As filed with the Securities and Exchange Commission
on October 25, 1995
1933 Act Registration No. 33-37928
1940 Act Registration No. 811-6259
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 10 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 12 X
(Check appropriate box or boxes.)
STRATUS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
200 Centre Terrace
1225 "L" Street
Lincoln, Nebraska 68508
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number,
including Area Code: (402) 476-3000
Thomas C. Smith
STRATUS FUND, INC.
200 Centre Terrace
1225 "L" Street
Lincoln, Nebraska 68508
(Name and Address of Agent for Service)
Copies of all communications to:
DONALD F. BURT, ESQ.
Cline, Williams, Wright, Johnson & Oldfather
1900 FirsTier Bank Building
Lincoln, Nebraska 68508
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing will become effective on October 27, 1995
pursuant to paragraph (b) of Rule 485.
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940, and the Rule 24f-2 Notice for the fiscal year ended June 30, 1995 was
filed on or about August 25, 1995.
<PAGE>
STRATUS FUND, INC.
Cross-Reference Sheet
Required by Rule 404(a)
N-1A Item No. Location in Prospectus
- ----------- PART A ----------------------
1. Cover Page..................................... Cover Page
2. Synopsis....................................... Introduction
3. Condensed Financial Information................ Financial Highlights
4. General Description of Registrant.............. Investment Objectives and
Policies; General
Information
5. Management of the Fund......................... Management; General
Information
6. Capital Stock and Other Securities............. Cover Page; Redemption of
Shares; Dividends and
Taxes;General Information
7. Purchase of Securities Being Offered........... Purchase of Shares
8. Redemption or Repurchase....................... Redemption of Shares
9. Pending Legal Proceedings...................... Not Applicable
PART B
Location in Statement
of Additional Information
------------------------
10. Cover Page..................................... Cover Page
11. Table of Contents.............................. Table of Contents
12. General Information and History................ General Information
13. Investment Objective and Policies.............. Investment Objectives,
Policies and Restrictions
14. Management of the Fund......................... Directors and Executive
Officers; Investment
Advisory and Other
Services
15. Control Persons and Principal
Holders of Securities.......................... Investment Advisory and
Other Services--Control
of the Adviser and the
Distributor; Capital
Stock
16. Investment Advisory and Other Services......... Investment Advisory and
Other Services -
Investment Advisory
Agreements and
Administration Agreement
17. Brokerage Allocation and Other Practices....... Portfolio Transactions
and Brokerage Allocations
18. Capital Stock and Other Securities............. Capital Stock and Control
19. Purchase, Redemption and Pricing of
Securities Being Offered....................... Net Asset Value and
Public Offering Price;
Redemption
20. Tax Status..................................... Tax Status
21. Underwriters................................... Control of the Advisor
and Distributor
<PAGE>
22. Calculation of Performance Data................ Calculation of
Performance Data
23. Financial Statements........................... Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS STRATUS FUND, Inc.
Intermediate Government Bond Portfolio
Government Securities Portfolio
Equity Income Portfolio
Capital Appreciation Portfolio
200 Centre Terrace, 1225 "L" Street
Lincoln, Nebraska 68508
(402) 476-3000, or 1-800-279-7437
STRATUS FUND, Inc. (the "Fund"), is a Minnesota corporation offering
shares in series, each series operated as a separate diversified open-end
management investment company. This Prospectus relates to the series designated
Intermediate Government Bond Portfolio, Government Securities Portfolio, Equity
Income Portfolio and Capital Appreciation Portfolio (the "Portfolios"). THE
PORTFOLIOS ARE NOT DEPOSITS OF, OR ENDORSED OR GUARANTEED BY, UNION BANK AND
TRUST COMPANY OR ANY OTHER BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL OR STATE AGENCY.
Intermediate Government Bond Portfolio has an investment objective of
current income, some or all of which is exempt from state income tax, consistent
with the preservation of capital.
Government Securities Portfolio has an investment objective of current
income consistent with the preservation of capital.
Equity Income Portfolio has an investment objective of capital
appreciation and income.
Capital Appreciation Portfolio has an investment objective of capital
appreciation.
This Prospectus concisely describes information about the Portfolios that
you ought to know before investing. Please read it carefully before investing
and retain it for future reference. A Statement of Additional Information about
the Portfolios dated as of the date of this Prospectus is available free of
charge from SMITH HAYES Financial Services Corporation, 200 Centre Terrace, 1225
"L" Street, Lincoln, Nebraska 68508, or telephone (402) 476-3000 or (800)
279-7437. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated in its entirety by
reference in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is 27, 1995
<PAGE>
INTRODUCTION
STRATUS FUND, Inc. (the "Fund") is a Minnesota corporation, commonly
called a mutual fund. The Fund, which was organized in October, 1990, has one
class of capital stock that is issued in series, each series referred to as a
Portfolio and operated as a separate diversified open-end management investment
company. This Prospectus only relates to the series designated Intermediate
Government Bond Portfolio, Government Securities Portfolio, Equity Income
Portfolio and Capital Appreciation Portfolio (the "Portfolios"). For information
regarding the Fund's other Portfolios, call or write to the Fund at the address
and telephone number on the cover page of this Prospectus.
The Portfolios
The Portfolios each have their own distinct investment objectives and
policies. The following is a brief summary of their investment objectives and
policies. For a complete discussion of the investment objectives and policies
see "Investment Objectives and Policies".
Intermediate Government Bond Portfolio has an investment objective of
current income, some or all of which is exempt from state income tax, consistent
with the preservation of capital. The Portfolio will attempt to achieve its
objective by investing at least 80% of its assets in securities issued or
guaranteed by the U.S. Government, its agents or instrumentalities. The
Portfolio will maintain an average dollar weighted maturity of between three (3)
and ten (10) years.
Government Securities Portfolio has an investment objective of current
income consistent with the preservation of capital. The Portfolio will attempt
to achieve its objective by investing at least 80% of its total assets in
securities issued or guaranteed by the U. S. Government, its agents or
instrumentalities and the remainder of its assets in marketable debt obligations
rated at the time of purchase within the three highest debt ratings established
by Moody's Investment Services, Inc. ("Moody's") or Standard and Poor's
Corporation ("S&P") (Aaa, Aa, and A for Moody's and AAA, AA and A for S&P),
obligations of commercial banks, including repurchase agreements and money
market instruments.
Equity Income Portfolio has an investment objective of capital
appreciation and income. The Portfolio will attempt to achieve its objective by
investing in a diversified portfolio of common stock and securities convertible
into common stock, the majority of which will be of seasoned companies with
market capitalizations of $500 million or more, and debt to capital ratios of
60% or lower. In addition, the Portfolio will maintain at least 65% of its total
assets in equity securities yielding dividends and/or interest bearing
securities convertible into common stock.
Capital Appreciation Portfolio has an investment objective of capital
appreciation. The Portfolio will attempt to achieve its objective by investing
in a diversified portfolio of common stocks and convertible securities which are
anticipated to have earnings growth above market averages.
<PAGE>
The Investment Adviser and Administrator
The Portfolios are managed by Union Bank and Trust Company of Lincoln,
Nebraska (the "Adviser"). Lancaster Administrative Services, Inc. acts as the
Fund's transfer agent and administrator ("Administrator"). The Portfolios pay
the Adviser and Administrator monthly fees for advisory services and
administrative services rendered. See "Management - Investment Adviser and
Administrator" and "Management -- Portfolio Brokerage."
The Distributor
SMITH HAYES Financial Services Corporation ("SMITH HAYES"), a wholly
owned subsidiary of Consolidated Investment Corporation, acts as the
distributor ("Distributor") of the Fund's shares. See "Purchase of Shares."
Purchase of Shares
Shares of the Portfolios are offered to the public at the next determined
net asset value after receipt of an order by the Distributor without a sales
charge. See "Valuation of Shares." The minimum aggregate initial investment in
the Portfolios is $1,000 unless waived by the Fund. Subsequent investments can
be made in amounts of $1,000 or more.
Certain Risk Factors to Consider
An investment in the Portfolios is subject to certain risks, as set forth
in detail under "Investment Objectives and Policies," including, with respect to
the Equity Income Portfolio, those risks associated with investing in special
situations and engaging in options transactions. As with other mutual funds,
there can be no assurance that the Portfolios will achieve their objectives.
Redemptions
Shares of the Portfolios may be redeemed at any time at their net asset
value next determined after receipt of a redemption request by the Distributor.
The Fund reserves the right, upon 30 days' written notice, to redeem a
shareholder's investment in a Portfolio if the net asset value of the shares
held by such shareholder falls below $500 as a result of redemptions or
transfers. See "Redemption of Shares - Involuntary Redemption."
Dividends
Dividends are declared at least annually (see "Dividends and Taxes") and
will be automatically reinvested unless the shareholder elects otherwise.
<PAGE>
Expenses
The Fund offers shares of the Portfolios without any sales load or
contingent sales loads on purchases, reinvestments of dividends or redemptions
and does not charge any exchange or account maintenance fees. The table below is
provided to assist the investor in understanding the various expenses that an
investor in the Portfolios will bear, whether directly or indirectly, through an
investment in the Portfolios. For more complete descriptions of the various
costs and expenses, see "Management -- Investment Adviser and Administrator" and
"Management -- Expenses."
Annual Operating Expenses
The table below provides information regarding expenses for the Portfolios
expressed as annual percentages of average daily net assets.
Intermediate Government Equity Capital
Government Securities Income Appreciation
Bond Portfolio Portfolio Portfolio Portfolio
Management Fees
Investment Advisory Fees .65% .50% .50% 1.40%
Administration Fees .25% .25% .25% .25%
---- ---- ---- ----
Total Management Fees .90% .75% .75% 1.65%
Other Expenses .36% .20% .22% 1.19%
---- ---- ---- -----
Total Portfolio
Operating Expenses 1.26% .95% .97% 2.84%
==== === ==== ====
Commencing January 4, 1994, the Capital Appreciation Portfolio began
paying the Adviser a basic investment advisory fee of 1.40% of average annual
net assets that is adjusted upward or downward based upon the Portfolio's
performance relative to the Standard and Poor's 500 Stock Index on a 12 month
average. Depending upon performance, the fee could be up to 2.80% of average
annual net assets or as low as 0. The management fees for the Capital
Appreciation Portfolio have been restated to reflect the basic fee of 1.40%
without adjustment. The annual management fee for the period July 1, 1994 until
June 30, 1995 was .34%. From January 1, 1992 until October 31, 1995 the
Administrator waived 15% of its .25% administration fee. Commencing November 1,
1995 the Administrator will not waive any portion of its fee, therefore the
expenses have been restated accordingly. The additional fees will be used by the
Administrator to enter Sub-Administration Agreements with various banks. Such
fees may be rebated to bank customers . See "Management - Investment Adviser and
Administrator"
<PAGE>
Example:
You would pay these expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period.
Intermediate Government Equity Capital
Government Securities Income Appreciation
PERIOD Bond Portfolio Portfolio Portfolio Portfolio
1 year $13 $10 $10 $29
3 years $40 $30 $31 $88
5 years $69 $52 $54 $150
10 years $152 $116 $120 $317
The purpose of the table above is to assist investors in understanding the
various costs and expenses that an investor will bear directly or indirectly as
a result of an investment in the Portfolios. Such expenses do not include any
fees charged by Union Bank and Trust Company or any of its affiliates or other
financial institutions to customer accounts which may be invested in shares of
the Portfolios. Union Bank and Trust Company currently charges certain trust and
custodial accounts up to .75% of the average annual value of assets in such
accounts for maintaining such accounts. See "Management" for a more complete
discussion of the shareholder transaction and annual operating expenses for the
Portfolios of the Fund. THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
Shareholder Inquiries
Any questions or communications regarding a shareholder account should be
directed to your SMITH HAYES investment executive or other broker-dealer.
General inquiries regarding the Portfolios should be directed to the Fund at one
of the telephone numbers set forth on the cover page of this Prospectus.
FINANCIAL HIGHLIGHTS
The following financial highlights, which provides selected data for a
share of each Portfolio outstanding throughout the periods and other information
as indicated, has been audited by KPMG Peat Marwick LLP, independent certified
public accountants, to the extent of their report appearing in the Fund's Annual
Financial Report which is contained in the Statement of Additional Information
and which is available upon request without charge as set forth on the cover
page of this Prospectus. Further information about the performance of the
Portfolios is also contained in the Fund's Annual Financial Report.
<PAGE>
FINANCIAL HIGHLIGHTS
Intermediate Government Bond Portfolio
Years Ended June 30, 1995, 1994, 1993, and 1992 and for the period from
May 15, 1991 (commencement of operations) to June 30, 1991
Net asset value: 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Beginning of period $10.29 10.84 10.72 10.02 10.00
----- ----- ----- ----- -----
Income (loss) from investment
operations:
Net investment income 0.50 0.47 0.38 0.94 0.07
Net realized and unrealized
gain (loss)
on investments 0.27 (0.55) 0.34 0.70 (0.05)
---- ------ ---- ---- ------
Total income (loss) from
investment operations 0.77 (0.08) 0.72 1.64 0.02
---- ------ ---- ---- ----
Less distributions:
Dividends from net
investment income (0.50) (0.47) (0.38) (0.94) -
Distributions from capital gains - - (0.22) - -
---- ----- ------ ----- -----
Total distributions (0.50) (0.47) (0.60) (0.94) -
------ ------ ------ ------ -----
End of period $10.56 10.29 10.84 10.72 10.02
===== ===== ===== ===== =====
Total return 7.9% (.8%) 8.9% 11.4% 1.6%*
==== ===== ==== ===== =====
Ratios/Supplemental data:
Net assets, end of period $5,518,431 7,774,768 6,747,719 4,680,585 2,230,413
Ratio of expenses to
average net assets 1.11% 1.05% 1.12% 1.04% 1.46%**
Ratio of net income
to average net assets 4.84% 4.41% 4.58% 5.31% 7.41%**
Portfolio turnover rate 27.67% 21.02% 32.39% 205.89% -
*Total return is not annualized.
**Annualized for those periods less than twelve months in duration.
<PAGE>
FINANCIAL HIGHLIGHTS
Government Securities Portfolio
Equity Income Portfolio
Year ended June 30, 1995 and the period from October 8, 1993
(commencement of operations) to June 30, 1994
Government Equity
Securities Income
Portfolio Portfolio
Net asset value: 1995 1994 1995 1994
---- ---- ---- ----
Beginning of period $9.40 10.00 9.84 10.00
----- ----- ---- -----
Income (loss) from investment
operations:
Net investment income 0.45 0.27 0.22 0.19
Net realized and unrealized
gain (loss)
on investments 0.37 (0.60) 1.72 (0.16)
---- ------ ---- ------
Total income (loss) from
investment operations 0.82 (0.33) 1.94 0.03
---- ------ ---- ----
Less distributions:
Dividends from net
investment income (0.45) (0.27) (0.22) (0.19)
Distributions from
capital gains - - (0.09) -
------ ------ ------ ------
Total distributions (0.45) (0.27) (0.31) (0.19)
------ ------ ------ ------
End of period $9.77 $9.40 11.47 9.84
===== ===== ===== ====
Total return 9.0% (3.4%)* 20.3% (.03%)*
==== ====== ===== ======
Ratios/Supplemental data:
Net assets, end of period $13,885,204 12,477,517 12,813,352 12,892,161
Ratio of expenses to
average net assets 0.80% 0.74%** .82% 0.76%**
Ratio of net income to
average net assets 4.82% 3.89%** 2.14% 2.38%**
Portfolio turnover rate 33.88% 17.36% 19.89% 10.05%
*Total return is not annualized.
**Annualized for those periods less than twelve months in duration.
<PAGE>
FINANCIAL HIGHLIGHTS
Capital Appreciation Portfolio
Years Ended June 30, 1995 and 1994 and for the period from January 4,
1993 (commencement of operations) to June 30, 1993
Net asset value: 1995 1994 1993
---- ---- ----
Beginning of period $8.95 9.40 10.00
----- ---- -----
Income (loss) from investment
operations:
Net investment loss (0.15) (0.12) (0.04)
Net realized and unrealized
gain (loss) on investments 2.62 (0.33) (0.56)
------ ------ ------
Total Income (loss) from
investment operations 2.47 (0.45) (0.60)
------ ------ ------
Less distributions from capital gains (0.19) - -
------ ------ ------
End of period $11.23 8.95 9.40
====== ==== ====
Total return 28.6% (4.8%) (6.0%)*
===== ====== =======
Ratios/Supplemental data:
Net assets, end of period $748,588 653,757 583,403
Ratio of expenses to average net assets 2.69% 2.13% 2.41%**
Ratio of net loss to average net assets (1.59%) (1.27%) (1.04%)**
Portfolio turnover rate 214.47% 9.09% 4.42%
*Total return is not annualized.
**Annualized for those periods less than twelve months in duration.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Portfolios listed below cannot be
changed without shareholder approval in the manner described under the caption
"Special Investment Methods - Investment Restrictions." In view of the risks
inherent in all investments in securities, there is no assurance that these
objectives will be achieved. The investment policies and techniques employed in
pursuit of the Portfolios' objectives may be changed without shareholder
approval, unless otherwise noted. See "Special Investment Methods" for
definitions and discussion regarding certain types of securities and the risks
of investing in such securities.
Intermediate Government Bond Portfolio
Investment Objective
The investment objective of the Intermediate Government Bond Portfolio is
to provide current income, some or all of which is exempt from state income tax,
consistent with the preservation of capital. In order to achieve this objective,
at least 80% of the assets of the Portfolio will be invested, at the time of
purchase, in securities issued or guaranteed by the U.S. Government, its
agencies or its instrumentalities. Additionally, the Portfolio may invest in
money market instruments. See "Special Investment Methods - Money Market
Instruments."
The Portfolio will maintain an average dollar weighted maturity with
respect to all of the debt securities in which it will invest between three (3)
and ten (10) years.
Investment Policies
In seeking to achieve its objective of current income, the Portfolio will
normally purchase securities with a view to holding them rather than selling
them to achieve short-term trading profits. However, the Portfolio reserves the
right to sell any security without regard to the length of time it has been held
if general economic, industry or securities market conditions warrant such
action. The Portfolio expects that annual portfolio turnover rate will normally
not exceed 100%. The higher the portfolio turnover rate, the higher will be its
expenditures for brokerage commissions and related transaction costs.
The Portfolio is not a money market fund. The value of an investment in
the Portfolio will fluctuate daily as the value of the Portfolio's assets
change. The Portfolio will attempt to invest in many securities in a variety of
industries, but it cannot assure the elimination of investment and market risks
nor the attainment of its objective.
<PAGE>
Government Securities Portfolio
Investment Objective
The investment objective of the Government Securities Portfolio is to
provide current income, consistent with the preservation of capital. In order to
achieve this objective, at least 80% of the total assets of the Portfolio will
be invested in securities issued or guaranteed by the U. S. Government, its
agencies or its instrumentalities. In addition, the Portfolio will invest its
remaining assets in the following securities:
1. Domestic issues of marketable debt obligations, rated at time of
purchase within the three highest debt rating categories established by Moody's
or S&P. A description of these debt rating categories (Moody's Aaa, Aa, and A,
and S&P AAA, AA, and A) is found in Appendix A to the Statement of Additional
Information. In selecting domestic issues of marketable debt securities for the
Portfolio, the Adviser will utilize a fundamental analysis of the issuer's
financial condition and operations, including an analysis of products and
services and competition, management research and development activities. Such
issuers generally will have a debt to capital ratio of less than 60% and have
market capitalization in excess of $500,000,000.
2. Obligations of commercial banks, including negotiable certificates of
deposit, banker's acceptances and repurchase agreements on securities issued or
guaranteed by the U.S. Government. Certificates of deposit and banker's
acceptances evidence the obligation of the banking institution to repay funds
deposited with it for a specified period of time at a stated interest rate. A
repurchase agreement involves the sale of securities and an agreement by the
seller to repurchase the securities at the same price plus an amount equal to an
agreed upon interest rate within a specified time period, usually until the next
business day but occasionally for longer periods. Repurchase agreements involve
certain risks which are described in greater detail in the Statement of
Additional Information.
3. Money market instruments. See "Special Investment Methods -
Money Market Instruments."
Investment Policies
The Portfolio will not concentrate its investments in any particular
industry or group of industries. Instead, the Portfolio will invest in a number
of different industries and at no time invest 25% or more of its total assets in
any one industry or group of industries.
In seeking to achieve its objective of current income, the Portfolio will
normally purchase securities with a view to holding them rather than selling
them to achieve short-term trading profits. However, the Portfolio reserves the
right to sell any security without regard to the length of time it has been held
if general economic, industry or securities market conditions warrant such
action. The Portfolio expects that annual portfolio turnover rate will normally
not exceed 100%. The higher the Fund's portfolio turnover rate, the higher will
be its expenditures for brokerage commissions and related transaction costs.
<PAGE>
The Portfolio is not a money market fund. The value of an investment in
the Portfolio will fluctuate daily as the value of the Portfolio's assets
change. The Portfolio will attempt to invest in many securities in a variety of
industries, but it cannot assure the elimination of investment and market risks
nor the attainment of its objective. The average dollar-weighted maturity of the
Portfolio's investments in debt instruments will normally be between three and
seven years.
Equity Income Portfolio
Investment Objective
The investment objective of the Equity Income Portfolio is capital
appreciation and income. The Portfolio will seek to achieve its objectives by
investing in a diversified portfolio of common stock and convertible securities
convertible into common stock. Except during periods when the Portfolio assumes
a temporary defensive position and invests in U.S. Government securities,
repurchase agreements and money market instruments, the Portfolio will have at
least 65% of its total assets invested in common stock or in securities
convertible to common stock. In addition, the Portfolio will maintain at least
65% of its total assets in equity securities yielding dividends and/or interest
bearing securities convertible into common stock.
Investment Policies
The Portfolio intends to invest principally in medium and large
capitalization companies (greater than $500 million market capitalization) with
debt to capital ratios of 60% or lower, which, in the view of the Adviser,
possess attractive growth characteristics, market valuations and dividends.
Stock market capitalizations are calculated by multiplying the total number of
common shares outstanding by the market price per share of the stock.
The Portfolio seeks to identify and invest in companies whose earnings and
dividends the Adviser believes will grow faster than inflation and faster than
the economy in general and whose growth the Adviser believes has not yet been
fully reflected in the market price of the companies' shares and which will
outperform the Standard and Poor's Equity Index on a risk adjusted basis (an
evaluation of return adjusted by a factor reflecting the volatility of the issue
versus the S & P 500 index). In seeking these investments, the Adviser relies
primarily on a company-by-company analysis (rather than on a broader analysis of
industry or economic sector trends) and considers such matters as the quality of
a company's management, the existence of a leading or dominant position in a
major product line or market and the soundness of the company's financial
position. Once companies are identified as possible investments, the Adviser
applies a number of valuation measures to determine the relative attractiveness
of each company and selects those companies whose shares are most attractively
priced. The Adviser may use options in hedging strategies designed to protect
the Portfolio's holdings. See "Special Investment Methods - Options
Transactions."
<PAGE>
The Equity Income Portfolio intends periodically to invest in special
situations. A special situation arises when, in the opinion of the Adviser, the
securities of a particular company will, within a reasonably estimable period of
time, be accorded market recognition at an appreciated value solely by reason of
a development particularly or uniquely applicable to that company and regardless
of general business conditions or movements of the stock market as a whole.
Developments creating special situations might involve, among others, the
following: "workouts" such as liquidations, reorganizations, recapitalizations
or mergers; material litigation; technological breakthroughs; and new management
or management policies. Special situations involve a different type of risk than
is inherent in ordinary investment securities; that is, a risk involving the
likelihood or timing of specific events rather than general economic market or
industry risks. As with any securities transaction, investment in special
situations involves the risk of decline or total loss of the value of the
investment. However, the Adviser will not invest in special situations unless,
in its judgment, the risk involved is reasonable in light of the Portfolio's
investment objective, the amount to be invested and the expected investment
results.
The convertible securities in which the Portfolio may invest include
convertible debt and convertible preferred stock which is rated in the three
highest ratings categories of Moody's Investors Service, Inc. ("Moody's") and
Standard and Poor's, Inc. ("S&P's") for such securities. For a description of
the Moody's and S&P's ratings see Appendix A to the Statement of Additional
Information.
When the Investment Adviser believes that prevailing market or economic
conditions warrant a temporary defensive investment position, the Portfolio may
invest a portion or all of its assets in non-convertible preferred stock,
non-convertible debt securities and United States Government, state and
municipal and governmental agency and instrumentality obligations, or funds may
be retained in cash or cash equivalents, such as money market mutual fund
shares. Securities issued or guaranteed by the United States Government may
include, for example, Treasury Bills, Bonds and Notes which are direct
obligations of the United States Government. Obligations issued or guaranteed by
United States Government agencies or instrumentalities may include, for example,
those of Federal Intermediate Credit Banks, Federal Home Loan Banks, Federal
National Mortgage Association and Farmers Home Administration. Such securities
will include, for example, those supported by the full faith and credit of the
United States Treasury or the right of the agency or instrumentality to borrow
from the Treasury as well as those supported only by the credit of the issuing
agency or instrumentality. State and municipal obligations, which are typically
tax exempt, may include both general obligation and revenue obligations, issued
for a variety of public purposes such as highways, schools, sewer and water
facilities, as well as industrial revenue bonds by public bodies to finance
private commercial and industrial facilities.
Capital Appreciation Portfolio
Investment Objective
The Investment Objective of the Capital Appreciation Portfolio is capital
appreciation. The Portfolio will seek to achieve this objective by investing in
<PAGE>
a diversified portfolio of common stocks and securities convertible into common
stocks. The Adviser intends to invest principally in companies which it believes
will have earnings growth above the market averages with an emphasis toward
companies whose growth the Adviser believes has not been fully reflected in the
market price of such companies' shares. While the Portfolio may assume from time
to time temporary defensive positions and invest in U.S. Government debt
securities, repurchase agreements and money market instruments, the Portfolio
will maintain at least 65% of its total assets in common stocks or in securities
convertible into common stock at all times.
In making investment selections, the Adviser relies primarily on a
company-by-company analysis (rather than on a broader analysis of industry or
economic sector trends) and considers such matters as the quality of a company's
management, the existence of a leading or dominant position in a major product
line market and the soundness of a company's financial position. As companies
are identified as possible investments, the Adviser further evaluates such
companies by application of a number of valuation techniques to determine the
relative attractiveness of each company. Based upon these factors, the Adviser
will attempt to select those companies whose shares, in its estimation, are most
attractively priced.
The Capital Appreciation Portfolio will also periodically invest in
special situations. A special situation arises when, in the opinion of the
Adviser, the securities or particular company will, within a reasonable period
of time, be accorded market recognition at an appreciated value solely by reason
of a development particularly or uniquely applicable to that company and
regardless of general business conditions or movements of the stock market as a
whole. Developments creating special situations include recapitalizations or
mergers, material litigation, technological breakthroughs, and new management or
management policies. Special situations also involve a different type of risk
than is inherent in ordinary investment securities; that is, a risk that the
Investment Adviser may inaccurately predict the likelihood or timing of specific
events rather than general economic or industry risks and as a result fail to
achieve the investment objective. As in any securities transaction, an
investment in a special situation may result in the decline or total loss of the
value of the particular investment. The Adviser will not, however, invest in
special situations, unless, in its judgment, the risk involved is reasonable in
light of the Portfolio's investment objective, the amount to be invested and the
expected investment results.
The Capital Appreciation Portfolio may invest in convertible securities
including convertible debt and convertible preferred stock. Such convertible
debt and convertible preferred stock shall be rated BBB or higher by S&P or Baa
by Moody's. For a description of Moody's and S&P's ratings see Appendix A to the
Statement of Additional Information. Securities rated Baa by Moody's and BBB by
S&P have speculative characteristics. The Adviser may also use options and
hedging strategies designed to protect the Portfolio's holdings.
<PAGE>
SPECIAL INVESTMENT METHODS
The Portfolios may invest in U.S. Government Securities, repurchase
agreements, convertible securities, options for hedging purposes and money
market instruments. Descriptions of such securities, and the inherent risks of
investing in such securities, are set forth below.
U.S. Government Securities
The Portfolios may invest in U.S. Government Securities which are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Obligations issued by the U.S. Treasury include Treasury
Bills, Notes and Bonds which differ from each other mainly in their interest
rates and the length of their maturity at original issue. In this regard,
Treasury Bills have a maturity of one year or less, Treasury Notes have
maturities of one to ten years and Treasury Bonds generally have maturities
greater than ten years. Such Treasury Securities are backed by the full faith
and credit of the U.S. Government.
The obligations of U.S. Government agencies or instrumentalities are
guaranteed or backed in a variety of ways by the U.S. Government, its agencies
or instrumentalities. Some of these obligations, such as Government National
Mortgage Association mortgage-related securities, and obligations of the Farmers
Home Administration, are backed by the full faith and credit of the U.S.
Treasury. Obligations of the Farmers Home Administration are also backed by the
issuer's right to borrow from the U.S. Treasury. Obligations of Federal Home
Loan Banks and the Farmers Home Administration are backed by the discretionary
authority of the U.S. Government to purchase certain obligations of agencies or
instrumentalities. Obligations of Federal Home Loan Banks, the Farmers Home
Administration, Federal Farm Credit Banks, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation are backed by the
credit of the agency or instrumentality issuing the obligations.
As with all fixed income securities, various market forces influence the
value of such securities. There is an inverse relationship between the market
value of such securities and yield. As interest rates rise, the value of the
securities falls; conversely, as interest rates fall, the market value of such
securities rises.
Repurchase Agreements
The Government Securities, Equity Income and Capital Appreciation
Portfolios may enter into repurchase agreements on U.S. Government Securities
for temporary defensive purposes. A repurchase agreement involves the purchase
by a Portfolio of U.S. Government Securities with the condition that after a
stated period of time (usually seven days or less) the original seller will buy
back the same securities ("collateral") at a predetermined price or yield.
Repurchase agreements involve certain risks not associated with direct
investments in securities. In the event the original seller defaults on its
obligation to repurchase, as a result of its bankruptcy or otherwise, the
Portfolio will seek to sell the collateral, which action could involve costs or
delays. In such case, the Portfolio's ability to dispose of the collateral to
recover such investment may be restricted or delayed. While collateral will at
<PAGE>
all times be maintained in an amount equal to the repurchase price under the
agreement (including accrued interest due thereunder), to the extent proceeds
from the sale of collateral were less than the repurchase price, a Portfolio
would suffer a loss.
Options Transactions
The Equity Income Portfolio and Capital Appreciation Portfolio may
purchase put options, solely for hedging purposes, in order to protect portfolio
holdings in an underlying security against a substantial decline in the market
value of such holdings ("protective puts"). Such protection is provided during
the life of the put because the Portfolio may sell the underlying security at
the put exercise price, regardless of a decline in the underlying security's
market price. Any loss to the Portfolio is limited to the premium paid for, and
transaction costs paid in connection with, the put plus the initial excess, if
any, of the market price of the underlying security over the exercise price.
However, if the market price of such security increases, the profit a Portfolio
realizes on the sale of the security will be reduced by the premium paid for the
put option less any amount for which the put is sold.
The Equity Income Portfolio and Capital Appreciation Portfolio may also
purchase call options solely for the purpose of hedging against an increase in
prices of securities that the Portfolio ultimately wants to buy. Such protection
is provided during the life of the call option because the Portfolio may buy the
underlying security at the call exercise price regardless of any increase in the
underlying security's market price. In order for a call option to be profitable,
the market price of the underlying security must rise sufficiently above the
exercise price to cover the premium and transaction costs. By using call options
in this manner, a Portfolio will reduce any profit it might have realized had it
bought the underlying security at the time it purchased the call option by the
premium paid for the call option and by transaction costs.
The Equity Income Portfolio and Capital Appreciation Portfolio may only
purchase exchange-traded put and call options. Exchange-traded options are third
party contracts with standardized strike prices and expiration dates and are
purchased from a clearing corporation. Exchange-traded options have a continuous
liquid market while other options may not. See "Special Investment Methods -
Investment Restrictions."
Use of options in hedging strategies is intended to protect performance
but can result in poorer performance than without hedging with options, if the
Adviser is incorrect in its forecasts of the direction of stock prices.
Normally, the Portfolio will only invest in options to protect existing
positions and as a result, will normally invest no more than 10% of the
Portfolio's assets in options.
Convertible Securities
Convertible securities are securities that may be exchanged or converted
into a predetermined number of the issuer's underlying common shares at the
option of the holder during a specified time period. Convertible securities may
<PAGE>
take the form of convertible preferred stock, convertible bonds or debentures,
or a combination of the features of these securities. The investment
characteristics of convertible securities vary widely, allowing convertible
securities to be employed for different investment objectives.
Convertible bonds and convertible preferred stocks are fixed income
securities entitling the holder to receive the fixed income of a bond or the
dividend preference of a preferred stock until the holder elects to exercise the
conversion privilege. They are senior securities, and, therefore, have a claim
to assets of the issuer prior to the common stock in the case of liquidation.
However, convertible securities are generally subordinated to non-convertible
securities of the same company. The interest income and dividends from
convertible bonds and preferred stocks provide a stream of income with generally
higher yields than common stocks, but lower than non-convertible securities of
similar quality.
As with all fixed income securities, various market forces influence the
market value of convertible securities, including changes in the prevailing
level of interest rates. As the level of interest rates increases, the market
value of convertible securities tends to decline and, conversely, as interest
rates decline, the market value of convertible securities tends to increase. The
unique investment characteristic of convertible securities (the right to
exchange for the issuer's common stock) causes the market value of the
convertible securities to increase when the value of the underlying common stock
increases. However, because security prices fluctuate, there cannot be an
assurance of capital appreciation. Most convertible securities will not reflect
as much capital appreciation as their underlying common stocks. When the
underlying common stock is experiencing a decline, the value of the convertible
security tends to decline to a level approximating the yield-to-maturity basis
of straight non-convertible debt of similar quality, often called "investment
value," and may not experience the same decline as the underlying common stock.
Most convertible securities sell at a premium over their conversion values
(i.e., the number of shares of common stock to be received upon conversion
multiplied by the current market price of the stock). This premium represents
the price investors are willing to pay for the privilege of purchasing a fixed
income security with a possibility of capital appreciation due to the conversion
privilege. If this appreciation potential is not realized, the premium may not
be recovered.
Money Market Instruments
The Government Securities, Equity Income and Capital Appreciation
Portfolios may invest in money market instruments which include:
(i) U.S. Treasury Bills;
(ii) U.S. Treasury Notes with maturities of 18 months or less;
(iii) U.S. Government Securities subject to repurchase agreements;
<PAGE>
(iv) Obligations of domestic branches of U.S. banks (including
certificates of deposit and bankers' acceptances with maturities of 18 months or
less) which at the date of investment have capital, surplus, and undivided
profits (as of the date of their most recently published financial statements)
in excess of $10,000,000 and obligations of other banks or savings and loan
associations if such obligations are insured by the Federal Deposit Insurance
Corporation ("FDIC") or the Federal Savings and Loan Insurance Corporation
("FSLIC");
(v) Commercial paper which at the date of investment is rated A-1 by S&P
or P-1 by Moody's or, if not rated, is issued or guaranteed as to payment of
principal and interest by companies which at the date of investment have an
outstanding debt issue rated AA or better by S&P or Aa or better by Moody's;
(vi) Short-term (maturing in one year or less) corporate obligations which
at the date of investment are rated AA or better by S&P or Aa or better by
Moody's; and
(vii) Shares of no-load money market mutual funds (subject to the
ownership restrictions of the Investment Company Act of 1940). See
"Investment Objectives, Policies and Restrictions" in the Statement of
Additional Information.
The Intermediate Government Bond Portfolio may invest in the Money Market
Instruments described in (i), (ii), (iv) and (vii) above, provided that
investments in shares of no load money market mutual funds shall be further
invested in those money market mutual funds which invest solely in those
securities otherwise permitted for the Portfolio. Investment by a Portfolio in
shares of a money market mutual fund indirectly results in the investor paying
not only the advisory fee and related fees charged by the Portfolio, but also
the advisory fees and related fees charged by the adviser and other entities
providing services to the money market mutual fund.
Borrowing
The Portfolios may borrow money from banks for temporary or emergency
purposes in an amount of up to 10% of the value of the Portfolio's total assets.
Interest paid by a Portfolio on borrowed funds would decrease the net earnings
of that Portfolio. None of the Portfolios will purchase portfolio securities
while outstanding borrowings exceed 5% of the value of the Portfolio's total
assets. Each of the Portfolios may mortgage, pledge, or hypothecate its assets
in an amount not exceeding 10% of the value of its total assets to secure
temporary or emergency borrowing. The policies set forth in this paragraph are
fundamental and may not be changed with respect to a Portfolio without the
approval of a majority of that Portfolio's shares.
Portfolio Turnover
While it is not the policy of any of the Portfolios to trade actively for
short-term (less than six months) profits, each Portfolio will dispose of
securities without regard to the time they have been held when such action
<PAGE>
appears advisable to the Adviser, subject to, among other factors, the
constraints imposed on regulated investment companies by Subchapter M of the
Internal Revenue Code. See "Dividends, and Taxes." In the case of each
Portfolio, frequent changes will result in increased brokerage and other costs.
The methods of calculating portfolio turnover rate are set forth in the
Statement of Additional Information under "Investment Objectives, Policies and
Restrictions - Portfolio Turnover."
Investment Restrictions
The Fund has adopted certain investment restrictions applicable to the
Portfolios which are set forth in the Statement of Additional Information. Some
of these restrictions, which are fundamental and may not be changed without
shareholder approval, include the following: (1) no Portfolio will invest 25% or
more of its total assets in any one industry (this restriction does not apply to
securities of the U.S. Government or its agencies and instrumentalities and
repurchase agreements relating thereto; however, utility companies, gas,
electric, telephone, telegraph, satellite, and microwave communications
companies are considered as separate industries); (2) no security can be
purchased by a Portfolio, except the Intermediate Government Bond Portfolio if,
as a result, more than 5% of 75% of the total assets of that Portfolio would
then be invested in the securities of a single issuer (other than U.S.
Government obligations); (3) as to the Intermediate Government Bond Portfolio,
no security may be purchased by it if, as a result, more than 5% of the value of
100% of its total assets would be invested in the securities of a single issuer
(other than U.S. Government obligations); (4) no security can be purchased by a
Portfolio if as a result more than 10% of any class of securities, or more than
10% of the outstanding voting securities of an issuer, would be held by that
Portfolio; and (5) no Portfolio will cause more than 10% of the value of its
total assets to be invested collectively in repurchase agreements maturing in
more than seven days and other illiquid securities. Additional investment
restrictions are set forth in the Statement of Additional Information.
If a percentage restriction set forth under "Investment Objectives and
Policies" is adhered to at the time of an investment, a later increase or
decrease in percentage resulting from changes in values or assets will not
constitute a violation of such restriction. The foregoing investment
restrictions, as well as all investment objectives and policies designated by
the Fund as fundamental policies in the Statement of Additional Information, may
not be changed without the approval of a "majority" of a Portfolio's shares
outstanding, defined as the lesser of: (a) 67% of the votes cast at a meeting of
shareholders for a Portfolio at which more than 50% of the shares are
represented in person or by proxy, or (b) a majority of the outstanding voting
shares of that Portfolio. These provisions apply to each Portfolio if the action
proposed to be taken affects that Portfolio. The Adviser may also agree to
certain additional investment policies in order to qualify the shares of some of
the Portfolios in various states.
<PAGE>
MANAGEMENT
Board of Directors
As in all corporations, the Fund's Board of Directors has the primary
responsibility for overseeing the overall management of the Fund. The Board of
Directors meets periodically to review the activities of the Portfolios and the
Adviser and to consider policy matters relating to the Portfolios and the Fund.
Investment Adviser and Administrator
Union Bank and Trust Company has been retained under an Investment
Advisory Agreement with the Fund to act as the Portfolios' Adviser subject to
the authority of the Board of Directors. Union Bank and Trust Company was
chartered as a state bank in 1918 and through its Trust Department has been
managing investments for its trust accounts for many years; however, until the
organization of the Fund, Union had not previously advised mutual funds. Union
is substantially owned by Farmers and Merchants Investment, Inc., a Nebraska one
bank holding company, which is controlled by members of the Dunlap family, which
includes Michael S. Dunlap, an officer and director of the Fund. The address of
the Adviser is 3643 So. 48th, Lincoln, Nebraska 68506.
The Adviser furnishes the Portfolios with investment advice and, in
general, supervises the management and investment programs of the Fund. The
Adviser furnishes at its own expense all necessary administrative services:
office space, equipment, clerical personnel for servicing the investments of the
Portfolios, investment advisory facilities, executive and supervisory personnel
for managing the investments and effecting the securities transactions of the
Portfolios. In addition, the Adviser pays the salaries and fees of all officers
and directors of the Fund who are affiliated persons of the Adviser. Under the
Investment Advisory Agreement, the Adviser receives a monthly fee computed
separately on the daily average net asset value of the respective Portfolio at
an annual rate of .50% for the Government Securities and Equity Income
Portfolios; .65% for the Intermediate Government Bond Portfolio and 1.40% of the
daily net asset value of the Capital Appreciation Portfolio plus a
performance-based adjustment described below.
With regard to the investment advisory fee paid for the Capital
Appreciation Portfolio, the Capital Appreciation Portfolio pays the Adviser a
basic monthly management fee computed at the annual rate of 1.40% of its daily
average net asset value. In addition, the Capital Appreciation Portfolio pays
the Adviser an incentive adjustment, by which the basic fee may be increased or
decreased by up to 1.40% of the average daily net asset value during the latest
12 months (a rolling average method) of the Portfolio, depending upon the
performance of the Portfolio relative to the S&P 500. See the Statement of
Additional Information for a detailed discussion of the incentive fee. For the
period ending June 30, 1995, the Fund paid the Adviser $2,292, which when
annualized represented a fee equivalent to .34% of average annual net assets.
This basic fee is higher than that paid by most other investment companies.
<PAGE>
William S. Eastwood, CFA, Jon C. Gross, CFA, and Curtis R. LeValley are
responsible for the day-to-day management of the Portfolio's investments.
William S. Eastwood has been affiliated with Union Bank & Trust Company and the
management of the Fund and of the various common trust funds of Union Bank &
Trust Company since March of 1995. Prior to joining Union Bank & Trust, Mr.
Eastwood was Statewide Manager of Trust Investments for a regional bank. Mr.
Eastwood was responsible for the management of equity and fixed income common
funds at that bank from 1979 to 1995. Mr. Eastwood holds the Chartered Financial
Analyst (CFA) professional designation. Jon C. Gross is currently a Trust
Investment Officer/Portfolio Manager and has been affiliated with Union Bank &
Trust Company since 1988 and has been actively involved in management of the
Fund and the common and collective funds of the Bank since July, 1991. Mr. Gross
holds the Chartered Financial Analyst (CFA) professional designation. Curtis
LeValley is currently a Trust Investment Officer/Portfolio Manager and has been
affiliated with Union Bank & Trust Company since May of 1995. Prior to joining
Union Bank & Trust, Mr. LeValley managed investment accounts for high net worth
individuals. Mr. LeValley is currently enrolled in the CFA program.
Lancaster Administrative Services, Inc., has also been retained as the
Fund's Administrator under a Transfer Agent and Administrative Services
Agreement with the Fund. The Administrator provides, or contracts with others to
provide, all necessary recordkeeping services and share transfer services for
the Fund. The Administrator is entitled to receive an administration fee,
computed and paid monthly, at an annual rate of .25% of the average daily net
assets of each Portfolio. The Administrator intends to enter into
Sub-Administration Agreements with various banks and financial institutions
pursuant to which such banks and financial institutions will provide
subaccounting and other shareholder services to their customers who invest in
the Portfolios. These Sub-Administration Agreements will provide for the payment
of a fee of up to .15% of average daily net assets of the Portfolios represented
by shares held by the banks. Banks may reimburse customer accounts for such fees
if required by local trust laws.
Expenses
The expenses paid by the Portfolios are deducted from total income before
dividends are paid. These expenses include, but are not limited to, the fees
paid to the Adviser and the Administrator, taxes, interest, ordinary and
extraordinary legal and auditing fees, custodial charges, registration and blue
sky fees incurred in registering and qualifying the Portfolios under state and
federal securities laws, association fees, director fees paid to directors who
are not affiliated with the Adviser, and any other fees not expressly assumed by
the Adviser or Administrator. Any general expenses of the Fund that are not
readily identifiable as belonging to a particular Portfolio will be allocated to
the Portfolios on a pro rata basis, at the time such expenses are accrued. The
Portfolios pay their own brokerage commissions and related transactions costs.
<PAGE>
Portfolio Brokerage
The primary consideration in effecting transactions for the Portfolios is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and the broker-dealers through or with which (acting on an agency
basis or as principal) they seek execution at the most favorable prices. The
Adviser may consider a number of factors in determining which broker-dealers to
use for the Portfolios' transactions. These factors, which are more fully
discussed in the Statement of Additional Information, include, but are not
limited to, research services, the reasonableness of commissions and quality of
services and execution. Portfolio transactions for the Portfolios may be
effected through SMITH HAYES, which also acts as the Distributor of the Fund's
shares, if the commissions, fees or other remuneration received by SMITH HAYES
are reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. SMITH HAYES has represented that, in executing portfolio
transactions for the Fund, it intends to charge commissions which are
substantially less than non-discounted retail commissions. In effecting
portfolio transactions through SMITH HAYES, the Fund intends to comply with
Section 17(e)(1) of the Investment Company Act of 1940 (the "1940 Act"), as
amended.
Banking Law Matters
Banking laws and regulations, including the Glass-Steagall Act as
currently interpreted by the Board of Governors of the Federal Reserve System,
prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 or any affiliate thereof from sponsoring, organizing,
controlling, or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares and prohibit banks
generally from issuing, underwriting, selling or distributing securities. The
same laws and regulations generally permit a bank or bank affiliate to act as
investment adviser, transfer agent, or custodian to an investment company and to
purchase shares of the investment company as agent for and upon the order of a
customer. Cline, Williams, Wright, Johnson & Oldfather, counsel to the Fund,
believe that the Adviser and any other bank or bank affiliate that may perform
advisory or sub-transfer agent or similar services may perform the services
described in this Prospectus for the Fund and its shareholders without violating
applicable federal banking laws or regulations.
However, judicial or administrative decisions or interpretations of, as
well as changes in, either federal or state statutes or regulations relating to
the activities of banks and their affiliates could prevent a bank or bank
affiliate from continuing to perform all or a part of the activities
contemplated by this Prospectus. If a bank or bank affiliate were prohibited
from so acting, its shareholder customers would be permitted to remain
shareholders of the Fund and an alternative means of continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the Fund might occur and a shareholder serviced by such bank or bank affiliate
might no longer be able to avail itself of their services. It is not expected
that shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
<PAGE>
Performance Information
From time to time, performance information for the Portfolios showing a
Portfolio's average annual total return, aggregate total return and/or yield may
be presented in advertisements and sales literature. Such performance figures
are based on historical earnings and are not intended to indicate future
performance. Average annual total return will be calculated for the period since
the establishment of the Portfolio for which performance is being calculated.
Average annual total return is measured by comparing the value of an investment
in a Portfolio at the beginning of the relevant period to the redeemable value
of the investment at the end of the period (assuming immediate reinvestment of
any dividends or capital gains distributions). Aggregate total return is
calculated similarly to average annual total return except that the return
figure is aggregated over the relevant period instead of annualized. Yield will
be computed by dividing a Portfolio's net investment income per share (as
calculated on a yield to maturity basis) earned during a recent 30-day period by
that Portfolio's per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) earned on the last day
of the period and annualizing the result.
In addition, from time to time the Portfolios may present their
distribution rate in supplemental sales literature which is accompanied or
preceded by a prospectus and in its shareholder reports. Distribution rates will
be computed by dividing the distribution per share made by a Portfolio over a
12-month period by the maximum offering price per share. The calculation of
income and the distribution rate includes both income and capital gains
dividends and does not reflect unrealized gains or losses. The distribution rate
differs from the yield, because it includes capital items which are often
non-reoccurring in nature, whereas yield does not include such items.
Investors may also judge the performance of each Portfolio by comparing
its performance to the performance of other mutual funds or other mutual fund
portfolios with comparable investment objectives and policies through various
mutual fund or market indices and to data prepared by various services, which
indices or data may be published by such services or by other services or
publications. In addition to performance information, general information about
the Portfolios that appears in such publications may be included in
advertisements and reports to shareholders.
Yield and total return are functions of the type and quality of
instruments held by a Portfolio, operating expenses and market conditions.
Consequently, current yields and total return will fluctuate and are not
necessarily representative of future results. Any fees charged by the Adviser or
any of its affiliates with respect to customer accounts for investing in shares
of any of the Portfolios will not be included in performance calculations; such
fees, if charged, will reduce the actual performance by that quoted. In
addition, if the Adviser, the Administrator, or other parties providing services
to the Fund, voluntarily reduce all or part of their respective fees for a
Portfolio, the yield and total return for that Portfolio will be higher than it
would otherwise be in the absence of such voluntary fee reductions.
<PAGE>
PURCHASE OF SHARES
General
SMITH HAYES acts as the principal distributor of the Fund's shares. The
Portfolios' shares may be purchased at the net asset value per share from
registered representatives of SMITH HAYES and from certain other broker-dealers
who have sales agreements with SMITH HAYES. The address of SMITH HAYES is that
of the Fund. Shareholders will receive written confirmation of their purchases.
Stock certificates will not be issued in order to facilitate redemptions and
transfers between the Portfolios. SMITH HAYES reserves the right to reject any
purchase order. Shares of the Portfolios are offered to the public without a
sales charge at the net asset value per share next determined following receipt
of an order by SMITH HAYES. See "Valuation of Shares."
Investors may purchase shares by completing the Purchase Application
included in this Prospectus and submitting it with a check payable to:
STRATUS FUND, Inc.
200 Centre Terrace
1225 "L" Street
Lincoln, Nebraska 68508
For subsequent purchases, the name of the account and the account number should
be included with any purchase order to properly identify your account. Payment
for shares may also be made by bank wire. To do so, the investor must direct his
or her bank to wire immediately available funds directly to the Custodian as
indicated below:
1. Telephone the Fund (402) 476-3000 and furnish the name, the account
number and the telephone number of the investor as well as the amount being
wired and the name of the wiring bank. If a new account is being opened,
additional account information will be requested and an account number will be
provided.
2. Instruct the bank to wire the specific amount of immediately available
funds to the Custodian. The Fund will not be responsible for the consequences of
delays in the bank or Federal Reserve wire system. The investor's bank must
furnish the full name of the investor's account and the account number.
<PAGE>
The wire should be addressed as follows:
UNION BANK AND TRUST COMPANY
Lincoln, Nebraska
Fund Department, ABA #104910795
Lincoln, Nebraska 68506
Account of STRATUS FUND, Inc.
---------------------------------
FBO (Account Registration name)
#________________________________
3. Complete a Purchase Application and mail it to the Fund, if shares being
purchased by bank wire transfer represent an initial purchase. (The completed
Purchase Application must be received by the Fund before subsequent instructions
to redeem Fund shares will be accepted). Banks may impose a charge for the wire
transfer of funds.
Minimum Investments
Except as provided under the Automatic Investment Plan a minimum initial
aggregate investment of $1,000 is required, unless waived by the Distributor.
All investments must be made through your SMITH HAYES investment executive or
other broker-dealer.
Automatic Investment Plan
Under an automatic investment plan, money is withdrawn each month from a
shareholder's predesignated bank account for investment in a Portfolio. The
minimum investment is $50 per Portfolio. A shareholder must make an initial
investment of at least $50 in each receiving Portfolio. By investing the same
dollar amount each month, a shareholder will purchase more shares when a
Portfolio's net asset value is low and fewer shares when the net asset value is
high. This means that the shareholder's average purchase price per share can be
lower than if he or she purchased the same total number of shares in a single
transaction. While periodic investing can help build significant savings over
time, it does not assure a profit or protect against loss in a declining market.
Investor's must notify their account representative to establish an
automatic investment plan, and his or her bank must be a member of the Automated
Clearing House. The shareholder may revoke the plan at any time, but it may take
up to 15 days from the date a written revocation notice is received to terminate
the plan. Any purchases of shares made during the period shall be considered
authorized. If an automatic withdrawal cannot be made from the shareholder's
predesignated bank account to provide funds for automatic share purchases, the
shareholder's plan will be terminated.
<PAGE>
REDEMPTION OF SHARES
Redemption Procedure
Shares of the Portfolios, in any amount, may be redeemed at any time at
their current net asset value next determined after a request in good order is
received by SMITH HAYES. To redeem shares of the Portfolios, an investor must
make a redemption request through a SMITH HAYES investment executive or other
broker-dealer. If the redemption request is made to a broker-dealer other than
SMITH HAYES, such broker-dealer will wire a redemption request to SMITH HAYES
immediately following the receipt of such a request. A redemption request will
be considered to be in "good order" if made in writing and accompanied by the
following:
1. a letter of instruction or stock assignment specifying the number or
dollar value of shares to be redeemed, signed by all the owners of the shares in
the exact names in which they appear on the account, or by an authorized officer
of a corporate shareholder indicating the capacity in which such officer is
signing;
2. a guarantee of the signature of each owner by an eligible
institution which is a participant in the Securities Transfer Agent
Medallion Program which includes many U.S. commercial banks and members of
recognized securities exchanges; and
3. other supporting legal documents, if required by applicable law, in
the case of estates, trusts, guardianships, custodianships, corporations
and pension and profit-sharing plans.
Payment of Redemption Proceeds
Normally, the Fund will make payment for all shares redeemed within five
business days, but in no event will payment be made more than seven days after
receipt by SMITH HAYES of a redemption request in good order. However, payment
may be postponed or the right of redemption suspended for more than seven days
under unusual circumstances, such as when trading is not taking place on the New
York Stock Exchange. Payment of redemption proceeds may also be delayed until
the check used to purchase the shares to be redeemed has cleared the banking
system, which may take up to 15 days from the purchase date. A shareholder may
request that the Fund transmit redemption proceeds by Federal Funds bank wire to
a bank account designated on the shareholder's account application form,
provided such bank wire redemptions are in the amounts of $500 or more and all
requisite account information is provided to the Fund.
<PAGE>
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account at any time
the net asset value of the account falls below $500 as the result of a
redemption or transfer request. Shareholders will be notified in writing that
the value of their account is less than $500 and will be allowed 30 days to make
additional investments before the redemption is processed.
Automatic Withdrawal Plan
Investors who own shares of the Fund with a value of $5,000 or more may
elect to redeem a portion of their shares on a regular periodic (monthly,
quarterly or annual) basis. The minimum withdrawal amount is $100. Payment may
be made to the shareholder, a predesignated bank account, or to another payee.
Under this plan, sufficient shares are redeemed form the shareholder's
account(s) in time to send a check in the amount requested on or about the first
day of a month. Redemptions under the automatic withdrawal plan will reduce and
may ultimately exhaust the value of the designated account(s). Taxable gains or
losses may be realized when shares are redeemed under the automatic withdrawal
plan.
Purchasing additional shares concurrently with automatic withdrawals is
likely to be disadvantageous to the shareholder because to tax liabilities.
Consequently, the Portfolio will not normally accept additional purchase
payments in single amounts of less than $5,000 from a shareholder who has this
plan in effect. Any charges to operate an automatic withdrawal plan will be
assessed against the shareholder's account(s) when each withdrawal is effected.
Investor's must notify their account representative to establish an
automatic withdrawal plan. Forms must be properly completed and received at
least 30 days before the first payment date. An automatic withdrawal plan may be
terminated at any time, by written notice from the shareholder.
VALUATION OF SHARES
The Portfolios determine their net asset value on each day the New York
Stock Exchange (the "Exchange") is open for business, provided that the net
asset value need not be determined for a Portfolio on days when no Portfolio
shares are tendered for redemption and no order for Portfolio shares is
received. The calculation is made as of the close of business of the Exchange
(currently 4:00 p.m., New York time) after the Portfolios have declared any
applicable dividends.
The net asset value per share for each of the Portfolios is determined by
dividing the value of the securities owned by the Portfolio plus any cash and
other assets (including interest accrued and dividends declared but not
collected) less all liabilities by the number of Portfolio shares outstanding.
For the purposes of determining the aggregate net assets of the Portfolios, cash
and receivables will be valued at their face amounts. Interest will be recorded
<PAGE>
as accrued and dividends will be recorded on the ex-dividend date. Securities
traded on a national securities exchange or on the NASDAQ National Market System
are valued at the last reported sale price that day. Securities traded on a
national securities exchange or on the NASDAQ National Market System for which
there were no sales on that day and securities traded on other over-the-counter
markets for which market quotations are readily available are valued at the mean
between the bid and the asked prices. Portfolio securities underlying actively
traded options will be valued at their market price as determined above. The
current market value of any exchange-traded option held by a Portfolio is its
last sales price on the exchange prior to the time when assets are valued unless
the bid price is higher or the asked price is lower, in which event such bid or
asked price is used. Lacking any sales that day, the options will be valued at
the mean between the current closing bid and asked prices. Securities and other
assets for which market prices are not readily available are valued at fair
value as determined in good faith by the Board of Directors. With the approval
of the Board of Directors, the Portfolios may utilize a pricing service, bank,
or broker-dealer experienced in such matters to perform any of the
above-described functions.
DIVIDENDS AND TAXES
Dividends
All net investment income dividends and net realized capital gains
distributions with respect to the shares of any Portfolio will be payable in
additional shares of such Portfolio unless the shareholder notifies his or her
SMITH HAYES investment executive or other broker-dealer of an election to
receive cash. The taxable status of income dividends and/or net capital gains
distributions is not affected by whether they are reinvested or paid in cash.
Each of the Portfolios will pay dividends from net investment income to its
shareholders at least annually or as may be required to remain a regulated
investment company under the Internal Revenue Code (the "Code") and distribute
net realized capital gains, if any, to its shareholders on an annual basis.
Taxes
The Portfolios will each be treated as separate entities for federal income
tax purposes. The Fund intends to qualify the Portfolios as "regulated
investment companies" as defined in the Code. Provided certain distribution
requirements are met, the Portfolios will not be subject to federal income tax
on their net investment income and net capital gains that they distribute to
their shareholders.
Shareholders subject to federal income taxation will receive taxable
dividend income or capital gains, as the case may be, from distributions,
whether paid in cash or received in the form of additional shares. Promptly
after the end of each calendar year, each shareholder will receive a statement
of the federal income tax status of all dividends and distributions paid during
the year.
<PAGE>
Shareholders of the Intermediate Government Bond and the Government
Securities Portfolios may be able to exclude a portion of the dividends received
from taxable income as exempt interest income under various state income tax
rules. Shareholders should consult their tax advisers as to the extent and
availability of these exclusions.
The Fund is subject to the backup withholding provisions of the Code and is
required to withhold income tax from dividends and redemptions paid to a
shareholder at a 31% rate, if such shareholder fails to furnish the Portfolio
with a taxpayer identification number or under certain other circumstances.
Accordingly, shareholders are urged to complete and return Form W-9 when
requested to do so by the Fund.
This discussion is only a summary and relates solely to federal tax
matters. Dividends may also be subject to state and local taxation. Shareholders
are urged to consult with their personal tax advisers.
GENERAL INFORMATION
Capital Stock
The Fund is authorized to issue a total of one billion shares of common
stock, with a par value of $.001 per share. Of these shares, the Board of
Directors has authorized the issuance of shares in series designated
Intermediate Government Bond Portfolio, Government Securities Portfolio, Equity
Income Portfolio and Capital Appreciation Portfolio shares. The Board of
Directors designated 10 million shares to each of the Portfolios. The Board of
Directors is empowered under the Fund's Articles of Incorporation to issue other
series of the Fund's common stock without shareholder approval or to designate
additional authorized but unissued shares for issuance by one or more existing
Portfolios.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable and freely transferable. All shares have equal voting rights. They
can be issued as full or fractional shares. A fractional share has pro rata the
same rights and privileges as a full share. The shares possess no preemptive or
conversion rights.
Voting Rights
Each share of the Portfolios has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the Fund's
shares. On some issues, such as the election of directors, all shares of the
Fund, irrespective of series, vote together as one series. Cumulative voting is
not authorized. This means that the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so, and, in such event, the holders of the remaining shares will be
unable to elect any directors.
<PAGE>
On an issue affecting only one Portfolio, the shares of the Portfolio vote
as a separate series. Examples of such issues would be proposals to (i) change
the Investment Advisory Agreement, (ii) change a fundamental investment
restriction pertaining to only one Portfolio or (iii) change a Portfolio's
Distribution Plan. In voting on the Investment Advisory Agreement or proposals
affecting only one Portfolio, approval of such an agreement or proposal by the
shareholders of one Portfolio would make that agreement effective as to that
Portfolio whether or not the agreement or proposal had been approved by the
shareholders of the Fund's other Portfolios.
As of September 30, 1995, the Adviser held of record but not beneficially,
a substantial majority of the outstanding shares of each of the Portfolios and
therefore may be deemed to control each of the Portfolios within the meaning of
the 1940 Act.
Shareholders Meetings
The Fund does not intend to hold annual or periodically scheduled regular
meetings of shareholders unless it is required to do so. Minnesota corporation
law requires only that the Board of Directors convene shareholder meetings when
it deems appropriate. However, Minnesota law provides that if a regular meeting
of shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding 3% or more of the voting shares of the Fund
may demand a regular meeting of shareholders by written notice given to the
chief executive officer or chief financial officer of the Fund. Within 30 days
after receipt of the demand, the Board of Directors shall cause a regular
meeting of shareholders to be called, which meeting shall be held no later than
90 days after receipt of the demand, all at the expense of the Fund.
In addition, the 1940 Act requires a shareholder vote for all amendments to
fundamental investment policies and restrictions, for all investment advisory
contracts and amendments thereto, and for all amendments to Rule 12b-1
distribution plans. Finally, the Fund's Articles of Incorporation provide that
shareholders also have the right to remove Directors upon two-thirds vote of the
outstanding shares and may call a meeting to remove a Director upon the
application of 10% or more of the outstanding shares. The Fund is obligated to
facilitate shareholder communications in this situation if certain conditions
are met.
Allocation of Income and Expenses
The assets received by the Fund for the issue or sale of shares of the
Portfolios, and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are allocated to the Portfolios, and constitute
the underlying assets of the Portfolios. The underlying assets of the Portfolios
are required to be segregated on the books of account, and are to be charged
with the expenses of the Portfolios and with a share of the general expenses of
the Fund. Any general expenses of the Fund not readily identifiable as belonging
to a particular series are allocated among all series based upon the relative
net assets of each series at the time such expenses were accrued.
<PAGE>
Transfer Agent, Dividend Disbursing Agent and Custodian
Union Bank and Trust Company, Lincoln, Nebraska, serves as Custodian for
the Fund's portfolio securities and cash. The Administrator acts as Transfer
Agent and Dividend Disbursing Agent. In its capacity as Transfer Agent and
Dividend Disbursing Agent, the Administrator performs many of the clerical and
administrative functions for the Portfolios.
Reports to Shareholders
The Fund will issue semi-annual reports which will include a list of
securities of the Portfolio owned by the Fund and financial statements, which in
the case of the annual report, will be examined and reported upon by the Fund's
independent auditor.
Legal Opinion
The legality of the shares offered hereby will be passed upon, and the
opinion with respect to all tax matters will be rendered by, Messrs. Cline,
Williams, Wright, Johnson & Oldfather, 1900 FirsTier Bank Building, Lincoln,
Nebraska 68508.
Auditors
The Fund's auditors are KPMG Peat Marwick LLP, Omaha, Nebraska, independent
certified public accountants.
<PAGE>
TABLE OF CONTENTS
Introduction .............................................. 2
Annual Operating Expenses.................................. 4
Financial Highlights....................................... 5
Investment Objective
and Policies............................................... 9
Intermediate Government Bond............................ 9
Government Securities................................... 10
Equity Income........................................... 11
Capital Appreciation.................................... 12
Special Investment Methods ................................ 14
Management ................................................ 19
Purchase of Shares ........................................ 23
Redemption of Shares ...................................... 25
Valuation of Shares ....................................... 26
Dividends and Taxes........................................ 27
General Information........................................ 28
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE
COVER PAGE OF THIS PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY STRATUS
FUND, INC. OR SMITH HAYES FINANCIAL SERVICES CORPORATION. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
<PAGE>
STRATUS FUND, INC.
INTERMEDIATE GOVERNMENT
BOND PORTFOLIO
GOVERNMENT SECURITIES
PORTFOLIO
EQUITY INCOME PORTFOLIO
CAPITAL APPRECIATION
PORTFOLIO
PROSPECTUS
INVESTMENT ADVISER
Union Bank and Trust Company
ADMINISTRATOR,
TRANSFER AGENT AND
DIVIDEND PAYING AGENT
Lancaster Administrative
Services, Inc.
DISTRIBUTOR
SMITH HAYES Financial
Services Corporation
CUSTODIAN
Union Bank and Trust Company
Lincoln, Nebraska
<PAGE>
STRATUS FUND, Inc. Date -------------------
500 Centre Terrace, 1225 L Street, Lincoln, NE 68508 Account #---------------
In accordance with the terms and conditions set forth in this form, the current
prospectus, and my instructions below, I wish to establish a Shareholder Account
in the designated Portfolio(s) as follows:
O Intermediate Government Bond Portfolio -------------------- % or $
O Government Securities Portfolio -------------------- % or $
O Equity Income Portfolio -------------------- % or $
O Capital Appreciation Portfolio -------------------- % or $
ACCOUNT REGISTRATION (Please Print)
NOTE: In the case of two or more co-owners, the account will be registered "
Joint Tenants with Right of Survivorship" and not as "Tenants-in-common" unless
otherwise specified.
O Individual
- ---------------------------------------------------------- O Jt. WROS
Name of Shareholder O Corporation
O Trust
- ---------------------------------------------------------- O Other------
Name of Co-Owner (if any)
- -------------------------------------------------------------------------------
Street Address City State Zip Code
- --------------------------- Citizen of----- U.S.----- Other(specify)-----
Social Security or T.I.N. #
- --------------------------------------- --------------------------------
(Area Code) Home Telephone (Area Code) Business Telephone
DIVIDEND AND INVESTMENT OPTION (One box must be checked)
O Reinvest all dividends and capital gains distributions.
O Reinvest capital gain distributions only.
O Receive all dividends and capital gain distributions in cash.
SYSTEMATIC WITHDRAWAL PLAN
Mail a check for ----- prior to the last day of each -- O Month O Quarter O Year
First check to be mailed------------------(specify month)
SHAREHOLDER AUTHORIZATION AND CERTIFICATION
I authorize any instructions contained herein and certify under penalties of
perjury:(Strike number 2 if not true)
1. that the social security or other taxpayer identification number is correct;
2. that I am not subject to withholding either because of a failure to report
all interest or dividends or I was subject to withholding and the Internal
Revenue Service has notified me that I am no longer subject to withholding.
O Exempt from backup withholding
O Non-exempt from backup withholding
X----------------------------------- X--------------------------------------
Signature of Shareholder/or Signature of Co-Owner (if any)
Authorized Officer, if corporation
FOR DEALER ONLY (We hereby authorize Stratus Fund, Inc. as our agent in
connection with transactions under this authorization form. We guarantee the
shareholder's signature.)
- ------------------------------------ ----------------------------------------
Dealer Name (Please Print) Signature of Registered Representative
- ------------------------------------ ----------------------------------------
Home Office Address Address of Office Serving Account
- ------------------------------------ ----------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------ ----------------------------------------
Authorized Signature of Dealer Branch No. Reg. Rep. No. Reg. Rep. Last Name
<PAGE>
STRATUS FUND, INC.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
EQUITY INCOME PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
October 27, 1995
Table of Contents
Page
GENERAL INFORMATION........................................................2
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...........................2
Intermediate Government Bond Portfolio.................................2
Government Securities Portfolio........................................2
Equity Income Portfolio................................................3
Capital Appreciation Portfolio.........................................3
Portfolio Turnover.....................................................4
All Portfolios.........................................................4
DIRECTORS AND EXECUTIVE OFFICERS...........................................5
INVESTMENT ADVISORY AND OTHER SERVICES.....................................6
PORTFOLIO TRANSACTIONS AND BROKERAGE
ALLOCATIONS ..........................................................10
CAPITAL STOCK AND CONTROL.................................................11
NET ASSET VALUE AND PUBLIC OFFERING PRICE.................................12
REDEMPTION................................................................12
TAX STATUS................................................................13
CALCULATION OF PERFORMANCE DATA...........................................13
FINANCIAL STATEMENTS......................................................14
AUDITORS..................................................................14
APPENDIX A - Ratings of Corporate Obligations............................A-1
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the combined Prospectus for the
Intermediate Government Bond Portfolio, Government Securities Portfolio, Equity
Income Portfolio and Capital Appreciation Portfolio dated October 27, 1995, and
should be read in conjunction therewith. A copy of the Prospectus may be
obtained from the Fund at 200 Centre Terrace, 1225 "L" Street, Lincoln,
Nebraska, 68508.
<PAGE>
GENERAL INFORMATION
---------------------
The shares of the STRATUS FUND, Inc. (the "Fund") are currently offered in
series, with each series representing a separate investment portfolio with its
own investment objectives and policies. This Statement of Additional Information
relates to the series designated Intermediate Government Bond Portfolio,
Government Securities Portfolio, Equity Income Portfolio and Capital
Appreciation Portfolio shares (the "Portfolios"). The investment objectives and
policies of the Portfolios are set forth in the Prospectus. The Fund was
originally incorporated under the name NEW HORIZON FUND, INC. on October 29,
1990 and changed its name to APEX FUND, INC. on November 9, 1990. The name was
changed to STRATUS FUND, INC. on January 23, 1991. The Union Government
Securities Portfolio and Union Equity Income Portfolio changed their names to
simply Government Securities Portfolio and Equity Income Portfolio effective
April 30, 1994. The Growth/Income Portfolio was merged into the Equity Income
Portfolio on the same date and ceased separate existence. Certain additional
investment information is set forth below.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
-------------------------------------------------
Intermediate Government Bond Portfolio
The investment objective of the Intermediate Government Bond Portfolio is to
provide current income, some or all of which is exempt from state income tax,
consistent with the preservation of capital. In order to achieve this objective,
at least 80% of the assets of the Portfolio will be invested, at the time of
purchase, in securities issued or guaranteed by the United States Government,
its agencies or its instrumentalities.
The Portfolio will maintain an average dollar weighted maturity of between
three and ten years on debt securities it owns.
Government Securities Portfolio
The investment objective of the Government Securities Portfolio is to
provide current income consistent with the preservation of capital. In order to
achieve this objective, at least 80% of the total assets of the Portfolio will
be invested, at the time of purchase, in securities issued or guaranteed by the
United States Government, its agencies or its instrumentalities.
Additionally, the Portfolio may invest the remainder of its assets in:
(1) Domestic marketable debt obligations, rated at time of purchase within
the three highest debt rating categories established by Moody's Investors
Service, Inc. (Moody's)(Aaa, Aa and A) or Standard and Poor's Corporation
("Standard and Poor's) (AAA,AA and A) (see "Appendix" hereto);
(2) Obligations of commercial banks, including repurchase agreements. A
repurchase agreement involves the sale of securities and an agreement by the
seller to repurchase the securities at the same price plus an amount equal
to an agreed upon interest rate within a specified time period, usually
until the next business day but occasionally for longer periods. The
Portfolio must initially rely upon the credit of a particular bank for
completion of the repurchase agreement. Such repurchase agreements are
intended to be fully collateralized, in an amount equal to at least the
principal amount of the transaction plus accrued interest earned thereon, by
the underlying Government or agency securities valued at their fair market
value each day. Although the Portfolio will normally have legal title to and
construction possession of the collateral, it cannot eliminate the risk of a
default by a bank which could result in a loss to the Portfolio on the sale
of the underlying securities or delays in obtaining the collateral because
of bankruptcy or insolvency proceedings.
(3) Money Market investments as fully described in the Prospectus.
<PAGE>
Equity Income Portfolio
Ordinarily, the Equity Income Portfolio will be principally invested in
common stocks and other equity-related securities, such as convertible bonds and
preferred stock. Investments in convertible bonds and preferred stock will only
be made in securities which are rated in the top three classifications by
Moody's Investors Service, Inc. or Standard and Poor's Corporation. (see
"Appendix A" hereto for a description of these ratings).
In addition to common and preferred stocks, the Equity Income Portfolio may
invest in other securities having equity features because they are convertible
into, or represent the right to purchase, common stock. Convertible bonds and
debentures are corporate debt instruments, frequently unsecured and subordinated
to senior corporate debt, which may be converted into common stock at a
specified price. Such securities may trade at a premium over their face amount
when the price of the underlying common stock exceeds the conversion price, but
otherwise will normally trade at prices reflecting current interest rate trends.
The Equity Income Portfolio may purchase securities of other investment
companies, subject to the limitations discussed under "Investment Objectives,
Policies and Restrictions - All Portfolios." The Equity Income Portfolio does
not intend to purchase any such securities involving the payment of a front-end
sales load, but may purchase shares of investment companies specializing in
securities in which the Equity Income Portfolio has a particular interest or
shares of closed-end investment companies which frequently trade at a discount
from their net asset value.
The Equity Income Portfolio intends periodically to invest in special
situations. A special situation arises when, in the opinion of the Investment
Adviser, the securities of a particular company will, within a reasonably
estimable period of time, be accorded market recognition at an appreciated value
solely by reason of a development particularly or uniquely applicable to that
company and regardless of general business conditions or movements of the stock
market as a whole. Developments creating special situations might involve, among
others, the following: "workouts" such as liquidations, reorganizations,
recapitalizations or mergers; material litigations; technological breakthroughs;
and new management or management policies. Special situations involve a
different type of risk than is inherent in ordinary investment securities, that
is, a risk involving the likelihood or timing of specific events rather than
general economic market or industry risks. As with any securities transaction,
investment in special situations involves the risk of decline or total loss of
the value of the investment. However, the Adviser will not invest in special
situations unless, in its judgment, the risk involved is reasonable in light of
the Portfolio's investment objective, the amount to be invested and the expected
investment results.
Capital Appreciation Portfolio
The Investment Objective of the Capital Appreciation Portfolio is capital
appreciation. The Portfolio will seek to achieve this objective by investing in
a diversified portfolio of common stocks and securities convertible into common
stocks. The Investment Adviser intends to invest principally in companies which
it believes will have earnings growth above the market averages with an emphasis
toward companies whose growth the Investment Adviser believes has not been fully
reflected in the market price of such companies' shares. While the Portfolio may
assume from time to time temporary defensive positions and invest in U.S.
Government debt securities, repurchase agreements and money market instruments,
the Portfolio will maintain at least 65% of its total assets in common stocks or
in securities convertible into common stock at all times.
In making investment selections, the Investment Adviser relies primarily on
a company by company analysis (rather than on a broader analysis of industry or
economic sector trends) and considers such matters as the quality of a company's
management, the existing of a leading or dominant position in a major product
line or market and the soundness of a company's financial position. As companies
are identified as possible investments, the Investment Adviser further evaluates
such companies by application of a number of valuation techniques to determine
the relative attractiveness of each company. Based upon these factors, the
Investment Adviser will attempt to select those companies whose shares, in its
estimation, are most attractively priced.
<PAGE>
The Capital Appreciation Portfolio will also periodically invest in special
situations. A special situation arises when, in the opinion of the Investment
Adviser, the securities or particular company will, within a reasonable period
of time, be accorded market recognition at an appreciated value solely by reason
of a development particularly or uniquely applicable to that company and
regardless of general business conditions or movements of the stock market as a
whole. Developments creating special situations include recapitalizations or
mergers, material litigation, technological break-throughs, and new management
or management policies. Special situations also involve a different type of risk
that is inherent in ordinary investment securities, that is, a risk that the
Investment Adviser may inaccurately predict the likelihood or timing of specific
events rather than general economic or industry risks and as a result fail to
achieve the investment objective. As in any securities transaction, an
investment in a special situation may result in the decline or total loss of the
value of the particular investment. The Investment Adviser will not, however,
invest in special situations, unless, in its judgement, the risk involved is
reasonable in light of the Portfolio's investment objective, the amount to be
invested and the expected investment results.
The Capital Appreciation Portfolio may invest in convertible securities
including convertible debt and convertible preferred stock. Such convertible
debt and convertible preferred stock shall be rated BBB or higher by Standard
and Poors, Inc. ("S&P") or Baa or higher by Moody's Investors Services, Inc.
("Moody's"). For a description of the Moody's and S & P ratings see Appendix to
Statement of Additional Information. The Investment Adviser may also use options
and hedging strategies designed to protect the Portfolio's holdings.
Portfolio Turnover
The portfolio turnover rate for each of the Portfolios is calculated by
dividing the lesser of a Portfolio's purchases or sales of securities for the
year by the monthly average value of the securities. The calculation excludes
all securities whose remaining maturities at the time of acquisition were one
year or less. The portfolio turnover rate may vary greatly from year to year as
well as within a particular year, and may also be affected by cash requirements
for redemption of shares. Portfolio turnover will not be a limiting factor in
making investment decisions.
All Portfolios
The Fund has adopted a number of investment policies and restrictions for
all the Portfolios, some of which can be changed by the Board of Directors.
Others may be changed only by the holders of a majority of the outstanding
shares of each Portfolio and include the following:
Without shareholder approval, each of the Portfolios may not:
(1) purchase any securities other than those described under "Investment
Objectives and Policies" in the Prospectus for each Portfolio:
(2) invest more than 5% as to 75% of its total assets, except that the
Intermediate Government Bond Portfolio may not invest more than 5% as
to 100% of its total assets, taken at market value at the time of a
particular purchase, in the securities of any one issuer, other than in
U.S.Government securities;
(3) invest more than 5% of its total assets, taken at market value at the
time of a particular purchase, in securities of issuers with operating
records, including any predecessors, of less than three years;
(4) acquire more than 10%, at the time of a particular purchase, of the
outstanding voting securities of any one issuer;
(5) invest in companies for the purpose of exercising control or
influencing management;
(6) purchase securities of other investment companies, except in connection
with a merger, acquisition, consolidation or reorganization or by
purchase in the open market where no profit to the sponsor or dealer
results from the purchase other than customary brokerage commissions or
pursuant to the provisions of the Investment Company Act of 1940 which
restricts purchases to not more than 3% of the stock of another
investment company or purchases of stock of other investment companies
equal to more than 5% of the respective Portfolio's assets in the case
of a single investment company and 10% of such assets in the case of all
investment companies in the aggregate;
<PAGE>
(7) purchase or sell real estate, commodities or commodity contracts,
futures contracts or interests in oil, gas or other mineral exploration
or development programs;
(8) purchase securities on margin or make short sales;
(9) underwrite securities of other issuers;
(10)purchase or write puts, and calls, or engage in straddles, and spreads
or any combination thereof other than as described under "Special
Investment Methods" in the Prospectuses;
(11)make loans to other persons other than by purchasing part of an issue
of debt obligations; a Portfolio may, however, invest up to 10% of its
total assets, taken at market value at time of purchase, in repurchase
agreements maturing in not more than seven days;
(12)borrow money, except to meet extraordinary or emergency needs for
funds, and then only from banks in amounts not exceeding 10% of its
total assets, nor purchase securities at any time borrowings exceed 5%
of its total assets;
(13)mortgage, pledge, hypothecate, or in any manner transfer, as security
for indebtedness, any securities owned by the respective Portfolio
except as may be necessary in connection with borrowings as described in
(12) above and then securities mortgaged, hypotheticated or pledged may
not exceed 5% of the respective Portfolio's total assets taken at market
value;
(14)invest in securities with legal or contractual restrictions on resale
(except for repurchase agreements as described in (11) above); and
(15)purchase or hold securities of any issuer if 5% of the securities of
such issuer are owned by the Adviser or by directors and officers of the
Fund or the Adviser owning individually more than 1/2 of 1% of its
securities.
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
The names, addresses and principal occupations during the past five years of
the directors and executive officers of the Fund are given below:
Name, Position with Fund and Address Principal Occupation Last Five Years
- ------------------------------------ ------------------------------------
*Thomas C. Smith, Chief Financial Chairman, CONLEY SMITH, Inc.; Vice
Officer & Treasurer; President, Lancaster Administrative
200 Centre Terrace, 1225 "L" Street Services, Inc., Lincoln, Nebraska;
Lincoln, Nebraska 68501 Chairman and President, SMITH HAYES
Financial Services Lincoln, Nebraska;
Chairman and President, Consolidated
Investment Corporation, Lincoln,
Nebraska; Vice President and
Director, Consolidated Realty
Corporation, Lincoln, Nebraska.
*Michael S. Dunlap, President Executive Vice President and Director
and Secretary Union Bank and Trust Company,Lincoln,
4732 Calvert Street Nebraska; Director, Lancaster County
Lincoln, Nebraska 68506 Bank, Waverly, Nebraska; and Unipac
Service Corporation.
<PAGE>
Name, Position with Fund and Address Principal Occupation Last Five Years
- ------------------------------------ ------------------------------------
Stan Schrier, Director President, Food 4 Less, Inc.,a retail
11128 John Galt Blvd. grocery chain, and owner,
Omaha, Nebraska 68137 Schrier-Lawson Motor Center.
R. Paul Hoff, Director Physician and CEO of Seward Clinic,
311 Jackson P.C., Seward, Nebraska.
Seward, Nebraska 68434
Edson L. Bridges III, Director Director, Bridges Investment Fund,
8401 W. Dodge Road, #256 Inc., a registered open end
Omaha, Nebraska 68114 management invest ment company,
February, 1991 to present; Vice
President and Director of Bridges
Investment Counsel Inc., a
registered investment adviser.
Jon Gross, Vice President Trust Officer, Union Bank and Trust
3643 South 48th Street Company, Lincoln, Nebraska, since
Lincoln, Nebraska 68506 1991 and an employee of Union Bank
and Trust Company since 1987.
*Interested directors of the Fund by virtue of their affiliation with
Lancaster Administrative Services, Inc., SMITH HAYES Financial Services
Corporation and Union Bank and Trust Company as defined under the
Investment Company Act of 1940.
The addresses of the directors and officers of the Fund are that of the Fund
unless otherwise indicated.
The following table represents the compensation amounts received for
services as a director of the Funds for the year ended June 30, 1995:
Compensation Table
Pension or
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as Part From the Fund
Name and Position From Fund of the Fund Expenses Paid to Directors
Thomas C. Smith, Director $0 $0 $0
Chief Financial Officer
& Treasurer
Michael S. Dunlap, $0 $0 $0
Director, President
& Secretary
Stan Schrier, Director $2,000 $0 $2,000
R. Paul Hoff, Director $2,000 $0 $2,000
Edson L. Bridges III, $2,000 $0 $2,000
Director
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
---------------------------------------
General
Lancaster Administrative Services, Inc. ("LAS") acts as the administrator
("Administrator") and SMITH HAYES Financial Services Corporation ("SMITH HAYES")
acts as the Fund's distributor ("Distributor"). Union Bank and Trust Company,
("Union"), 4732 Calvert Street, Lincoln, NE 68506 acts as the investment adviser
(the "Adviser") to the Portfolios and as the Fund's Custodian (the "Custodian").
The Adviser acts as such pursuant to written agreements periodically approved by
the directors or the shareholders of the Fund. SMITH HAYES acts as the Fund's
distributor pursuant to an Underwriting Agreement under which SMITH HAYES agrees
to publicly distribute the Fund's shares continuously. SMITH HAYES has a related
agreement with Union pursuant to which SMITH HAYES maintains an office and sales
personnel on Union premises to facilitate Fund distribution as well as provide
Union customers access to other brokerage services. The Underwriting Agreement
is reviewed annually by the Board of Directors and was last approved on July 20,
1995. LAS and SMITH HAYES address is 200 Centre Terrace, 1225 "L" Street,
Lincoln, Nebraska, 68508. Union's address is 3643 South 48th Street, Lincoln,
Nebraska 68506.
Control of the Adviser and the Distributor
SMITH HAYES and the Distributor are wholly owned subsidiaries of
Consolidated Investment Corporation, a Nebraska corporation, which is engaged
through its subsidiaries in various aspects of the financial services industry.
Thomas C. Smith is the control person of Consolidated Investment Corporation.
Union is controlled by and is a subsidiary of Farmers and Merchants Investments,
Inc., a Nebraska bank holding company. Farmers and Merchants Investment, Inc. is
controlled by the Dunlap family of which Michael S. Dunlap is a member.
Investment Advisory Agreement and Administration Agreement
LAS acts as Administrator to the Fund under a Transfer Agent and
Administrative Services Agreement (the "Administration Agreement"). Union acts
as the Adviser to the Portfolios, under Investment Advisory Agreements (the
"Advisory Agreements"). The Advisory Agreements and Administration Agreement are
approved annually by the Board of Directors (including a majority of the
directors who are not parties to the Advisory and Administration Agreement, or
interested persons of any such parties (other than as directors of the Fund)).
The Advisory Agreement and Administration Agreement were approved by the
shareholders of the Intermediate Government Bond Portfolio on October 10, 1991.
The Advisory Agreement and Administration Agreement for all Portfolios were last
approved by the Board of Directors on July 20, 1995.
The Advisory Agreements and Administration Agreement terminate automatically
in the event of their assignment. In addition, the Advisory Agreements and
Administration Agreement are terminable at any time, without penalty, by the
Board of Directors of the Fund or, with respect to the Advisory Agreements, by
vote of a majority of the Trust's outstanding voting securities on not more than
60 days' written notice to the Adviser, or as the case may be, and by the
Adviser or Administrator, as the case may be, on 60 days' written notice to the
Fund. The Administration Agreement is terminable by the vote of a majority of
all outstanding voting securities of the Fund. Unless sooner terminated, the
Advisory Agreements and Administration Agreement shall continue in effect for
more than two years after their execution, only so long as such continuance is
specifically approved at least annually by either the Board of Directors or by a
vote of a majority of the outstanding voting securities of the Trust, provided
that in either event such continuance is also approved by a vote of a majority
of the directors who are not parties to such agreement, or interested persons of
such parties, cast in person at a meeting called for the purpose of voting on
such approval.
<PAGE>
Pursuant to the Advisory Agreements, the Intermediate Government Bond
Portfolio pays Union a monthly advisory fee equal on an annual basis to .65% of
the Intermediate Government Bond Portfolio's daily average net assets. The
Government Securities Portfolio and Equity Income Portfolio pays Union a monthly
advisory fee equal on an annual basis to .50% of the daily average net assets.
The Capital Appreciation Portfolio pays Union a monthly advisory fee calculated
at the annual rate of 1.4% of the daily net asset value of the Portfolio. In
addition this fee is subject to an incentive adjustment commencing January 4,
1994, calculated monthly, depending upon the performance of the Portfolio
relative to the Standard and Poor's 500 Index (the "Index"), on the basis of
1/12 of the results during the last 12 months (a moving average method). The
incentive adjustment, if any, is added to or subtracted from the monthly basic
management fee, and is payable after the close of each month on the basis of the
latest 12 months' experience. The incentive adjustment is accrued as incurred
for the purpose of calculating the redemption price and offering price per
share. The incentive adjustment for the Portfolio is calculated each month as
follows:
(1) The sum of the net asset value of a share of the Portfolio at the end of
the last 12 month period, plus the value per share during such period,
of all cash distributions made and capital gain taxes paid or payable on
undistributed realized long-term capital gains (treated as reinvested
shares of the Portfolio on the record date of such distribution or the
date on which provision for such taxes is made, as the case may be) is
compared to the net asset value per share of the Portfolio at the
beginning of the period and the differences expressed as a percentage
(the "Portfolio's Percentage Change").
(2) The Portfolio's Percentage Change is compared to the percentage change
in the Index, which change is determined by adding the level of the
index at the end of the period, in accordance with Securities and
Exchange Commission guidelines, the value of cash distributions on
securities which comprise the Index, treating the value of such
distributions as reinvested in the Index based on a monthly value
supplied by Standard and Poor's and comparing such adjusted level with
the level of the Index at the beginning of the period.
(3) The Portfolio's Percentage Change is then compared to the change in
Index for the period and the incentive adjustment as set forth in the
following table is multiplied by the net asset value of the Portfolio
averaged daily over the 12 month period and divided by twelve. The
incentive adjustment may not in any case exceed 1/12 of 1.40% of the
average net asset value for the 12 month period (equivalent on an annual
basis to 1.40%).
<PAGE>
Performance Total
Relative to Adviser
S&P 500 Index Fee
------------- ---------
U -7.00% and less 0.00% Minimum Mgt Fee
N -6.50% 0.10%
D -6.00% 0.20%
E -5.50% 0.30%
R -5.00% 0.40%
-4.50% 0.50%
P -4.00% 0.60%
E -3.50% 0.70%
R -3.00% 0.80%
F -2.50% 0.90%
O -2.00% 1.00%
R -1.50% 1.10%
M -1.00% 1.20%
-0.50% 1.30%
Basic Mgt Fee -0.00% 1.40%
0.50% 1.50%
O 1.00% 1.60%
V 1.50% 1.70%
E 2.00% 1.80%
R 2.50% 1.90%
3.00% 2.00%
P 3.50% 2.10%
E 4.00% 2.20%
R 4.50% 2.30%
F 5.00% 2.40%
O 5.50% 2.50%
R 6.00% 2.60%
M 6.50% 2.70%
+7.00% and Greater 2.80% Maximum Mgt Fee
Pursuant to the Administration Agreement, the Administrator provides, or
contracts with others to provide, the Fund all necessary bookkeeping and
shareholder recordkeeping services, share transfer services, and custodial
services. Under the Administration Agreement, the Administrator receives an
administration fee, computed separately for each Portfolio and paid monthly, at
an annual rate of .25% of the daily average net assets of each Portfolio.
Commencing January 1, 1992, the Administrator agreed to waive .15% of its fee
until further notice. For the years ended June 30, 1993, 1994 and, 1995 and
1995, the Fund paid to Advisor and the Administrator the following amounts for
advisory and administrative services as indicated:
<PAGE>
Advisory Fees Administration Fees
-------------- --------------------
Intermediate Government
Bond Portfolio
1995 $40,101 $ 6,169
1994 $51,830 $ 7,974
1993 $33,993 $ 5,092
Capital Appreciation
Portfolio
1995 $ 2,370 $ 672
1994 $ 5,886 $ 729
1993 $ 3,104 $ 222
Equity Income Portfolio
1995 $59,230 $11,846
1994 $43,945 $ 8,805
Government Securities
Portfolio
1995 $64,587 $12,917
1994 $44,959 $ 8,992
* Period ending April 30, 1994.
Under the Advisory Agreements, the Adviser provides the Portfolios with
advice and assistance in the selection and disposition of that Portfolios'
investments. All investment decisions are subject to review by the Board of
Directors of the Fund. The Adviser is obligated to pay the salaries and fees of
any affiliates of the Adviser serving as officers or directors of the Fund.
The laws of certain States require that if a mutual fund's expenses
(including advisory fees but excluding interest, taxes, brokerage commissions
and extraordinary expenses) exceed certain percentages of average net assets,
the Fund must be reimbursed for such excess expenses. Based upon the fee
structure for the Portfolios, the Fund should not be subject to such
reimbursement provisions.
Custodian
The Fund's Custodian is Union. Under the Custodian Agreement Union holds all
cash and securities of the Fund's various Portfolios through its trust
department and effects transactions in the Fund's securities and cash only upon
written instruction from the Fund's authorized persons. Union receives fees from
the Intermediate Government Bond Portfolio and the Capital Appreciation
Portfolio for acting as Custodian based upon the market value of the Fund's
securities which are calculated and billed quarterly at the annual rates of
eleven (11) basis points for the market value of securities up to $10 million,
six (6) basis points for the next $10 million and two and one half (2.5) basis
points over $20 million. Additionally, Union is paid an annual fee of $100 per
account and transaction charges of $12 for each transaction in the Fund's
securities or accounts. However, the Government Securities Portfolio and the
Equity Income Portfolio pay no Custodian fees.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATIONS
----------------------------------------------
The Adviser is responsible for decisions to buy and sell securities for the
Portfolio, the selection of broker-dealers to effect the transactions and the
negotiation of brokerage commissions, if any. In placing orders for securities
transactions, the primary criterion for the selection of a broker-dealer is the
ability of the broker-dealer, in the opinion of the Adviser, to secure prompt
execution of the transactions on favorable terms, including the reasonableness
of the commission (if any) and considering the state of the market at the time.
When consistent with these objectives, business may be placed with
broker-dealers who furnish investment research and/or services to the Adviser.
Such research or services include advice, both directly and in writing, as to
the value of securities; the advisability of investing in, purchasing or selling
securities; and the availability of securities, or purchasers or sellers of
securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts. This allows the Adviser to supplement their own investment research
activities and enables the Adviser to obtain the views and information of
individuals and research staffs of many different securities firms prior to
making investment decisions for the Portfolio. To the extent portfolio
transactions are effected with broker-dealers who furnish research services, the
Adviser receives benefits, not capable of evaluation in dollar amounts, without
providing any direct monetary benefit to the Portfolio from these transactions.
The Adviser believes that most research services obtained generally benefit
several or all of the accounts which they manage, as opposed to solely
benefiting one specific managed Fund or account. Normally, research services
obtained through managed funds or accounts investing in common stocks would
primarily benefit the managed funds or accounts which invest in common stock;
similarly, services obtained from transactions in fixed-income securities would
normally be of greater benefit to the managed funds or accounts which invest in
debt securities.
The Adviser has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of transactions in exchange for research services
except as noted below. However, from time to time, the Adviser may elect to use
certain brokers to execute transactions in order to encourage them to provide it
with research services which the Adviser anticipates will be useful to it. The
Adviser will authorize the Fund to pay an amount of commission for effecting a
securities transaction for a Portfolio in excess of the amount of commission
another broker-dealer would have charged only if the Adviser determines, in good
faith, that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker-dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion.
Portfolio transactions may be effected through the Distributor, as discussed
in the Prospectus under "Management-Portfolio Brokerage." In determining the
commissions to be paid to the Distributor, it is the policy of the Fund that
such commissions, will, in the judgment of the Adviser, subject to review by the
Board of Directors, be both (a) at least as favorable as those which would be
charged by other qualified brokers in connection with comparable transactions
involving similar securities being purchased or sold on a securities exchange
during a comparable period of time, and (b) at least as favorable as commissions
contemporaneously charged by the Distributor on comparable transactions for its
most favored comparable unaffiliated customers. While the Fund does not deem it
practicable and in the best interest of the Fund to solicit competitive bids for
commission rates on each transaction, consideration will regularly be given to
posted commission rates as well as to other information concerning the level of
commissions charged on comparable transactions by other qualified brokers.
All transactions will be effected pursuant to the Fund's Guidelines
Regarding Payment of Brokerage Commissions to Affiliated Persons adopted by the
Board of Directors including a majority of the noninterested directors pursuant
to Rule 17(e)-1 under the Investment Company Act of 1940.
<PAGE>
In certain instances, there may be securities which are suitable for the
Fund as well as for that of one or more of the advisory clients of the Adviser.
Investment decisions for the Fund and for such advisory clients are made by the
Adviser with a view to achieving the investment objectives. It may develop that
a particular security is bought or sold for only one client of the Adviser even
though it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients of the Adviser when
one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients of
the Adviser are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed by the
Adviser, as the case may be, to be equitable to each (and may result, in the
case of purchases, in allocation of that security only to some of those clients
and the purchase of another security for other clients regarded by the Adviser,
as the case may be, as a satisfactory substitute). It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Fund involved is concerned. At the same time, however, it
is believed that the ability of the Fund to participate in volume transactions
will sometimes produce better execution prices.
For the periods ending June 30, 1995, 1994, and 1993 and 1992, the Fund paid
$12,219, $15,148 $41,468, $5,586 and $14,318 $5,460 in brokerage commissions,
some of which was paid to the Fund's Distributor, allocated among the Portfolios
as follows:
1995 1994 1993
----- ---- -----
Intermediate Government Bond $3,250 $ 25 $ 0
Portfolio
Government Securities Portfolio 2,300 600 0
Equity Income Portfolio 7,629 3,410 0
Capital Appreciation Portfolio 21,020 1,551 5,460
------ ------ ------
$34,199 $5,586 $5,460
The remaining brokerage commissions were paid to eight unaffiliated
broker/dealers.
CAPITAL STOCK AND CONTROL
-------------------------
A complete description of the rights and characteristics of the Fund's
capital stock is included in the Prospectus. UBATCO & Co. as nominee of Union,
owned of record, without voting rights the number and percentage of the
outstanding shares of the Portfolios as of September 30, 1994 1995 as set forth
below:
The following table also provides the name and address of any person who
owned beneficially 5% or more of the outstanding shares of each Portfolio as of
the same date.
Portfolio Name & Address Shares % Ownership
- --------- ---------------- ---------- -----------
Capital Appreciation UBATCO & Co. 72,705.780 100.00%
Portfolio 4732 Calvert Street
Lincoln, NE 68506
Including
Central Agency, Inc. 7,683.930 10.56%
Milford, NE 68405
MD Investments 25,656.517 35.28%
Mike Dunlap
P.O. Box 6155
Lincoln, NE 68516 68506
Unipac Services Corp. 19,196.359 26.40%
3015 S. Parker Road
Aurora, CO 80014
<PAGE>
Portfolio Name & Address Shares % Ownership
- --------- ---------------- ---------- -----------
Equity Income UBATCO & Co. 1,254,641.235 99.49%
Portfolio 4732 Calvert Street
Lincoln, NE 68506
Including
Union Bank & Trust Co. 212,167.727 16.82%
Profit Sharing Plan & 401K Plan
4732 Calvert Street
Lincoln, NE 68506
Crete/Sunflower 401K 78,524.438 6.22%
P.O. Box 81228
Lincoln, NE 68528
Linweld 401K/PSP 144,908.265 11.49%
1225 "L" Street, Ste. 600
Lincoln, NE 68508
Intermediate Government UBATCO & Co. 550,542.074 99.32%
Bond Portfolio 4732 Calvert Street
Lincoln, NE 68506
Including
Madonna Rehab Hospital 31,752.172 5.72%
5401 South Street
Lincoln, NE 68506
Government Securities UBATCO & Co. 1,434,561.481 100.00%
Portfolio 4732 Calvert Street
Lincoln, NE 68506
Including
Union Bank & Trust Co. 130,497.367 9.09%
Profit Sharing Plan & 401K Plan
4732 Calvert Street
Lincoln, NE 68506
Crete/Sunflower 401K 117,308.630 8.17%
P.O. Box 81228
Lincoln, NE 68528
K&Z Distributing 73,417.991 5.11%
P.O. Box 29289
Lincoln, NE 68529
Leavitt Brothers PSP 80,292.171 5.59%
Rt 2, Box 1
Lincoln, NE 68520
The Directors and officers of the Fund beneficially owned 12,231.301 shares
or 2.20%, 33,439.875 shares or 2.33%, 17,143.716 shares or 1.35% and 5,563.455
shares or %7.65%, respectively, of the Intermediate Government Bond Portfolio,
Government Securities Portfolio, Equity Income Portfolio and the Capital
Appreciation Portfolio. Directors and officers owned 2.05% of the shares
outstanding in all Portfolios.
<PAGE>
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of the Fund's shares is
summarized in the Prospectus in the text following the heading "Purchase of
Shares--Public Offering Price" and "Valuation of Shares." The net asset value of
the Fund's shares is determined each day that the New York Stock Exchange is
open, provided that the net asset value need not be determined on days when no
shares are tendered for redemption and no order for shares is received. The New
York Stock Exchange is not open for business on the following holidays (or on
the nearest Monday or Friday if the holiday falls on a weekend): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
and Christmas.
REDEMPTION
----------
Redemption of shares, or payment, may be suspended at times (a) when the New
York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Portfolios of securities owned by
them is not reasonably practicable, or it is not reasonably practicable for the
Portfolios fairly to determine the value of their net assets, or (d) during any
other period when the Securities and Exchange Commission, by order, so permits,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
TAX STATUS
----------
The Fund has qualified and intends to continue to qualify both of its
Portfolios as "regulated investment companies" under Subchapter M of the
Internal Revenue Code of 1986, as amended, so as to be relieved of federal
income tax on its capital gains and net investment income distributed to
shareholders. To qualify as a regulated investment company, a Portfolio must,
among other things, receive at least 90% of its gross income each year from
dividends, interest, gains from the sale of other disposition of securities and
certain other types of income including, with certain exceptions, income from
options and futures contracts. However, gains from the sale or other disposition
of stock or securities held for less than three months must constitute less than
30% of each Portfolio's gross income. This restriction may limit the extent to
which a Portfolio may effect sales of securities held for less than three months
or transactions in futures contracts and options even when the Adviser otherwise
would deem such transaction to be in the best interest of a Portfolio. The Code
also requires a regulated investment company to diversify its holdings. The
Internal Revenue Service has not made its position clear regarding the treatment
of futures contracts and options for purposes of the diversification test, and
the extent to which a Portfolio could buy or sell futures contracts and options
may be limited by this requirement.
The Code requires that all regulated investment companies pay a
nondeductible 4% excise tax to the extent the regulated investment company does
not distribute 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined, in general, on an October 31 year end.
The required distributions are based only on the taxable income of a regulated
investment company.
Ordinarily, distributions and redemption proceeds earned by a Portfolio
shareholder are not subject to withholding of federal income tax. However, if a
shareholder fails to furnish a tax identification number or social security
number, or certify under penalties of perjury that such number is correct, the
Fund may be required to withhold federal income tax ("backup withholding") from
all dividend, capital gain and/or redemption payments to such shareholder.
Dividends and capital gain distributions may also be subject to backup
withholding if a shareholder fails to certify under penalties of perjury that
such shareholder is not subject to backup withholding due to the underreporting
of certain income. These certifications are contained in the purchase
application enclosed with the Prospectus.
CALCULATIONS OF PERFORMANCE DATA
--------------------------------
From time to time the Fund may quote the yield for the Portfolios in
advertisements or in reports and other communications to shareholders. For this
purpose, yield is calculated by dividing a Portfolios's net investment income
per share for the base period which is 30 days or one month, by the Portfolio's
maximum offering purchase price on the last day of the period and annualizing
the result. The Portfolio's net investment income changes in response to
fluctuations in interest rates and in the expenses of the Portfolio.
Consequently, any given quotation should not be considered as representative of
what the Portfolio's yield may be for any specified period in the future.
<PAGE>
Yield information may be useful in reviewing a Portfolio's performance and
for providing a basis for comparison with other investment alternatives.
However, a Portfolio's yield will fluctuate, unlike other investments which pay
a fixed yield for a stated period of time. Current yield should be considered
together with fluctuations in the Portfolio's net asset value over the period
for which yield has been calculated, which, when combined, will indicate a
Portfolio's total return to shareholders for that period. Other investment
companies may calculate yields on a different basis. In addition, investors
should give consideration to the quality and maturity of the portfolio
securities of the respective investment companies when comparing investment
alternatives.
Investors should recognize that in periods of declining interest rates a
bond portfolio's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, such portfolio's yield will tend
to be somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a bond Portfolio from the continuous sale of its shares will likely
be invested in instruments producing lower yields than the balance of such
portfolio's holdings, thereby reducing the current yield of such Portfolio. In
periods of rising interest rates, the opposite can be expected to occur.
The Fund may also quote the indices of bond prices and yields prepared by
Shearson Lehman Hutton Inc. and Salomon Brothers Inc., leading broker-dealer
firms. These indices are not managed for any investment goal. Their composition
may, however, be changed from time to time.
The Intermediate Government Bond Portfolio may quote the yield or total
return on Ginnie Maes, Fannie Maes, Freddie Macs, corporate bonds and Treasury
bonds and notes, either as compared to each other or as compared to the
Portfolio's performance. In considering such yields or total returns, investors
should recognize that the performance of securities in which the Portfolio may
invest does not reflect the Portfolio's performance, and does not take into
account either the effects of portfolio management or of management fees or
other expenses; and that the issuers of such securities guarantee that interest
will be paid when due and that principal will be fully repaid if the securities
are held to maturity, while there are no such guarantees with respect to shares
of the Portfolio. Investors should also be aware that the mortgage underlying
mortgage-related securities may be prepaid at any time. Prepayment is
particularly likely in the event of an interest rate decline, as the holders of
the underlying mortgages seek to pay off high-rate mortgages or renegotiate them
at potentially lower current rates. Because the underlying mortgages are more
likely to be prepaid at their par value when interest rates decline, the value
of certain high-yielding mortgage-related securities may have less potential for
capital appreciation than conventional debt securities (such as U. S. Treasury
bonds and notes) in such markets. At the same time, such mortgage-related
securities may have less potential for capital appreciation when interest rates
rise.
<PAGE>
In connection with the quotations of yields in advertisements described
above, the Fund may also provide average annual total returns from the date of
inception for one, five and ten-year periods if applicable. Total return is a
calculation which equates an initial amount invested to the ending redeemable
value at a specified time. It assumes the reinvestment of all dividends and
capital gains distributions. Average total return will be the average of the
total returns for each year in the period. The Portfolios may also provide a
total return figure for the most recent calendar quarter prior to the
publication of the advertisement.
The yields of the Intermediate Government Bond Portfolio and Government
Securities Portfolio for the 30-day period ending June 30, 1994 1995 were 5.01%
5.06% and 4.34% 5.00% respectively.
The average annual total returns of the Portfolios for one year and
inception to date ending June 30, 1994 1995 are as follows:
Year Inception to Date
---- ------------------
Intermediate Government Bond Portfolio 7.9% 6.6%
Capital Appreciation Portfolio 28.6% 5.8%
Equity Income Portfolio 20.3% 11.3%
Government Securities Portfolio 9.0% 3.0%
<PAGE>
FINANCIAL STATEMENTS
--------------------
The Fund hereby incorporates by reference the information in the Fund's
Annual Financial Report dated June 30, 1995, filed with the Securities and
Exchange Commission on August 29, 1995 and which is available upon request to
the Fund without charge.
AUDITORS
On July 20, 1995, the Board of Directors, including all
disinterested directors, unanimously approved the appointment of KPMG Peat
Marwick LLP, Two Central Park Plaza, Suite 1501, Omaha, Nebraska 68102 as the
Fund's accountants.
<PAGE>
APPENDIX A
RATINGS OF CORPORATE OBLIGATIONS,
COMMERCIAL PAPER, AND PREFERRED STOCK
Ratings of Corporate Obligations
Moody's Investors Service, Inc.
Aaa: 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.
Aa: 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 risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal and interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
Those securities in the A and Baa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols A-1 and Baa-1.
Other A and Baa securities comprise the balance of their respective groups.
These rankings (1) designate the securities which offer the maximum in security
within their quality groups, (2) designate securities which can be bought for
possible upgrading in quality, and (3) additionally afford the investor an
opportunity to gauge more precisely the relative attractiveness of offerings in
the marketplace.
<PAGE>
Standard & Poor's Corporation
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Although they normally exhibit 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
bonds in this category than for bonds in higher rated categories. Bonds rated
BBB are regarded as having speculation characteristics.
BB--B--CCC-CC: Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation among such bonds and CC the highest degree of
speculation. Although such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Ratings of Preferred Stock
Standard & Poor's Corporation
Standard & Poor's preferred stock rating is an assessment of the capacity
and willingness of an issuer to pay preferred stock dividends and any applicable
sinking fund obligations. A preferred stock rating differs from a bond rating
inasmuch as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect this
difference, the preferred stock rating symbol will normally not be higher than
the bond rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
1. Likelihood of payment--capacity and willingness of the issuer
to meet the timely payment of preferred stock dividends and
any applicable sinking fund requirements in accordance with
the terms of the obligation.
2. Nature of and provisions of the issue.
3. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors'
rights.
AAA: This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA: A preferred stock issue rated AA also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated AAA.
A: An 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.
<PAGE>
BBB: An issue rated BBB is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than for issues
in the A category.
BB, B, CCC: Preferred stock rated BB, B, and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While
such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CC: The rating CC is reserved for a preferred stock issue in
arrears on dividends or sinking fund payments but that is currently
paying.
C: A preferred stock rated C is a nonpaying issue.
D: A preferred stock rated D is a nonpaying issue with the
issuer in default on debt instruments.
NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S & P does
not rate a particular type of obligation as a matter of policy.
Plus (+) or Minus (-) To provide more detailed indications of
preferred stock quality, 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 rating categories.
Moody's Investors Service, Inc.
aaa: 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.
aa: An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
a: An issue which is rated a 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, nevertheless, expected to be maintained at adequate levels.
baa: 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.
ba: An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
b: An issue which is rated b generally lacks the characteristics of
a desirable investment. Assurance of dividend payments and maintenance
of other terms of the issue over any long period of time may be small.
caa: An issue which is rated caa is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
<PAGE>
ca: An issue which is rated ca is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payment.
c: This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
<PAGE>
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Included in prospectus for the Intermediate Government Bond
Portfolio, Government Securities Portfolio, Equity Income
Portfolio and Capital Appreciation Portfolio:
(i) Financial Highlights
(2) Incorporated by reference in Part B:
Independent Auditor's Report; Statement of Assets
and Liabilities, June 30, 1995; Statement of
Operations, Year ended June 30, 1995; Statements of
Changes in Net Assets, Years ended June 30, 1995
and 1994; Notes to Financial Statements; Schedule
of Investments in Securities; and Financial
Highlights all included in the Fund's Annual
Financial Report dated June 30, 1995.
(b) Exhibits
Exhibit No. Description
1. (a) Articles of Incorporation
(b) Articles of Amendment to the Articles of Incorporation
(c Articles of Amendment to the Articles of Incorporation
(d) Articles of Amendment to the Articles of Incorporation
2. Bylaws as amended
5. (a) Transfer Agent and Administrative Services Agreement
(b) Investment Advisory Agreement with Union Bank & Trust
Company
(c) Investment Advisory Agreement with Union Bank and
Trust Company for the Capital Appreciation Portfolio
(d) Investment Advisory Agreement with Union Bank & Trust
Company for the Union Equity/Income Portfolio and
Union Government Securities Portfolio.
6. Underwriting Agreement
8. Amended Custodian Agreement
<PAGE>
10. (a) Opinion and Consent of Messrs. Cline, Williams,
Wright, Johnson & Oldfather
(b) Opinion and Consent of Messrs. Cline, Williams,
Wright, Johnson & Oldfather with Respect to the
Capital Appreciation Portfolio
(c) Opinion and Consent of Messrs. Cline, Williams,
Wright, Johnson & Oldfather with Respect to the
Union Equity/Income Portfolio and Union Government
Bond Portfolio
11. Consent of KPMG Peat Marwick LLP
13. Revised Subscription Agreement of Initial Stockholder
16. Schedules of Performance Computation
Item 25. Persons Controlled by or under Common Control with Registrant
N/A
Item 26. Number of Holders of Securities
Title of Class Number of Record Holders
Common Stock 6 as of September 30, 1995
---
Equity/Income Portfolio
Government Securities Portfolio 2 as of September 30, 1995
---
Capital Appreciation Portfolio 2 as of September 30, 1995
---
Intermediate Government Bond Portfolio 4 as of September 30, 1995
---
Item 27. Indemnification
Section 302A.521 of the Minnesota Business Corporation Act requires
indemnification of officers and directors of the Registrant under circumstances
set forth therein. Reference is made to Article X of the Articles of
Incorporation (Exhibit 1), Article XIII of the Bylaws of Registrant (Exhibit 2
hereto), to Section 10 of the Underwriting Agreement (Exhibit 6) and to Section
8 of the Transfer Agent and Administrative Services Agreement (Exhibit 5a) for
additional indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification by the Registrant is against public policy as expressed
<PAGE>
in the Act and, therefore, may be unenforceable. In the event that a claim for
such indemnification (except insofar as it provides for the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suit or proceeding) is asserted
against the Registrant by such director, officer or controlling person and the
Securities and Exchange Commission is still of the same opinion, 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 of whether or not such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
Union Bank and Trust Company
Union Bank and Trust Company is a state bank chartered in the state of
Nebraska and is engaged in the general banking business with trust powers. All
Directors and officers of Union Bank and Trust Company are principally engaged
in Banking unless otherwise indicated.
Name of Director Positions with Other Substantial Business
and Officer Adviser Past Two Years
----------- ------------- ------------------------
Jay L. Dunlap Director and CEO Banking
Phylis Acklie Director Vice President, Corporate
Secretary and Director
Crete Carrier Corporation,
Lincoln, Nebraska
Gerry Dunlap Director Banking
Michael S. Dunlap Director and Executive Banking
Vice President
Angie Muhleisen Director and Executive Banking
Vice President
Tonn Osterguard Director Banking
Edwin C. Perry Director Attorney
R. David Wilcox Senior Vice President - Banking
Trust Department
William C. Eastwood Senior Vice President - Banking
Trust Department
<PAGE>
Ken Backemeyer Senior Vice President - Banking
Trust Department
Ross Wilcox Director and President Banking
Robert Robart Senior Vice President Banking
Keith May Executive Vice President Banking
Thomas D. Potter Director President and Chief
Operating Officer, Lincoln
Mutual Life Insurance
Company, Lincoln,
Nebraska
Neil S. Tyner Director Chairman, Director and
Chief Operating Officer,
Ameritas Life Insurance
Company
The address is the address of the Adviser unless otherwise indicated, which is
contained under "Management" in the Prospectus.
Item 29. Principal Underwriters
(a) SMITH HAYES Trust, Inc.
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
Thomas C. Smith Chairman and Treasurer
200 Centre Terrace President
1225 "L" Street
Lincoln, NE 68508
(c) Not applicable.
Item 30. Location of Accounts and Records
All required accounts, books and records will be maintained by Thomas C.
Smith, 200 Centre Terrace, 1225 "L" Street, P.O. Box 83000, Lincoln, Nebraska
68508 and Michael S. Dunlap, 4732 Calvert Street, Lincoln, Nebraska 68506
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lincoln, State of Nebraska, on the
25th day of October, 1995. By the execution hereof, the Registrant hereby
certifies that this Post Effective Amendment meets all of the requirements of
effectiveness pursuant to Rule 485(b).
STRATUS FUND, INC.
By /s/ Michael S. Dunlap
--------------------------
Michael S. Dunlap, President
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities indicated on October 25, 1995:
Signatures
/s/ Michael S. Dunlap
- ----------------------------------
Michael S. Dunlap
President,
Chief Executive Officer,
Secretary and Director
/s/ Thomas C. Smith
- ----------------------------------
Thomas C. Smith
Chief Financial Officer,
Treasurer and Director
- ----------------------------------
R. Paul Hoff
Director
/s/ Stan Schrier
- ----------------------------------
Stan Schrier
Director
/s/ Edson L. Bridges, III
- ----------------------------------
Edson L. Bridges, III
Director
<PAGE>
KPMG PEAT MARWICK
TWO CENTRAL PARK PLAZA
OMAHA, NE 68102
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
STRATUS FUND, INC.
We consent to the use of our report dated July 21, 1995 incorporated herein
by reference and to the reference to our firm under the captions "Financial
Highlights" and "Auditors" in this post-effective amendment #12 of Form N-1(a)
Registration Statement of Stratus Fund, Inc.
KPMG PEAT MARWICK LLP
Omaha, Nebraska
October 25, 1995
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT
NO. 10
TO
FORM N-1A REGISTRATION STATEMENT
FOR
STRATUS FUND, INC.
1933 Reg. No. - 33-37928
1940 Reg No. - 811-6255
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE QUOTATIONS
EQUITY INCOME PORTFOLIO
The Total Return information shown in the Statement of Additional
Information for the Equity Income Portfolio was calculated as follows:
TOTAL RETURN:
P(1 + T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of a
period, at the end of the period
The computation of average annual return assumes dividends and
distributions are reinvested at net asset value (as stated in the prospectus) on
the reinvestment dates during the period.
The ending redeemable value assumes a complete redemption at the end of
the period.
Total Return for the Period Ending June 30, 1995
P = $1,000 (initial value)
n = 1 year
ERV = $1,203 (ending redeemable value)
Solve for T:
$1,000 (1 + T)1 = 1,203
T = .203 or 20.3% annualized
Total Return from Inception (October 8, 1993) to June 30, 1995:
P = $1,000 (initial value)
n = 1.7260 years (630 days)
ERV = $1,203 (ending redeemable value)
Solve for T:
$1,000 (1 + T)1.7260 = 1,203
T = .113 or 11.3% annualized
<PAGE>
GOVERNMENT SECURITIES PORTFOLIO
The Total Return information shown in the Statement of Additional
Information for the Government Securities Portfolio was calculated as follows:
TOTAL RETURN:
P(1 + T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of a
period, at the end of the period
The computation of average annual return assumes dividends and
distributions are reinvested at net asset value (as stated in the prospectus) on
the reinvestment dates during the period.
The ending redeemable value assumes a complete redemption at the end of
the period.
Total Return for the Period Ending June 30, 1995:
P = $1,000 (initial value)
n = 1 year
ERV = $1,090 (ending redeemable value)
Solve for T:
$1,000 (1 + T)1 = 1,090
T = .09 or 9% annualized
Total Return from Inception (October 8, 1993) to June 30, 1995:
P = $1,000 (initial value)
n = 1.7260 years (630 days)
ERV = $1,053 (ending redeemable value)
Solve for T:
$1,000 (1 + T)1.7260 = 1,053
T = .03 or 3% annualized
The yield quotation for the Government Securities Portfolio described in
the Statement of Additional Information was calculated according to the
following formula for the 30 day period ending June 30, 1995.
YIELD = 2[( a = 1)6 - 1]
cd
a = dividends and interest earned during period net
for accrued expenses (net of reimbursements) or $56,934
<PAGE>
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
or 1,412,222.140
d = the maximum offering price per share on the last day of
the period or $9.77
The yield for the thirty (30) day period was 5.00%.
<PAGE>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
The Total Return information shown in the Statement of Additional
Information for the Intermediate Government Bond Portfolio was calculated as
follows:
TOTAL RETURN:
P(1 + T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of a
period, at the end of the period
The computation of average annual return assumes dividends and
distributions are reinvested at net asset value (as stated in the prospectus) on
the reinvestment dates during the period.
The ending redeemable value assumes a complete redemption at the end of
the period.
Total Return for the Period Ending June 30, 1995:
P = $1,000 (initial value)
n = 1 year
ERV = $1,079 (ending redeemable value)
Solve for T:
$1,000 (1 + T)1 = 1,079
T = .079 or 7.9% annualized
Total Return from Inception (May 15, 1991) to June 30, 1995:
P = $1,000 (initial value)
n = 4.1288 years (1507 days)
ERV = $1,299 (ending redeemable value)
Solve for T:
$1,000 (1 + T)4.1288 = 1,205
T = .066 or 6.6% annualized
The yield quotation for the Intermediate Government Bond Portfolio
described in the Statement of Additional Information was calculated according to
the following formula for the 30 day period ending June 30, 1994.
YIELD = 2[( a = 1)6 - 1]
cd
a = dividends and interest earned during period net
for accrued expenses (net of reimbursements) or $23,039
<PAGE>
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
or 522,875.421
d = the maximum offering price per share on the last day of
the period or $10.56
The yield for the thirty (30) day period was 5.06%.
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
The Total Return information shown in the Statement of Additional
Information for the Equity Income Portfolio was calculated as follows:
TOTAL RETURN:
P(1 + T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of a
period, at the end of the period
The computation of average annual return assumes dividends and
distributions are reinvested at net asset value (as stated in the prospectus) on
the reinvestment dates during the period.
The ending redeemable value assumes a complete redemption at the end of
the period.
Total Return for the Period Ending June 30, 1995:
P = $1,000 (initial value)
n = 1 year
ERV = $1,286 (ending redeemable value)
Solve for T:
$1,000 (1 + T)1 = 1,286
T = .286 or 28.6% annualized
Total Return from Inception (January 4, 1993) to June 30, 1995:
P = $1,000 (initial value)
n = 2.4849 years (907 days)
ERV = $1,151 (ending redeemable value)
Solve for T:
$1,000 (1 + T)2.4849 = 1,151
T = .058 or 5.8 annualized
ARTICLES OF INCORPORATION
OF
NEW HORIZON FUND, Inc.
For the purpose of forming a Minnesota business corporation pursuant to the
provisions of Minnesota Statutes, Chapter 302A, as now enacted or hereafter
amended, the following Articles of Incorporation are adopted:
ARTICLE 1.
The name of this corporation is NEW HORIZON FUND, Inc.
ARTICLE 2.
This corporation shall have general business purposes and shall have
unlimited power to engage in and do any lawful act concerning any and all lawful
businesses for which corporations may be organized under the Minnesota Statutes,
Chapter 302A. Without limiting the generality of the foregoing, this corporation
shall have specific power:
(a) To conduct, operate and carry on the business of an
"open-end" management investment company pursuant to applicable state and
federal regulatory statutes, and exercise all the powers necessary and
appropriate to the conduct of such operations.
(b) To purchase, subscribe for, invest in or otherwise
acquire, and to own, hold, pledge, mortgage, hypothecate, sell, possess,
transfer or otherwise dispose of, or turn to account or realize upon, and
generally deal in, all forms of securities of every kind, nature, character,
type and form, and other financial instruments which may not be deemed to be
securities, including but not limited to futures contracts and options thereon.
Such securities and other financial instruments may include but are not limited
to shares, stocks, bonds, debentures, notes, scrip, participation certificates,
rights to subscribe, warrants, options, certificates of deposit, bankers'
acceptances, repurchase agreements, commercial paper, choses in action,
evidences of indebtedness, certificates of indebtedness and certificates of
interest of any and every kind and nature whatsoever, secured and unsecured,
issued or to be issued, by any corporation, company, partnership (limited or
general), association, trust, entity or person, public or private, whether
organized under the laws of the United States, or any state, commonwealth,
territory or
<PAGE>
possession thereof, or organized under the laws of any foreign country, or any
state, province, territory or possession thereof, or issued or to be issued by
the United States government or any agency or instrumentality thereof, and
futures contracts and options thereon.
(c) In the above provisions of this Article 2, purposes shall also be
construed as powers and powers shall also be construed as purposes, and the
enumeration of specific purposes or powers shall not be construed to limit other
statements of purposes or to limit purposes or powers which the corporation may
otherwise have under applicable law, all of the same being separate and
cumulative, and all of the same may be carried on, promoted and pursued,
transacted or exercised in any place whatsoever.
ARTICLE 3.
This corporation shall have perpetual existence.
ARTICLE 4.
The location and post office address of the registered agent and office
of the corporation in Minnesota is The Prentice-Hall Corporation System, Inc.,
Multi-Foods Tower, 33 South Sixth Street, Minneapolis, Minnesota 55402.
ARTICLE 5.
The total number of authorized shares of this corporation is 1,000,000,000
all of which shall be common shares of the par value of $.001 each. Of said
common shares, 100,000,000 shares may be issued in the series of common shares
hereby designated Money Market Portfolio Common Shares, 10,000,000 shares may be
issued in the series of common shares hereby designated Growth/Income Portfolio
Common Shares, 10,000,000 shares may be issued in the series of common shares
designated Intermediate Government Bond Portfolio shares and the balance of
880,000,000 shares may be issued in such series with such designations,
preferences and relative, participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, or may be authorized for
issuance as additional shares of any existing series or portfolio as and to the
extent stated or expressed in a resolution or resolutions providing for the
issue of any such series or shares of common shares adopted from time to time by
the Board of Directors of this corporation pursuant to the authority hereby
vested in said Board of Directors. The corporation may issue and sell any of its
shares in fractional denominations to the same extent as its whole shares, and
shares and fractional denominations shall have, in proportion to the relative
fractions represented thereby, all
<PAGE>
the rights of whole shares, including, without limitation, the right to vote,
the right to receive dividends and distributions, and the right to participate
upon liquidation of the corporation. Each series of common shares established
hereby or which the Board of Directors may establish, as provided herein, will
evidence, an interest in a separate and distinct portion of the corporation's
assets, which shall take the form of a separate portfolio of investment
securities, cash and other assets as described in the corporation's current
Registration Statement on Form N-1A as filed with the Securities and Exchange
Commission. Authority to establish additional separate portfolios is hereby
vested in the Board of Directors of this corporation, and such separate
portfolios may be established by the Board of Directors without the
authorization or approval of the holders of any series of shares of this
corporation.
ARTICLE 6.
The shareholders of each series of common shares of this corporation:
(a) shall not have the right to cumulate votes for the election of the
Directors; and
(b) shall have no preemptive right to subscribe to any issue of shares of
any class or series of this corporation now or hereafter made.
ARTICLE 7.
The shareholders of the Money Market Portfolio shares, the Growth/Income
Portfolio shares, the Intermediate Government Bond Portfolio shares and any
other series designated by the Board of Directors as provided herein shall have
the following rights and preferences:
(a) On any matter submitted to a vote of shareholders of this corporation,
all common shares of this corporation then issued and outstanding and entitled
to vote, irrespective of series, shall be voted in the aggregate and not by
series, except: (i) when otherwise required by Minnesota Statutes, Chapter 302A,
in which case shares will be voted by individual series; (ii) when otherwise
required by the Investment Company Act of 1940, as amended, or the rules adopted
thereunder, in which case shares shall be voted by individual series; and (iii)
when the matter does not affect the interests of a particular series, in which
case only shareholders of the series affected shall be entitled to vote thereon
and shall vote by individual series.
(b) All consideration received by this corporation for the issue or sale of
shares of any series, together with all assets, income, earnings, profits and
proceeds
<PAGE>
derived therefrom (including all proceeds derived from the sale, exchange or
liquidation thereof and, if applicable, any assets derived from any reinvestment
of such proceeds in whatever form the same may be) shall become part of the
assets of the portfolio to which the shares of that series relate, for all
purposes, subject only to the rights of creditors, and shall be so treated upon
the books of account of this corporation. Such assets, income, earnings, profits
and proceeds (including any proceeds derived from the sale, exchange or
liquidation thereof and, if applicable, any assets derived from any reinvestment
of such proceeds in whatever form the same maybe) are herein referred to as
"assets belonging to" a series of the common shares of this corporation.
(c) Assets of this corporation not belonging to any particular series
are referred to herein as "General Assets." General Assets shall be allocated to
each series in proportion to the respective net assets belonging to such series.
The determination of the Board of Directors shall be conclusive as to the amount
of assets, as to the characterization of assets as those belonging to a series
or as General Assets, and as to the allocation of General Assets.
(d) The assets belonging to a particular series of common shares shall
be charged with the liabilities incurred specifically on behalf of such series
of common shares ("Special Liabilities"). Such assets shall also be charged with
a share of the general liabilities of this corporation ("General Liabilities")
in proportion to the respective net assets belonging to such series of common
shares. The determination of the Board of Directors shall be conclusive as to
the amount of liabilities, including accrued expenses and reserves, as to the
characterization of any liability as a Special Liability or General Liability,
and as to the allocation of General Liabilities.
(e) The Board of Directors may, to the extent permitted by Minnesota
Statutes, Chapter 302A, and in the manner provided herein, declare and pay
dividends or distributions in shares or cash on any or all series of common
shares, the amount of such dividends and the payment thereof being wholly in the
discretion of the Board of Directors. Dividends or distributions on shares of
any series of common shares shall be paid only out of the earnings, surplus, or
other lawfully available assets belonging to such series (including, for this
purpose, any General Assets allocated to such series).
(f) In the event of the liquidation or dissolution of this corporation,
holders of the shares of any series shall have priority over the holders of any
other series with respect to, and shall be entitled to receive, out of the
assets of this corporation available
<PAGE>
for distribution to holders of shares, the assets belonging to such series of
common shares and the General Assets allocated to such series of common shares,
and the assets so distributable to the holders of the shares of any series shall
be distributed among suchholders in proportion to the number of shares of such
series held by them and recorded on the books of this corporation.
(g) With the approval of a majority of the shareholders of each of the
affected series of common shares, the Board of Directors may transfer the assets
of any portfolio to any other portfolio. Upon such a transfer, the corporation
shall issue common shares representing interests in the portfolio to which the
assets were transferred in exchange for all common shares representing interests
in the portfolio from which the assets were transferred. Such shares shall be
exchanged at their respective net asset values.
ARTICLE 8.
The following additional provisions, when consistent with law, are hereby
established for the management of the business, for the conduct of the affairs
of the corporation, and for the purpose of describing certain specific powers of
the corporation and of its Directors and shareholders.
(a) In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Incorporation, the Board of Directors
is expressly authorized to do the following:
(1) to make, adopt, alter, amend and repeal Bylaws of the corporation
unless reserved to the shareholders by the Bylaws or by the laws of the State of
Minnesota, subject to the power of the shareholders to change or repeal such
Bylaws;
(2) to distribute, in its discretion, for any fiscal year (in the year
or in the next fiscal year) as ordinary dividends and as capital gains
distributions, respectively, amounts sufficient to enable the corporation to
qualify under the Internal Revenue Code as a regulated investment company to
avoid any liability for federal income tax in respect of such year. Any
distribution or dividend paid to shareholders from any capital source shall be
accompanied by a written statement showing the source or sources of such
payment;
(3) to authorize, subject to such vote, consent, or approval of
shareholders and other conditions, if any, as may be required by any applicable
statute, rule or regulation, the execution and performance by the corporation of
any agreement or agreements with
<PAGE>
any person, corporation, association, company, trust, partnership (limited or
general) or other organization whereby, subject to the supervision and control
of the Board of Directors, any such other person, corporation, association,
company, trust, partnership (limited orgeneral), or other organization shall
render managerial, investment advisory, distribution, transfer agent, accounting
and/or other services to the corporation (including, if deemed advisable, the
management or supervision of the investment portfolios of the corporation) upon
such terms and conditions as may be provided in such agreement or agreements;
(4) to authorize any agreement of the character described in subparagraph 3
of this paragraph (a) with any person, corporation, association, company, trust,
partnership (limited or general) or other organization, although one or more of
the members of the Board of Directors or officers of the corporation may be the
other party to any such agreement or an officer, director, employee,
shareholder, or member of such other party, and no such agreement shall be
invalidated or rendered voidable by reason of the existence of any such
relationship;
(5) to allot and authorize the issuance of the authorized but unissued
shares of any class or series of this corporation;
(6) to accept or reject subscriptions for shares of any series made after
incorporation; and
(7) to fix the terms, conditions and provisions of and authorize the
issuance of options to purchase or subscribe for shares of any series including
the option price or prices at which shares may be purchased or subscribed for.
(b) The determination as to any of the following matters made by or
pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties, shall be final and conclusive
and shall be binding upon the corporation and every holder of shares of its
capital stock; namely, the amount of the assets, obligations, liabilities and
expenses of each portfolio of the corporation; the amount of the net income of
each portfolio of the corporation from dividends and interest for any period and
the amount of assets at any time legally available for the payment of dividends
in each portfolio; the amount of paid-in surplus, other surplus, annual or other
net profits, or net assets in excess of capital, undivided profits, or excess of
profits over losses on sales of securities of each portfolio; the amount,
purpose, time of creation,
<PAGE>
increase or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
the market value, or any sale, bid or asked price to be applied in determining
the market value, of any security owned or held by or in each portfolio of the
corporation; the fair value of any other asset owned by or in each portfolio of
the corporation; the number of shares of each series of the corporation issued
or issuable; any matter relating to the acquisition, holding and disposition of
securities and other assets by each portfolio of the corporation; and any
question as to whether any transaction constitutes a purchase of securities on
margin, a short sale of securities, or an underwriting of the sale of, or
participation in any underwriting or selling group inconnection with the public
distribution of any securities.
(c) The Board of Directors or the shareholders of the corporation may
adopt, amend, affirm or reject investment policies and restrictions upon
investment or the use of assets of each portfolio of the corporation and may
designate some such policies as fundamental and not subject to change other than
by a vote of a majority of the outstanding voting securities, as such phrase is
defined in the Investment Company Act of 1940, of the affected portfolio or
portfoliosof the corporation.
(d) The corporation shall indemnify such persons for such expenses and
liabilities, in such manner, under such circumstances, and to the full extent
permitted by Section 302A.521 of the Minnesota Statutes, as now enacted or
hereafter amended, provided, however, that no such indemnification may be made
if it would be in violation of Section17(h) of the Investment Company Act of
1940, as now enacted or hereafter amended.
(e) Any action which might be taken at a meeting of the Board of
Directors, or any duly constituted committee thereof, may be taken without a
meeting if done in writing and signed by a majority of the Directors or
committee members, unless otherwise provided by the Investment Company Act of
1940 or regulations thereunder.
(f) Notwithstanding any other provision of these Articles of
Incorporation, no person shall serve as a director of this corporation after the
holders of record of not less than two-thirds of the outstanding shares of the
corporation have declared that such director be removed from office by votes
cast in person or by proxy at a meeting called for such purpose. Notwithstanding
the provisions of Minnestota statutes, subchapter 302(A), the Board of Directors
shall promptly call a meeting of shareholders for the
<PAGE>
removal of a director if recordholders of not less than 10 percent of the
outstanding shares request in writing that such a meeting be held. Whenever 10
or more shareholders of record who have been such for at least six months
preceding the date of application and who in aggregate own shares having a net
asset value of at least $25,000 or at least 1 percent of the oustanding shares,
whichever is less, shall apply to the Board of Directors in writing stating that
they wish to communicate with other shareholders with a view to obtaining
signatures to request a meeting pursuant to this section and which is
accompanied by the form of communication proposed to be transmitted to such
other shareholders, the Board of Directors shall within five business days after
receipt thereof either afford such applicants access to the list of names and
addresses of such shareholders on such date or inform such applicants of the
approximate number of such shareholders of record and the approximate cost of
mailing to them the proposed communication and form of request. If such
applicants provide sufficient copies of all materials to be so mailed and
provide payment for all reasonable costs and expenses of mailing, the Board of
Directors shall mail such materials to all shareholders of record, unless within
five days of the tender of the materials and payment therefor the Board of
Directors files with the Securities and Exchange Commission and provides to the
applicants a copy of a written statement signed by a majority of the directors
which indicates that in their opinion such material contains untrue statements
of fact or omits to state facts necessary to make the statements contained
therein not misleading, or would be in violation of law, and specifying the
basis of such opinion.
ARTICLE 9.
The names and addresses of the first Directors, who shall serve until the
first meeting of shareholders or until their successors are elected and
qualified are:
Thomas D. Hayes 500 Centre Terrace
1225 "L" Street
Lincoln, NE 68508
R. Paul Hoff 311 Jackson
Seward, NE
Stan Schrier 11128 John Galt Blvd.
Omaha, NE 68137
Michael C. Dunlap 5315 South 30
Lincoln, NE 68516
Edson Bridges, III 8401 West Dodge Road
Omaha, NE 68114
<PAGE>
ARTICLE 10.
To the fullest extent permitted by Minnesota Statutes, Chapter 302A, as the
same exists or may hereafter be amended, and to the extent not inconsistent with
the Investment Company Act of 1940 and regulations thereunder, a director of
this corporation shall not be liable to this corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
ARTICLE 11.
The name and address of the incorporator, who is a natural person of full
age, is:
Name Address
John C. Miles 1900 FirsTier Bank Building
Lincoln, NE 68508
IN WITNESS WHEREOF, the undersigned sole incorporator has executed these
Articles of Incorporation on January 15, 1988.
/s/ John C. Miles
------------------------------
John C. Miles
STATE OF NEBRASKA )
) ss
COUNTY OF LANCASTER )
On October 26th, 1990, before me, a Notary Public, personally appeared John
C. Miles, to me known to be the person named as the incorporator of NEW HORIZON
FUND, Inc., a Minnesota corporation, who executed the foregoing Articles of
Incorporation on behalf of said corporation.
/s/ Rondalyn K. Smith
-------------------------------
(Notarial Seal)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF THE NEW HORIZON FUND, INC.
Pursuant to Chapter 302A.131-139 of the Minnesota Business Corporation
Act, the Corporation hereby adopts these Articles of Amendment.
(1) The name of the corporation is New Horizon Fund, Inc.
(2) On November 7, 1990, the Board of Directors and sole Shareholder of
the corporation unanimously adopted, by written consent, the following Amendment
to the Articles of Incorporation changing the corporation's name to Apex Fund,
Inc.:
Article 1 of the Articles of Incorporation is hereby amended and
restated as follows:
"ARTICLE 1.
The name of this corporation is Apex Fund, Inc."
In witness whereof, the undersigned, president and assistant secretary
of the corporation, have executed these Articles of Amendment to the Articles of
Incorporation as of the 7th day of November, 1990.
/s/ Michael C. Dunlap
-----------------------------
Michael C. Dunlap, President
/s/ Jean Becker
-----------------------------
Jean Becker, Assistant Secretary
STATE OF NEBRASKA )
) ss.
COUNTY OF LANCASTER )
The foregoing instrument was acknowledged before me as of this 8th day of
November, 1990, by Michael C. Dunlap, President.
/s/ Janice R. Kinnan
-----------------------------
Notary Public
STATE OF NEBRASKA )
) ss.
COUNTY OF LANCASTER )
The foregoing instrument was acknowledged before me as of this 8th day
of November, 1990, by Jean Becker, Assistant Secretary.
/s/ Sharon A. Shelley
------------------------------
Notary Public
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF THE
APEX FUND, INC.
Pursuant to Chapter 302A.131-139 of the Minnesota Business Corporation
Act, the Corporation hereby adopts these Articles of Amendment.
(1) The name of the corporation is Apex Fund, Inc.
(2) On January 15, 1991, the Board of Directors and sole Shareholder of
the corporation unanimously adopted, by written consent, the following Amendment
to the Articles of Incorporation changing the corporation's name to Stratus
Fund, Inc.:
Article 1 of the Articles of Incorporation is hereby amended and
restated as follows:
"ARTICLE 1.
The name of this corporation is Stratus Fund, Inc."
In witness whereof, the undersigned, president and assistant secretary
of the corporation, have executed these Articles of Amendment to the Articles of
Incorporation as of the 15th day of January, 1991.
/s/ Michael C. Dunlap
----------------------------
Michael C. Dunlap, President
/s/ Jean Becker
----------------------------
Jean Becker, Assistant Secretary
STATE OF NEBRASKA )
) ss.
COUNTY OF LANCASTER )
The foregoing instrument was acknowledged before me as of this 15th day of
January, 1991, by Michael C. Dunlap, President.
/s/ Janice R. Kinnan
----------------------------
Notary Public
STATE OF NEBRASKA )
) ss.
COUNTY OF LANCASTER )
The foregoing instrument was acknowledged before me as of this 15th day
of January, 1991, by Jean Becker, Assistant Secretary.
/s/ John C. Miles
----------------------------
Notary Public
STRATUS FUND, INC.
ARTICLES OF AMENDMENT
STRATUS FUND, INC., a Minnesota corporation having its principal office
in the City of Lincoln, Nebraska (the "Corporation"), certifies that:
FIRST: The Articles of the Corporation is amended by reclassifying all
of the shares of the Corporation's Common Stock designated Growth/Income
Portfolio Shares as shares of the Corporation's Common Stock designated Union
Equity Income Shares.
SECOND: Upon effectiveness of these Articles of Amendment:
(a) All the assets and liabilities of the Corporation's Growth/Income
Portfolio shall be conveyed, transferred and delivered to the Corporation's
Union Equity Income Portfolio represented by shares of the Corporation's Common
Stock designated Union Equity Income Portfolio, and shall thereupon become and
be assets and liabilities belonging to the Union Equity Income Portfolio;
(b) All of the issued and outstanding shares of the Growth/Income Portfolio
will be automatically, and without the need of any further act or deed,
reclassified into a number of full and fractional, issued and outstanding,
shares of the Corporation's Common Stock, par value $.001 per share designated
Union Equity Income Portfolio equal to the aggregate net asset value of the
Growth/Income Portfolio divided by the net asset value per share of the Union
Equity Income Portfolio on a performance basis and as more fully set forth in
the Plan of Reorganization attached hereto as Appendix A.
(c) The shares of the Corporation's Common Stock designated Union Equity
Income Portfolio shares and Union Government Securities Portfolio shares are
hereby renamed Equity Income Portfolio shares and Government Securities
Portfolio shares respectively; and
As a result, the Common Stock of the Corporation is designated and allocated as
follows:
Intermediate Government Bond Portfolio shares 10,000,000
Capital Appreciation Portfolio shares 10,000,000
Equity Income Portfolio shares 20,000,000
Government Securities Portfolio shares 10,000,000
Variable Rate Portfolio shares 10,000,000
Money Market Portfolio shares 100,000,000
The remaining 840,000,000 shares of the Corporation's Common Stock shall be
undesignated and reserved for future issuance.
THIRD: This amendment shall not increase the authorized capital stock
of the Corporation. The amendment reclassifies the 10,000,000 authorized shares
of Common Stock designated Growth/Income Portfolio shares as 10,000,000
additional shares of Common Stock designated Equity Income Portfolio shares but
does not amend the description of any class of stock as set forth in the
Articles.
<PAGE>
FOURTH: This amendment has been duly authorized by the Board of Directors
of the Corporation and approved by the stockholders of the Corporation entitled
to vote thereon.
FIFTH: These Articles of Amendment shall be effective as of 12:01 a.m.,
April 30, 1994.
IN WITNESS WHEREOF, STRATUS FUND, INC. has caused these Articles of
Amendment to be signed in its name and on its behalf by its President, and
attested by its Secretary, on the 28th day of April, 1994.
ATTEST: STRATUS FUND, INC.
/s/ Jean Becker /s/ Thomaas D. Hayes
- ------------------- By:--------------------------
Jean Becker Thomas D. Hayes
Assistant Secretary Chairman
<PAGE>
Appendix A
PLAN OF REORGANIZATION
This Plan of Reorganization dated as of the 16th day of December 1993,
(the "Plan") sets forth the procedures and actions necessary to merge the series
designated Growth/Income Portfolio of the Stratus Fund, Inc. into the series of
the STRATUS FUND, INC. designated Union Equity Income Portfolio.
WHEREAS, on July 22, 1993 and December 16, 1993, the Board of Directors
of the Stratus Fund, Inc. approved this Plan in substantially this form
providing for the reorganization of the Growth/Income Portfolio with and into
the series designated Union Equity Income Portfolio and found that such
transaction was in the best interests of shareholders.
NOW, THEREFORE, in consideration of these premises, the Board of
Directors does hereby set forth the Plan of Reorganization necessary to
consummate the transaction.
Article I. The Reorganization
Section 1.01. Upon the terms and subject to the conditions hereof, and
in accordance with the Business Corporation Law of the State of Minnesota (the
"MBCL"), Growth/Income Portfolio shall be reorganized with and into the series
designated Union Equity Income Portfolio (the "Reorganization") following the
satisfaction or waiver of the conditions set forth in Article III hereof.
Following the Reorganization, the Growth/Income Portfolio shall be deemed to
have redeemed all of its shares and shall cease separate existence as a
registered investment management company under Subchapter M of the Internal
Revenue Code.
Section 1.02. The Reorganization shall be consummated by filing with
the Secretary of State of Minnesota Articles of Amendment and such documents in
such form as required by, and executed in accordance with, the relevant
provisions of the MBCL. The time of filing such documents with the Secretary of
State of Minnesota or such other times as determined by the Board of Directors
shall be the "Effective Time" for the Reorganization, but for accounting
purposes, the Reorganization shall occur at the later of 12:01 a.m. on April 1,
1994, or the Effective Time.
Section 1.03. The Reorganization of the Growth/Income Portfolio into
the Union Equity Income Portfolio shall have the effect of a reorganization of
corporations, except that any liability, obligation or penalty assumed by Union
Equity Income Portfolio relating to or arising from the Growth/Income Portfolio
shall be satisfied first out of the assets of the Growth/Income Portfolio before
recourse to any other assets of the Union Equity Income Portfolio.
Section 1.04. At the Effective Time of the Reorganization all property
of every description, and all interests, rights, privileges and powers of the
Growth/Income Portfolio, subject to all liabilities of, whether accrued,
absolute, contingent or otherwise (such assets subject to such liabilities there
are herein referred to as the "Assets") will be transferred and conveyed by the
Growth/Income Portfolio to the Union Equity Income Portfolio and will be assumed
by Union Equity Income Portfolio, such that at and after the Effective Time of
the Reorganization, the Assets (including liabilities) of the Growth/Income
Portfolio will become Assets of the Union Equity Income Portfolio.
Section 1.05. The Articles of Incorporation and Bylaws of the Stratus
Fund shall remain in effect at the Effective Time as the Articles of
Incorporation and Bylaws of Stratus Fund, Inc., except to the extent amended to
reclassify the shares of the Growth/Income Portfolio as Union Equity Portfolio
shares.
<PAGE>
Section 1.06. In exchange for the transfer of assets described in
Section 1.04, each share and each fractional share of Growth/Income Portfolio
common stock (the "Shares") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Reorganization and without any action on
the part of the holder thereof, be converted into fully paid and non-assessable
Union Equity Income Portfolio shares and/or fractions thereof of Stratus Fund
equal to the net asset value of the shares of the Growth/Income Portfolio so
held, as described in Article V of the Articles of Incorporation of Stratus
Fund, as supplemented by the resolution of the Board of Directors of Stratus
Fund establishing such Union Equity Income Portfolio shares.
Section 1.07. At the Effective Time of the Reorganization, each
shareholder of the Growth/Income Portfolio will have the right to receive any
unpaid dividends or other distributions which were declared before the Effective
Time of the Reorganization with respect to shares held by the shareholder
immediately prior to the Effective Time of the Reorganization. To facilitate the
foregoing issuance, the Company will establish open accounts in the name of each
holder of shares representing the number of shares of the Growth/Income
Portfolio owned by each such shareholder as a result of the Reorganization.
Article II. Transfer of Shares
Section 2.01. (a) Prior to the Effective Time, Smith Hayes Portfolio
Management, Inc. shall be designated to act as transfer agent for the Stratus
Fund in connection with the Reorganization. At the Effective Time, ownership of
the Shares by each registered holder thereof, as evidenced by a book entry on
the books of registry maintained by the transfer agent, will become ownership of
a number of Union Equity Income Portfolio shares, identically registered,
without additional notice to such registered holder.
(b) After the Effective Time, there shall be no transfers in the stock
transfer books of Stratus Fund for Growth/Income Portfolio shares. Any such
purported transfer shall be deemed a transfer of Union Equity Income Portfolio
shares to which such shares have been converted.
Article III. Conditions to Consummation of the Reorganization
Section 3.01. The consummation of the Reorganizations is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) This Plan shall have been adopted by the affirmative vote of the
shareholders of the Growth/Income Portfolio by the requisite vote in accordance
with applicable law;
(b) No statute, rule, regulation, executive order, decree or injunction
shall be enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Reorganization;
(c) No suit, action, claim, proceeding or investigation before any
court, arbiter or administrative government or regulatory body, United States or
foreign, shall have been threatened or shall have been commenced and be pending
against the Stratus Fund or any of its respective affiliates, associates,
officers or directors seeking to prevent or delay the transactions contemplated
by, or challenging any of the terms or provisions of, the Plan or seeking
damages in connection therewith;
(d) All approvals, consents, authorizations, orders and waivers from
governmental and regulatory agencies and third parties required to consummate
the transactions contemplated hereby (including the order of the Securities and
Exchange Commission declaring effective the Post-Effective Amendment to the
Stratus Fund's Registration Statement on Form N-1A registering the Union Equity
Income Portfolio shares under the
<PAGE>
Securities Act of 1933), which, either individually or in the aggregate, if not
obtained would preclude the Reorganization from occurring without a violation of
law or would have a material adverse effect on the financial condition, results
of operations or business of either party taken as a whole following the
Reorganization shall have been obtained.
(e) The Stratus Fund will have received an opinion of Cline, Williams,
Wright, Johnson & Oldfather to the effect that (i) the shares of the Union
Equity Income Portfolio issued pursuant to this Plan will, when issued in
accordance with the provisions hereof, be legally issued, fully paid and
non-assessable; and (ii) the reorganization will not give rise to the
recognition of income, gain or loss for Federal income tax purposes to either of
the Portfolios or their respective shareholders.
Article IV. Termination; Amendment
Section 4.01. This Plan may be terminated and the Reorganization
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding the approval thereof of the Growth/Income Portfolio, upon order
of the Board of Directors of the Stratus Fund.
Section 4.02. This Plan may be amended by action taken by the Board of
Directors of the Stratus Fund at any time before or after approval of this Plan
by the respective shareholders thereof but, after any such approval, no
amendment shall be made which adversely affects the rights of such shareholders
hereunder without the approval of such shareholders in the same manner as
required for approval of this Plan. This Plan may not be amended except by an
instrument in writing signed on behalf of the Board of Directors of the Stratus
Fund.
Amended as of January 15, 1991 to reflect the amendment and restatement of the
second paragraph of Section 3.12.
BYLAWS
OF
STRATUS FUND, INC.
ARTICLE I
OFFICERS, CORPORATE SEAL
Section 1.01. Name. The name of the corporation is STRATUS FUND, Inc.
Section 1.02. Registered Office. The registered office of the corporation in
Minnesota shall be that set forth in the Articles of Incorporation or in the
most recent amendment of the Articles of Incorporation or resolution of the
directors filed with the Secretary of State of Minnesota changing the registered
office.
Section 1.03. Other Offices. The corporation's office in Nebraska shall be
500 Centre Terrace, 1225 "L" Street, Lincoln, Nebraska, and the corporation may
have such other offices and places of business, within or without the State of
Minnesota, as the directors shall, from time to time, determine.
Section 1.04. Corporate Seal. The corporation shall have no seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Except as provided otherwise by
Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at any
place, within or without the State of Minnesota, designated by the directors
and, in the absence of such designation, shall be held at the registered office
of the corporation in the State of Minnesota. The directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at 10:00 o'clock a.m.
Section 2.02. Regular Meetings. Annual meetings of shareholders will not be
held unless called by the shareholders pursuant to Minnesota Statutes Section
302A.431 or unless required by the Investment Company Act of 1940 and the rules
and regulations promulgated thereunder. Regular meetings shall be held only with
such frequency and at such times and places as provided in and required by
Minnesota Statutes Section 302A.431.
<PAGE>
Section 2.03. Special Meetings. Special meetings of the shareholders may be
held at any time and for any purpose and may be called by the Chairman of the
Board, the President, and two or more directors, or by one or more shareholders
holding ten percent (10%) or more of the shares entitled to vote on the matters
presented to the meeting.
Section 2.04. Quorum; Adjourned Meetings. The holders of ten percent (10%)
of the shares outstanding and entitled to vote at a meeting shall constitute a
quorum for the transaction of business at any shareholders' meeting. In case a
quorum shall not be present at a meeting, those present in person or by proxy
shall adjourn to such day as they shall, by majority vote, agree upon without
further notice other than by announcement at the meeting at which such
adjournment is taken. If a quorum is present, a meeting may be adjourned from
time to time without notice other than announcement at the meeting. At adjourned
meetings at which a quorum is present, any business may be transacted which
might have been transacted at the meeting as originally noticed. If a quorum is
present, the shareholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.05. Voting. At each meeting of the shareholders, every shareholder
shall have the right to vote in person or by proxy. Each shareholder, unless the
Articles of Incorporation or applicable laws provide otherwise, shall have one
vote for each share having voting power registered in his name on the books of
the corporation. Upon the demand of any shareholder, the vote upon any question
before the meeting shall be by written ballot. Except as otherwise specifically
provided by these Bylaws or as required by provisions of the Investment Company
Act of 1940 or other applicable laws, all questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote. If the matter(s) to be presented at a regular
or special meeting relates only to a particular portfolio or portfolios of the
corporation, then only the shareholders of the series of stock issued by such
portfolio or portfolios are entitled to vote on such matter(s).
Section 2.06. Voting - Proxies. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been executed in
writing by the shareholder himself or by his attorney thereunto duly authorized
in writing. No proxy shall be voted after three years from its date unless it
provides for a longer period.
Section 2.07. Closing of Books. The Board of Directors may fix a time, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, as
a record date for the determination of the shareholders entitled to notice of,
and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record
<PAGE>
date so fixed. If the Board of Directors fails to fix a record date for
determination of the shareholders entitled to notice of, and to vote at, any
meeting of shareholders, the record date shall be the thirtieth (30th) day
preceding the date of such meeting.
Section 2.08. Notice of Meetings. The Secretary or an Assistant Secretary
shall mail to each shareholder, shown by the books of the corporation to be a
holder of record of voting shares, at his address as shown by the books of the
corporation, a notice setting out the time and date and place of any
shareholders' meeting, which notice shall be mailed at least fourteen (14) days
prior thereto. Every notice of any shareholders' meeting shall state the purpose
or purposes for which the meeting has been called, pursuant to Section 2.03, and
the business transacted at all meetings shall be confined to the purpose stated
in the call.
Section 2.09. Waiver of Notice. Notice of any meeting may be waived either
before, at or after such meeting in writing signed by each shareholder or
representative thereof entitled to vote the shares so represented.
Section 2.10. Written Action. Any action which might be taken at a meeting
of the shareholders may be taken without a meeting if done in writing and signed
by a majority of the shareholders entitled to vote on that action. If the action
to be taken relates to a particular portfolio or portfolios of the corporation,
then only shareholders of the series of stock issued by such portfolio or
portfolios are entitled to vote on such action.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Tenure of Office. The business of the corporation
shall be conducted by and its property managed by a Board of Directors
consisting of no less than three (3) nor more than nine (9) directors and the
initial Board of Diretors shall consist of five (5) directors, which number may
be increased or decreased as provided in Section 3.03 of this Article. Each
director shall hold office until the next meeting of stockholders of the
corporation next succeeding his election or until his successor is duly elected
and qualified. Directors need not be stockholders.
The Board of Directors may elect a chairman, who shall preside at meetings
and shall have such other responsibilities and duties as may be requested of or
assigned to him by the Board.
Section 3.02. Vacancies. In case of any vacancy in the Board of Directors
through death, resignation or other cause, a majority of the remaining
directors, although such majority is less than a quorum, by an affirmative vote,
may, subject to any limitations
<PAGE>
contained in the Articles of Incorporation, or the Investment Company Act of
1940, elect a successor to hold office until the next annual meeting of the
stockholders of the corporation or until his successor is duly elected and
qualified.
Section 3.03. Increase or Decrease in Number of Directors. Subject to any
limitations contained in the Articles of Incorporation, the Board of Directors,
by the vote of a majority of the entire Board, may increase the number of
directors, and any vacancies so created shall be filled by the stockholders at
the next meeting of stockholders called for that purpose. Subject to the said
limitations, the Board of Directors, by the vote of a majority of the entire
Board, may likewise decrease the number of directors to a number not less than
three.
Section 3.04. Election of Entire New Board. If at any time after the first
meeting of stockholders of the corporation more than one-third of the directors
in office shall consist of directors elected by the Board of Directors, a
meeting of the stockholders shall be called forthwith for the purpose of
electing the entire Board of Directors, and the terms of office of the directors
then in office shall terminate upon the election and qualification of such Board
of Directors. This Section 3.04 may be altered, amended or repealed only upon
the affirmative vote of the holders of a majority of all the shares of the
common stock of the corporation at the time outstanding and entitled to vote.
Section 3.05. Place of Meetings, Office and Records. The directors may hold
their meetings, have one or more offices and keep the books of the corporation
outside the State of Minnesota at any office or offices of the corporation or at
any other place as they may from time to time by resolution determine, or, in
the case of meetings, as shall be specified or fixed in the respective notices
or waivers of notice thereof.
Section 3.06. Regular Meetings. Regular meetings of the Board of Directors
shall be held quarterly at such time and on such notice as the directors may
from time to time determine.
A meeting of the Board of Directors shall be held immediately after a
meeting of the stockholders called for the election of directors. Said meeting
shall be held at the same place as the stockholders' meeting. No notice of such
meeting of the Board of Directors is required.
Section 3.07. Special Meetings. Special meetings of the Board of Directors
may be held from time to time upon call of the President or of a majority of the
directors by oral or telegraphic or written notice duly served on or sent or
mailed to each director not less than two (2) days before such meeting. No
notice need be given to any director who attends in person or to any director
who, in writing executed and filed with the records of
<PAGE>
the meeting either before or after the holding thereof, waives such notice. Such
notice or waiver of notice need not state the purpose or purposes of such
meeting.
Section 3.08. Quorum. A majority of the directors shall constitute a quorum
for the transaction of business, provided that a quorum shall in no case be less
than two directors. If at any meeting of the Board there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum shall have been obtained. The act of the majority of the
directors present at any meeting at which there is a quorum shall be the act of
the directors, except as otherwise provided in the Articles of Incorporation or
in these Bylaws, or by specific statutory provisions superseding the
restrictions and limitations in the Articles of Incorporation or in these
Bylaws, or any contract or agreement to which the corporation is a party.
Section 3.09. Executive Committee. The Board of Directors may, in each year,
by the affirmative vote of a majority of the entire Board, elect from the
directors an Executive Committee to consist of such number of directors (not
less than two) as the Board may from time to time determine. The chairman of the
Committee shall be elected by the Board of Directors. The Board of Directors by
affirmative vote shall have power at any time to change the members of such
Committee and may fill vacancies in the Committee by election from the
directors. When the Board of Directors is not in session, the Executive
Committee shall have and may exercise any or all of the powers of the Board of
Directors in the management of the business and affairs of the corporation
(including the power to authorize a seal of the corporation to be affixed to all
papers which may require it as the need arises) except as provided by law or by
any contract or agreement to which the corporation is a party and except the
power to increase or decrease the size of, or fill vacancies on, the Board, to
remove or appoint executive officers or to dissolve, or change the membership
of, the Executive Committee, and the power to make or amend the Bylaws of the
corporation. The Executive Committee may fix its own rules for the conduct of
its business or such rules may be established by resolution of the Board of
Directors, but in every case the presence of a majority shall be necessary to
constitute a quorum. In the absence of any member of the Executive Committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Directors to act in the place of
such absent member.
Section 3.10. Investment Committee. The Board of Directors may appoint an
Investment Committee, consisting of three or more members, all of whom shall be
members of the Board of Directors. The Board of Directors may remove any member
and may appoint new alternate or additional members of the Investment Committee,
and may request persons who are not directors to serve as ex officio members. It
shall be the function of the Investment Committee to advise the Board of
Directors as to the
<PAGE>
investment of the assets of the corporation. The Investment Committee shall have
no power or authority to make any contract or incur any liability whatever or to
take any action binding upon the corporation, the officers, the Board of
Directors or the stockholders.
Section 3.11. Other Committees. The Board of Directors, by the affirmative
vote of a majority of the entire Board, may appoint other committees which shall
in each case consist of such number of members (not less than two) who are
members of the Board of Directors and shall have and may exercise such powers as
the Board may determine in the resolution appointing them. A majority of all
members of any such committee may determine its action and fix the time and
place of its meeting, unless the Board of Directors shall otherwise provide. The
Board shall have power at any time to change the members and powers of any such
committee, to fill vacancies, and to discharge any such committee, or to request
persons who are not directors to serve as ex officio members thereof.
Section 3.12. Action by Consent. Unless otherwise provided by the Articles
of Incorporation or Bylaws, or by the Investment Company Act of 1940 or rules or
regulations promulgated thereunder, any action required by statute to be taken
at a meeting of the directors, or of any 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 effect as a unanimous vote. The
consent may be executed by the directors in counterparts.
Members of the Board of Directors, or any committee designated by the Board,
may participate in a meeting of the Board or such committee by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this provision, except as otherwise required by the Investment
Company Act of 1940 which requires actual physical attendance of directors of
meetings involving the approval of Investment Advisory Agreements and
Distribution Plans adopted pursuant to Rule 12b-1, shall constitute presence in
person at such meeting.
Section 3.13. Compensation of Directors. Directors who are also officers or
employees of the corporation's investment adviser or principal underwriter,
shall take no compensation and expenses for the attendance at a meeting. Other
directors shall receive such compensation and reimbursement for expenses as
shall be fixed by the Board of Directors.
<PAGE>
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of a
Chairman of the Board (if one is elected by the Board), the President, one or
more Vice Presidents (if desired by the Board), a Secretary and one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, and
such other officers and agents as may, from time to time, be elected by the
Board of Directors. Any two offices except those of Chairman of the Board,
President and Vice President may be held by one person.
Section 4.02. Election, Term of Office and Qualifications. At each annual
meeting of the Board of Directors, the Board shall elect, from within or without
their number, the President, the Secretary, the Treasurer and such other
officers as may be deemed advisable. Such officers shall hold office until the
next annual meeting of the directors or until their successors are elected and
qualify. The President and all other officers who may be directors shall
continue to hold office until the election and qualification of their
successors, notwithstanding an earlier termination of their directorship.
Section 4.03. Resignation. Any officer may resign his office at any time by
delivering a written resignation to the Board of Directors, the President, the
Secretary, or any Assistant Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.04. Removal and Vacancies. Any officer may be removed from his
office by a majority of the whole Board of Directors, with or without cause.
Such removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason by death, resignation or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.
Section 4.05. Chairman of the Board. The Chairman of the Board, if one is
elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.
Section 4.06. President. The President shall have general active management
of the business of the corporation. In the absence of the Chairman of the Board,
he shall preside at all meetings of the shareholders and directors. He shall be
the chief executive officer of the corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall be ex
officio a member of all standing committees. He may execute and deliver, in the
name of the corporation, any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the corporation and, in
<PAGE>
general, shall perform all duties usually incident to the office of President.
He shall have such other duties as may, from time to time, be prescribed by the
Board of Directors.
Section 4.07. Vice President. Each Vice President shall have such powers and
shall perform such duties as may be specified in the Bylaws or prescribed by the
Board of Directors or by the President. In the event of absence or disability of
the President, Vice Presidents shall succeed to his power and duties in the
order designated by the Board of Directors.
Section 4.08. Secretary. The Secretary shall be secretary of, and shall
attend all, meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. He shall
give proper notice of meetings of shareholders and directors. He shall keep the
seal of the corporation and shall affix the same to any instrument requiring it
and may, when necessary, attest the seal by his signature. He shall perform such
other duties as may, from time to time, be prescribed by the Board of Directors
or by the President.
Section 4.09. Treasurer. The Treasurer shall keep accurate accounts of all
moneys of the corporation received or disbursed. He shall deposit all moneys,
drafts and checks in the name of, and to the credit of, the corporation in such
banks and depositories as a majority of the whole Board of Directors shall, from
time to time designate. He shall have power to endorse, for deposit, all notes,
checks and drafts received by the corporation. He shall disburse the funds of
the corporation, as ordered by the Board of Directors, making proper vouchers
therefor. He shall render to the President and the directors, whenever required,
an account of all his transactions as Treasurer and of the financial condition
of the corporation, and shall perform such other duties as may, from time to
time, be prescribed by the Board of Directors or by the President.
Section 4.10. Assistant Secretaries. At the request of the Secretary, or in
his absence or disability, any Assistant Secretary shall have power to perform
all the duties of the Secretary and, when so acting, shall have all the powers
of, and be subject to all restrictions upon, the Secretary. The Assistant
Secretaries shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
Section 4.11. Assistant Treasurers. At the request of theTreasurer, or in
his absence or disability, any Assistant Treasurer shall have power to perform
all the duties of the Treasurer, and when so acting, shall have all the powers
of, and be subject to all the restrictions upon, the Treasurer. The Assistant
Treasurers shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
<PAGE>
Section 4.12. Compensation. The officers of this corporation shall receive
such compensation for their services as may be determined, from time to time, by
resolution of the Board of Directors.
Section 4.13. Surety Bonds. The Board of Directors may require any officer
or agent of the corporation to execute a bond (including, without limitation,
any bond required by the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission) to the corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his duties to the
corporation, including responsibility for negligence and for the accounting of
any of the corporation's property, funds or securities that may come into his
hands. In any such case, a new bond of like character shall be given at least
every six years, so that the date of the new bond shall not be more than six
years subsequent to the date of the bond immediately preceding.
ARTICLE V
SHARES AND THEIR TRANSFER AND REDEMPTION
Section 5.01. Certificates for Shares. (a) Shares issued by the corporation
are uncertificated.
Section 5.02. Issuance of Shares. The Board of Directors is authorized to
cause to be recorded on the stock transfer books of the corporation that number
of shares of the corporation up to the full amount authorized by the Articles of
Incorporation in such 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 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, their
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 X hereunder.
Section 5.03. Redemption of Shares. Upon the demand of any shareholder this
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 X
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,
<PAGE>
making disposal of portfolio securities or valuation of net assets of the
corporation not reasonably practicable.
Section 5.04. Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named on the books of the
corporation in the case of uncertificated shares or in the certificate in the
case of certificated shares, or the shareholder's legal representative, or the
shareholder's duly authorized attorney-in-fact, and, in the case of certificated
shares, upon surrender of the certificate or the certificates for such shares or
a duly executed assignment covering shares held in uncertificated form. The
corporation may treat, as the absolute owner of shares of the corporation, the
person or persons in whose name shares are registered on the books of the
corporation.
Section 5.05. Registered Shareholders. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by the laws of Minnesota.
Section 5.06. Transfer Agents and Registrars. The Board of Directors may
from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock there after issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 5.07. Transfer Regulations. The shares of stock of the corporation
may be freely transferred, and the Board of Directors may from time to time
adopt rules and regulations with reference to the method of transfer of the
shares of stock of the corporation.
Section 5.08. Redemption of Small Shareholder Accounts. If the value of a
shareholder's investment in the corporation becomes less than the amount
described in the corporation's registration statement on Form N-1A as filed with
the Securities and Exchange Commission (the "Registration Statement") or the net
asset value of any portfolio becomes less than the amount described in the
Registration Statement (or such other amount as may be determined from time to
time by the Board of Directors) as a result of a redemption or transfer of
shares, the corporation's officers are authorized, in their discretion, on
behalf of such portfolio, to redeem such shareholder's entire interest
<PAGE>
and remit such amount, provided that such a redemption will only be effected by
the corporation following (a) the mailing by the corporation to such shareholder
of a "notice of intention to redeem," and (b) the passage of such time period as
may be determined by the Board of Directors, during which time the shareholder
will have the opportunity to make an additional investment in the corporation to
increase the value of suchshareholder's account to at least such minimum amount.
ARTICLE VI
DIVIDENDS
It shall be the policy of the corporation to distribute to its shareholders,
at least annually, sufficient net investment income and realized capital gains
in order to comply with the provisions of the United States Internal Revenue
Code which relieve investment companies from Federal Income Tax. The Board of
Directors may provide to the shareholders a plan for reinvesting such net
investment income and capital gains under such terms and conditions as they, in
their discretion, shall deem desirable.
ARTICLE VII
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.01. Books and Records. The Board of Directors of the corporation
shall cause to be kept:
(1) a share register, giving the names and addresses of the
shareholders, the number and classes held by each, and the dates on which the
certificates therefor were issued;
(2) records of all proceedings of shareholders and directors; and
(3) such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business.
Section 7.02. Documents Kept at Registered Office. The Board of
Directors shall cause to be kept at the registered office of the corporation in
Minnesota, or at the office located in the state of Nebraska originals or copies
of:
(1) records of all proceedings of the shareholders and directors;
(2) Bylaws of the corporation and all amendments thereto; and
(3) reports made to any or all of the shareholders within the last
preceding three (3) years.
<PAGE>
Section 7.03. Audit, Accountant.
(a) 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.
(b) The corporation shall employ an independent certified public accountant
or firm of independent certified public accountants as its Accountant to examine
the accounts of the corporation and to sign and certify financial statements
filed by the corporation. The Accountant's certificates and reports shall be
addressed both to the Board of Directors and to the shareholders.
(c) A majority of the members of the Board of Directors shall select the
Accountant at any meeting held before the first regular meeting of shareholders,
and thereafter shall select the Accountant annually at a meeting held within
thirty (30) days before or after the beginning of the fiscal year of the
corporation. Such selection shall be submitted for ratification or rejection at
the next succeeding shareholders' meeting. If such meeting shall reject such
selection, the Accountant shall be selected by majority vote, either at the
meeting at which the rejection occurred or at a subsequent meeting of
shareholders called for the purpose.
(d) Any vacancy occurring between regular meetings, due to the death,
resignation or otherwise of the Accountant, may be filled by the Board of
Directors.
Section 7.04. Fiscal Year. The corporation shall operate and its financial
statements shall be prepared on a fiscal year ending June 30 of each calendar
year.
ARTICLE VIII
INSPECTION OF BOOKS
Section 8.01. Every shareholder of the corporation shall have a right to
examine, in person or by agent or attorney, at any reasonable time or times, for
any proper purpose, and at the place or places where usually kept, the share
register, books of account and records of the proceedings of the shareholders
and directors and to make extracts therefrom.
ARTICLE IX
VOTING OF STOCK HELD
Section 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name and on behalf of the corporation, to cast the votes
which the corporation may be entitled to cast
<PAGE>
as a stockholder or otherwise in any other corporation or association, any of
whose stock or securities may be held by the corporation, at meetings of the
holders of the stock or other securities of any such other corporation or
association, or to consent in writing to any action by any such other
corporation or association, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and may execute
or cause to be executed on behalf of the corporation and under its corporate
seal, or otherwise, such written proxies, consents, waivers, or other
instruments as it may deem necessary or proper in the circumstances; or any of
such officers may themselves attend any meeting of the holders of stock or other
securities of any such corporation or association and there at vote or
exerciseany or all other powers of the corporation as the holder of such stock
or other securities of such other corporation or association, or consent in
writing to any action by any such other corporation or association.
ARTICLE X
DETERMINATION OF NET ASSET VALUE
Section 10.01. The net asset value per share of each series of stock issued
by the portfolios 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) at the Board of
Directors shall determine. Provisions in the currently effective Prospectus of
the corporation regarding determination of net asset value shall be controlling.
Section 10.02. For purposes of the computation of net asset value of the
corporation's shares, the following shall apply:
(a) The Board of Directors, or its authorized officer or other
representative, shall compute the net asset value of shares of common stock at
such times and by such methods as may be required by the Investment Company Act
of 1940 or rules or regulations thereunder. In the absence of any such
requirements, such computation shall be made at least once each day on which the
New York Stock Exchange is open for unrestricted trading. Such computation shall
be as of the close of the New York Stock Exchange.
The Board of Directors may cause the net asset value to be computed at other
times and may vary or terminate the effective periods, to the extent permitted
by applicable law.
(b) The net asset value in effect for the purpose of the issue of common
stock to the public shall be the net asset value next determined after receipt
of a purchase order at the principal office of the corporation or its agent or
in accordance with any provision of the Investment Company Act of 1940 and any
rule or regulation thereunder, or any rule or regulation made or adopted by any
Securities Association registered under the Securities Exchange Act of 1934.
<PAGE>
(c) The net asset value applicable to each share of common stock of the
corporation surrendered to the corporation for redemption, pursuant to the
provisions of Article VII, Section 7.06 hereof, shall be that value next
determined after the request for redemption is properly received by the
corporation or its agent at either of their principal offices, or in accordance
with such other requirements as may be determined by the directors for
expediting redemptions.
(d) The net asset value of each share of common stock of the corporation
shall be the quotient obtained by dividing the value of the net assets of the
corporation (the value of the assets of the corporation less its liabilities
exclusive of common stock and surplus) by the total number of shares of common
stock outstanding at such close, all determined and computed as follows:
(1) The assets of the corporation shall be deemed to include:
(i) All cash on hand, on deposit or on call;
(ii) All bills and notes and accounts receivable;
(iii) All shares of stock and subscription rights and other
securities owned or contracted for by the corporation, other than its own stock;
(iv) All stock and cash dividends and cash distributions to be
received by the corporation and not yet received by it, but declared to
stockholders of record on a date on or before the date as of which the net asset
value is being determined;
(v) All interest accrued on any interest bearing securities
owned by the corporation; and
(vi) All other property of any kind and nature including
prepaid expenses, the value of such assets to be determined as follows:
In determining the value of the assets of the corporation for
the purpose of obtaining the net asset value, securities with maturities of
sixty days or less will be valued at cost and interest will be accrued daily.
All other assets of the corporation shall be valued by such method as the Board
of Directors in good faith shall deem to reflect their fair market value.
(2) The liabilities of the corporation shall be deemed to include:
<PAGE>
(i) All bills and notes and accounts payable:
(ii) All administrative expenses payable and/or accrued
(including management fees);
(iii) All contractual obligations for the payment of money or
property, including the amount of any unpaid dividend declared upon the
corporation's stock and payable to stockholders of record on or before the day
as of which the value of the corporation's stock is being determined;
(iv) All reserves, if any, authorized or approved by the Board
of Directors for taxes; and
(v) All other liabilities of the corporation of whatsoever
kind and nature, except liabilities represented by outstanding common stock and
surplus of the corporation.
(3) For the purpose hereof:
(i) Common stock subscribed for shall be deemed to be
outstanding as of the time of acceptance of any subscription and the entry
thereof on the books of the corporation and the net price thereof shall be
deemed to be an asset of the corporation; and
(ii) Common stock surrendered for redemption to the
corporation pursuant to the provisions of Article VII, Section 7.06 hereof shall
be deemed to be outstanding until the close of business on the date surrendered
and, thereupon, and until paid, the redemption price thereof shall be deemed to
be a liability of the corporation.
ARTICLE XI
CUSTODY OF ASSETS
Section 11.01. All securities and cash owned by this corporation shall, as
hereinafter provided, be held by or deposited with a bank or trust company
having (according to its last published report) not less than two million
dollars ($2,000,000) aggregate capital, surplus and undivided profits (the
"Custodian").
This corporation shall enter into a written contract with the Custodian
regarding the powers; duties and compensation of the Custodian with respect to
the cash and securities of this corporation held by the Custodian. Said contract
and all amendments thereto shall be approved by the Board of Directors of this
corporation. In the event of the Custodian's resignation or termination, the
corporation shall use its best efforts promptly to obtain a
<PAGE>
success or Custodian and shall require that the cash and securities owned by
this corporation held by the Custodian be delivered directly to such successor
Custodian.
ARTICLE XII
AMENDMENTS
Section 12.01. These Bylaws may be amended or altered by a vote of the
majority of the whole Board of Directors at any meeting provided that notice of
such proposed amendment shall have been given in the notice given to the
directors of such meeting. Such authority in the Board of Directors is subject
to the power of the shareholders to change or repeal such Bylaws by a majority
vote of the shareholders present or represented at any meeting of shareholders
called for such purpose. The Board of Directors shall not make or alter any
Bylaws fixing their qualifications, classifications, term of office, or number,
except that the Board of Directors may make or alter any Bylaw to increase their
number.
ARTICLE XIII
INDEMNIFICATION
No indemnification shall be made by this corporation that is inconsistent
with the guidelines set forth in Investment Company Act Releases No. 7221 (June
9, 1972) and No. 11330 (September 2, 1980) or, if such releases are modified,
superseded or rescinded, the guidelines set forth in any successor releases
regarding indemnification under Section 17(h) of the Investment Company Act of
1940.
This copy of the Bylaws is a true and accurate copy of the Bylaws
approved and adopted by the Board of Directors on October 30, 1990 and as
amended on January 15, 1991.
/s/ Jean Becker
-------------------------
Assistant Secretary
AMENDED
TRANSFER AGENT
AND
ADMINISTRATIVE SERVICES AGREEMENT
This Amended Agreement made this 1st day of July, 1995 by and between
STRATUS FUND, INC., a Minnesota corporation (the "Fund") and LANCASTER
ADMINISTRATIVE SERVICES, INC., a Nebraska corporation (the "Administrator").
WITNESSETH:
WHEREAS, SMITH HAYES Portfolio Management, Inc. transferred its transfer
agency and administrative services department to Lancaster Administrative
Services, Inc. ("LAS") effective as of July 1, 1995; and
WHEREAS, the parties desire to reflect the reorganization by amending and
restating the Agreement to reflect the proper parties.
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR.
Subject to the conditions set forth in this Agreement, the Fund hereby
appoints the Administrator, and the Administrator accepts such appointment, to
act as the Fund's Transfer Agent and Dividend Disbursing Agent and to administer
the general affairs of the Fund and provide services to the shareholders subject
to the supervision of the Board of Directors of the Fund for the period and on
the terms set forth herein. The Administrator agrees during such period, at its
own expense, to render the services and to assume the obligations herein set
forth, for the compensation herein provided.
<PAGE>
2. DUTIES AND EXPENSES OF THE ADMINISTRATOR AND FUND.
(a) The Fund shall, at all times, inform the Administrator as to the
condition of its affairs.
(b) The Administrator shall furnish the Fund with office facilities at
Administrator's offices, including such space, furniture, equipment and supplies
as well as personnel sufficient to carry out the necessary administrative,
clerical and bookkeeping functions for the Fund. Administrator agrees that it
will perform all of the usual and ordinary services as Transfer Agent and
Dividend Disbursing Agent and as agent for the various shareholder accounts
including but not limited to: issuing, transferring and cancelling stock
certificates, maintaining all shareholder accounts, preparing annual shareholder
meeting lists, mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses, withholding taxes on non-resident alien
accounts, disbursing income dividends and capital gains distributions, preparing
and filing U.S. Treasury Department Form 1099 for all shareholders, preparing
and mailing confirmation forms to shareholders for all purchases and
liquidations of Fund shares and other confirmable transactions in shareholders'
accounts, recording reinvestment of dividends and distributions in Fund shares,
causing liquidation of shares and causing disbursements to be made to withdraw
plan holders.
3. FEES OF THE ADMINISTRATOR.
For the services and facilities to be furnished and the obligations to be
assumed by the Administrator hereunder, the Fund shall pay, commencing with the
effective date of the first public offering of shares of the Fund, an annual fee
of: .25% of the weekly average net asset value of each
<PAGE>
Portfolio of the Fund as ascertained each business day and paid monthly. The
compensation for the period from the effective date hereof to the next
succeeding last day of the month shall be prorated according to the proportion
which such period bears to the full month ending on such date, and provided
further that, upon any termination of this Agreement before the end of any
month, such compensation for the period from the end of the last month ending
prior to such termination to the date of termination, shall be prorated
according to the proportion which such period bears to a full month, and shall
be payable upon the date of termination. For the purpose of the Administrator's
compensation, the net asset value of the Fund's Portfolios shall be computed in
the manner specified in its Bylaws in connection with the determination of the
net asset value of its shares.
4. INDEPENDENT CONTRACTOR.
The Administrator shall, for all purposes herein, be an independent
contractor and shall have no authority to act for or represent the Fund in any
way unless otherwise provided. No agreement, bid, offer, commitment, contract or
other engagement entered into by the Administrator whether on behalf of the
Administrator or whether purported to have been entered into on behalf of the
Fund shall be binding upon the Fund without its approval, and all acts
authorized to be done by the Administrator under this Agreement shall be done by
it as an independent contractor and not as an agent.
5. NON-EXCLUSIVE SERVICES OF THE ADMINISTRATOR.
Except to the extent necessary for performance of the Administrator's
obligations hereunder, nothing shall restrict the right of the Administrator or
any of its directors, officers, or employees who may be directors, officers or
employees of the Fund to engage in any other business or to devote time
<PAGE>
and attention to the management or other aspects of any other business whether
of a similar or dissimilar nature or to render services of any kind to any other
corporation, firm, individual or association. The services of the Administrator
to the Fund hereunder are not to be deemed exclusive, and the Administrator
shall be free to render similar services to others so long as its services
hereunder be not impaired thereby.
6. EFFECTIVE PERIOD AND APPROVAL.
This Agreement shall become effective as of the date that the Fund's
Registration Statement shall become effective with the Securities and Exchange
Commission ("Effective Date"), provided, however, that:
(a) it, along with any related agreements, has been approved by a vote of
the Board of Directors of the Fund, and of the Directors who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of this Agreement or any related
agreements, cast in person at a meeting called for the purpose of
voting on the Agreement and any related agreements; and
(b) after two years from the Effective Date, it shall continue in effect
from year to year only if approved annually in the manner set forth in
paragraph (a).
7. TERMINATION OF THE AGREEMENT.
This Agreement shall automatically terminate in the event of its
assignment. The Agreement may also be terminated at any time on sixty (60) days
written notice, without payment of penalty, by either party, and in the case of
the Fund:
(a) by a vote of a majority of the members of the Board of Directors who
are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of this Agreement or
related agreements; or
<PAGE>
(b) by a vote of a majority of the outstanding voting securities of the Fund.
8. INDEMNIFICATION.
Administrator shall not be responsible and the Fund shall indemnify and
hold Administrator harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability which may be asserted
against Administrator or for which it may be held to be liable, arising out of
or in any way attributable to:
(a) All actions of Administrator required to be taken by Administrator
pursuant to this Agreement provided that Administrator has acted in good faith
and with due diligence.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's negligence or willful misconduct or
which arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on, or the carrying out of, any instructions or requests
of the Fund.
(d) Defaults by dealers with respect to payment for share orders previously
entered.
(e) The reliance on, or the carrying out of, any instructions or requests
of the Fund.
(f) The offer or sale of the Fund's shares in violation of any requirement
under federal securities laws or regulations or the securities laws or
regulations of any state or in violation of any stop order or other
determination or ruling by any federal agency or state, with respect to the
offer or sale of such shares, in such state (unless such violation results from
Administrator's failure to comply with written instructions of the Fund or of
any officer of the Fund that no offers or sales by made in or to residents of
such state).
<PAGE>
Administrator shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of Administrator's willful failure to comply with the
terms of this Agreement or which arise out of Administrator's gross negligence
or willful misconduct.
At any time Administrator may apply to any officer of the Fund for
instructions, and may consult with legal counsel for the Fund or its own legal
counsel, at the expense of the Fund, with respect to any matter arising in
connection with the services to be performed by Administrator under this
Agreement and Administrator shall not be liable and shall be indemnified by the
Fund for any action taken or omitted by it in good faith in reliance upon such
instructions or upon the opinion of such counsel. Agent shall be protected and
indemnified in acting upon any paper or document believed by it to be genuine
and to have been signed by the proper person or persons and shall not be held to
have notice of any change of authority of any person, until receipt of written
notice thereof from the Fund. Administrator shall also be protected and
indemnified in recognizing stock certificates which Administrator reasonably
believes to bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper counter-signature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
<PAGE>
In no event and under no circumstances shall either party to this Agreement
be liable to the other party for consequential damages under any provision of
this Agreement or for any act or failure to act hereunder.
9. SAFEKEEPING OF BOOKS AND RECORDS.
Administrator hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms, and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of such certificates,
uncertificated shares, forms and devices. To the extent required by Section 31
of the Investment Company Act of 1940 and Rules thereunder, Administrator agrees
that all records maintained by Administrator under this Agreement are the
property of the Fund and will be preserved and will be surrendered promptly to
the Fund on request. Administrator and the Fund agree that all books, records,
information and the date pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation of and the carrying out of
this Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person.
10. AMENDMENT OF THE AGREEMENT.
The Agreement may be amended from time to time by either party, except that
any such amendment that materially increases the compensation to the
Administrator hereunder shall not be effective unless approved by a majority of
the outstanding voting securities, and all material amendments to this Agreement
shall be approved in the manner set forth in paragraph 6(b).
<PAGE>
11. DEFINITIONS.
For the purpose of this Agreement, the terms "vote of a majority of the
outstanding securities", "assignment", "affiliated person" and "interested
person" shall have the respective meanings specified in the Investment Company
Act of 1940 as amended; provided, however, that wherever in this Agreement it is
provided that this Agreement may be amended or terminated by or with the consent
of shareholders, such action shall only be effective with respect to those
Portfolios of the Fund the shareholders of which have taken the requisite
action.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their proper officers and their corporate seals to be hereunto
affixed, all as of the day and year first above written.
(SEAL) STRATUS FUND, INC.
Attest:
/s/ Michael Dunlap
- ----------------------- By ----------------------------
LANCASTER ADMINISTRATIVE
SERVICES, INC.
Attest:
/s/ Jean B. Norris
- ----------------------- By -----------------------------
Investment Advisory Agreement
AGREEMENT, made this 12th day of May, 1991, by and between APEX
FUND, a Minnesota corporation (the "Fund") and Union Bank & Trust Company,
a Nebraska state bank (the "Investment Adviser"):
WITNESSETH:
WHEREAS, the Fund intends to engage in business as a management
investment company and will register as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Fund desires to appoint the Investment Adviser to render
investment advisory services to the Fund in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Investment Adviser desires to be appointed to perform
services on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained; the Fund and the Investment Adviser agree as follows:
1. APPOINTMENT AND DUTIES OF INVESTMENT ADVISER
The Fund hereby appoints the Investment Adviser to act as investment
adviser to the Intermediate Government Bond Portfolio and the Growth/Income
Portfolio (the "Portfolios") of the Fund and, subject to the supervision of the
Board of Directors of the Fund, to supervise the investment activities of the
Portfolios as hereinafter set forth; to obtain and evaluate such information and
advice relating to the economy, securities markets and securities, as it deems
necessary or useful to discharge its duties hereunder; to continuously manage
the assets of the Portfolios in a manner consistent with the
<PAGE>
investment objective and policies of the Portfolios as set forth in the most
current registration statement of the Fund; to determine the securities to be
purchased, sold or otherwise disposed of by the Portfolios and the timing of
such purchases, sales and dispositions; to take such further action, including
the placing of purchase and sale orders on behalf of the Fund, as it shall deem
necessary or appropriate; and to furnish to or place at the disposal of the Fund
such information, evaluations, analyses and opinions formulated or obtained by
it in the discharge of its duties as the Fund may, from time to time, reasonably
request.
It is agreed that the Investment Adviser may enter into sub-investment
advisory agreements with one or more persons registered under the Investment
Advisers Act of 1940 to assist the Investment Adviser, at its expense, in
performing its duties and responsibilities hereunder, including, but not limited
to, the placing of purchase and sell orders on behalf of the Fund.
2. EXPENSES OF INVESTMENT ADVISER.
The Investment Adviser shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Adviser shall be deemed to
include persons employed or otherwise retained by the Investment Adviser to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and
<PAGE>
scientific developments, and such other information, advice and assistance as
the Investment Adviser may deem appropriate. The Investment Adviser shall
maintain records as may be required under the Act and the Investment Advisers
Act of 1940 and such records shall be made available to the Fund upon request.
3. EXPENSES AND DUTIES OF FUND.
Unless otherwise expressly agreed to by the Investment Adviser, the
Fund assumes and shall pay or cause to be paid all other expenses of the Fund,
including, without limitation: (a) the costs of shareholder reports; (b) any
fees pursuant to any investment advisory agreement and any management agreement
with the Fund; (c) fees pursuant to any plan of distribution that the Fund may
adopt; (d) the charges and expenses of any registrar, custodian, sub-custodian
or depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, as well as any stock transfer or dividend agent
appointed by the Fund; (e) brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
(f) all taxes and fees payable by the Fund to federal, state or other
governmental agencies or pursuant to any foreign laws; (g) the cost and expense
of engraving or printing of certificates representing shares of the Fund; (h)
all costs and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions or pursuant to any foreign
laws (including filing fees and legal fees) and the
<PAGE>
expense of printing and distributing prospectuses and supplements; (i) all
expenses of shareholders' and Directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; (j) the fees and travel
expenses of Directors or members of any advisory board or committee who are not
employees of the Investment Adviser; (k) all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption whether in shares or in
cash; (l) charges and expenses of any outside service used for pricing of the
Funds shares; (m) ordinary charges and expenses of legal counsel, including
counsel to the Directors of the Fund who are not interested persons (as defined
in the Act) of the Fund or the Investment Adviser, and of independent
accountants, in connection with any matter relating to the Fund; (n) membership
dues of industry associations; (o) interest payable on Fund borrowings; (p)
postage; (q) insurance premiums on property or personnel (including Officers and
Directors) of the Fund which inure to its benefit; (r) extraordinary legal,
accounting, and other expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto); and
(s) all other costs of the Fund's operation.
The Fund will, from time to time, furnish or otherwise make available
to the Investment Adviser such financial reports, proxy statements, and other
information relating to the business and affairs of the Fund as the Investment
Adviser may reasonably require in order to discharge its duties and obligations
hereunder or to comply with any applicable law and regulations.
<PAGE>
4. FEES OF INVESTMENT ADVISER.
For the services to be rendered, the facilities furnished, and the
obligations assumed by the Investment Adviser, the Fund, shall pay to the
Investment Adviser, commencing with the effective date of the first public
offering of shares of the Fund, a monthly investment advisory fee, computed
separately for the Portfolios, at the annual rates of .65% of the average net
asset value of the Intermediate Government Bond Portfolio and 1.00% of the
average net asset value of the Growth/Income Portfolio computed on the basis of
the weekly average net asset value of the Portfolios as ascertained each
business day. The compensation for the period from the effective date hereof to
the next succeeding last day of the month shall be prorated according to the
proportion which such period bears to the full month ending on such date, and
provided further that, upon any termination of this Agreement before the end of
the month, such compensation for the period from the end of the last month
ending prior to such termination to the date of termination, shall be prorated
according to the proportion which such period bears to a full month, and shall
be payable upon the date of termination. For the purpose of the Investment
Adviser's compensation, the value of the Portfolio's net assets shall be
computed in the manner specified in its Bylaws in connection with the
determination of the net asset value of shares. Payment of the Investment
Adviser's compensation for the preceding month shall be made as promptly as
possible after the last day of such month.
<PAGE>
5. BEST EFFORTS.
The Investment Adviser will use its best efforts in the supervision and
management of the investment advisory activities of the Portfolios but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations hereunder, the Investment Adviser shall not be
liable to the Fund or any of its investors for any error of judgment or mistake
of law or fact, for any act or omission by the Investment Adviser or for any
losses sustained by the Fund or investors.
6. INDEPENDENT CONTRACTOR.
Investment Adviser shall, for all purposes herein, be an independent
contractor and shall have no authority to act for or represent the Fund in its
investment commitments unless otherwise provided.
Nothing contained in this Agreement shall prevent the Investment
Adviser or any affiliated person of the Investment Adviser from acting as
investment adviser or manager for any other person, firm, corporation or other
entity, and shall not, in anyway, bind or restrict the Investment Adviser or any
such affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any Director, Officer or employeeof the Investment Adviser to engage in any
other business or to devote his time and attention in part to the management or
other aspects of any other business whether of a similar or dissimilarnature.
<PAGE>
7. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the close of business on
the date the Fund's Registration Statement becomes effective with the Securities
and Exchange Commission (the "Effective Date") and shall continue in effect
unless sooner terminated as herein provided until two years from the date
thereof and thereafter only if approved at least annually: (a) by the Board of
Directors of the Fund; or (b) by the vote of a majority of the outstanding
shares of the Portfolios of the Fund, as defined in the Act, and, in addition,
(c) by the vote of a majority of the Directors of the Fund who are not parties
hereto nor interested persons of any party, as required by the Act; provided,
that the first such approval by Directors under (a) or (c) shall take place
within ninety (90) days prior to the date two years from the Effective Date and
each subsequent, annual approval shall take place within ninety (90) days prior
to June 30 in each year thereafter, and each approval if made by the vote of
shareholders of the Fund shall be made at a meeting held prior to June 30 in any
fiscal year, and each such approval whetherunder (a) and (c) or under (b) and
(c) shall be effective to continue such Agreement for a period ending June 30 of
the next succeeding year.
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund, or by a vote of a majority of
the outstanding voting securities of the Money Market Portfolio Fund, within the
meaning of the Act, in either case upon not less than sixty (60) days' written
notice to Investment Adviser, and it may
<PAGE>
be terminated by Investment Adviser upon sixty (60) days' written notice to the
Fund. This Agreement shall automatically terminate in the event of its
assignment, within the meaning of the Act, unless such automatic termination
shall be prevented by an exemptive order of the Securities and Exchange
Commission.
8. AMENDMENT OF AGREEMENT.
This Agreement may be amended from time to time by agreement of the
parties provided that such amendment shall be approved both by the vote of a
majority of Directors of the Fund, including a majority of Directors who are not
parties to this Agreement or interested persons of any such party to this
Agreement (other than as Directors of the Fund) cast in person at a meeting
called for that purpose, and by the holders of a majority of the outstanding
voting securities of the Fund.
This Agreement may be amended by agreement of the parties without the
vote or consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision hereof,
or if they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Adviser shall be liable for failing to do so.
9. INTERESTED PERSONS.
It is understood that Directors, Officers, agents and shareholders of
the Fund are or may be interested in the Investment Adviser (or any successor
thereof) as Directors, Officers, agents, shareholders, or otherwise; that
Directors, Officers, agents and
<PAGE>
shareholders of the Investment Adviser are or may be interested in the Fund as
Directors, Officers, agents, shareholders or otherwise; that the Investment
Adviser (or any such successor) is or may be interested in the Fund as
shareholder or otherwise.
10. DEFINITIONS.
For the purpose of this Agreement, the terms "vote of a majority of the
outstanding voting securities", "assignments", "affiliated person", and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940, as amended; provided, however, that wherever in
this Agreement it is provided that this Agreement may be amended or terminated
by or with the consent of shareholders, such action shall only be effective with
respect to those Portfolios of the Fund the shareholders of which have taken the
requisite action.
11. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
State of Nebraska and the applicable provisions of the Act and the Investment
Advisers Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have executed, accepted and
delivered this Agreement on the day and year first above written in Lincoln,
Nebraska.
<PAGE>
(SEAL) APEX, INC.
Attest:
/s/ Thomas D. Hayes
- --------------------------- By --------------------------
Secretary Chairman
UNION BANK AND TRUST COMPANY
Attest:
/s/ Ross Wilcox
- --------------------------- By ---------------------------
Secretary President
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this 30th day of October, 1992, by and between STRATUS
FUND, INC. a Minnesota corporation (the "Fund") and Union Bank & Trust Company,
a Nebraska state bank (the "Investment Adviser"):
WITNESSETH:
WHEREAS, the Fund is engaged in business as a management investment
company and has registered as such under the Investment Company Act of 1940, as
amended (the "Act"); and
WHEREAS, the Fund desires to appoint the Investment Adviser to render
investment advisory services to the Fund in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Investment Adviser desires to be appointed to perform
services on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained; the Fund and the Investment Adviser agree as follows:
1. APPOINTMENT AND DUTIES OF INVESTMENT ADVISER
The Fund hereby appoints the Investment Adviser to act as investment
adviser to the Capital Appreciation Portfolio (the "Portfolio") of the Fund and,
subject to the supervision of the Board of Directors of the Fund to, supervise
the investment activities of the Portfolio as hereinafter set forth; to obtain
and evaluate such information and advice relating to the economy, securities
markets and securities as it deems necessary or useful to discharge its duties
hereunder; to continuously manage the assets of the Portfolio in a manner
consistent with the investment objective and policies of the Portfolio as set
forth in the most current registration statement of the Fund; to determine the
securities to be purchased, sold or otherwise disposed of by the Portfolio and
the timing of such purchases, sales and dispositions; to take such further
action, including the placing of purchase and sale orders on behalf of the Fund,
as it shall deem necessary or appropriate; and to furnish to or place at the
disposal of the Fund such information, evaluations, analyses and opinions
formulated or obtained by it in the discharge of its duties as the Fund may,
from time to time, reasonably request.
It is agreed that the Investment Adviser may enter into subinvestment
advisory agreements with one or more persons registered under the Investment
Advisers Act of 1940 to assist the Investment Adviser, at its expense, in
performing its duties and responsibilities hereunder, including, but not limited
to, the placing of purchase and sell orders on behalf of the Fund.
<PAGE>
2. EXPENSES OF INVESTMENT ADVISER
The Investment Adviser shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Adviser shall be deemed to
include persons employed or otherwise retained by the Investment Adviser to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Adviser may
deem appropriate. The Investment Adviser shall maintain records as may be
required under the Act and the Investment Advisers Act of 1940 and such records
shall be made available to the Fund upon request.
3. EXPENSES AND DUTIES OF FUND
Unless otherwise expressly agreed to by the Investment Adviser, the
Fund assumes and shall pay or cause to be paid all other expenses of the Fund,
including, without limitation: (a) the costs of shareholder reports; (b) any
fees pursuant to any investment advisory agreement and any management agreement
with the Fund; (c) fees pursuant to any plan of distribution that the Fund may
adopt; (d) the charges and expenses of any registrar, custodian, sub-custodian
or depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, as well as any stock transfer or dividend agent
appointed by the Fund; (e) brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
(f) all taxes and fees payable by the Fund to federal, state or other
governmental agencies or pursuant to any foreign laws; (g) the cost and expense
of engraving or printing of certificates representing shares of the Fund; (h)
all costs and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions or pursuant to any foreign
laws (including filing fees and legal fees) and the expense of printing and
distributing prospectuses and supplements; (i) all expenses of shareholders' and
Directors' meetings and of preparing, printing and mailing of proxy statements
and reports to shareholders; (j) the fees and travel expenses of Directors or
members of any advisory board or committee who are not employees of the
Investment Adviser; (k) all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption whether in shares or in cash; (l) charges
and expenses of any outside service used for pricing of the Funds shares; (m)
ordinary charges and expenses of legal counsel, including counsel to the
Directors of the Fund who are not interested persons (as defined in the Act) of
the Fund or the Investment Adviser, and of independent accountants, in
connection with any matter relating to the Fund; (n) membership dues of industry
associations; (o) interest payable on Fund borrowings; (p) postage; (q)
insurance premiums on property or personnel (including Officers and Directors)
of the Fund which inure to its benefit; (r) extraordinary legal, accounting, and
other expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and (s) all other
costs of the Fund's operation.
<PAGE>
The Fund will, from time to time, furnish or otherwise make available
to the Investment Adviser such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Adviser may reasonably require in order to discharge its duties and obligations
hereunder or to comply with any applicable law and regulations.
4. FEES OF INVESTMENT ADVISER
For the services to be rendered, the facilities furnished, and the
obligations assumed by the Investment Adviser, the Fund, shall pay to the
Investment Adviser, commencing with the effective date of the first public
offering of shares of the Fund, a monthly investment advisory fee, computed
separately for the Portfolio, at the annual rate set forth on Exhibit 1 attached
hereto and incorporated by reference herein. The compensation for the period
from the effective date hereof to the next succeeding last day of the month
shall be prorated according to the proportion which such period bears to the
full month ending on such date, and provided further that, upon any termination
of this Agreement before the end of the month, such compensation for the period
from the end of the last month ending prior to such termination to the date of
termination, shall be prorated according to the proportion which such period
bears to a full month, and shall be payable upon the date of termination. For
the purpose of the Investment Adviser's compensation, the value of the
Portfolio's net assets shall be computed in the manner specified in its Bylaws
in connection with the determination of the net asset value of shares. Payment
of the Investment Adviser's compensation for the preceding month shall be made
as promptly as possible after the last day of such month.
5. BEST EFFORTS
The Investment Adviser will use its best efforts in the supervision and
management of the investment advisory activities of the Portfolio but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations hereunder, the Investment Adviser shall not be
liable to the Fund or any of its investors for any error of judgment or mistake
of law or fact, for any act or omission by the Investment Adviser or for any
losses sustained by the Fund or investors.
6. INDEPENDENT CONTRACTOR
Investment Adviser shall, for all purposes herein, be an independent
contractor and shall have no authority to act for or represent the Fund in its
investment commitments unless otherwise provided.
Nothing contained in this Agreement shall prevent the Investment
Adviser or any affiliated person of the Investment Adviser from acting as
investment adviser or manager for any other person, firm, corporation or other
entity and shall not in any way bind or restrict the Investment Adviser or any
such affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any Director, Officer or employee of the Investment Adviser to engage in
<PAGE>
any other business or to devote his time and attention in part to the management
or other aspects of any other business whether of a similar or dissimilar
nature.
7. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the close of business on
the date the Fund's Registration Statement for the Capital Appreciation
Portfolio becomes effective with the Securities and Exchange Commission (the
"Effective Date") and shall continue in effect unless sooner terminated as
herein provided until two years from the date thereof and thereafter only if
approved at least annually: (a) by the Board of Directors of the Fund; or (b) by
the vote of a majority of the outstanding shares of the Portfolios of the Fund,
as defined in the Act, and, in addition, (c) by the vote of a majority of the
Directors of the Fund who are not parties hereto nor interested persons of any
party, as required by the Act; provided, that the first such approval by
Directors under (a) or (c) shall take place within ninety (90) days prior to the
date two years from the Effective Date and each subsequent, annual approval
shall take place within ninety (90) days prior to June 30 in each year
thereafter, and each approval if made by the vote of shareholders of the Fund
shall be made at a meeting held prior to June 30 in any fiscal year, and each
such approval whether under (a) and (c) or under (b) and (c) shall be effective
to continue such Agreement for a period ending June 30 of the next succeeding
year.
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund, or by a vote of a majority of
the outstanding voting securities of the Capital Appreciation Portfolio within
the meaning of the Act, in either case upon not less than sixty (60) days'
written notice to Investment Adviser, and it may be terminated by Investment
Adviser upon sixty (60) days' written notice to the Fund. This Agreement shall
automatically terminate in the event of its assignment, within the meaning of
the Act, unless such automatic termination shall be prevented by an exemptive
order of the Securities and Exchange Commission.
8. AMENDMENT OF AGREEMENT
This Agreement may be amended from time to time by agreement of the
parties provided that such amendment shall be approved both by the vote of a
majority of Directors of the Fund, including a majority of Directors who are not
parties to this Agreement or interested persons of any such party to this
Agreement (other than as Directors of the Fund) cast in person at a meeting
called for that purpose, and by the holders of a majority of the outstanding
voting securities of the Fund.
This Agreement may be amended by agreement of the parties without the
vote or consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision hereof,
or if they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Adviser shall be liable for failing to do so.
<PAGE>
9. INTERESTED PERSONS
It is understood that Directors, Officers, agents and shareholders of
the Fund are or may be interested in the Investment Adviser (or any successor
thereof) as Directors, Officers, agents, shareholders, or otherwise; that
Directors, Officers, agents and shareholders of the Investment Adviser are or
may be interested in the Fund as Directors, Officers, agents, shareholders or
otherwise; that the Investment Adviser (or any such successor) is or may be
interested in the Fund as shareholder or otherwise.
10. DEFINITIONS
For the purpose of this Agreement, the terms "vote of a majority of the
outstanding voting securities", "assignments", "affiliated person", and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940, as amended; provided, however, that wherever in
this Agreement it is provided that this Agreement may be amended or terminated
by or with the consent of shareholders, such action shall only be effective with
respect to those Portfolios of the Fund the shareholders of which have taken the
requisite action.
11. APPLICABLE LAW
This Agreement shall be construed in accordance with the laws of the
State of Nebraska and the applicable provisions of the Act and the Investment
Advisers Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have executed, accepted and
delivered this Agreement on the day and year first above written in Lincoln,
Nebraska.
(SEAL) STRATUS FUND, INC.
Attest:
/s/ Michael Dunlap
- --------------------------- By ---------------------------------
Secretary Chairman
UNION BANK AND TRUST COMPANY
Attest:
/a/ Ross Wilcox
- --------------------------- By ---------------------------------
Secretary President
<PAGE>
Exhibit 1
As compensation for the Investment Adviser's services to the Fund
during the period of this Agreement, the Fund will pay to the Investment Adviser
a fee calculated and paid pursuant to the provisions of this exhibit. The fee
described below will be calculated and paid monthly. The period which forms the
basis for each monthly fee calculation shall be the 12 months ending with the
month for which such fee calculation is made, and such 12-month period shall be
referred to below as the "fee period".
(a) BASIC FEE. As primary compensation for the services rendered and
the expenses assumed by the Investment Adviser, the Fund shall pay the
Investment Adviser a monthly basic advisory fee, based on the net asset value of
the Capital Appreciation Portfolio averaged daily over the fee period ("Average
Daily Net Asset Value"), in an amount equal to 1/12th of (i) 1.4% of the portion
of the Average Daily Net Asset Value during the fee period. The Average Daily
Net Asset Value will be computed by averaging the net asset values of the
Capital Appreciation Portfolio at the close of each business day during the fee
period.
(b) INCENTIVE FEE. The monthly basic advisory fee shall be subject to
an incentive adjustment depending upon the investment performance of the Capital
Appreciation Portfolio relative to the Standard & Poors Index of 500 Stocks
(herein called the "Index") during the fee period. The incentive adjustment, if
any, shall be computed as of the end of each fee period, shall be added to or
subtracted from the monthly basic advisory fee calculated for such fee period
and shall be calculated as follows:
(i) There shall be added to the net asset value of a share of the Capital
Appreciation Portfolio outstanding at the close of business on the last business
day of the fee period: (A) the value of all cash distributions per share of the
Capital Appreciation Portfolio made during such fee period, accumulated to the
end of such fee period, which amount shall be treated as if reinvested in shares
of the Capital Appreciation Portfolio at the net asset value per share, after
giving effect to any such distributions, in effect at the close of business on
the respective record date or dates for the payment thereof, and (B) the value
of capital gains taxes per share of the Capital Appreciation Portfolio paid or
payable on undistributed realized long-term capital gains during the fee period,
accumulated to the end of such fee period, which amount shall be treated as
reinvested in shares of the Capital Appreciation Portfolio at the net asset
value per share, after giving effect of such taxes, in effect at the close of
business on the date on which such provision is made therefore. The adjusted net
asset value per share of the Capital Appreciation Portfolio, as so calculated,
shall then be compared with the net asset value of a share of the Capital
Appreciation Portfolio at the close of business on the business day immediately
preceding the first day of the fee period. The difference between such adjusted
net asset value of share at the close of business on the last day of the fee
period and the net asset value of a share at the close of
<PAGE>
business on the day immediately preceding the first day of the fee period
shall then be expressed as a percentage of the net asset value of a share of the
Capital Appreciation Portfolio at the close of business on the day immediately
preceding the first day of the fee period (such percentage being herein referred
to as the "net asset value percentage change").
(ii) There shall be added to the level of the Index at the close of
business on the last business day of the fee period, in accordance with
Commission guidelines, the value, computed consistently with the "Index", of
cash distributions made during the fee period and accumulated to the end of such
fee period, by companies whose securities comprised the Index. For this purpose
cash distributions on securities which comprise the Index made during the fee
period shall be treated as reinvested in the Index at the close of business on
the last day of each month following the payment of such distribution. The
adjusted level of the Index thus obtained shall then be compared to the level of
the Index at the close of business on the business day immediately preceding the
first day of the fee period and the difference in the two levels shall be
expressed as a percentage of the Index level at the close of business on the
business day immediately preceding the first day of the fee period (such
percentage being hereinafter referred to as the "Index Percentage Change").
(iii) The Index percentage change will then be subtracted from the net
asset value percentage change to determine the performance differential, it
being understood that any time either the percentage change and/or the
performance differential could result in a negative figure. To the extent that
there is a positive or negative performance differential, an incentive
adjustment for each such fee period shall be an amount equal to 1/12th of the
excess performance differential multiplied by the average daily net asset value
for the fee period according to the attached chart, labeled Appendix 1 and
incorporated by reference herein. Notwithstanding any positive or negative
performance differential or incentive fee adjustment calculated pursuant
thereto, there shall in no event be an incentive adjustment for any fee period
exceeding 1/12th of 1.4% of the average daily net asset value during such fee
period.
(iv) For purpose hereof, the incentive adjustment shall be computed in
accordance with any applicable rules, regulations and attributable releases
promulgated by the Commission.
(c) REIMBURSEMENT. Notwithstanding any other provision in this
Investment Advisory Agreement, the Investment Adviser agrees to reimburse the
Capital Appreciation Portfolio for its actual expenses incurred, exclusive of
brokerage commissions, interest taxes, dividends on short sales and the positive
incentive adjustment, if any, in excess of the lowest expense maximum
<PAGE>
permitted by the state securities commission of the states in which the Capital
Appreciation Portfolio has registered its securities for sale (hereinafter
called the "maximum expense limitation").
(d) ACCRUAL AND PAYMENT OF THE FEE. The Capital Appreciation
Portfolio's expenses (including the monthly basic advisory fee) and the
incentive adjustment for each fee period, shall be computed and accrued daily
and taken into account in computing the daily net asset value of the Capital
Appreciation Portfolio shares. However, expenses in excess of the maximum
expense limitation shall not be accrued for the purpose of computing the daily
net asset value of a Capital Appreciation Portfolio share. The incentive
adjustment for any fee period will not be accrued for the purpose of calculating
the basic advisory fee for the incentive adjustment for such period or for the
purpose of determining that performance differential for such period. The amount
of the basic advisory fee and any incentive adjustment will be determined
monthly promptly after the close of the fee period, and the fee for such period
will be paid after such determination period.
<PAGE>
APPENDIX A
Performance Total
Relative to Adviser
S&P 500 Index Fee
U -7.00% and less 0.00% Minimum Mgt Fee
N -6.50% 0.10%
D -6.00% 0.20%
E -5.50% 0.30%
R -5.00% 0.40%
-4.50% 0.50%
P -4.00% 0.60%
E -3.50% 0.70%
R -3.00% 0.80%
F -2.50% 0.90%
O -2.00% 1.00%
R -1.50% 1.10%
M -1.00% 1.20%
-0.50% 1.30%
Basic Mgt Fee 0.00% 1.40%
0.50% 1.50%
O 1.00% 1.60%
V 1.50% 1.70%
E 2.00% 1.80%
R 2.50% 1.90%
3.00% 2.00%
P 3.50% 2.10%
E 4.00% 2.20%
R 4.50% 2.30%
F 5.00% 2.40%
O 5.50% 2.50%
R 6.00% 2.60%
M 6.50% 2.70%
+7.00% and Greater 2.80% Maximum Mgt Fee
Investment Advisory Agreement
AGREEMENT, made this 1st day of August, 1993, by and between STRATUS
FUND, INC. a Minnesota corporation (the "Fund") and Union Bank & Trust Company,
a Nebraska state bank (the "Investment Adviser"):
WITNESSETH:
WHEREAS, the Fund intends to engage in business as a management
investment company and will register as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Fund desires to appoint the Investment Adviser to render
investment advisory services to the Fund in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Investment Adviser desires to be appointed to perform
services on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained; the Fund and the Investment Adviser agree as follows:
1. APPOINTMENT AND DUTIES OF INVESTMENT ADVISER
The Fund hereby appoints the Investment Adviser to act as investment
adviser to the Union Equity/Income Portfolio and the Union Government Bond
Portfolio (the "Portfolios") of the Fund and, subject to the supervision of the
Board of Directors of the Fund, to supervise the investment activities of the
Portfolios as hereinafter set forth; to obtain and evaluate such information and
advice relating to the economy, securities markets and securities, as it deems
necessary or useful to discharge its duties hereunder; to continuously manage
the assets of the Portfolios in a manner consistent with the investment
objective and policies of the Portfolios as set forth in the most current
registration statement of the Fund; to determine the securities to be purchased,
sold or otherwise disposed of by the Portfolios and the timing of such
purchases, sales and dispositions; to take such further action, including the
placing of purchase and sale orders on behalf of the Fund, as it shall deem
necessary or appropriate; and to furnish to or place at the disposal of the Fund
such information, evaluations, analyses and opinions formulated or obtained by
it in the discharge of its duties as the Fund may, from time to time, reasonably
request.
It is agreed that the Investment Adviser may enter into sub-investment
advisory agreements with one or more persons registered under the Investment
Advisers Act of 1940 to assist the Investment Adviser, at its expense, in
performing its duties and responsibilities hereunder, including, but not limited
to, the placing of purchase and sell orders on behalf of the Fund.
<PAGE>
2. EXPENSES OF INVESTMENT ADVISER.
The Investment Adviser shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Adviser shall be deemed to
include persons employed or otherwise retained by the Investment Adviser to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Adviser may
deem appropriate. The Investment Adviser shall maintain records as may be
required under the Act and the Investment Advisers Act of 1940 and such records
shall be made available to the Fund upon request.
3. EXPENSES AND DUTIES OF FUND.
Unless otherwise expressly agreed to by the Investment Adviser, the
Fund assumes and shall pay or cause to be paid all other expenses of the Fund,
including, without limitation: (a) the costs of shareholder reports; (b) any
fees pursuant to any investment advisory agreement and any management agreement
with the Fund; (c) fees pursuant to any plan of distribution that the Fund may
adopt; (d) the charges and expenses of any registrar, custodian, sub-custodian
or depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, as well as any stock transfer or dividend agent
appointed by the Fund; (e) brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
(f) all taxes and fees payable by the Fund to federal, state or other
governmental agencies or pursuant to any foreign laws; (g) the cost and expense
of engraving or printing of certificates representing shares of the Fund; (h)
all costs and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions or pursuant to any foreign
laws (including filing fees and legal fees) and the expense of printing and
distributing prospectuses and supplements; (i) all expenses of shareholders' and
Directors' meetings and of preparing, printing and mailing of proxy statements
and reports to shareholders; (j) the fees and travel expenses of Directors or
members of any advisory board or committee who are not employees of the
Investment Adviser; (k) all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption whether in shares or in cash; (l) charges
and expenses of any outside service used for pricing of the Funds shares; (m)
ordinary charges and expenses of legal counsel, including counsel to the
Directors of the Fund who are not interested persons (as defined in the Act) of
the Fund or the Investment Adviser, and of independent accountants, in
connection with any matter relating to the Fund; (n) membership dues of industry
associations; (o) interest payable on Fund borrowings; (p) postage; (q)
insurance premiums on property or personnel (including Officers and Directors)
of the Fund which inure to its benefit; (r) extraordinary legal, accounting, and
other expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and (s) all other
costs of the Fund's operation.
<PAGE>
The Fund will, from time to time, furnish or otherwise make available
to the Investment Adviser such financial reports, proxy statements, and other
information relating to the business and affairs of the Fund as the Investment
Adviser may reasonably require in order to discharge its duties and obligations
hereunder or to comply with any applicable law and regulations.
4. FEES OF INVESTMENT ADVISER.
For the services to be rendered, the facilities furnished, and the
obligations assumed by the Investment Adviser, the Fund, shall pay to the
Investment Adviser, commencing with the effective date of the first public
offering of shares of the Fund, a monthly investment advisory fee, computed
separately for the Portfolio, at the annual rate set forth on Exhibit 1 attached
hereto and incorporated by reference herein. The compensation for the period
from the effective date hereof to the next succeeding last day of the month
shall be prorated according to the proportion which such period bears to the
full month ending on such date, and provided further that, upon any termination
of this Agreement before the end of the month, such compensation for the period
from the end of the last month ending prior to such termination to the date of
termination, shall be prorated according to the proportion which such period
bears to a full month, and shall be payable upon the date of termination. For
the purpose of the Investment Adviser's compensation, the value of the
Portfolio's net assets shall be computed in the manner specified in its Bylaws
in connection with the determination of the net asset value of shares. Payment
of the Investment Adviser's compensation for the preceding month shall be made
as promptly as possible after the last day of such month.
5. BEST EFFORTS.
The Investment Adviser will use its best efforts in the supervision and
management of the investment advisory activities of the Portfolios but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations hereunder, the Investment Adviser shall not be
liable to the Fund or any of its investors for any error of judgment or mistake
of law or fact, for any act or omission by the Investment Adviser or for any
losses sustained by the Fund or investors.
6. INDEPENDENT CONTRACTOR.
Investment Adviser shall, for all purposes herein, be an independent
contractor and shall have no authority to act for or represent the Fund in its
investment commitments unless otherwise provided.
Nothing contained in this Agreement shall prevent the Investment
Adviser or any affiliated person of the Investment Adviser from acting as
investment adviser or manager for any other person, firm, corporation or other
entity, and shall not, in anyway, bind or restrict the Investment Adviser or any
such affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any Director, Officer or employeeof the Investment Adviser to engage in any
other business or to devote his time and attention in part to the management or
other aspects of any other business whether of a similar or dissimilarnature.
<PAGE>
7. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the close of business on
the date the Fund's Registration Statement becomes effective with the Securities
and Exchange Commission (the "Effective Date") and shall continue in effect
unless sooner terminated as herein provided until August 1, 1994 and thereafter
only if approved at least annually: (a) by the Board of Directors of the Fund;
or (b) by the vote of a majority of the outstanding shares of the Portfolios of
the Fund, as defined in the Act, and, in addition, (c) by the vote of a majority
of the Directors of the Fund who are not parties hereto nor interested persons
of any party, as required by the Act; provided, that the first such approval by
Directors under (a) or (c) shall take place within ninety (90) days prior to
August 1, 1994 and each subsequent, annual approval shall take place within
ninety (90) days prior to June 30 in each year thereafter, and each approval if
made by the vote of shareholders of the Fund shall be made at a meeting held
prior to June 30 in any fiscal year, and each such approval whetherunder (a) and
(c) or under (b) and (c) shall be effective to continue such Agreement for a
period ending June 30 of the next succeeding year.
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund, or by a vote of a majority of
the outstanding voting securities of the Money Market Portfolio Fund, within the
meaning of the Act, in either case upon not less than sixty (60) days' written
notice to Investment Adviser, and it may be terminated by Investment Adviser
upon sixty (60) days' written notice to the Fund. This Agreement shall
automatically terminate in the event of its assignment, within the meaning of
the Act, unless such automatic termination shall be prevented by an exemptive
order of the Securities and Exchange Commission.
8. AMENDMENT OF AGREEMENT.
This Agreement may be amended from time to time by agreement of the
parties provided that such amendment shall be approved both by the vote of a
majority of Directors of the Fund, including a majority of Directors who are not
parties to this Agreement or interested persons of any such party to this
Agreement (other than as Directors of the Fund) cast in person at a meeting
called for that purpose, and by the holders of a majority of the outstanding
voting securities of the Fund.
This Agreement may be amended by agreement of the parties without the
vote or consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision hereof,
or if they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Adviser shall be liable for failing to do so.
<PAGE>
9. INTERESTED PERSONS.
It is understood that Directors, Officers, agents and shareholders of
the Fund are or may be interested in the Investment Adviser (or any successor
thereof) as Directors, Officers, agents, shareholders, or otherwise; that
Directors, Officers, agents and shareholders of the Investment Adviser are or
may be interested in the Fund as Directors, Officers, agents, shareholders or
otherwise; that the Investment Adviser (or any such successor) is or may be
interested in the Fund as shareholder or otherwise.
10. DEFINITIONS.
For the purpose of this Agreement, the terms "vote of a majority of the
outstanding voting securities", "assignments", "affiliated person", and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940, as amended; provided, however, that wherever in
this Agreement it is provided that this Agreement may be amended or terminated
by or with the consent of shareholders, such action shall only be effective with
respect to those Portfolios of the Fund the shareholders of which have taken the
requisite action.
11. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
State of Nebraska and the applicable provisions of the Act and the Investment
Advisers Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have executed, accepted and
delivered this Agreement on the day and year first above written in Lincoln,
Nebraska.
<PAGE>
(SEAL) STRATUS FUND, INC.
Attest:
/s/ Michael Dunlap
- ------------------------ By ---------------------------
Secretary Chairman
UNION BANK AND TRUST COMPANY
Attest:
/s/ Ross Wilcox
- ------------------------ By ---------------------------
Secretary President
<PAGE>
EXHIBIT I
Fees
Union Equity/Income Portfolio .50%
Union Government Bond Portfolio .50%
Underwriting and Distribution Agreement
THIS AGREEMENT, made this 12th day of May, 1991 by and between APEX FUND, Inc.,
a Minnesota corporation, (the "Fund") and SMITH HAYES Financial Services
Corporation, a Nebraska corporation (the "Distributor").
WITNESSETH:
1. UNDERWRITING SERVICES.
The Fund hereby engages the Distributor, and the Distributor hereby
agrees to act, as principal underwriter for the Fund in the sale and
distribution to the public of the shares (the "Shares") of the portfolios of the
Fund referred to herein (the "Portfolios"), either through dealers or otherwise.
TheDistributor agrees to offer such Shares for sale at all times when such
Shares are available for sale and may lawfully beoffered for sale and sold.
2. SALE OF FUND SHARES.
.
Such Shares are to be sold only on the following terms:
(a) All subscriptions, offers or sales shall be subject to acceptance
or rejection by the Fund. Any offer or sale shall be conclusively presumed to
have been accepted by the Fund if the Fund shall fail to notify the Distributor
of the rejection of such offer or sale prior to the computation of the net asset
value of the Fund's Shares next following receipt by the Fund of notice of such
offer or sale.
<PAGE>
(b) No Share of the Fund shall be sold by the Distributor for any
consideration other than cash or for any amount less than the net asset value of
such Share, computed as provided in the currently effective Prospectus of the
Fund (the "Net Asset Value"). Except as provided below, all Shares of the Fund
sold by the Distributor shall be sold at the public offering price, as
hereinafter defined.
(c) Subject to paragraph (b) above, the public offering price of the
Shares shall be the Net Asset Value thereof next determined following receipt of
an order by the Fund's transfer agent plus the sales load, if any, which shall
be such percentage of the public offering price, computed to the nearest cent,
as may be agreed upon by the Fund and the Distributor and specifically approved
by the Board of Directors of the Fund (the "Sales Load"), provided that no
schedule of Sales Loads shall be effective until set forth in a prospectus of
the Fund meeting the requirements of the Securities Act of 1933. Said Sales Load
maybe graduated on a scale based on the dollar amount of Shares sold.
(d) The Sales Load may, at the discretion of the Fund and the
Distributor, be reduced or eliminated as permitted by the Investment Company Act
of 1940, and the rules and regulations thereunder, as they may be amended from
time to time, or as set forth below, provided that the Fund shall in no event
receive for any Shares sold an amount less than the Net Asset Value thereof. In
addition,
(i) Shares may be sold at their Net Asset Value, without a
Sales Load, to Consolidated Investment Corporation or its subsidiaries
or to Union Bank and Trust Company and its subsidiaries and to the
directors, officers, employees, sales representatives and retirees of
Consolidated Investment Corporation or its subsidiaries or to Union
Bank and Trust Company and its subsidiaries and spouses or children,
under the age of 21 of any such persons. Such persons must give written
assurance that they have bought for investment purposes, and that the
securities will not be resold except through redemption or repurchase
by or on behalf of the Fund.
<PAGE>
(ii) The Distributor may exchange Shares of any Portfolio of
the Fund at the Net Asset Value, without Sales Load, to any purchaser
who shall pay for such Shares entirely with the proceeds of the
redemption of redeemable Shares of anyother Portfolio or Portfolios of
the Fund.
3. INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. The Fund may extend to
its shareholders with respect to any of its Portfolios the right to purchase
Shares issued by such Portfolio at the Net Asset Value thereof with the proceeds
of any dividend or capital gain distribution paid or payable by such Portfolio
to its shareholders.
4. REGISTRATION OF SHARES.
The Fund agrees to make prompt and reasonable efforts to effect and
keep in effect, at its own expense, the registration or qualification of its
Shares for sale, in such jurisdictions as the Fund may designate.
5. INFORMATION TO BE FURNISHED THE DISTRIBUTOR. The Fund agrees that it
will furnish the Distributor with such information with respect to the affairs
and accounts of the Fund, as the Distributor may, from time to time, reasonably
require, and further agrees that the Distributor, at all reasonable times, shall
be permitted to inspect the books and records of the Fund.
<PAGE>
6. ALLOCATION OF EXPENSES.
During the periods of this contract, the Fund shall pay or cause to be
paid all expenses, costs and fees incurred by the Fund which are not assumed by
the Distributor. The Distributor shall pay all costs of distributing the Shares
including, but not limited to, compensation in addition to Sales Loads, if any,
paid to registered representatives of the Distributor and to broker/dealers that
have entered into sales agreements with the Distributor, costs of printing and
distributing prospectuses, statements of additional information and shareholder
reports for new shareholders, costs of printing, preparing and distributing
sales literature, costs of preparing and running advertisements on radio,
television, newspapers or magazines and costs connected with the use of a
"toll-free" telephone number for the Fund, and other distribution related
expenses.
7. COMPENSATION TO THE DISTRIBUTOR
As compensation for all of its services provided and its costs assumed
under this Agreement, the Distributor shall receive the following forms and
amounts of compensation.
(a) Sales Loads.
On sales of Shares of the Fund, the Distributor shall receive the Sales
Load, if any, that is, the difference between the total amount charged and
received by the Distributor as the purchase price for the Shares and the Net
Asset Value thereof. The amount of such Sales Loads may be retained or deducted
by the Distributor from any sums received by it in payment for Shares so sold.
If such amount is not deducted by the Distributor from such payments, such
amount shall be paid to the Distributor by the Fund not later than five business
days after the close of any month during which any such sales were made by the
Distributor and payment received by the Fund.
<PAGE>
(b) Reimbursement for Expenses.
The Fund shall reimburse the Distributor for its actual costs,
including but not limited to compensation (in addition to Sales Loads) paid to
registered representatives of the Distributor and to broker/dealers that have
entered into sale agreements with the Distributor, costs of printing, preparing
and distributing sales literature, costs of preparing and running advertisements
on radio, television, newspapers or magazines and cost connected with the use of
a "toll-free" telephone number for the Fund, and other distribution-related
expenses as set for in the Fund's Plan of Distribution (the "Plan"), Section 6
of this Agreement and in any related agreements, incurred with respect to each
of the Fund's Portfolios. All such reimbursements will be separately computed
and paid for each Portfolio and will be based on the actual costs of
distribution incurred with respect to each Portfolio. Such reimbursements shall
be subject to the following limitations.
<PAGE>
(i) Expense reimbursement to the Distributor shall not exceed
the percentages of the average daily net assets of a Portfolio
computed in accordance with the currently effective Prospectus
of the Fund of each of the Portfolios and as identified in the
Plan of Distribution adopted by the Fundpursuant to Rule 12b-1
under the Investment Company Act of1940.
(ii) On or before the 15th day of each month, the Distributor
shall provide the Fund with an itemized list of costs of
distribution incurred during the preceding month with respect
to each Portfolio reimbursable under this Agreement and the
Plan for which the Distributor desires to be reimbursed. The
Fund shall reimburse the Distributor for such costs within 30
days of receipt of such itemized list. The Fund may, in any
month, reimburse the Distributor for costs in excess of 1/12
of the per annum limitations of paragraph (b)(i) above, but in
no event shall the total reimbursement made by the Fund for
any Portfolio in any calendar year exceed the limitations of
paragraph (b)(i) above.
8. LIMITATION OF THE DISTRIBUTOR'S AUTHORITY.
The Distributor shall be deemed to be an authorized independent
contractor and, except as specifically provided or authorized herein, shall have
no authority to act for or represent the Fund.
9. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS. The
Distributor shall subscribe for the Shares of the Fund only for the purpose of
covering purchase orders already received by it or for the purpose of investment
for its own account. In the event that an order for the purchase of Shares of
the Fund is placed with the Distributor by a customer or dealer and subsequently
cancelled, the Distributor shall forthwith cancel the subscription for such
Shares entered on the books of the Fund, and, if the Distributor has paid the
Fund for such Shares, shall be entitled to receive from the Fund in refund of
such payment the lessor of:
<PAGE>
(a) the consideration received by the Fund for said Shares; or
(b) the Net Asset Value of such Shares at the time of cancellation
by the Distributor.
10. INDEMNIFICATION OF THE FUND.
The Distributor agrees to indemnify the Fund against any and all
litigation and other legal proceedings of any kind or nature and against any
liability, judgment, cost or penalty imposed as a result of such litigation or
proceedings in any way arising out of or in connection with the sale or
distribution of the Shares of the Fund by the Distributor. In the event of the
threat or institution of any such litigation or legal proceedings against the
Fund, the Distributor shall defend such action on behalf of the Fund at its own
expense, and shall pay any such liability, judgment, cost or penalty resulting
therefrom, whether imposed by legal authority or agreed upon by way of
compromise and settlement; provided, however, the Distributor shall not be
required to pay or reimburse the Fund for any liability, judgment, cost or
penalty incurred as a result of an omission to supply information by the Fund to
the Distributor, or to the Distributor by a director, officer or employee of the
Fund who is not an Interested Person of the Distributor (as defined in Section
2(a)(19) of the Investment Company Act of 1940 and the rules, regulations and
releases relating thereto), unless the information so supplied or omitted was
available to the Distributor or the Fund's investment adviser without recourse
to the Fund or any such Interested Person of the Fund.
<PAGE>
11. FREEDOM TO DEAL WITH THIRD PARTIES.
The Distributor shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
12. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
The effective date of this Agreement shall be the date of commencement
of the Fund's initial public offering of shares. Wherever referred to in this
Agreement, the vote or approval of the holders of a majority of the outstanding
Shares of the Fund or any Portfolio of the Fund shall mean the vote of 67% or
more of such Shares if the holders of more than 50% of such Shares are present
in person or by proxy or the vote of more than 50% of such Shares, whichever is
less.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect from year to year after April 30, 1989, but only so long as
such continuance is specifically approved at least annually either: (1) by the
Board of Directors of the Fund, including the specific approval of a majority of
the directors who are not Interested Persons of the Fund or of the Distributor
and who have no direct or indirect financial interest in the operation of the
Plan, or in any agreements relating to the Plan, cast in person at a meeting
called for the purpose of voting on such approval; or (2) by the vote of the
holders of a majority of the outstanding Shares of the Fund; provided that if a
majority of the outstanding Shares of any Portfolio votes to approve this
Agreement, such approval shall be effective with respect to such Portfolio
whether or not the shareholders of any other Portfolio have voted to approve
this Agreement.
<PAGE>
This Agreement may be terminated at any time without the payment of any
penalty by the vote of a majority of the members of the Board of Directors of
the Fund who are not Interested Persons of the Fund and who have no direct or
indirect or financial interest in the operation of the Plan or in any agreements
relating to the Plan, by the vote of the holders of a majority of the
outstanding Shares of the Fund (provided that if a majority of the outstanding
Shares of any Portfolio votes to terminate this Agreement, such termination
shall be effective with respect to such Portfolio whether or not the
shareholders of any other Portfolio have voted to terminate this Agreement) or
by the Distributor, upon not more than sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment.
13. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until
approved by the Distributor and by vote of a majority of the Board of Directors
of the Fund who are not Interested Persons of the Distributor.
<PAGE>
14. NOTICES.
Any notices under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid to the other party at such address as such
other party may designate in writing for the receipt of such notice.
IN WITNESS WHEREOF, the Fund and the Distributor have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
APEX FUND, Inc.
/s/ Michael Dunlap
By --------------------------
President
SMITH HAYES Financial Services
Corporation
/s/ Thomas D. Hayes
By --------------------------
President
CUSTODIAN AGREEMENT
This Agreement, dated the 1st day of May, 1994, made by and between
STRATUS Fund, Inc. (the "Fund"), a corporation operating as an open-end
management investment company, duly organized under the laws of the State of
Minnesota, and Union Bank and Trust Company, Lincoln, Nebraska (the
"Custodian"), a duly organized state bank with principal offices in Lincoln,
Nebraska:
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint Custodian as custodian of the
securities and cash of the Fund's various Portfolios, and Custodian is willing
to act in such capacity upon the terms and conditions herein set forth; and
WHEREAS, Custodian in its capacity as custodian hereunder will also
collect and apply the dividends and interest on said securities in the manner
and to the extent herein set forth.
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
do hereby agree as follows:
Section 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
Custodian shall mean Union Bank and Trust Company, in its capacity as
custodian under this Agreement.
Fund shall mean STRATUS FUND, Inc., and each of its Portfolios.
Oral Instruction shall mean an authorization, instruction or approval
transmitted to the Custodian in person or by telex, telephone, telegram,
telecopy or other mechanical or documentary means lacking signatures, by the
person or persons authorized by a resolution of the Board of Directors of the
Fund to give oral instructions on behalf of the Fund.
Securities shall mean bonds, debentures, notes, stocks, evidences of
indebtedness, and other securities and investments from time to time owned by
the Fund and held within the United States.
Shareholders shall mean the registered owners from time to time of the
Shares in accordance with the stock registry records maintained by the Fund's
Transfer Agent.
<PAGE>
Shares shall mean the shares of common stock of the Fund, whether or
not such Shares shall be evidenced by certificates.
Written Instructions shall mean an authorization, instruction,
certification or approval in form acceptable to the Custodian, signed by one or
more officers of the Fund or other signatories authorized to sign Written
Instructions by a resolution of the Board of Directors of the Fund.
Section 2. The Fund shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Directors authorizing
execution of Written Instructions and specifying the number of signatories
required, together with certified signatures of authorized signatories. If the
certifying officer is authorized to sign Written Instructions, the certification
also shall be signed by a second officer of the Fund.
The Fund shall, from time to time, file with the Custodian a certified
copy of each resolution of its Board of Directors authorizing the transmission
of Oral Instructions and specifying the person or persons authorized to give
Oral Instructions in accordance with this Agreement. If the certifying officer
is authorized to give Oral Instructions, the certification also shall be signed
by a second officer of the Fund. Upon transmitting any Oral Instruction, the
Fund shall promptly forward to the Custodian a Written Instruction confirming
the authorization, instruction or approval transmitted by such Oral Instruction.
Each resolution filed with the Custodian in accordance with the terms
hereof shall be considered in full force and effect and the Custodian shall be
fully protected in acting in reliance thereon until such time as it receives
written notice to the contrary.
Section 3. The Fund hereby appoints the Custodian as custodian of the
Securities of the Fund and cash from time to time on deposit hereunder, to be
held by the Custodian and applied as provided in this Agreement. The Custodian
hereby accepts such appointment subject to the terms and conditions hereinafter
provided. Such Securities and cash shall be and remain the sole property of the
Fund. Funds held by the Custodian may be deposited in a general checking
account. The Securities of the Fund shall be held by the Custodian or a
recognized securities depository and shall, unless payable to bearer, be
registered in the name of the Custodian or in the name of its nominee or in the
name of a recognized securities depository. Securities, excepting bearer
securities, delivered from time to time to the Custodian upon purchase or
otherwise shall in all cases be in due form for transfer or already registered
as above provided. Notwithstanding any other provision of this Agreement, the
parties hereto agree that the Custodian shall be authorized in the performance
of its duties hereunder to deposit all or any part of the Securities owned by
the Fund in the Federal Reserve/ U.S. Treasury book-entry system in accordance
with applicable law, including Rule 17f-4 under the Investment Company Act of
1940, as hereafter amended or supplemented.
The Custodian is further specifically authorized to enter into a
sub-custodian agreement with the Bank of New York for the holding of the Funds'
securities, provided that the Custodian shall be subject to all the terms and
conditions of this Agreement.
<PAGE>
Section 4. The Fund will deposit with the Custodian the Securities
owned by the Fund at the time this Agreement becomes effective. Thereafter the
Fund will cause to be deposited with the Custodian additional Securities as the
same are purchased or otherwise acquired from time to time.
The Fund will make an deposit of cash to be held and applied by the
Custodian hereunder. Thereafter the Fund will cause to be deposited with the
Custodian hereunder (i) the net proceeds of Securities sold from time to time
and (ii) the net proceeds from the sale of Shares, if any, whether representing
initial issue or reinvestments of dividends and/or distributions payable to
Shareholders.
The Fund warrants that it shall keep all of its Securities, similar
investments, cash proceeds, and other cash assets of the Fund in the custody of
the Custodian, except where permitted to otherwise keep, deposit, loan, pledge
or otherwise dispose of or maintain such assets in accordance with applicable
law, including Section 17(f) of the Investment Company Act of 1940, rules,
regulations, or orders of the Securities and Exchange Commission.
Section 5. The Custodian will collect from time to time the dividends
and interest on the Securities held by it hereunder and will deposit the same in
the Fund's account. The Custodian is authorized to advance or pay out of said
account accrued interest on bonds purchased and dividends on stocks sold and
like items. In the event that any dividends or interest payments are received by
the Fund, the Fund will endorse to the Custodian, or cause to be endorsed,
dividend and interest checks and will issue appropriate orders to the issuers of
the Securities to pay dividends and interest to the Custodian. Subject to proper
reserves for dividends owing on stocks sold and like items, the Custodian will
disburse the money from time to time on deposit in the account to or upon the
order of the Fund as it may from time to time direct in accordance with this
Agreement.
Section 6. The Custodian is hereby authorized and directed to disburse
cash from time to time as follows:
(a) to pay the proper compensation and expenses of the
Custodian upon receipt of Written or Oral Instructions;
(b) to pay, or provide the Fund with money to pay taxes upon
receipt of appropriate Written Instructions;
(c) for the purpose of completing the purchase of Securities
purchased by the Fund, upon receipt of (i) Written or Oral Instructions
specifying the Securities and stating the purchase price, and the name
of the broker, investment banker or other party to or upon whose order
the purchase price is to be paid; and (ii) upon receipt of such
Securities by the Custodian;
<PAGE>
(d) for the purpose of transferring to the Fund money to
purchase Shares, upon receipt of Written or Oral Instructions;
(e) for the purpose of exercising warrants and rights received
upon the Securities, upon timely receipt of Written Instructions
authorizing the exercise of such warrants and rights and stating the
consideration to be paid;
(f) for the purpose of paying over to the Transfer Agent or
dividend disbursing agent such amounts as may be stated in Written
Instructions, representing proceeds of the sale of warrants, rights,
stock dividends, profits and increases in values of the Securities, as
the Fund may determine to include in dividends and/or distributions on
the shares;
(g) to pay interest, management or supervisory fees,
administration, dividend and transfer agency fees and costs,
compensation of personnel, or operating expenses (including, without
limitation thereto, fees for legal, accounting and auditing services),
and to disburse cash for other proper corporate purposes. Before making
any such payment or disbursement, however, the Custodian shall receive
(and may conclusively rely upon) Written Instructions requesting such
payment or disbursement and stating that it is for one or more of the
purposes hereinabove enumerated, provided that if the disbursement is
for other proper corporate purposes, the Written Instructions shall
state that the disbursement was authorized by resolution of the Board
of Directors of the Fund and is for a proper corporate purpose.
Section 7. The Custodian is hereby authorized and directed to deliver
Securities from time to time as follows:
(a) for the purpose of completing sales of Securities sold by
the Fund, upon receipt of (i) the net proceeds of sale and (ii) Written
or Oral Instructions specifying the Securities sold and stating the
amount to be received and the broker, investment banker or other party
to or upon whose order the Securities are to be delivered;
(b) for the purpose of exchanging Securities for other
Securities and/or cash upon timely receipt of (i) Written or Oral
Instructions stating the Securities to be delivered and the Securities
and/or cash to be received in exchange and the manner in which the
exchange is to be made, and (ii) against receipt of the other
Securities and/or cash as specified in the Written or Oral
Instructions;
(c) for the purpose of exchanging or converting Securities
pursuant to their terms or pursuant to any plan of conversion,
consolidation, recapitalization, reorganization, readjustment or
otherwise, upon timely receipt of (i) Written Instructions authorizing
such exchange or conversion and stating the manner in which such
exchange or conversion is to be made, and (ii) against receipt of the
Securities, certificates of deposit, interim receipts, and/or cash to
be received as specified in the Written Instructions;
<PAGE>
(d) for the purpose of presenting Securities for payment which
have matured or have been called for redemption upon receipt of
appropriate Written or Oral Instructions;
(e) for the purpose of delivery of Securities upon redemption
of Shares in kind, upon receipt of (i) proper instruments of transfer
or other redemption documentation with respect to such Shares, and (ii)
appropriate Written Instructions.
Section 8. The Custodian assumes no duty, obligation or responsibility
whatsoever to exercise any voting or consent powers with respect to the
Securities held by it from time to time hereunder, it being understood that the
Fund, or such person or persons as it may designate, shall have the right to
vote, or consent or otherwise act with respect to such Securities. The Custodian
will, but only upon timely receipt of Written Instructions, furnish to the Fund
proxies or other appropriate authorizations with respect to Securities
registered in the name of the Custodian or its nominee so that such voting
powers, or powers to consent or otherwise act may be exercised by the Fund or
pursuant to its direction.
Section 9. The Custodian's compensation shall be as set forth in
Schedule A hereto attached, or as shall be set forth in amendments to such
schedule approved by the Fund and the Custodian.
Section 10. Except as otherwise expressly provided by law, the
Custodian assumes no duty, obligation or responsibility whatsoever to handle,
forward, or process in any way notices of stockholder meetings, proxy
statements, annual reports, conversion notices, call notices, or other notices
or written materials of any kind sent to the registered owners of securities
(hereafter referred to as "notices and materials"), excluding only stock
certificates and dividend and interest payments, it being understood that
responsibility for obtaining such notices and materials, and for taking action
thereon, is the sole responsibility of the Fund and its investment advisers, and
not the responsibility of the Custodian. As an accommodation only, the Custodian
will make reasonable efforts to forward such notices and written materials as it
receives to the Fund, but makes no warranty or representation that all notices
and materials will be forwarded, and the Fund hereby agrees that it shall make
no claim whatsoever against the Custodian for any expense, damage, or loss of
any kind arising out of or in connection with any act or omission of the
Custodian, including any intentional or negligent act or omission of the
Custodian, in connection with such notices and materials. Upon receipt by the
Custodian of warrants or rights issued in connection with the assets of the
Fund, the Custodian shall enter on its ledgers appropriate notations indicating
such receipt, but shall have no further obligation whatsoever to notify the Fund
or any other person of such receipt, or to take any action of any kind with
respect to such warrants or rights except upon receipt of Written Instructions
authorizing the exercise or sale of such warrants or rights.
<PAGE>
Section 11. The Custodian assumes only the usual duties or obligations
normally performed by custodians of investment companies. It specifically
assumes no responsibility for the management, investment or reinvestment of the
Securities from time to time owned by the Fund whether or not on deposit
hereunder, it being understood that the responsibility for the proper and timely
management, investment and reinvestment of said Securities shall be that of the
Fund and its investment advisers.
The Custodian shall not be liable for any taxes, assessments or
governmental charges which may be levied or assessed upon the Securities held by
it hereunder, or upon the income therefrom or otherwise whatsoever. The
Custodian may pay any such tax, assessment or charge and reimburse itself out of
the monies of the Fund or out of the Securities held hereunder.
Section 12. No liability of any kind shall be attached to or incurred
by the Custodian by reason of its custody of the funds, assets, or Shares held
by it, from time to time, under this Agreement, or otherwise by reason of its
position as custodian hereunder, except only for its own gross negligence, bad
faith, or willful misconduct in the performance of its duties as specifically
set forth in this Agreement. Without limiting the generality of the foregoing
sentence, the Custodian:
(a) May rely upon the advice of counsel, who may be counsel
for the Fund or for the Custodian, and upon statements of accountants,
brokers and other persons believed by it, in good faith, to be expert
in the matters upon which they are consulted; and for any action taken
or suffered in good faith based upon such advice or statements the
Custodian shall not be liable to anyone;
(b) Shall not be liable for anything done or suffered to be
done, in good faith, in accordance with any request or advice of, or
based upon information furnished by, the Fund or its officers or
agents;
(c) Where authorized in this Agreement to act upon an Oral
Instruction, may act upon any Oral Instruction which it receives and
which it believes in good faith was transmitted by the person or
persons authorized by the Board of Directors of the Fund to give such
Oral Instructions. The Custodian shall have no duty or obligation to
request or require a confirmatory Written Instruction or to make any
inquiry or effort of certification of such Oral Instruction;
(d) Is authorized to accept a certificate of the Secretary or
Assistant Secretary of the Fund to the effect that a resolution in the
form submitted has been duly adopted by its Board of Directors or by
the Shareholders, as conclusive evidence that such resolution has been
duly adopted and is in full force and effect;
(e) May rely and shall be protected in acting upon any
signature, Written or Oral (including telephone, telegraph or
mechanical) Instruction, request, letter of transmittal, certificate,
opinion of counsel, statement, instrument, report, notice, consent,
order, or other paper or document believed by it to be genuine and to
have been signed, forwarded or presented by the purchaser, Fund or
other proper party or parties.
<PAGE>
Section 13. The Fund (including its successors and assigns) hereby
agrees to indemnify and hold harmless the Custodian and its successors and
assigns of and from any and all liability whatsoever arising out of or in
connection with the Custodian's status, acts, or omissions under this Agreement,
except only for liability arising out of the Custodian's own gross negligence,
bad faith, or willful misconduct in the performance of its duties specifically
set forth in this Agreement. Without limiting the generality of the foregoing,
the Fund (including its successors and assigns) does hereby agree to fully
indemnify and hold harmless the Custodian, its successors and assigns, from any
and all loss, liability, claims, demands, actions, suits and expenses of any
nature as the same may arise from the failure of the Fund to comply with any
law, rule, regulation or order of the United States, any State or any other
jurisdiction, governmental authority, body or board relating to the sale,
registration, or qualification of the Securities, or from the failure of the
Fund to perform any duty or obligation under this Agreement.
Upon written request of the Custodian, the Fund shall assume the entire
defense of any claim subject to the foregoing indemnity, or the joint defense
with the Custodian of such claim, as the Custodian shall request. The
indemnities and defense provisions of this Section 13 shall indefinitely survive
termination of this Agreement.
Section 14. This Agreement may be amended from time to time without
notice to or approval of the Shareholders by a supplemental agreement, in form
approved by counsel, executed by the Fund and the Custodian and amending and
supplementing this Agreement in the manner mutually agreed.
Section 15. Either the Fund or the Custodian may give sixty (60) days'
written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice. In case such
notice of termination is given either by the Fund or by the Custodian, the Board
of Directors of the Fund shall, by resolution duly adopted, promptly appoint a
Successor Custodian to serve upon the terms set forth in this Agreement as then
amended and supplemented. Each Successor Custodian shall be a bank, trust
company, or a bank and trust company in good standing, with legal capacity to
accept custody of the securities of a mutual fund, and meeting all of the
requirements of Section 26 of the Investment Company Act of 1940. Upon receipt
of written notice from the Fund of the appointment of such successor and upon
receipt of Written Instructions, the Custodian shall deliver such Securities and
cash as it may then be holding hereunder directly to and only to the Successor
Custodian. Unless or until a Successor Custodian has been appointed as above
provided, the Custodian then acting shall continue to act as Custodian under
this Agreement. Every Successor Custodian appointed hereunder shall execute and
deliver an appropriate written acceptance of its appointment and shall thereupon
become vested with the rights, powers, obligations
<PAGE>
and custody of its predecessor Custodian. The Custodian ceasing to act shall
nevertheless, upon request of the Fund and the Successor Custodian and upon
payment of its charges and disbursements, execute an instrument in form approved
by its counsel transferring to the Successor Custodian all the predecessor
Custodian's rights, duties, obligations and custody.
In case the Custodian shall consolidate with or merge into any other
corporation, the corporation remaining after or resulting from such
consolidation or merger shall ipso facto, without the execution or filing of any
papers or other documents, succeed to and be substituted for the Custodian with
like effect as though originally named as such.
Section 16. This Agreement shall take effect on the date the Fund's
Registration Statement filed with the Securities and Exchange Commission becomes
effective or such other date as the parties agree to transfer the Fund assets to
the Custodian.
Section 17. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 18. Subject to the requirements of the Investment Company Act
of 1940, and the rules promulgated thereunder, the Custodian may from time to
time in its sole discretion delegate some or all of its duties hereunder to one
or more wholly owned subsidiaries of Custodian, which shall perform such
functions as the agent of the Custodian. To the extent of such delegation, the
term "Custodian" in this Agreement shall be deemed to refer to the Custodian,
such subsidiary or subsidiaries, or to any of them, as the context may indicate.
Section 19. Nothing contained in this Agreement is intended to or shall
require the Custodian, in any capacity hereunder to perform any functions or
duties on any holiday or other date of special observance on which the Custodian
is closed. Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day on which both the New
York Stock Exchange and the Custodian are open.
Section 20. This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without the
written consent of the Custodian, or by the Custodian without the written
consent of the Fund, authorized or approved by a resolution of its Board of
Directors.
<PAGE>
IN WITNESS WHEREOF, the Fund and Custodian have caused this Agreement
to be signed by their respective Presidents or Vice Presidents and their
corporate seals hereunto duly affixed, and attested by their respective
Secretaries or Assistant Secretaries, as of the day and year first above
written.
Attest: STRATUS FUND, INC.
/s/ Michael Dunlap /s/ Michael Dunlap
- ---------------------------- By ------------------------------
Secretary President
(CORPORATE SEAL)
Attest: UNION BANK AND TRUST COMPANY
/s/ Michael Dunlap /s/ Ross Wilcox
- --------------------------- By ------------------------------
(Title) (Vice) President
(CORPORATE SEAL)
<PAGE>
SCHEDULE A
STRATUS FUND, INC.
CUSTODIAL FEE AGREEMENT
For purposes of annual fee charges based on market value of securities, the
following charges will apply to the Capital Appreciation Portfolio and the
Intermediate Government Bond Portfolio and will be grouped as one when applying
the following schedule of charges. There is no charge for custodial services
rendered hereunder for the other Portfolios of the Fund. This annual charge will
be calculated and billed quarterly and will exclude from the market value all
cash and cash equivalents in the money market sweep account.
Basis
Points Dollars
$ 1 - $10 million 11.00 $11,000.00
$10 - $20 million 6.00 6,000.00
Over $20 million 2.5
Plus $100 per account
Investment transaction charges of $12 each will be assessed to each fund in
which the following transactions occur:
1. Purchases/Sales
2. Maturities/Calls/Expirations
3. Principal Payments
4. Free Receipts/Deliveries
Assume $25 million and 6 accounts the cost would be as follows:
Basis
Points Dollars
Example: $ 0 - $10 million 11.00 $11,000.00
$10 - $20 million 6.00 6,000.00
Over $20 million 2.5 1,250.00
Plus $100 per account 600.00
Fee before transaction charges $-----.00
This schedule of fees shall remain in effect unless both parties shall agree to
changes due to changing needs or responsibilities associated with the custodial
services rendered.
LAW OFFICES OF
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1900 FIRSTIER BANK BUILDING
LINCOLN, NE 68508
May 10, 1991
Board of Directors
Stratus Fund, Inc.
Lincoln, Nebraska
Re: Form N-1A Registration Statement
Ladies and Gentlemen:
Our opinion has been requested with respect to the shares of common
stock designated Growth/Income Portfolio shares and Intermediate Government Bond
Portfolio shares, $.001 par value share (the "shares"), of the Stratus Fund,
Inc. (the "Fund"), which are being registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, by Form N-1A
Registration Statement.
We have examined the Fund's Articles of Incorporation and Bylaws,
reviewed certain minutes of corporate proceedings, and have made such additional
factual and legal inquiry as we deemed necessary under the circumstances. Based
upon the foregoing, it is our opinion that:
1. The Fund is a duly and validly organized corporation presently
existing in good standing under the laws of the state of
Minnesota.
2. The issuance and sale of the shares have been duly and validly
authorized by the necessary corporate action; and said shares
will, upon delivery against payment, be duly authorized,
validly issued and outstanding, fully paid, and nonassessable
shares of common stock of the Fund.
We consent to the use of this opinion as an exhibit to the Fund's Form
N-1A Registration Statement and further consent to the reference of our firm
under the heading "Legal Opinions" in the Prospectus forming a part thereof.
Very truly yours,
JOHN C. MILES
For the Firm
LAW OFFICES OF
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1900 FIRSTIER BANK BUILDING
LINCOLN, NE 68508
October 30, 1992
Board of Directors
Stratus Fund, Inc.
Lincoln, Nebraska
Re: Form N-1A Registration Statement
Ladies and Gentlemen:
Our opinion has been requested with respect to the shares of common
stock designated Capital Appreciation Portfolio shares, $.001 par value share
(the "shares"), of the Stratus Fund, Inc. (the "Fund"), which are being
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, by Post-Effective Amendment to your Form N-1A Registration
Statement.
We have examined the Fund's Articles of Incorporation and Bylaws,
reviewed certain minutes of corporate proceedings, and have made such additional
factual and legal inquiry as we deemed necessary under the circumstances. Based
upon the foregoing, it is our opinion that:
1. The Fund is a duly and validly organized corporation presently
existing in good standing under the laws of the state of
Minnesota.
2. The issuance and sale of the shares have been duly and validly
authorized by the necessary corporate action; and said shares
will, upon delivery against payment, be duly authorized,
validly issued and outstanding, fully paid, and nonassessable
shares of common stock of the Fund.
We consent to the use of this opinion as an exhibit to the Fund's Form
N-1A Registration Statement and further consent to the reference of our firm
under the heading "Legal Opinions" in the Prospectus forming a part thereof.
Very truly yours,
JOHN C. MILES
For the Firm
LAW OFFICES OF
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1900 FIRSTIER BANK BUILDING
LINCOLN, NE 68508
May 26, 1993
Board of Directors
Stratus Fund, Inc.
Lincoln, Nebraska
Re: Form N-1A Registration Statement
Ladies and Gentlemen:
Our opinion has been requested with respect to the shares of common
stock designated Union Equity/Income Portfolio shares, $.001 par value and Union
Government Bond Portfolio shares, $.001 par value share (the "Shares"), of the
Stratus Fund, Inc. (the "Fund"), which are being registered with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, by
Post-Effective Amendment to your Form N-1A Registration Statement.
We have examined the Fund's Articles of Incorporation and Bylaws,
reviewed certain minutes of corporate proceedings, and have made such additional
factual and legal inquiry as we deemed necessary under the circumstances. Based
upon the foregoing, it is our opinion that:
1. The Fund is a duly and validly organized corporation presently
existing in good standing under the laws of the state of
Minnesota.
2. The issuance and sale of the shares have been duly and validly
authorized by the necessary corporate action; and said shares
will, upon delivery against payment, be duly authorized,
validly issued and outstanding, fully paid, and nonassessable
shares of common stock of the Fund.
We consent to the use of this opinion as an exhibit to the Fund's Form
N-1A Registration Statement and further consent to the reference of our firm
under the heading "Legal Opinions" in the Prospectus forming a part thereof.
Very truly yours,
JOHN C. MILES
For the Firm
May 3, 1991
Stratus Fund, Inc.
Attn: Board of Directors
Gentlemen:
Previously I subscribed for shares of the Money Market Portfolio to be
offered by the Stratus Fund, Inc. Please disregard all prior subscriptions and
regard this as my subscription for shares of the Stratus Fund, Inc.'s
Growth/Income Portfolio and Intermediate Government Bond Portfolio. I hereby
subscribe for 5,000 shares each of the Growth/Income Portfolio and Intermediate
Government Bond Portfolio at a price of $10.00 per share and shall pay such
purchase price upon your demand. I shall hold all such shares purchased for
investment purposes only and shall only redeem such shares at such time as the
Fund has received payment for at least, in the aggregate, $100,000 of
subscriptions for shares in any or all of the Fund's portfolios in a public
offering.
Very truly yours,
THOMAS D. HAYES
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<LEGEND>
Pursuant to Item 601 (c) (2) (i) of Regulations S-K and S-B.
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<NAME> STRATUS FUND INC.
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<NAME> INTERMEDIATE GOVT BOND
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<LEGEND>
Pursuant to Item 601 (c) (2) (i) of Regulations S-K and S-B.
</LEGEND>
<CIK> 0000870156
<NAME> STRATUS FUND, INC.
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<LEGEND>
Pursuant to Item 601 ((c) (2) (i) of Regulations S-K and S-B.
</LEGEND>
<CIK> 0000870156
<NAME> STRATUS FUND, INC.
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<LEGEND>
Pursuant to Item 601 (c) (2) (i) of Regulations S-K and S-B.
</LEGEND>
<CIK> 0000870156
<NAME> STRATUS FUND, INC.
<SERIES>
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<NAME> GOVERMENT SECURITIES PORTFOLIO
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