost
SCHEDULE C
FEE SCHEDULE
- - BASE FEES FOR FUNDS
Shareholder account fee for equity, fixed income and balanced funds:
$ 20.00 open accounts
2.50 closed accounts
Minimum annual fee:
Aggressive Equity Fund $22,000
Growth Fund 7,000
Wasatch-Hoisington
U.S. Treasury Fund 5,000
Mid-Cap Fund 7,000
Micro-Cap Fund 5,000
The base fee assumes a single class of shares, no load or 12b-1 plan;
availability of automatic investment plans and systematic withdrawal
plans (using Sunstone's regular processing date); quarterly or less
frequent dividend distributions; annual capital gain distributions;
annual tax reporting; telephone privileges and
all standard reports.
- - ADDITIONAL FEES TO BE ADDED TO BASE FEE
TYPE OF SERVICE OR ANNUAL SHAREHOLDER MINIMUM ANNUAL
FUND FUNCTION ACCOUNT FEE FEE PER FUND
------------------ -------------------- -------------
Front-end load 1.50 2,000
CDSC, back-end load or
redemption fee 2.00 3,000
12b-1 plan 1.00 1,000
Monthly dividends on
non-money market funds 2.00 2,000
Check writing privilege 2.00 2,000
Asset allocation program 1.00 2,000
Additional class of shares --- one-half minimum above
- - ONE-TIME SET-UP FEES
(per Fund family)
Conversion from Firstar's transfer agent system
Programming $15,000 estimated
Out-of-pocket expenses At cost
(Firstar may have additional charges)
NSCC FundSERV set-up 2,500
NSCC networking 1,500
Asset allocation program 5,000
Remote access set-up (per location) 1,000
Northern Money Market Funds (per Northern Fund) 2,500
- - ACCOUNT MAINTENANCE AND PROCESSING FEES
(per occurrence)
Shareholder account set-up 1.00
AIP/SWP/Automatic Exchange account set-up 1.00
AIP/SWP/Automatic Exchange transaction processing .50
AIP/SWP/Automatic Exchange alternate
date transaction processing 1.50
Check writing signature verification 0.50
Omnibus account transaction 2.50
Transaction processing - FundSERV 0.20
Certificate issuance 4.00
Locating lost shareholders 8.00
Taxpayer ID number solicitation 1.25
Telephone exchange fee 5.00
Asset allocation transactions
(purchases, redemptions, rebalancing) 1.00
IRA/SEP processing
Annual maintenance or custodial fee (per account) 12.50
Account termination (transfer or rollover) 15.00
Monthly remote access user charge
First user and password 150.00
Additional users and passwords (each) 100.00
- - OUT-OF-POCKET EXPENSES
Per check processing (dividend, capital
gains, redemption) .25
Per statement and confirm processing .25
Per tax form processing .15
Per label printing for proxy or
marketing purposes .05
Production of ad hoc reports 25.00
Bulk mailings At cost
Bank account service fees and any other
bank charges At cost
Check stock At cost
Statement paper At cost
Envelopes At cost
Tax forms At cost
Postage and express delivery charges At cost
Telephone and long distance charges At cost
Fax charges At cost
P.O. box rental At cost
800-phone number At cost
Inventory and records storage At cost
FundSERV charges At cost
Travel expenses At cost
Outgoing wire fee At cost
Check writing transaction fees
Stop payments At cost
Non-sufficient funds At cost
Check copy 2.50
Account transcripts older than 2 years
(per year, per fund) 5.00
Non-sufficient funds At cost
- - MAINTENANCE OF NORTHERN MONEY MARKET FUNDS
An annual fee of $2,000 per Northern Money Market Fund used in
connection with your fund family is added to the base fee of each of
your funds.
- - CUSTOM PROGRAMMING
Additional fees may apply for special programming to meet your servicing
requirements or to create custom reports.
SCHEDULE D
RECORDS MAINTAINED BY SUNSTONE
Account applications
Cancelled certificates plus stock powers and supporting documents
Checks including check registers, reconciliation records, any adjustment
records and tax withholding documentation
Indemnity bonds for replacement of lost or missing stock certificates and
checks
Liquidation, redemption, withdrawal and transfer requests including stock
powers, signature guarantees and any supporting documentation
Shareholder correspondence
Shareholder transaction records
Share transaction history of the Funds
AMENDED AND RESTATED
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
WASATCH FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
Intending to be legally bound, the undersigned hereby amend and restate Schedule
A to the aforesaid Agreement to include the following investment portfolios:
WASATCH AGGRESSIVE EQUITYFUND
WASATCH MICRO-CAP FUND
WASATCH GROWTH FUND
WASATCH MID-CAP FUND
WASATCH - HOISINGTON U.S. TREASURY FUND
WASATCH WORLD WIDE FUND
Dated October 1, 1996
WASATCH FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC
By: By:
------------------------- -------------------------
Samuel S. Stewart, Jr. Miriam M. Allison
President President
AMENDED AND RESTATED
SCHEDULE C
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
WASATCH FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
FEE SCHEDULE
Dated: October 1, 1996
Intending to be legally bound, the undersigned hereby amend and restate Schedule
A to the aforesaid Agreement to include the following investment portfolios:
- - BASE FEES FOR FUNDS
Shareholder account fee for equity, fixed income and balanced funds:
$ 20.00 open accounts
2.50 closed accounts
Minimum annual fee:
Aggressive Equity Fund $22,000
Growth Fund 7,000
Wasatch-Hoisington
U.S. Treasury Fund 5,000
Mid-Cap Fund 7,000
Micro-Cap Fund 5,000
World Wide Fund 7,000
The base fee assumes a single class of shares, no load or 12b-1 plan;
availability of automatic investment plans and systematic withdrawal
plans (using Sunstone's regular processing date); quarterly or less
frequent dividend distributions; annual capital gain distributions;
annual tax reporting; telephone privileges and all standard reports.
- - ADDITIONAL FEES TO BE ADDED TO BASE FEE
TYPE OF SERVICE OR ANNUAL SHAREHOLDER MINIMUM ANNUAL
FUND FUNCTION ACCOUNT FEE FEE PER FUND
------------------ -------------------- -------------
Front-end load 1.50 2,000
CDSC, back-end load or
redemption fee 2.00 3,000
12b-1 plan 1.00 1,000
Monthly dividends on
non-money market funds 2.00 2,000
Check writing privilege 2.00 2,000
Asset allocation program 1.00 2,000
Additional class of shares --- one-half minimum above
- - ONE-TIME SET-UP FEES
(per Fund family)
Conversion from Firstar's transfer agent system
Programming $15,000 estimated
Out-of-pocket expenses At cost
(Firstar may have additional charges)
NSCC FundSERV set-up 2,500
NSCC networking 1,500
Asset allocation program 5,000
Remote access set-up (per location) 1,000
Northern Money Market Funds (per Northern Fund) 2,500
- - ACCOUNT MAINTENANCE AND PROCESSING FEES
(per occurrence)
Shareholder account set-up 1.00
AIP/SWP/Automatic Exchange account set-up 1.00
AIP/SWP/Automatic Exchange transaction processing .50
AIP/SWP/Automatic Exchange alternate
date transaction processing 1.50
Check writing signature verification 0.50
Omnibus account transaction 2.50
Transaction processing - FundSERV 0.20
Certificate issuance 4.00
Locating lost shareholders 8.00
Taxpayer ID number solicitation 1.25
Telephone exchange fee 5.00
Asset allocation transactions
(purchases, redemptions, rebalancing) 1.00
IRA/SEP processing
Annual maintenance or custodial fee (per account) 12.50
Account termination (transfer or rollover) 15.00
Monthly remote access user charge
First user and password 150.00
Additional users and passwords (each) 100.00
- - OUT-OF-POCKET EXPENSES
Per check processing (dividend, capital
gains, redemption) .25
Per statement and confirm processing .25
Per tax form processing .15
Per label printing for proxy or
marketing purposes .05
Production of ad hoc reports 25.00
Bulk mailings At cost
Bank account service fees and any other
bank charges At cost
Check stock At cost
Statement paper At cost
Envelopes At cost
Tax forms At cost
Postage and express delivery charges At cost
Telephone and long distance charges At cost
Fax charges At cost
P.O. box rental At cost
800-phone number At cost
Inventory and records storage At cost
FundSERV charges At cost
Travel expenses At cost
Outgoing wire fee At cost
Check writing transaction fees
Stop payments At cost
Non-sufficient funds At cost
Check copy 2.50
Account transcripts older than 2 years
(per year, per fund) 5.00
Non-sufficient funds At cost
- - MAINTENANCE OF NORTHERN MONEY MARKET FUNDS
An annual fee of $2,000 per Northern Money Market Fund used in
connection with your fund family is added to the base fee of each of
your funds.
- - CUSTOM PROGRAMMING
Additional fees may apply for special programming to meet your servicing
requirements or to create custom reports.
Dated October 1, 1996
WASATCH FUNDS, INC. SUNSTONE FINANCIAL GROUP, INC
By: By:
----------------------- ----------------------
Samuel S. Stewart, Jr. Miriam M. Allison
President President
DORSEY & WHITNEY LLP
PILLSBURY CENTER SOUTH
220 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402-1498
TELEPHONE: (612) 340-2600
FAX: (612) 340-2868
Wasatch Funds, Inc.
68 South Main Street
Suite 400
Salt Lake City, Utah 84101
Re: Registration Statement on Form N-1A
File No. 33-10451
Dear Sir/Madam:
We have acted as counsel to Wasatch Funds, Inc., a Utah corporation
(the "Company"), in connection with a Registration Statement on Form N-1A
(File No. 33-10451) (the "Registration Statement") relating to the sale by the
Company of an indefinite number of Series F (designated as Wasatch World Wide
Fund) Common Shares of the Company, par value $.001 per share (the "Common
Shares").
We have examined such documents and have reviewed such questions of
law as we have considered necessary and appropriate for the purposes of our
opinions set forth below. In rendering our opinions set forth below, we have
assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures and the conformity to authentic originals of all
documents submitted to us as copies. We have also assumed the legal capacity
for all purposes relevant hereto of all natural persons and, with respect to all
parties to agreements or instruments relevant hereto other than the Company,
that such parties had the requisite power and authority (corporate or otherwise)
to execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials. We have
also assumed that the Common Shares will be issued and sold as described in the
Registration Statement.
Based on the foregoing, we are of the opinion that the Common Shares
to be sold by the Company pursuant to the Registration Statement have been duly
authorized by all requisite corporate action and, upon issuance, delivery and
payment therefor as described in the Registration Statement, will be validly
issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Utah.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"General Information" in the Prospectus constituting part of the Registration
Statement.
Dated: July 10, 1996
Very truly yours,
/s/ Dorsey & Whitney LLP
------------------------
Dorsey & Whitney LLP
MJR
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to all references to our
firm included in or made a part of this Form N-1A registration statement for the
Wasatch World Wide Fund.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
July 9, 1996
<TABLE>
<CAPTION>
WASATCH WORLD WIDE FUND
COMPUTATION OF ONE YEAR HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN
FORM N-1A PART C ITEM 16E
Initial Shares Reinvested Dividend Record Reinvest
Investment NAV Outstanding Shares Amount Date Ex-Date Rate Price
---------- --- ----------- ------ ------ ---- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
8/31/96 1,000.00 10.00 100.000
8/31/97 1,057.00 10.07 104.965 4.965 50.00 12/30/96 12/31/96 0.50 10.07
</TABLE>
HYPOTHETICAL TOTAL RETURN CALCULATION
P(1+T)^n = ERV
1,000(1+T)^1 = 1,057.00
T = 5.70%
