Securities Act Registration No. 33-47044
Investment Company Act Reg. No. 811-6628
__________________________________________________________________________
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. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
(Check appropriate box or boxes.)
______________________
THE YACKTMAN FUNDS, INC.
(Exact name of Registrant as Specified in Charter)
303 West Madison Street
Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 201-1200
(Registrant's Telephone Number, including Area Code)
Copy to:
Donald A. Yacktman Richard L. Teigen
Yacktman Asset Management Co. Foley & Lardner
303 West Madison Street 777 East Wisconsin Avenue
Chicago, Illinois 60606 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Registrant has registered an indefinite number or amount of its Common
Stock under the Securities Act of 1933 and filed its required Rule 24f-2
Notice for Registrant's fiscal year ending December 31, 1996 on February
21, 1997.
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[X] on October 30, 1997 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
THE YACKTMAN FUND, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of The Funds; Objective and
Registrant Investment Approach
5. Management of the Fund Objective and Investment
Approach; Management of the
Funds; Distributor; Capital
Structure
5A. Management's Discussion of Included in Annual Report
Fund Performance to Shareholders
6. Capital Stock and Other Dividends and
Securities Distributions; Taxes;
Capital Structure;
Stockholder Reports
7. Purchase of Securities Being Purchase of Shares;
Offered Determination of Net Asset
Value; Retirement Plans;
Dividends and Distributions
8. Redemption or Repurchase Exchange Privilege;
Redemption of Shares;
Systematic Withdrawal Plan
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives and Investment Restrictions and
Policies Considerations
14. Management of the Fund Directors and Officers of
the Company
15. Control Persons and Directors and Officers of
Principal Holders of the Company; Investment
Securities Adviser and Administrator
16. Investment Advisory and Investment Adviser and
Other Services Administrator; Custodian;
Independent Accountants;
Distribution Plan
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and Other Included in Prospectus
Securities under "Capital Structure"
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under "Determination of Net
Offered Asset Value";"Purchase of
Shares"; "Retirement
Plans"; "Dividends and
Distributions";
Determination of Net Asset
Value; Systematic
Withdrawal Plan
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Performance Information
Data
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
<PAGE>
THE YACKTMAN FUNDS, INC.
SUPPLEMENT DATED OCTOBER 30, 1997
TO THE PROSPECTUS DATED APRIL 30, 1997
THE YACKTMAN FUNDS
1. FINANCIAL HIGHLIGHTS
The following financial information replaces the financial information under
the caption "FINANCIAL HIGHLIGHTS" on page 5 of the Prospectus.
The following financial highlights of each Fund are derived from each Fund's
financial records and should be read together with each Fund's financial
statements and related notes. The Yacktman Fund's financial statements for the
periods prior to 1997 have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon was unqualified and is included in the Annual
Report to Shareholders. Further information about the performance of The
Yacktman Fund is also contained in the Annual Report to Shareholders, copies of
which may be obtained without charge upon request. The Yacktman Focused Fund's
unaudited financial statements for the period ended September 30, 1997 are
included in the Statement of Additional Information dated October 30, 1997,
copies of which may also be obtained without charge upon request.
<TABLE>
<CAPTION>
The Yacktman
The Yacktman Fund Focused Fund
--------------------------------------------------------------------------------
Six July 6, May 1,
Months 1992<F1> 1997<F1>
Ended Year Ended December 31, through through
June 30, 1997 -------------------------------------- Dec. 31, Sept. 30, 1997
(Unaudited) 1996 1995 1994 1993 1992 (Unaudited)
- ------------------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period....................... $13.34 $12.09 $10.05 $9.56 $10.39 $10.00 $10.00
Income from investment
operations
Net investment income........... 0.13 0.24 0.22 0.22 0.14 0.05 0.05
Net realized and unrealized
gains (losses) on
investments................... 1.59 2.90 2.81 0.61 (0.83) 0.42 1.85
---------- -------- -------- -------- -------- ------- -------
Total from investment
operations.................... 1.72 3.14 3.03 0.83 (0.69) 0.47 1.90
---------- -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net).............
Net asset value, end of period
investment income............. (0.12) (0.24) (0.22) (0.22) (0.14) (0.05) (0.05)
---------- -------- -------- -------- -------- ------- -------
Distributions from net .........
realized gains................ -- (1.65) (0.77) (0.12) -- (0.03) --
---------- -------- -------- -------- -------- ------- -------
Total distributions............. (0.12) (1.89) (0.99) (0.34) (0.14) (0.08) (0.05)
Net asset value, end of period.. $14.94 $13.34 $12.09 $10.05 $9.56 $10.39 $11.85
========== ======== ======== ======== ======== ======= =======
Total Return...................... 12.93%<F2> 26.02% 30.42% 8.80% (6.58)% 4.72%<F2> 19.02%<F2>
========== ======== ======== ======== ======== ======= =======
Supplemental data and ratios:
Net assets, end of
period (000s)................. $1,074,128 $755,617 $566,723 $295,133 $143,024 $74,666 $41,149
========== ======== ======== ======== ======== ======= =======
Ratio of net expenses to
average net assets<F5>........ 0.91%(3) 0.96% 0.99% 1.07% 1.18% 1.18%<F3> --
========== ======== ======== ======== ======== ======= =======
Ratio of net expenses to average
net assets after expense
reductions<F5>................ 0.85%<F3> 0.90% 0.91% 1.07% 1.18% 1.18%<F3> 1.25%<F3><F4>
========== ======== ======== ======== ======== ======= =======
Ratio of net income to average
net assets<F5> ............... 1.90%<F3> 1.80% 2.02% 2.49% 1.61% 1.49%<F3> 1.60%<F3><F4>
========== ======== ======== ======== ======== ======= =======
Portfolio turnover rate......... 37.23% 58.54% 55.37% 49.44% 61.14% 30.94% 35.15%
========== ======== ======== ======== ======== ======= =======
Average commission rate paid
per share..................... $0.0535 $0.0550 N/A N/A N/A N/A $0.0609
========== ======== ======== ======== ======== ======= =======
<FN>
<F1> Commencement of operations
<F2> Not annualized
<F3> Annualized
<F4> Net of reimbursements. Without the fee waiver, the ratio of expenses to average net assets would have been 1.80% and the ratio
of net investment income to average net assets would have been 1.05%.
<F5> The Adviser has directed certain portfolio trades of The Yacktman Fund to a broker at best price and execution and has
generated soft dollar credits to be used against sub-transfer agency fees. Shareholders benefited under this arrangement as the
net expenses of The Yacktman Fund do not include such sub-transfer agency fees.
</TABLE>
2. OBJECTIVE AND INVESTMENT APPROACH - Options on Securities.
The following discussion replaces the discussion under the caption "OBJECTIVE
AND INVESTMENT APPROACH - Options on Securities" on pages 8 and 9 of the
Prospectus.
The Yacktman Fund may not purchase or write (sell) put or call options, but
The Yacktman Focused Fund may purchase and write put (but not call) options on
stocks. The Yacktman Focused Fund may purchase put options on
specific stocks to hedge against losses caused by declines in the prices of
stocks in its portfolio. The Yacktman Focused Fund may write (sell)
put options on stocks to generate income. The Yacktman Focused Fund will only
write put options if it is willing to purchase the stock at the exercise price.
When writing a put option and receiving a premium payment, The Yacktman
Focused Fund may become obligated during the term of the option to purchase the
securities underlying the option at a specific price (exercise price). This
event is unlikely to occur unless the market price of such securities is less
than the exercise price. To cover its obligation, The Yacktman Focused Fund will
maintain with its custodian in a segregated account cash or liquid securities
equal in value to the exercise price. When purchasing a put option, The Yacktman
Focused Fund has the right, in return for a premium paid, during the term of the
option, to sell the securities underlying the option at the exercise price. If a
put option which The Yacktman Focused Fund has purchased is not exercised, the
option will become worthless on the expiration date, and The Yacktman Focused
Fund will realize a loss in the amount of the premium paid, plus commission
costs. The stocks underlying put options purchased by The Yacktman Focused Fund
need not be stocks in The Yacktman Focused Fund's portfolio if the Adviser
believes that the put options purchased can provide an effective hedge for
stocks held by The Yacktman Focused Fund. However in such situations, there may
be an imperfect correlation between movements in the prices of the stocks
underlying the put options and movements in the prices of the stocks held by The
Yacktman Focused Fund. It is possible that The Yacktman Focused Fund could
suffer losses on both the put options it purchases and on the stocks held in its
portfolio. No assurances can be given that a market will exist at all times for
all outstanding put options purchased or sold by The Yacktman Focused Fund. If
no such market exists, The Yacktman Focused Fund would be unable to realize its
profits or limit its losses until it could exercise the put options it holds and
it would remain obligated until the put options it wrote were exercised or had
expired.
3. PURCHASE OF SHARES - General Information.
The following paragraph is inserted between the first and second paragraphs
under the caption "PURCHASE OF SHARES - General Information" on page 14 of the
Prospectus.
The Funds may authorize one or more broker-dealers, financial institutions or
other service providers ("Processing Intermediaries"), who may designate other
Processing Intermediaries, to accept purchase and redemption orders on the
Funds' behalf. In such event, a Fund will be deemed to have received a purchase
or redemption order when accepted by the Processing Intermediary and the order
will be priced at the Fund's net asset value next determined after the order is
accepted by the Processing Intermediary.
4. RETIREMENT PLANS.
The following discussion replaces the discussion under the caption,
"RETIREMENT PLANS - Individual Retirement Accounts ("IRA")" on page 15 of the
Prospectus.
Individual shareholders may establish their own tax-sheltered Individual
Retirement Accounts ("IRA"). The minimum initial investment for an IRA is $500.
The Funds currently offer a prototype IRA plan and, effective January 1, 1998,
will also offer a prototype Roth IRA plan and a prototype Education IRA plan.
There is currently no charge for establishing an account, although there is an
annual maintenance fee. (See the applicable IRA Custodial Agreement and
Disclosure Statement for a discussion of the annual maintenance fee, other fees
associated with the account, eligibility requirements and related tax
consequences.)
5. DETERMINATION OF NET ASSET VALUE.
The following two sentences are inserted after the third sentence and before
the fourth sentence of the third paragraph under the caption "DETERMINATION OF
NET ASSET VALUE" on pages 20 and 21 of the Prospectus.
Put options are valued at the last sales price on the valuation date if the
last sales price is between the closing bid and asked prices. Otherwise put
options are valued at the mean of the closing bid and asked prices.
The Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains the Prospectus dated April 30, 1997, The
Yacktman Funds' Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Securities and Exchange Commission.
<PAGE>
The Yacktman Funds
P R O S P E C T U S
APRIL 30,1997
P R O S P E C T U S
April 30, 1997
THE YACKTMAN FUNDS, INC.
303 West Madison Street
Chicago, Illinois 60606
1-800-525-8258
The Yacktman Funds, Inc. (the "Company") is an open-end management investment
company, commonly known as a mutual fund. The Company presently consists of two
investment portfolios designed to offer investors a choice of equity-oriented
investment opportunities. Each investment portfolio is individually referred to
as a "Fund" and collectively as the "Funds."
THE YACKTMAN FUND seeks long-term growth of capital, with current income as a
secondary objective. The Yacktman Fund is diversified and invests primarily in
equity securities of companies with market capitalizations of $1 billion or
more.
THE YACKTMAN FOCUSED FUND seeks long-term growth of capital, with current income
as a secondary objective. The Yacktman Focused Fund is non-diversified and
invests primarily in equity securities of companies with market capitalizations
of $1 billion or more. At any time The Yacktman Focused Fund may be invested in
a relatively limited number of securities.
This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Funds have filed with the Securities and Exchange
Commission.
A Statement of Additional Information, dated April 30, 1997, which is a part of
such Registration Statement, is incorporated herein by reference. A copy of the
Statement of Additional Information may be obtained, without charge, by writing
to the address, or calling the telephone number, stated above.
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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE STATEMENT
OF ADDITIONAL INFORMATION DATED APRIL 30, 1997 AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE YACKTMAN FUNDS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
TABLE OF CONTENTS
Summary.............................................................. 3
Expense Summary...................................................... 3
Shareholder and Fund Expenses........................................ 4
Financial Highlights................................................. 5
The Funds............................................................ 6
Objective and Investment Approach................................... 6
Management of the Funds............................................. 11
Purchase of Shares.................................................. 12
Retirement Plans.................................................... 15
Exchange Privilege.................................................. 16
Redemption of Shares................................................ 17
Systematic Withdrawal Plan.......................................... 19
Determination of Net Asset Value.................................... 20
Dividends and Distributions......................................... 20
Taxes............................................................... 21
Capital Structure................................................... 21
Shareholder Reports................................................. 23
Fund Performance.................................................... 23
S U M M A R Y
INVESTMENT OBJECTIVE
The investment objective of each Fund is to produce long-term growth of
capital, with current income as a secondary objective. Each Fund seeks to obtain
its primary investment objective by investing in common stocks, convertible
securities, American Depository Receipts and fixed income securities. The
Yacktman Focused Fund may also purchase put options on specific stocks in its
portfolio to hedge against loss. Each Fund seeks to obtain its secondary
investment objective by investing in dividend paying common stocks, convertible
securities, fixed income securities and short-term money market instruments.
Each Fund may lend its portfolio securities and The Yacktman Focused Fund may
write put options. In periods when management believes the markets are favorable
for common stocks, the greater portion of each Fund's investments will usually
be in that type of security. A Fund's investments are subject to market risk and
the value of its shares will fluctuate with changing market valuations of its
portfolio holdings. The Yacktman Focused Fund may leverage its investments and
is non-diversified. See "OBJECTIVE AND INVESTMENT APPROACH."
INVESTMENT ADVISER
Yacktman Asset Management Co. is the investment adviser (the "Adviser') of
the Funds. The Adviser was organized in April 1992 and acts as the investment
adviser to individuals and institutional clients with investment portfolios of
approximately $1.5 billion. See "MANAGEMENTOFTHEFUNDS."
PURCHASES AND REDEMPTIONS
Shares of the Funds are sold and redeemed at net asset value, without the
imposition of any sales or redemption charges. The minimum initial investment
is $2,500 (except for Individual Retirement Accounts and Automatic Investment
Plans, where the minimum is $500). The minimum subsequent investment is $100.
These minimums may be waived in the case of qualified retirement plans. See
"PURCHASE OF SHARES" and "RETIREMENT PLANS." Shares of the Funds may be
exchanged for shares of the Portico Money Market Fund, the Portico U.S.
Government Money Market Fund and the Portico Tax-Exempt Money Market Fund, at
their relative net asset values. See "EXCHANGE PRIVILEGE."
SHAREHOLDER SERVICES
Questions regarding the Funds may be directed to the Fund at 1-800-525-8258.
Inquiries regarding an investor's account should be directed to the Funds'
Transfer Agent at 1-800-457-6033.
E X P E N S E S U M M A R Y
The following table is intended to assist you in understanding the various
expenses that an investor bears, directly or indirectly, by being a shareholder
of the Funds. They should not be considered to be a representation of past or
future expenses. Actual expenses may be greater or less than those shown. For an
explanation of management and 12b-1 fees, see "MANAGEMENT OF THE FUNDS" and
"PURCHASE OF SHARES." The example assumes a 5% annual rate of return pursuant
to the requirement of the Securities and Exchange Commission. This hypothetical
rate of return is not intended to be representative of past or future
performance of the Funds.
S H A R E H O L D E R A N D F U N D E X P E N S E S
THE YACKTMAN THE YACKTMAN
FUND FOCUSED FUND
-------- ------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases ............... None None
Maximum Sales Load Imposed on Reinvested Dividends .... None None
Deferred Sales Load ................................... None None
Redemption Fees(1) .................................... None None
Exchange Fee(2) ....................................... None None
ANNUAL OPERATING EXPENSES(3)
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees ....................................... 0.64% 1.00%
12b-1 Fees ............................................ 0.07%(4) None
Other Expenses (net of reimbursement) ................. 0.24% 0.25%(5)
Total Fund Operating Expenses before
Expense Reductions (net of reimbursement) ........... 0.96%(5)(6) 1.25%(5)
Total Fund Operating Expenses after
Expense Reductions (net of reimbursement) ........... 0.90%(5)(6) 1.25%(5)
EXAMPLE:
You would pay the following expenses on a $1,000
investment, assuming (i) 5% annual return and
(ii) redemption at the end of each time period
1 year ................................................ $10 $13
3 years ............................................... 31 41
5 years ............................................... 55
10 years .............................................. 121
(1) A fee of $12.00 is charged for each wire redemption.
(2) A fee of $5.00 is charged for each telephone exchange.
(3) For the year ended December 31, 1996 for The Yacktman Fund. For The Yacktman
Focused Fund "Other Expenses" are estimated as The
(4) In any year, 12b-1 Fees will not exceed 0.25%. Payments under the 12b-1 Plan
may be made only with respect to shares beneficially owned by eligible
distributors' brokerage clients who became shareholders PRIOR TO DECEMBER
31, 1992.
(5) Total Fund Operating Expenses INCLUDE Management Fees, 12b-1 Fees and Other
Expenses. The Adviser will waive its management fees to the extent necessary
to insure that Total Fund Operating Expenses before Expense Reductions for
THE YACKTMAN FOCUSED FUND DO NOT EXCEED 1.25% OF AVERAGE NET ASSETS. Absent
reimbursement from the Adviser, "Other Expenses" for The Yacktman Focused
Fund are estimated to be 0.50% of average net assets and Total Fund
Operating Expenses before Expense Reductions are estimated to be 1.50% of
average net assets.
(6) The Adviser has directed certain portfolio trades of The Yacktman Fund to a
broker at best price and execution and has generated soft dollar credits to
be used against sub-transfer agency fees.
F I N A N C I A L H I G H L I G H T S
The financial information for a share of The Yacktman Fund outstanding
during the periods specified in the following table has been derived from the
financial records of The Yacktman Fund which have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon was unqualified
and is included in the Annual Report to Shareholders. The table should be read
in conjunction with the financial statements and related notes included in the
Annual Report to Shareholders. Further information about the performance of the
Funds is also contained in the Annual Report to Shareholders, copies of which
may be obtained without charge upon request.
<TABLE>
<CAPTION>
JULY 6, 1992(1)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- -------------
<S>............................................... <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 12.09 $ 10.05 $ 9.56 $ 10.39 $ 10.00
Income from investment operations:
Net investment income .......................... 0.24 0.22 0.22 0.14 0.05
Net realized and unrealized gains
(losses) on investments...................... 2.90 2.81 0.61 (0.83) 0.42
-------- -------- -------- -------- --------
Total from investment operations ............... 3.14 3.03 0.83 (0.69) 0.47
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ........... (0.24) (0.22) (0.22) (0.14) (0.05)
Distributions from net realized gains .......... (1.65) (0.77) (0.12) - (0.03)
-------- -------- -------- -------- --------
Total distributions ............................ (1.89) (0.99) (0.34) (0.14) (0.08)
-------- -------- -------- -------- --------
Net asset value, end of period ................. $ 13.34 $ 12.09 $ 10.05 $ 9.56 $ 10.39
======== ======== ======== ======== ========
Total Return...................................... 26.02% 30.42% 8.80% (6.58)% 4.72%(2)
======== ======== ======== ======== ========
Supplemental data and ratios:
Net assets, end of period (000s) ............... $755,617 $566,723 $295,133 $143,024 $74,666
======== ======== ======== ======== ========
Ratio of expenses to average net assets (3) .... 0.96% 0.99% 1.07% 1.18% 1.18%(4)
======== ======== ======== ======== ========
Ratio of expenses to average net assets after
expense reductions(3)........................ 0.90% 0.91% 1.07% 1.18% 1.18%(4)
======== ======== ======== ======== ========
Ratio of net income to average net assets after
expense reductions(3)........................ 1.80% 2.02% 2.49% 1.61% 1.49%(4)
======== ======== ======== ======== ========
Portfolio turnover rate ........................ 58.54% 55.37% 49.44% 61.14% 30.94%
======== ======== ======== ======== ========
Average commission rate paid per share ......... $ 0.0550 N/A N/A N/A N/A
<FN>
(1) Commencement of operations.
(2) Not annualized for the period July 6, 1992 through December 31, 1992.
(3) The Adviser has directed certain portfolio trades of The Yacktman Fund to a broker at best price and execution and has generated
soft dollar credits to be used against sub-transfer agency fees. Shareholders benefited under this arrangement as the net
expenses of The Yacktman Fund do not include such sub-transfer agency fees.
(4) Annualized.
</TABLE>
T H E F U N D S
The Yacktman Funds, Inc. (the "Company"), a Maryland corporation, was
organized on April 6, 1992. The Company is an open-end, management investment
company registered under the Invest-ment Company Act of 1940 (the "Act"). The
Company presently consists of two portfolios: The Yacktman Fund (diversified)
and The Yacktman Focused Fund (non-diversified) (each investment portfolio is
individually referred to as a "Fund" and collectively as the "Funds"). The
Funds offer a choice of equity-oriented investment opportunities.
Each Fund obtains its assets by continuously selling its shares to the
public. Proceeds from such sales are invested by the Funds in securities of
other companies. The resources of many investors are thus combined and each
individual investor has an interest in every one of the securities owned,
thereby providing diversification in a variety of industries. The Adviser
furnishes experienced management to select and watch over the investments of the
Funds. Each Fund will redeem any of its outstanding shares on demand of the
owner at the next determined net asset value. Registration of the Funds under
the Act does not involve supervision of the Funds' management or policies by the
Securities and Exchange Commission.
O B J E C T I V E A N D
I N V E S T M E N T A P P R O A C H
GENERAL
The investment objective of each of the Funds is to produce long-term growth
of capital, with current income as a secondary objective. Each Fund pursues its
primary investment objective by investing primarily in common stocks,
convertible securities, American Depository Receipts and fixed income
securities. The Yacktman Focused Fund may also purchase put options on specific
stocks in its portfolio to hedge against loss. Each Fund pursues its secondary
investment objective by investing in dividend paying common stocks, convertible
securities, fixed income securities and short-term money market instruments.
Each Fund may lend its portfolio securities and The Yacktman Focused Fund may
write put options.
Because shares of each Fund represent an investment in securities with
fluctuating market prices, the net asset value per share of each Fund will vary
as the aggregate value of the Fund's portfolio securities increases or
decreases. An investment in the Funds should be considered a long-term
investment. The Funds are not designed to meet investors' short-term financial
needs, nor is any single Fund or a combination of the Funds intended to provide
a complete or balanced investment program.
The investment objectives, policies and practices of each Fund, unless
otherwise stated, are not fundamental and may be changed by the Board of
Directors without shareholder approval. Because of the risks inherent in all
investments, there can be no assurance that the objectives of the Funds will be
met. The descriptions that follow are designed to help choose the Fund that best
fits an investor's investment objectives.
THE YACKTMAN FUND
The investment objective of The Yacktman Fund is long-term growth of
capital, with current income as a secondary objective. The Yacktman Fund invests
primarily in companies with large capitalization ($1 billion or more) with long
records of earnings growth and dividends. In managing the investment portfolio
for The Yacktman Fund, the Adviser will diversify The Yacktman Fund's holdings
among many companies and industries.
THE YACKTMAN FOCUSED FUND
The investment objective of The Yacktman Focused Fund is long-term growth of
capital, with current income as a secondary objective. The Yacktman Focused Fund
also invests primarily in companies with large capitalization ($1 billion or
more) with long records of earnings growth and dividends. However, in managing
the investment portfolio for The Yacktman Focused Fund, the Adviser may focus on
a relatively limited number of securities (i.e., generally 25 or less, other
than money market instruments). The Adviser believes that this focused
investment strategy has the potential for higher total returns than an
investment strategy calling for investment in a larger number of securities.
However, the use of this focused investment strategy may increase the volatility
of The Yacktman Focused Fund's investment performance. If the securities in
which The Yacktman Focused Fund invests perform poorly, this Fund could incur
greater losses than it would have had it invested in a greater number of
securities.
OTHER INVESTMENT POLICIES AND RISKS
In addition to the investment policies described above (and subject to
certain restrictions described below), each of the Funds (unless indicated to
the contrary) may invest in the following securities and employ the following
investment techniques, some of which may present special risks as described
below. A more complete discussion of certain of these securities and investment
techniques and the associated risks is contained in the Statement of Additional
Information. Unless indicated to the contrary, there is no limitation on the
percentage of assets which may be invested in any particular type of security.
MONEY MARKET INSTRUMENTS
In times when the Adviser believes that adverse economic or market
conditions justify such action, substantial portions of a Fund's assets may be
held in money market instruments such as United States Treasury bills,
certificates of deposit of U.S. banks, commercial paper and commercial paper
master notes (which are demand instruments without a fixed maturity bearing
interest at rates which are fixed to known lending rates and automatically
adjusted when such lending rates change) rated A-2 or better by Standard &
Poor's Corporation ("Standard & Poor's") or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"). The Yacktman Focused Fund may also invest in
securities issued by other investment companies that invest in high-quality,
short-term debt securities (i.e., money market funds). In addition to the
advisory fees and other expenses The Yacktman Focused Fund bears directly in
connection with its own operations, as a shareholder of another investment
company, The Yacktman Focused Fund would bear its pro rata portion of the other
investment company's advisory fees and other expenses and such fees and other
expenses will be borne indirectly by The Yacktman Focused Fund's shareholders. A
Fund may also invest in money market instruments in amounts as the Adviser
believes are reasonable to satisfy anticipated redemption requests and to
generate current income.
FIXED INCOME SECURITIES
Both Funds may invest in U.S. government securities and publicly distributed
corporate bonds and debentures to generate current income and when the Adviser
believes such securities offer opportunities for long-term growth of capital,
such as during periods of declining interest rates when the market value of such
securities generally rises. The Yacktman Fund will limit its investments in non-
convertible bonds and debentures to those which have been assigned one of the
two highest ratings of either Standard & Poor's (AAA and AA) or Moody's (Aaa and
Aa). In the event a bond or debenture is downgraded after investment, The
Yacktman Fund may retain such security unless it is rated less than investment
grade (i.e., less than BBB by Standard & Poor's or Baa by Moody's). The Yacktman
Focused Fund will limit its investments in non-convertible bonds and debentures
to those which have been assigned a rating of at least investment grade.
Securities rated BBB by Standard & Poor's or Baa by Moody's, although investment
grade, exhibit speculative characteristics and are more sensitive than higher
rated securities to changes in economic conditions. If a bond or debenture is
downgraded below investment grade, both Funds will promptly dispose of such bond
or debenture, unless the Adviser believes it disadvantageous to the Fund and its
shareholders to do so. A description of the foregoing ratings is set forth in
the Statement of Additional Information. The fixed income securities held by The
Yacktman Fund will normally have short-term maturities, although The Yacktman
Fund may invest in obligations having maturities as long as five years. The
Yacktman Focused Fund may invest in fixed income securities of any length
maturity. The value of fixed income securities will tend to decrease when
interest rates rise and increase when interest rates fall. Fixed income
securities with shorter maturities, while generally offering lower yields,
generally provide greater price stability than longer-term securities and are
less affected by changes in interest rates.
CONVERTIBLE SECURITIES
The Funds may also invest in convertible securities (debt securities or
preferred stocks of corporations which are convertible into or exchangeable for
common stocks). The Adviser will select only those convertible securities for
which it believes (a) the underlying common stock is a suitable investment for
each Fund using the criteria described above and (b) a greater potential for
total return exists by purchasing the convertible security because of its higher
yield. Each Fund may invest up to 5% of its net assets in convertible debt
securities rated less than investment grade. Debt securities rated less than
investment grade are commonly referred to as "junk bonds."
FOREIGN SECURITIES
The Funds may also invest in U.S. dollar-denominated securities of foreign
issuers in the form of American Depository Receipts ("ADRs") that are
regularly traded on recognized U.S. exchanges or in the U.S. over-the-counter
("OTC") market. Investments in securities of foreign issuers may involve risks
which are in addition to the usual risks inherent in domestic investments. In
many countries, there is less publicly available information about issuers than
is available in the reports and ratings published about companies in the United
States. Additionally, foreign companies may not be subject to uniform
accounting, auditing and financial reporting standards.
OPTIONS ON SECURITIES
The Yacktman Fund may not puchase or write (sell) put or call options, but
The Yacktman Focused Fund may purchase and write put (but not call) options on
stocks. The Yacktman Focused Fund will purchase put options on specific stocks
in its portfolio only to hedge against a loss caused by an unexpectedly large
decline in the price of the stock. The Yacktman Focused Fund may write (sell)
put options on stocks to generate income. The Yacktman Focused Fund will only
write put options if it is willing to purchase the stock at the exercise price.
When writing a put option and receiving a premium payment, The Yacktman
Focused Fund may become obligated during the term of the option to purchase the
securities underlying the option at a specific price (exercise price). This
event is unlikely to occur unless the market price of such securities is less
than the exercise price. To cover its obligation, The Yacktman Focused Fund will
maintain with its custodian in a segregated account cash or liquid securities
equal in value to the exercise price. When purchasing a put option, The Yacktman
Focused Fund has the right, in return for a premium paid, during the term of the
option, to sell the securities underlying the option at the exercise price. If a
put option which The Yacktman Focused Fund has purchased is not exercised, the
option will become worthless on the expiration date, and The Yacktman Focused
Fund will realize a loss in the amount of the premium paid, plus commission
costs. No assurance can be given that a market will exist at all times for all
outstanding put options purchased or sold by The Yacktman Focused Fund. In such
event, The Yacktman Focused Fund would be unable to realize its profits or limit
its losses until it could exercise the put options it holds and it would remain
obligated until the put options it wrote were exercised or had expired.
PORTFOLIO TURNOVER
The Funds do not trade actively for short-term profits. However, if the
objectives of the Funds would be better served, short-term profits or losses may
be realized from time to time. For the fiscal year ended December 31, 1996, the
PORTFOLIO TURNOVER RATE WAS APPROXIMATELY 60% FOR THE YACKTMAN FUND. THE
PORTFOLIO TURNOVER RATE FOR THE YACKTMAN FOCUSED FUND GENERALLY IS NOT EXPECTED
TO EXCEED 65%.The annual portfolio turnover rate indicates changes in a Fund's
portfolio and is calculated by dividing the lesser of purchases or sales of
portfolio securities (excluding securities having maturities at acquisition of
one year or less) for the fiscal year by the monthly average of the value of the
portfolio securities (excluding securities having maturities at acquisition of
one year or less) owned by the Fund during the fiscal year. The annual
portfolio turnover rate may vary widely from year to year depending upon market
conditions and prospects. Increased portfolio turnover necessarily results in
correspondingly heavier brokerage costs which the Fund must pay and increased
realized gains (or losses) to investors.
LENDING SECURITIES
For income purposes, a Fund may lend its portfolio securities. The Funds'
investment restrictions provide that no such loan may be made if thereafter more
than 30% of the value of a Fund's total assets would be subject to such loans.
Income may be earned on collateral received to secure the loans. Cash
collateral would be invested in money market instruments. U.S. government
securities collateral would yield interest or earn discount. Part of this
income might be shared with the borrower. Alternatively, a Fund could allow the
borrower to receive the income from the collateral and charge the borrower a
fee. In either event, the Fund would receive the amount of dividends or
interest paid on the loaned securities.
Usually these loans would be made to brokers, dealers or financial
institutions. Loans would be fully secured by collateral deposited with the
Funds' custodian in the form of cash and/or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities. This collateral must be
increased within one business day in the event that its value shall become less
than the market value of the loaned securities. Because there may be delays in
recovery or even loss of rights in the collateral should the borrower fail
financially, the loans will be made only to firms deemed by the Adviser to be of
good standing. Loans will not be made unless, in the judgment of the Adviser,
the consideration which can be earned from such loans justifies the risk.
The borrower, upon notice, must redeliver the loaned securities within 3
business days. In the event that voting rights with respect to the loaned
securities pass to the borrower and a material proposal affecting the securities
arises, the loan may be called or the Fund will otherwise secure or be granted a
valid proxy in time for it to vote on the proposal. In making such loans, a
Fund may utilize the services of a loan broker and pay a fee therefor. A Fund
may incur additional custodian fees for services in connection with lending of
securities.
BORROWING
Both Funds may borrow money from banks for temporary or emergency purposes
such as to meet redemption requests when liquidation of portfolio instruments
would be inconvenient or disadvantageous. The Yacktman Fund will borrow only for
such purposes and in an amount not exceeding 10% of the value of its total
assets. The Yacktman Fund will not purchase portfolio securities while any
borrowed amounts remain outstanding. The Yacktman Focused Fund may borrow money
for investment purposes. Borrowing for investment purposes is known as
leveraging. Leveraging investments, by purchasing securities with borrowed
money, is a speculative technique which increases investment risk, but also
increases investment opportunity. Since substantially all of The Yacktman
Focused Fund's assets will fluctuate in value, whereas the interest obligations
on borrowings may be fixed, the net asset value per share of The Yacktman
Focused Fund when it leverages its investments will increase more when The
Yacktman Focused Fund's assets increase in value and decrease more when the
portfolio assets decrease in value than would otherwise be the case. Interest
costs on borrowings may partially offset or exceed the returns on the borrowed
funds. Under adverse conditions, The Yacktman Focused Fund might have to sell
portfolio securities to meet interest or principal payments at a time investment
considerations would not favor such sales. As required by the Act, The Yacktman
Focused Fund must maintain continuous asset coverage (total assets, including
assets acquired with borrowed funds, less liabilities exclusive of borrowings)
of 300% of all amounts borrowed. If, at any time, the value of The Yacktman
Focused Fund's assets should fail to meet this 300% coverage test, The Yacktman
Focused Fund within three business days, will reduce the amount of The Yacktman
Focused Fund's borrowings to the extent necessary to meet this 300% coverage.
Maintenance of this percentage limitation may result in the sale of portfolio
securities at a time when investment considerations otherwise indicate that it
would be disadvantageous to do so.
BROKER PRACTICES
Subject to an overall policy to seek to place portfolio transactions as
efficiently as possible and at a favorable price, research services, payment of
Fund expenses and placement of orders by securities firms for the Fund's shares
may be taken into account as a factor in placing portfolio transactions.
INVESTMENT LIMITATIONS
Each Fund has adopted certain fundamental investment restrictions that may
be changed only with the approval of a majority of a Fund's outstanding shares.
A list of the Funds' policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional Information. In
order to provide a degree of flexibility, the Funds' investment objectives, as
well as other policies which are not deemed fundamental, may be modified by the
Board of Directors without shareholder approval. Any change in a Fund's
investment objective may result in the Fund having investment objectives
different from the objectives which the shareholder considered appropriate at
the time of investment in the Fund.
M A N A G E M E N T
O F T H E F U N D S
As a Maryland corporation, the business and affairs of the Company are
managed by its Board of Directors. The Company, on behalf of each of the Funds,
has entered into Investment Advisory Agreements (the "Advisory Agreements")
with Yacktman Asset Management Co., 303 West Madison Street, Chicago, Illinois
60606. Pursuant to such Advisory Agreements, the Adviser furnishes continuous
investment advisory services to each of the Funds. The Adviser does not advise
any other mutual funds, but does act as the investment adviser to individuals
and institutional clients with investment portfolios of approximately $1.5
billion. The Adviser was organized in April 1992. Mr. Donald A. Yacktman, the
president and sole stockholder of the Adviser, is the portfolio manager for each
of the Funds and, as such, is responsible for the day-to-day management of their
portfolios. Mr. Yacktman has managed each of the Funds' portfolios since
inception and was an officer and portfolio manager from April 1982 through March
11, 1992 with Selected Financial Services, Inc.; and a portfolio manager from
1968 to 1982 with Stein Roe & Farnham, where he was also a partner from 1974 to
1982.
The Adviser supervises and manages the investment portfolios of the Funds
and, subject to such policies as the Board of Directors of the Company may
determine, directs the purchase or sale of investment securities in the day-to-
day management of the Funds' investment portfolios. Under the Advisory
Agreements, the Adviser, at its own expense and without reimbursement from the
Funds, furnishes office space and all necessary office facilities, equipment and
executive personnel for managing the investments of the Funds and pays the
salaries and fees of all officers and directors of the Funds (except the fees
paid to directors who are not interested persons of the Adviser). For the
foregoing, the Adviser receives a monthly fee from The Yacktman Fund based on
The Yacktman Fund's average daily net assets at the annual rate of .65 of 1% on
the first $500,000,000 of average daily net assets, .60 of 1% on the next
$500,000,000 of average daily net assets and .55 of 1% on average daily net
assets in excess of $1,000,000,000 and a monthly fee from The Yacktman Focused
Fund based on The Yacktman Focused Fund's average daily net assets at the annual
rate of 1% on average daily net assets. The Adviser will waive all or a portion
of the advisory fee otherwise payable by The Yacktman Focused Fund to the extent
necessary to insure that aggregate annual operating expenses, excluding
interest, taxes, brokerage commissions and extraordinary items, do not exceed
1.25% of average net assets. The advisory fees paid in the fiscal year ended
December 31, 1996 by The Yacktman Fund were equal to .64% of The Yacktman Fund's
average net assets.
Pursuant to an Administration and Fund Accounting Agreement (the
"Administration Agreement"), Sunstone Financial Group, Inc. (the
"Administrator"), 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin
53202, acts as administrator and fund accountant. As administrator, the
Administrator provides clerical, compliance, regulatory and other administrative
services. As fund accountant, the Administrator calculates each Fund's net asset
value. For administrative services, the Administrator receives from The Yacktman
Fund a fee, computed daily and payable monthly, based on The Yacktman Fund's
average daily net assets at the annual rate of .15 of 1% on the first
$50,000,000 of average daily net assets, .05 of 1% on the next $50,000,000 of
average daily net assets and .025 of 1% on average daily net assets in excess of
$100,000,000. And for fund accounting services, the Administrator receives from
The Yacktman Fund a fee, computed daily and payable monthly, based on The
Yacktman Fund's average daily net assets at the annual rate of $20,000 on the
first $100,000,000 of average daily net assets, .010% on the next $100,000,000
of average daily net assets, and .005% of average daily net assets in excess of
$200,000,000.
For administrative and fund accounting services, The Yacktman Focused Fund
pays the Administrator a fee, computed daily and payable monthly, at the annual
rate of .05% of The Yacktman Focused Fund's average daily net assets, subject to
a minimum annual fee of $50,000.
The Funds pay all of their own expenses, including, without limitation, the
cost of preparing and printing the registration statement required under the
Securities Act of 1933 and the Act and any amendments thereto, the expense of
registering shares with the Securities and Exchange Commission and in the
various states, the printing and distribution costs of prospectuses mailed to
existing investors, reports to investors, reports to government authorities and
proxy statements, fees paid to directors who are not interested persons of the
Adviser, interest charges, taxes, legal expenses, association membership dues,
auditing services, insurance premiums, brokerage commissions and expenses in
connection with portfolio transactions, fees and expenses of the custodian of
the Funds' assets, printing and mailing expenses and charges and expenses of
dividend disbursing agents, accounting services agents, registrars and stock
transfer agents.
P U R C H A S E O F S H A R E S
INITIAL INVESTMENT
Shares of the Funds are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order. The Board of Directors of the
Company has established $2,500 as the minimum initial purchase and $100 as the
minimum for any subsequent purchase (except for Individual Retirement Accounts
("IRAs") and Automatic Investment Plans, where the initial minimum is $500,
and through dividend reinvestment). Investors will receive written notification
at least 30 days in advance of any changes in such minimum amounts.
BY MAIL
Share purchase applications may be obtained from the Funds. (Please note
that investors must use different forms if investing through an IRA or prototype
retirement plan. See "RETIREMENT PLANS.") Completed share purchase
applications should be mailed directly to:
The Yacktman Funds, Inc.
Shareholder Services Center
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
To purchase shares by OVERNIGHT OR EXPRESS MAIL, please use the following street
address:
The Yacktman Funds, Inc.
Shareholder Services Center, 3rd Floor
615 East Michigan Street
Milwaukee, Wisconsin 53202
The U.S. Postal Service or other independent delivery services are not agents of
the Funds. Therefore, deposit in the mail or with such services, does not
constitute receipt by Firstar Trust Company or the Funds. DO NOT mail letters by
overnight courier to the Post Office Box address.
All applications must be accompanied by payment in the form of a check made
payable to "The Yacktman Funds, Inc." All purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks. No cash will be accepted.
Firstar Trust Company will charge a $20 fee against an investor's account for
any payment check returned to the custodian for insufficient funds. The investor
will also be responsible for any losses suffered by the Funds as a result. When
a purchase is made by check and a redemption is made shortly thereafter, Firstar
Trust Company, the Funds' transfer agent (the "Transfer Agent"), may delay the
mailing of a redemption check until it is satisfied that the check has cleared.
(It will normally take up to 3 business days to clear local personal or
corporate checks and up to 7 business days to clear other personal and corporate
checks.)
BY WIRE
To avoid redemption delays as described above, purchases may be made by
direct wire transfers. The establishment of a new account by wire transfer
should be preceded by a telephone call to the Transfer Agent at 1-800-457-6033
or 1-414-765-4124. The investor will be asked to provide his or her name,
address, Social Security or tax identification number, the amount of his or her
investment and the name and address of the bank that will be wiring the
investment. The Transfer Agent will inform the investor of his or her assigned
investor account number at that time. Funds should be wired through the Federal
Reserve System as follows:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 0750-00022
For credit to Firstar Trust Company
Account Number 112-952-137
For further credit to The Yacktman Funds, Inc.
(name of Fund to be purchased)
(investor account number)
(name or account registration)
After wiring funds, the investor will receive in the mail from the Transfer
Agent a share purchase application. Upon receipt, the investor must complete
the application and return it to the Transfer Agent.
Inquiries concerning the Funds or the share purchase application may be
directed to the Transfer Agent. For telephone assistance call toll-free,
1-800-457-6033.
SUBSEQUENT INVESTMENTS (MINIMUM $100)
Additions to an investor's account may be made BY MAIL ($100 MINIMUM) or BY
WIRE ($1,000 MINIMUM). When adding to an account by mail, the investor should
send to the Transfer Agent his or her remittance, together with the detachable
form sent with the most recent statement from the Transfer Agent. If this form
is unavailable, the investor should send a note giving the full name of the
account and the account number. For additional investments made by wire
transfer, the investor should use the aforementioned wiring instructions. The
investor should notify the Transfer Agent at 1-800-457-6033 prior to wiring
funds. The required minimum investments may be waived in the case of qualified
retirement plans.
GENERAL INFORMATION
All applications to purchase shares of the Funds are subject to acceptance
by the Funds and are not binding until so accepted. The Funds do not, except as
indicated in the following sentence, accept telephone orders for the purchase of
shares, and they reserve the right to reject applications in whole or in part.
The Funds may accept telephone orders from broker-dealers who have been
previously approved by the Funds. It is the responsibility of such broker-
dealers promptly to forward purchase or redemption orders to the Funds. Although
there is no sales charge levied directly by the Funds, broker-dealers may charge
the investor a transaction-based fee or other fee for their services at either
the time of purchase or the time of redemption. Such charges may vary among
broker-dealers but in all cases will be retained by the broker-dealer and not
remitted to the Funds or the Adviser.
In order to relieve the investor of responsibility for safekeeping and
delivery of stock certificates, the Funds do not issue certificates unless the
investor requests a certificate each time a purchase is made. Instead, shares
purchased are automatically credited to an account maintained for the investor
on the books of the Funds by the Transfer Agent. The investor will receive a
statement showing the details of each transaction. No charge will be imposed
for the issuance of stock certificates.
AUTOMATIC INVESTMENT PLAN
The Funds offer an Automatic Investment Plan whereby an investor may
automatically make purchases of shares of the Funds on a regular, convenient
basis ($100 minimum per transaction). A $500 MINIMUM INITIAL INVESTMENT must
be met before the Automatic Investment Plan may be established. Under the
Automatic Investment Plan, an investor's designated bank or other financial
institution debits a preauthorized amount on the investor's account each month
and applies the amount to the purchase of shares of the Funds. The Automatic
Investment Plan must be implemented with a financial institution that is a
member of the Automated Clearing House ("ACH"). In addition, the Funds must
have a currently effective registration in those states in which it is
required. No service fee is currently charged by the Funds for participating
in the Automatic Investment Plan. A $20 fee will be imposed by the Transfer
Agent if sufficient funds are not available in the investor's account
at the time of the automatic transaction. Applications to establish the
Automatic Investment Plan are available from the Funds. Investors who wish
to make a change in investments made through an automatic investment plan
may do so by calling the Transfer Agent at 1-800-457-6033.
DISTRIBUTION PLAN
There are no sales loads on purchases of shares of the Funds nor redemption
charges on redemptions of shares. The Yacktman Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. THE EFFECTIVE 12B-1
FEE FOR THE YACKTMAN FUND WAS 0.07% FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
THE YACKTMAN FOCUSED FUND HAS NOT ADOPTED A DISTRIBUTION PLAN. Payments under
the Plan in any year are limited to 0.25% of the average daily net assets of The
Yacktman Fund. The Plan permits The Yacktman Fund to employ one or more
distributors of its shares. PAYMENTS UNDER THE PLAN, HOWEVER, MAY BE MADE ONLY
TO DISTRIBUTORS EMPLOYED BY THE YACKTMAN FUND WITH RESPECT TO SHARES
BENEFICIALLY OWNED BY EACH SUCH DISTRIBUTOR'S BROKERAGE CLIENTS WHO ESTABLISHED
THEIR YACKTMAN FUND ACCOUNTS PRIOR TO DECEMBER 31, 1992. Such fees may decline
as a percentage of net assets as assets of The Yacktman Fund increase and/or as
the clients of distributors employed by The Yacktman Fund who established their
accounts prior to December 31, 1992 redeem their shares. The Yacktman Fund pays
to each distributor a monthly fee for distribution of The Yacktman Fund's shares
at the rate of 0.65% per annum of the aggregate average daily net asset value of
the shares in the distributor's accounts. These distribution fees can be
characterized as trail fees. Such fees may be spent by a distributor on any
activities or expenses primarily intended to result in the sale of The Yacktman
Fund's shares, including but not limited to compensation paid to, and expenses
(including overhead and telephone expenses) of, employees of the distributor who
engage in or support the distribution of shares of The Yacktman Fund. See
"DISTRIBUTION PLAN" in the Statement of Additional Information for a more
complete description of the Plan. Long-term shareholders (e.g., in excess of 25
years) may pay more through the imposition of the distribution fee over time
than the economic equivalent of the maximum front-end sales charge permitted to
be charged by brokers if The Yacktman Fund were to have a front-end sales
charge.
R E T I R E M E N T P L A N S
The Funds offer the following retirement plans that may be funded with
purchases of shares of the Funds and may allow investors to shelter some of
their income from taxes:
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
Individuals who receive compensation or earned income, even if they are
active participants in a qualified retirement plan (or certain similar
retirement plans), may establish their own tax-sheltered Individual Retirement
Account ("IRA"). The MINIMUM INITIAL INVESTMENT for an IRA is $500. The Funds
offer a prototype IRA plan which may be adopted by individuals. There is
currently no charge for establishing an account, although there is an annual
maintenance fee. (See IRA Custodial Agreement and Disclosure Statement.)
Earnings on amounts held in an IRA are not taxed until withdrawal. However,
the amount of deduction, if any, allowed for IRA contributions is limited for
individuals who are active participants in an employer-maintained retirement
plan and whose incomes exceed specific limits.
SIMPLIFIED EMPLOYEE PENSION PLAN
("SEP-IRA")
The Funds also offer a Simplified Employee Pension (SEP) plan for employers,
including self-employed individuals, who wish to purchase shares of the Funds
with tax-deductible contributions. Under the SEP plan, employer contributions
are made directly to the IRA accounts of eligible participants.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS
("SIMPLE")
The Funds also offer a SIMPLE plan for employers, including self-employed
individuals, with 100 or fewer employees who wish to purchase shares of the
Funds with tax-deductible contributions. A SIMPLE plan allows employees to elect
to reduce their compensation and have such amounts contributed to the plan.
Under the SIMPLE plan, employer and employee contributions are made directly to
the SIMPLE IRA accounts of eligible participants.
DEFINED CONTRIBUTION RETIREMENT PLAN (KEOGH OR CORPORATE PROFIT-SHARING AND
MONEY-PURCHASE PLANS)
A prototype defined contribution retirement plan is available for employers,
including self-employed individuals, who wish to purchase shares of the Funds
with tax-deductible contributions.
CASH OR DEFERRED 401(K) PLAN
A prototype cash or deferred 401(k) arrange-ment is also available as part
of the Defined Contribution Retirement Plan for employers who wish to allow
employees to elect to reduce their compensation and have such amounts
contributed to the plan.
MODEL 403(B)(7) PLAN
A model 403(b)(7) plan is available for employees of certain charitable,
educational and governmental entities.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as application forms, are available from
the Funds upon request. The IRA documents contain a disclosure statement which
the Internal Revenue Service requires to be furnished to individuals who are
considering adopting the IRA. Because a retirement program involves commitments
covering future years, it is important that the investment objectives of the
Funds be consistent with the participant's retirement objectives. Premature
withdrawals from a retirement plan will result in adverse tax consequences.
Consultation with a competent financial and tax adviser regarding the foregoing
retirement plans is recommended.
E X C H A N G E P R I V I L E G E
The Company generally permits shareholders to exchange shares of The
Yacktman Fund for shares of The Yacktman Focused Fund. Additionally all or part
of the shares of the Funds owned by an investor may be exchanged for shares of
the Portico Money Market Fund, the Portico U.S. Government Money Market Fund and
the Portico Tax-Exempt Money Market Fund (collectively the "Portico Money
Funds"). The Portico Money Funds are described in a separate prospectus
available from the Funds. Firstar Investment Research & Management Company, an
affiliate of Firstar Trust Company, serves as the investment adviser to each of
the Portico Money Funds. Investors may subsequently exchange such shares and
shares purchased with reinvested dividends for shares of the Funds. Use of the
exchange privilege is subject to the minimum purchase and redemption amounts set
forth in this Prospectus and in the prospectus for the applicable Portico Money
Fund, and is available only if shares of the applicable Portico Money Fund are
registered for sale in the state of residence of the investor. Investors may
obtain a copy of the prospectuses for any Portico Money Fund from the Funds and
are advised to read it carefully before authorizing any investment in shares of
such fund.
Exchange requests are subject to a $1,000 MINIMUM. Exchange requests may be
subject to other limitations, including those relating to frequency, that may be
established from time to time to ensure that the exchanges do not disadvantage
the Funds or their investors. Investors will be notified at least 60 days in
advance of any changes in such limitations and may obtain the terms of any such
limitations by writing to The Yacktman Funds, Inc., Shareholder Services Center,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. Except as stated above, the Funds
currently do not impose any limitations on exchanges. There will be a $5.00 FEE
charged to the investor's account FOR EACH TELEPHONE EXCHANGE transacted by the
investor. This fee will be charged to the account from which the funds are being
withdrawn prior to effecting the exchange. There is NO FEE FOR A WRITTEN
EXCHANGE REQUEST.
An exchange involves a redemption of all or a portion of the shares in one
Fund and the investment of the redemption proceeds in shares of the other Fund
or the applicable Portico Money Fund. The redemption will be made at the per
share net asset value of the shares to be redeemed next determined after the
exchange request is received as described above. The shares of the Fund or the
Portico Money Fund to be acquired will be purchased at the per share net asset
value of those shares next determined coincident with or after the time of
redemption. For federal income tax purposes, an exchange of shares is a taxable
event and, accordingly, the investor may realize a capital gain or loss. Before
making an exchange request, the investor should consult a tax or other financial
adviser to determine the tax consequences of a particular exchange. For further
information regarding the exchange privilege, see "EXCHANGE PRIVILEGE" in the
Funds' Statement of Additional Information.
R E D E M P T I O N OF S H A R E S
REDEMPTION BY TELEPHONE
Investors may redeem shares of the Funds by telephone. To redeem shares by
telephone, an investor must check the appropriate box on the share purchase
application as the Funds do not make this feature available to shareholders
automatically. Once this feature has been requested, shares may be redeemed by
phoning the Transfer Agent at 1-800-457-6033 or
1-414-765-4124 and giving:
- the account name,
- the account number, and
- either the number of shares or the
- dollar amount to be redeemed.
Proceeds redeemed by telephone will be mailed or wired only to an investor's
address or bank of record as shown on the records of the Transfer Agent.
TELEPHONE REDEMPTIONS MUST BE IN AMOUNTS OF $1,000 OR MORE. Any written
redemption request received within 10 business days after an address change made
by telephone, must be accompanied by a signature guarantee and no telephone
redemption will be allowed within 10 business days of such a change.
Payment of the redemption proceeds for shares of the Funds redeemed by
telephone where an investor requests wire payment will normally be made in
federal funds on the next business day. As stated above, the Transfer Agent
will wire redemption proceeds only to the bank and account designated on
the share purchase application or in written instructions subsequently
received by the Transfer Agent, and only if the bank is a commercial bank
located within the United States. The Transfer Agent currently charges a
$12.00 FEE for each payment made by wire of redemption proceeds, which
fee will be deducted from the investor's account.
In order to arrange for telephone redemptions after a Fund account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. The
request must be signed by each registered holder of the account with the
signatures guaranteed by a commercial bank or trust company in the United
States, a member firm of the New York Stock Exchange or other eligible guarantor
institution. Further documentation may be requested from corporations,
executors, administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if they believe
it is advisable to do so. Procedures for redeeming shares of the Funds by
telephone may be modified or terminated by the Funds at any time. Neither the
Funds nor the Transfer Agent will be liable for following instructions for
telephone redemption transactions which they reasonably believe to be genuine
even if such instructions prove to be unauthorized or fraudulent. They will
employ reasonable procedures to confirm that instructions received by telephone
are genuine, including requiring the shareholder to provide the shareholder's
account number to verify ownership, tape recording all instructions and
providing written confirmation of such instructions, and if they do not, they
may be liable for losses due to unauthorized or fraudulent instructions.
REDEMPTION BY MAIL
Investors may request redemption of part or all of their shares by mail
whenever they wish. For most redemption requests, an investor need only deliver
to the Transfer Agent a written, unconditional request to redeem his or her
shares at net asset value. A request for redemption must include:
- the name of the Fund (i.e., The Yacktman
Fund, The Yacktman Focused Fund or a Portico money market fund);
- the account number;
- the dollar amount or number of shares
being redeemed;
- the name(s) on the account registration;
- the signatures of all registered account
owners; and
- a daytime telephone number.
If stock certificates have been issued, the investor must also deliver the
certificate or certificates in transferable form, duly endorsed or accompanied
by a separate stock power. In certain situations, such as where corporations,
executors, administrators, trustees and guardians are involved, additional
documentation and signature guarantees may be required. Redemptions are effected
only by the Transfer Agent. In case of any questions concerning the nature of
such additional requirements, the Transfer Agent should be contacted in advance.
Redemption requests may be submitted directly to the Transfer Agent at no
cost to the investor. They may also be submitted through securities dealers, in
which case a service fee may be charged by such dealer. If a redemption request
is not sent directly to the Transfer Agent, it will be forwarded to the Transfer
Agent, and the effective date of redemption will be delayed until the request is
received by the Transfer Agent. THUS, TO AVOID DELAY, PLEASE SUBMIT REDEMPTION
REQUESTS DIRECTLY TO THE TRANSFER AGENT at:
The Yacktman Funds, Inc.
Shareholder Services Center
P.O. Box 701
Milwaukee, WI 53202
The U.S. Postal Service or other independent delivery services are not agents of
the Funds. Therefore, deposit in the mail or with such services, does not
constitute receipt by Firstar Trust Company or the Funds. DO NOT mail letters by
overnight courier to the Post Office Box address. Correspondence mailed by
overnight courier should be sent to Firstar Trust Company, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202.
SIGNATURE GUARANTEE
Except in certain situations, such as where corporations, executors,
administrators, trustees and guardians are involved, signatures need not be
guaranteed unless:
- the redemption request exceeds $25,000;
- the proceeds of the redemption are requested to be sent by wire transfer
to a person other than the registered holder(s) of the shares to be
redeemed;
- the proceeds of the redemption are to be mailed to other than the address
of record; or
- a change of address request has been received by the Funds or the Transfer
Agent within the last 10 business days.
In such cases, each signature on any stock certificate, stock power or
redemption request must be guaranteed by a commercial bank or trust company in
the United States, a member firm of the New York Stock Exchange or other
eligible guarantor institution.
REDEMPTION PRICE
The redemption price per share is the next determined net asset value per
share for each Fund after receipt by the Transfer Agent of the written request
containing the information set forth above, accompanied by all required
documentation. The amount received will depend on the market value of the
investments in such Fund's portfolio at the time of determination of net asset
value and may be more or less than the cost of the shares redeemed. A check in
payment for shares redeemed will be mailed to the holder typically within one or
two days, but no later than the seventh day after receipt of the redemption
request in proper form and of all required documentation (except as indicated
above for certain redemptions of shares purchased by check).
Investors should be aware that during periods of substantial economic or
market change, telephone or wire redemptions may be difficult to implement. If
an investor is unable to contact the Transfer Agent by telephone, shares may
also be redeemed by delivering the redemption request to the Transfer Agent by
mail as described above.
When redemption is requested shortly after shares have been purchased by
personal check, the redemption proceeds will be delayed until the Funds can
verify that the check has cleared. (It will normally take up to 3 days to clear
local personal or corporate checks and up to 7 days to clear other personal and
corporate checks.) Investors may not use a wire transfer to a predesignated
account until the shares being redeemed have been issued for at least 10
business days. To reduce such delay, the Funds recommend that all purchases be
made by direct wire transfer.
To relieve the Funds of the cost of maintaining uneconomical accounts, the
Funds reserve the right to redeem the shares held in any account if, at the time
of any redemption of shares in the account, the net asset value of the remaining
shares in the account falls below $1,000. Before such involuntary redemption
would occur, the investor would be given at least 60 days' written notice and,
during that period, the investor could make an additional investment to restore
the account to at least the minimum amount, in which case there would be no such
redemption. Involuntary redemptions will not be made because the value of shares
in an account falls below the minimum amount solely because of a decline in any
Fund's net asset value. Any such involuntary redemption would be at net asset
value.
The right to redeem shares of the Funds will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension or (c)
an emergency, as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable for a
Fund to dispose of its securities or fairly to determine the value of its net
assets.
S Y S T E M A T I C
W I T H D R A W A L P L A N
To accommodate the current cash needs of investors, the Funds offer a
Systematic Withdrawal Plan, pursuant to which an investor may provide that a
fixed sum be distributed to him or her at regular intervals. AN INVESTOR MUST
OWN SHARES OF THE FUNDS WORTH AT LEAST $10,000 AT CURRENT NET ASSET VALUE IN
ORDER TO PARTICIPATE IN THE PLAN. In electing to participate in the Systematic
Withdrawal Plan, an investor should realize that within any given period the
appreciation of his or her investment in the Funds may not be as great as the
amount withdrawn. A more complete discussion of the Systematic Withdrawal Plan
is included in the Funds' Statement of Additional Information. The Systematic
Withdrawal Plan does not apply to shares of the Funds held in IRAs or other
retirement plans. An application for participation in the Systematic Withdrawal
Plan can be obtained from the Funds. Investors who wish to make a change in
their Systematic Withdrawal Plan may do so by calling the Transfer Agent at 1-
800-457-6033.
D E T E R M I N A T I O N O F
N E T A S S E T V A L U E
The price investors pay when buying shares of the Funds, and the price
investors receive when redeeming shares of the Funds, is the net asset value of
the shares. No sales charge or commission of any kind is added by the Funds upon
a purchase and no charge is deducted upon a redemption.
The per share net asset value of a Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital and surplus) by the total number of its shares outstanding at that time.
The net asset value is determined as of the close of regular trading (currently
4:00 p.m. Eastern time) on the New York Stock Exchange on each day the New York
Stock Exchange is open for trading. This determination is applicable to all
transactions in shares of the Funds prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
Securities which are traded on a recognized stock exchange are valued at the
last sale price on the securities exchange on which such securities are
primarily traded or at last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are valued at
the current bid prices. Securities traded on only over-the-counter markets are
valued on the basis of closing over-the-counter bid prices. Debt securities
(other than short-term instruments) are valued at prices furnished by a national
pricing service, subject to review by the Adviser and determination of the
appropriate price whenever a furnished price is significantly different from the
previous day's furnished price. Debt instruments maturing within 60 days are
valued by the amortized cost method. Any securities for which market quotations
are not readily available are valued at their fair value as determined in good
faith by the Board of Directors.
D I V I D E N D S A N D
D I S T R I B U T I O N S
THE FUNDS PAY DIVIDENDS QUARTERLY from net investment income. Any NET
REALIZED CAPITAL GAIN not offset by capital loss carryovers is distributed
ANNUALLY. Investors may elect to have all income dividends and capital gains
distributions reinvested in the Funds or paid in cash. See the share purchase
application for further information. If an investor does not specify an
election, all income dividends and capital gains distributions will
automatically be reinvested in full and fractional shares of the Funds,
calculated to the nearest 1,000th of a share. Shares will be purchased at the
net asset value in effect on the business day after the dividend record date and
will be credited to the investor's account on such date. As in the case of other
purchases, stock certificates will not be issued unless requested. Investors
will be advised of the number of shares purchased and the price following each
reinvestment. An election to reinvest or receive dividends and distributions in
cash will apply to all shares of the Funds registered in the same name,
including those previously purchased. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash.
An investor may change his or her election at any time by notifying the
Funds in writing. If such a notice is received between a dividend declaration
date and payment date, it will become effective on the day following the payment
date. The Funds may modify or terminate the dividend reinvestment program at any
time on 30 days' notice to participants.
The Transfer Agent will accept a request to change from cash to reinvest.
The Transfer Agent will also accept a request to change reinvest to cash as long
as the proceeds are sent to the address of record or to a preauthorized wire/EFT
payment address already established on the account. A request to begin EFT of
dividends to a bank not already on the account or to have the check sent to
another address must be received with a signature guarantee.
T A X E S
Each Fund intends to qualify annually for and elect tax treatment applicable
to a "regulated investment company" under Subchapter M of the Code. Each Fund
intends to distribute all of its taxable net income and realized net gains to
investors so that each Fund will not be required to pay any income taxes. Such
distributions are taxable as ordinary income or capital gain to investors unless
their income is not subject to income tax. Investors may also be subject to
state and local taxes on such distributions. Investors are informed annually of
the amount and nature of such income or gain. Only dividends that represent
dividends received by the Funds from U.S. corporations may, subject to certain
limitations, qualify for the dividends received deduction, which is available
only to certain corporations.
If a Fund distributes less than the amount it is required to distribute
during any year, such Fund will be subject to a 4% excise tax on the under-
distributed amount. Each Fund intends to declare and distribute dividends during
each year sufficient to prevent imposition of the excise tax.
A FUND WILL BE REQUIRED TO WITHHOLD FEDERAL INCOME TAX AT A RATE OF 31%
("backup withholding") from dividend payments and redemption and exchange
proceeds IF AN INVESTOR FAILS TO FURNISH SUCH FUND WITH HIS SOCIAL SECURITY
NUMBER OR OTHER TAX IDENTIFICATION NUMBER OR FAILS TO CERTIFY UNDER PENALTY OF
PERJURY THAT SUCH NUMBER IS CORRECT OR THAT HE IS NOT SUBJECT TO BACKUP
WITHHOLDING DUE TO THE UNDERREPORTING OF INCOME. This certification is included
as part of the share purchase application and should be completed when the
account is opened.
Investors should consult their tax advisers for a complete review of the tax
ramifications of an investment in the Funds.
C A P I T A L S T R U C T U R E
The Company's authorized capital consists of 1,000,000,000 shares of Common
Stock, $0.0001 par value. The common stock is divisible into an unlimited number
of "series," each of which is a separate Fund. Shareholders are entitled: (i)
to one vote per full share of Common Stock; (ii) to such distributions as may be
declared by the Company's Board of Directors out of funds legally available; and
(iii) upon liquidation, to participate ratably in the assets available for
distribution. There are no conversion or sinking fund provisions applicable to
the shares, and the holders have no preemptive rights and may not cumulate their
votes in the election of directors. Consequently the holders of more than 50% of
the shares of Common Stock voting for the election of directors can elect the
entire Board of Directors and, in such event, the holders of the remaining
shares voting for the election of directors will not be able to elect any person
or persons to the Board of Directors. The Maryland General Corporation Law
permits registered investment companies, such as the Company, to operate without
an annual meeting of shareholders under specified circumstances if an annual
meeting is not required by the Act. The Company has adopted the appropriate
provisions in its Bylaws and does not anticipate holding an annual meeting in
any year in which the election of directors is not required to be acted on by
share-holders under the Act. The Company also has adopted provisions in its
Bylaws for the removal of directors by the shareholders.
Shares of Common Stock are redeemable and are transferable. All shares
issued and sold by the Funds will be fully paid and nonassessable. Fractional
shares of Common Stock entitle the holder to the same rights as whole shares of
Common Stock. The Funds will not issue certificates evidencing shares of Common
Stock purchased unless so requested in writing. Where certificates are not
issued, the investor's account will be credited with the number of shares
purchased, relieving investors of responsibility for safekeeping of certificates
and the need to deliver them upon redemption. Written confirmations are issued
for all purchases of Common Stock. Any investor may deliver certificates to
Firstar Trust Company and direct that his or her account be credited with the
shares. Any investor may direct Firstar Trust Company at any time to issue a
certificate for his or her shares of Common Stock without charge. In addition to
serving as the Fund's Transfer Agent, Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202, is the custodian for all securities and cash
of the Funds and acts as the Funds' dividend disbursing agent.
Pursuant to the Company's Articles of Incorporation, the Board of Directors
may classify or reclassify any unissued shares of the Funds and may designate or
redesignate the name of any outstanding class of shares of the Funds. As a
general matter, shares are voted in the aggregate and not by class, except where
class voting is required by Maryland law or the Act (e.g., a change in
investment policy or approval of an investment advisory agreement). All
consideration received from the sale of shares of any class of the Funds'
shares, together with all income, earnings, profits and proceeds thereof, belong
to that class and are charged with the liabilities in respect of that class and
of that class' share of the general liabilities of the Funds in the proportion
that the total net assets of the class bear to the total net assets of all
classes of the Funds' shares. The net asset value of a share of any class is
based on the assets belonging to that class less the liabilities charged to that
class, and dividends may be paid on shares of any class of Common Stock only out
of lawfully available assets belonging to that class. In the event of
liquidation or dissolution of the Funds, the holders of each class would be
entitled, out of the assets of the Funds available for distribution, to the
assets belonging to that class.
S H A R E H O L D E R R E P O R T S
Investors will be provided at least semi-annually with a report showing each
Fund's portfolio and other information and annually after the close of the
Funds' fiscal year, which ends December 31, with an annual report containing
audited financial statements. An individual account statement will be sent to
the investor by Firstar Trust Company after each purchase, including
reinvestment of dividends, or redemption of shares of the Funds. Each investor
will also receive an annual statement after the end of the calendar year listing
all transactions in shares of the Funds during such year.
Investors who have questions about their respective accounts should call
Firstar Trust Company at 1-800-457-6033 or 1-414-765-4124. In addition,
investors who wish to make a change in their address of record, a change in
investments made through an automatic investment plan or a change in the manner
in which dividends are received may also do so by calling the Transfer Agent at
1-800-457-6033. Investors who have questions regarding the investment strategy
and historical performance of the Funds should call Yacktman Asset Management
Co. at 1-800-525-8258 and ask to speak to a member of the portfolio management
group. Alternatively, investors may also write to The Yacktman Funds, Inc., 303
West Madison Street, Chicago, Illinois 60606, Attention: Corporate Secretary.
F U N D P E R F O R M A N C E
Each Fund may provide from time to time in advertisements, reports to
investors and other communications with investors its average annual compounded
rate of return. An average annual compounded rate of return refers to the rate
of return which, if applied to an initial investment at the beginning of a
stated period and compounded over the period, would result in the redeemable
value of the investment at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect of all recurring fees.
An investor's principal in each Fund and the Fund's return are not guaranteed
and will fluctuate according to market conditions.
In reports or other communications to investors and in advertising material,
a Fund may compare its performance to the Consumer Price Index, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index and to the performance
of mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA") or Morningstar, Inc.
("Morningstar"), three widely recognized independent mutual fund reporting
services. Lipper, CDA and Morningstar performance calculations include
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. The Consumer Price Index is generally considered to be a
measure of inflation. The Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index are unmanaged indices of common stocks which are considered to
be generally representative of the United States stock market. The market prices
and yields of these stocks will fluctuate. A Fund also may quote performance
information from publications such as The Wall Street Journal, Kiplinger's
Personal Finance Magazine, Money Magazine, Forbes, Smart Money, Barron's, Worth
Magazine, and USA Today.
D I R E C T O R S
*JON D. CARLSON-Director. Executive Vice President of Yacktman Asset Management
Co.
THOMAS R. HANSON-Director. Partner of Fleming/Hanson Sales, a manufacturers
representative firm in the commercial and industrial air conditioning industry.
STANISLAW MALISZEWSKI-Director. Managing Director of Gateway Asset Management,
Inc., an investment management and marketing company for large institutional
investors.
STEPHEN E. UPTON-Director. Retired President of the Whirlpool Foundation.
*DONALD A. YACKTMAN-Director. President of Yacktman Asset Management Co.
P R I N C I P A L O F F I C E R S
DONALD A. YACKTMAN-President and Treasurer.
JON D. CARLSON-Vice President and Secretary.
RONALD W. BALL-Vice President.
I N V E S T M E N T A D V I S E R
YACKTMAN ASSET MANAGEMENT CO.
303 West Madison Street, Suite 1925
Chicago, Illinois 60606
A D M I N I S T R A T O R
SUNSTONE FINANCIAL GROUP, INC.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
C U S T O D I A N , T R A N S F E R
A G E N T A N D D I V I D E N D
D I S B U R S I N G A G E N T
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-457-6033
1-414-765-4124
I N D E P E N D E N T
A C C O U N T A N T S
PRICE WATERHOUSE LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
L E G A L C O U N S E L
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
THE YACKTMAN FUNDS
FOR FUND INFORMATION AND
SHAREHOLDER SERVICES,
CALL 1-800/525-8258
THE YACKTMAN FUNDS, INC.
Shareholder Services Center
615 East Michigan Street
P.O. Box 701
Milwaukee, WI 53201-0701
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION October 30, 1997
THE YACKTMAN FUNDS, INC.
303 West Madison Street
Chicago, Illinois 60606
Call Toll-Free 1-800-525-8258
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of The Yacktman Funds,
Inc. (the "Company") dated April 30, 1997 and the Supplement to the
Prospectus dated October 30, 1997 (collectively the "Prospectus"), for The
Yacktman Fund and The Yacktman Focused Fund (each referred to individually
as a "Fund" and collectively as the "Funds"). Requests for copies of the
Prospectus should be made by writing to The Yacktman Funds, Inc., 303 West
Madison Street, Chicago, Illinois 60606, Attention: Corporate Secretary,
or by calling 1-800-525-8258.
THE YACKTMAN FUNDS, INC.
TABLE OF CONTENTS
Page
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . 7
DIRECTORS AND OFFICERS OF THE COMPANY . . . . . . . . . . . . . . . . . 7
INVESTMENT ADVISER AND ADMINISTRATOR . . . . . . . . . . . . . . . . . 10
EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . 12
REDEMPTIONS IN KIND . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . 13
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . . 16
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 18
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 20
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 21
DESCRIPTION OF SECURITIES RATINGS . . . . . . . . . . . . . . . . . . . 31
INVESTMENT RESTRICTIONS AND CONSIDERATIONS
THE YACKTMAN FUND
As set forth in the Prospectus under the caption "OBJECTIVE AND
INVESTMENT APPROACH," the investment objective of The Yacktman Fund is to
produce long-term growth of capital, with current income as a secondary
objective. Consistent with this investment objective, The Yacktman Fund
has adopted the following investment restrictions which are matters of
fundamental policy and cannot be changed without approval of the holders
of the lesser of: (i) 67% of The Yacktman Fund's shares present or
represented at a stockholder's meeting at which the holders of more than
50% of such shares are present or represented; or (ii) more than 50% of
the outstanding shares of The Yacktman Fund.
1. The Yacktman Fund will diversify its assets in
different companies and will not purchase securities of any
issuer if, as a result of such purchase, The Yacktman Fund would
own more than 10% of the outstanding voting securities of such
issuer or more than 5% of The Yacktman Fund's assets would be
invested in securities of such issuer (except that up to 25% of
the value of The Yacktman Fund's total assets may be invested
without regard to this limitation). This restriction does not
apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
2. The Yacktman Fund will not sell securities short, buy
securities on margin, purchase warrants, participate in a joint-
trading account, or deal in options.
3. The Yacktman Fund will not borrow money, except for
temporary or emergency purposes, and then only from banks, in an
amount not exceeding 10% of the value of The Yacktman Fund's
total assets. The Yacktman Fund will not borrow money for the
purpose of investing in securities, and The Yacktman Fund will
not purchase any portfolio securities for so long as any
borrowed amounts remain outstanding.
4. The Yacktman Fund will not pledge or hypothecate its
assets, except to secure borrowings for temporary or emergency
purposes.
5. The Yacktman Fund will not invest more than 5% of The
Yacktman Fund's total assets in securities of any issuer which
has a record of less than three (3) years of continuous
operation, including the operation of any predecessor business
of a company which came into existence as a result of a merger,
consolidation, reorganization or purchase of substantially all
of the assets of such predecessor business.
6. The Yacktman Fund will not purchase securities of
other investment companies (as defined in the Investment Company
Act of 1940 (the "Act")), except as part of a plan of merger,
consolidation, reorganization or acquisition of assets.
7. The Yacktman Fund will not act as an underwriter or
distributor of securities other than shares of The Yacktman Fund
(except to the extent that The Yacktman Fund may be deemed to be
an underwriter within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), in the disposition of
restricted securities).
8. The Yacktman Fund will not purchase securities for
which there is no established market if, as a result of such
purchase, more than 5% of the total value of its total assets
would be invested in such securities.
9. The Yacktman Fund will not make loans, except it may
acquire debt securities from the issuer or others which are
publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of
portfolio securities if any such loans are secured continuously
by collateral at least equal to the market value of the
securities loaned in the form of cash and/or securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities and provided that no such loan will be made if
upon the making of that loan more than 30% of the value of The
Yacktman Fund's total assets would be the subject of such loans.
10. The Yacktman Fund will not concentrate 25% or more of
its total assets in securities of any one industry. This
restriction does not apply to obligations issued or guaranteed
by the United States Government, its agencies or
instrumentalities.
11. The Yacktman Fund will not make investments for the
purpose of exercising control or management of any company.
12. The Yacktman Fund will not purchase or sell real
estate or real estate mortgage loans and will not make any
investments in real estate limited partnerships.
13. The Yacktman Fund will not purchase or sell
commodities or commodity contracts, including futures contracts.
14. The Yacktman Fund will not purchase or sell any
interest in any oil, gas or other mineral exploration or
development program, including any oil, gas or mineral leases.
The Yacktman Fund has adopted certain other investment
restrictions which are not fundamental policies and which may be changed
by the Company's Board of Directors without stockholder approval. These
additional restrictions are as follows:
1. The Yacktman Fund will not acquire or retain any
security issued by a company, an officer or director of which is
an officer or director of The Yacktman Fund or an officer,
director or other affiliated person of The Yacktman Fund's
investment adviser, without authorization of the Board of
Directors of the Company.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions are adhered to at the time an investment is
made, and such percentage subsequently changes as a result of changing
market values or some similar event, no violation of The Yacktman Fund's
fundamental restrictions will be deemed to have occurred. Any changes in
The Yacktman Fund's investment restrictions made by the Board of Directors
will be communicated to stockholders prior to their implementation, which
communication may be made in an amendment to the Statement of Additional
Information incorporated by reference into the Prospectus.
THE YACKTMAN FOCUSED FUND
As set forth in the Prospectus under the caption "OBJECTIVE AND
INVESTMENT APPROACH," the investment objective of The Yacktman Focused
Fund is to produce long-term growth of capital, with current income as a
secondary objective. Consistent with this investment objective, The
Yacktman Focused Fund has adopted the following investment restrictions
which are matters of fundamental policy and cannot be changed without
approval of the holders of the lesser of: (i) 67% of The Yacktman Focused
Fund's shares present or represented at a stockholder's meeting at which
the holders of more than 50% of such shares are present or represented; or
(ii) more than 50% of the outstanding shares of The Yacktman Focused Fund.
1. The Yacktman Focused Fund may issue senior securities to
the extent permitted under the Act.
2. The Yacktman Focused Fund will not sell securities
short, buy securities on margin, purchase warrants or
participate in a joint trading account. The Yacktman Focused
Fund may invest in and commit its assets to writing and
purchasing put and call options on securities and stock indexes
to the extent permitted by the Act.
3. The Yacktman Focused Fund may borrow money to the
extent permitted by the Act. The Yacktman Focused Fund may
pledge or hypothecate its assets to secure its borrowings.
4. The Yacktman Focused Fund will not act as an
underwriter or distributor of securities other than shares of
The Yacktman Focused Fund (except to the extent that The
Yacktman Focused Fund may be deemed to be an underwriter within
the meaning of the Securities Act in the disposition of
restricted securities).
5. The Yacktman Focused Fund will not concentrate 25% or
more of its total assets in securities of any one industry.
This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.
6. The Yacktman Focused Fund will not purchase or sell
real estate or real estate mortgage loans and will not make any
investments in real estate limited partnerships.
7. The Yacktman Focused Fund will not purchase or sell
commodities or commodity contracts, including futures contracts.
8. The Yacktman Focused Fund will not make loans, except
it may acquire debt securities from the issuer or others which
are publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of
portfolio securities if any such loans are secured continuously
by collateral at least equal to the market value of the
securities loaned in the form of cash and/or securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities and provided that no such loan will be made if
upon the making of that loan more than 30% of the value of The
Yacktman Focused Fund's total assets would be the subject of
such loans.
9. The Yacktman Focused Fund will not purchase securities
of any issuer if, as a result of such purchase, The Yacktman
Focused Fund would own more than 10% of the outstanding voting
securities of such issuer or more than 5% of The Yacktman
Focused Fund's assets would be invested in securities of such
issuer, except that up to 50% of the value of The Yacktman
Focused Fund's total assets may be invested without regard to
this limitation. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its
agencies or instrumentalities.
10. The Yacktman Focused Fund will not purchase securities
for which there is no established market if, as a result of such
purchase, more than 5% of the value of its total assets would be
invested in such securities.
11. The Yacktman Focused Fund will not make investments
for the purpose of exercising control or management of any
company.
12. The Yacktman Focused Fund will not purchase or sell
any interest in any oil, gas or other mineral exploration or
development program, including any oil, gas or mineral leases.
The Yacktman Focused Fund has adopted certain other investment
restrictions which are not fundamental policies and which may be changed
by the Company's Board of Directors without stockholder approval. These
additional restrictions are as follows:
1. The Yacktman Focused Fund will not purchase securities
of other investment companies (as defined in the Act), except:
(a) as part of a plan of merger, consolidation, reorganization
or acquisition of assets; (b) securities of registered open-end
investment companies that invest exclusively in high quality,
short-term debt securities; or (c) securities of registered
investment companies on the open market where no commission
results, other than the usual and customary broker's commission.
No purchase described in (b) and (c) will be made if as a result
of such purchases (i) The Yacktman Focused Fund and its
affiliated persons would hold more than 3% of any class of
securities, including voting securities, of any registered
investment company; (ii) more than 5% of The Yacktman Focused
Fund's net assets would be invested in shares of any one
registered investment company; and (iii) more than 10% of The
Yacktman Focused Fund's net assets would be invested in shares
of registered investment companies.
2. The Yacktman Focused Fund will not acquire or retain
any security issued by a company, an officer or director of
which is an officer or director of The Yacktman Focused Fund or
an officer, director or other affiliated person of The Yacktman
Focused Fund's investment adviser, without authorization of the
Board of Directors of the Company.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions are adhered to at the time an investment is
made, and such percentage subsequently changes as a result of changing
market values or some similar event, no violation of The Yacktman Focused
Fund's fundamental restrictions will be deemed to have occurred. Any
changes in The Yacktman Focused Fund's investment restrictions made by the
Board of Directors will be communicated to stockholders prior to their
implementation, which communication may be made in an amendment to the
Statement of Additional Information incorporated by reference into the
Prospectus.
High Yield Convertible Securities
Each Fund may invest up to five percent of its net assets in
convertible securities rated less than investment grade. Investments in
such securities are subject to the risk factors outlined below. The
market for high yield convertible securities is subject to substantial
volatility. Issuers of high yield convertible securities may be of low
creditworthiness and the high yield convertible securities are likely to
be subordinated to the claims of senior lenders. The secondary market for
high yield convertible debt securities may at times become less liquid or
respond to adverse publicity or investor perceptions making it more
difficult for the Funds to value accurately such securities or dispose of
them.
Options on Securities
When The Yacktman Focused Fund wishes to terminate The Yacktman
Focused Fund's obligation with respect to a put option it has written, The
Yacktman Focused Fund may effect a "closing purchase transaction." The
Yacktman Focused Fund accomplishes this by buying a put option of the same
series as the put option previously written by The Yacktman Focused Fund.
The effect of the purchase is that the writer's position will be canceled.
However, a writer may not effect a closing purchase transaction after the
writer has been notified of the exercise of an option. When The Yacktman
Focused Fund is the holder of a put option, it may liquidate its position
by effecting a "closing sale transaction." The Yacktman Focused Fund
accomplishes this by selling a put option of the same series as the put
option previously purchased by The Yacktman Focused Fund. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected.
The Yacktman Focused Fund will realize a gain (or a loss) on a
closing purchase transaction with respect to a put option previously
written by it if the premium, plus commission costs, paid by The Yacktman
Focused Fund to purchase the put option is less (or greater) than the
premium, less commission costs, received by The Yacktman Focused Fund on
the sale of the put option. The Yacktman Focused Fund will realize a gain
(or a loss) on a closing sale transaction with respect to a put option
previously purchased by it if the premium, less commission costs, paid by
The Yacktman Focused Fund on the sale of the put option is greater (or
less) than the premium, plus commission costs, paid by The Yacktman
Focused Fund to purchase the put option.
Exchanges generally have established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which The Yacktman Focused Fund may buy or sell;
however, the Adviser intends to comply with all limitations.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "DETERMINATION
OF NET ASSET VALUE," the net asset value of the Funds will be determined
as of the close of regular trading (currently 4:00 p.m. Eastern time) on
each day the New York Stock Exchange is open for trading. The New York
Stock Exchange is open for trading Monday through Friday except New Year's
Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday,
the New York Stock Exchange will not be open for trading on the succeeding
Monday, unless unusual business conditions exist, such as the ending of a
monthly or the yearly accounting period.
DIRECTORS AND OFFICERS OF THE COMPANY
The name, age, address, principal occupations during the past
five years, and other information with respect to each of the directors
and officers of the Company are as follows:
Ronald W. Ball -- Vice President. Mr. Ball, 56, has been Senior
Vice President of Yacktman Asset Management Co. (the "Adviser") since
April, 1992. Prior to that time, he was a Senior Vice President and
Portfolio Manager at Selected Financial Services, Inc., a Chicago,
Illinois investment advisory firm, (since October, 1983) and President and
Portfolio Manager of Selected Special Shares, an investment company (since
October, 1986). Mr. Ball holds a B.S. in Business Administration from The
Ohio State University. His address is c/o Yacktman Asset Management Co.,
303 West Madison Street, Chicago, Illinois 60606.
*Jon D. Carlson -- Director, Vice President and Secretary. Mr.
Carlson, 56, has been the Executive Vice President of the Adviser since
May 14, 1992. Prior to this date he was a Senior Vice President of the
Kemper Securities Group, Inc., which he joined in March, 1989 from Kidder,
Peabody and Co. A graduate of The University of Michigan and the Michigan
Law School, Mr. Carlson has been admitted to the practice of law in
Michigan, New York and Illinois and served from 1972 to 1978 on the
Employee Benefits Committee of the Taxation Section of the American Bar
Association. His address is c/o Yacktman Asset Management Co., 303 West
Madison Street, Chicago, Illinois 60606.
Thomas R. Hanson -- Director. Mr. Hanson, 59, is a Partner of
Fleming/Hanson Sales, a manufacturers representative firm in the
commercial and industrial air conditioning industry. Prior to
establishing this firm in 1991, Mr. Hanson was President of Thermal Air
Systems, Inc., Bensenville, Illinois. He also serves on the Corporate
Member Board of Advocate Health Care, Inc., Oak Brook, Illinois, and on
the Advisory Board for the College of Engineering of the University of
Iowa from which he earned a B.S. in Mechanical Engineering. His address
is c/o Fleming/Hanson Sales, 3010 Woodcreek Drive, Downers Grove, Illinois
60515.
Stanislaw Maliszewski -- Director. Mr. Maliszewski, 53, has
been a Managing Director of Gateway Asset Management, Inc., an investment
management and marketing company for large institutional investors since
August, 1993. Prior to joining Gateway Asset Management, Inc. Mr.
Maliszewski was President of Princeton Futures Management Incorporated, an
investment advisory firm for large institutional investors. Neither
Gateway Asset Management, Inc. nor Princeton Futures Management
Incorporated is affiliated with, or a service provider to, the Adviser.
However, Mr. Maliszewski has been retained by the Adviser as a client
solicitor pursuant to Rule 206(4)-3 under the Investment Advisers Act of
1940. Prior to establishing Princeton Futures Management Incorporated in
1991, Mr. Maliszewski was with the Rosenberg Real Estate Equity Funds,
LaSalle Advisors Ltd., and the Investment Banking Services Group of
Goldman Sachs and Company. He holds an A.B. degree from Princeton
University and an MBA from Harvard University. His address is c/o Gateway
Asset Management, Inc., Suite 1420, 180 North LaSalle Street, Chicago,
Illinois 60601.
Stephen E. Upton -- Director. Mr. Upton, 73, is the retired
President of the Whirlpool Foundation, Benton Harbor, Michigan, a position
he held until 1993. He retired in 1988 as a Senior Vice President for
Whirlpool Corporation, a manufacturer of major household appliances. Mr.
Upton had been an officer and employee of Whirlpool since 1955. He has
served as Chairman of the Board of Trustees of Olivet College in Michigan
and as Chairman of the Consumer Affairs Committee for the United States
Chamber of Commerce and is a Trustee of the Michigan Colleges Foundation.
Mr. Upton holds a B.B.A. degree from The University of Michigan. His
address is 100 Ridgeway Road, St. Joseph, Michigan 49085.
*Donald A. Yacktman -- Director, President and Treasurer. Mr.
Yacktman, 56, has been the President of the Adviser since April 24, 1992.
Prior to that time, he was Senior Vice President of Selected Asset
Management, Inc., a Chicago, Illinois investment advisory firm, and the
President and portfolio manager from January 1, 1983 through March 11,
1992 of the Selected American Shares mutual fund. Prior to joining the
predecessor firm of Selected Asset Management, Inc., Mr. Yacktman was a
partner and portfolio manager for fourteen years at Stein Roe & Farnham,
an independent investment counseling firm based in Chicago. Mr. Yacktman
has served as a Bishop in the Church of Jesus Christ of Latter-Day Saints
and is a member of the Financial Analysts Society of Chicago. He holds a
B.S. Magna Cum Laude and Phi Beta Kappa from The University of Utah and an
MBA with distinction from Harvard University. His address is c/o Yacktman
Asset Management Co., 303 West Madison Street, Chicago, Illinois 60606.
*Messrs. Carlson and Yacktman are directors who are "interested
persons" of the Funds (as defined in the Act).
The Funds' standard method of compensating directors is to pay
each disinterested director an annual fee of $5,000 ($8,000 commencing
January 1, 1997) for services rendered, including attending meetings of
the Board of Directors. The Funds also may reimburse their directors for
travel expenses incurred in order to attend meetings of the Board of
Directors. For the fiscal year ended December 31, 1996 the disinterested
directors received aggregate fees (excluding $347 in reimbursements of
travel expenses) of $15,000. The table below sets forth the compensation
paid by The Yacktman Fund to each of the current directors of the Company
during the fiscal year ended December 31, 1996:
COMPENSATION TABLE
Pension or
Retirement Total
Benefits Estimated Compensa-
Aggregate Accrued As Annual tion from
Compensation Part of Benefits Company
from Fund Upon Paid to
Name of Person Company* Expenses Retirement Directors*
Jon D. Carlson $0 $0 $0 $0
Thomas R. Hanson $5,000 $0 $0 $5,000
Stanislaw Maliszewski $5,000 $0 $0 $5,000
Stephen E. Upton $5,000 $0 $0 $5,000
Donald A. Yacktman $0 $0 $0 $0
*The Yacktman Focused Fund did not commence operations until April
30, 1997.
As of September 30, 1997, all officers and directors of the
Company as a group beneficially owned 268,477 shares of The Yacktman Fund
or 0.37% of the then outstanding shares. At such date, Charles Schwab &
Co., 101 Montgomery Street, San Francisco, California 94104, owned of
record 38,820,374 shares of The Yacktman Fund, or 53.63% of the then
outstanding shares and National Financial Services Corp., c/o Fidelity
Investments, 82 Devonshire Street R20A, Boston, Massachusetts 02109,
owned of record 7,021,573 shares of The Yacktman Fund, or 9.70% of the
then outstanding shares. All of the shares owned by Charles Schwab & Co.
and National Financial Services Corp. were owned of record only. Other
than the foregoing, The Yacktman Fund was not aware of any person who, as
of September 30, 1997, owned of record or beneficially 5% or more of the
shares of The Yacktman Fund.
As of September 30, 1997, all officers and directors of the
Company as a group beneficially owned 153,851 shares of The Yacktman
Focused Fund or 4.43% of the then outstanding shares. At such date Charles
Schwab & Co. owned of record 1,527,451 shares of The Yacktman Focused Fund
or 43.99% of the then outstanding shares and National Financial Services
Corp. owned of record 334,468 shares of The Yacktman Focused Fund or 9.63%
of the then outstanding shares. All of the shares owned by Charles Schwab
& Co. and National Financial Services Corp. were owned of record only.
Other than the foregoing, The Yacktman Focused Fund was not aware of any
person who, as of September 30, 1997, owned of record or beneficially 5%
or more of the shares of The Yacktman Focused Fund.
INVESTMENT ADVISER AND ADMINISTRATOR
As set forth in the Prospectus under the caption "MANAGEMENT OF
THE FUNDS," the investment adviser to the Funds is Yacktman Asset
Management Co., 303 West Madison Street, Chicago, Illinois 60606 (the
"Adviser"). Pursuant to the investment advisory agreements entered into
between the Company, on behalf of each of the Funds, and the Adviser (the
"Advisory Agreements"), the Adviser furnishes continuous investment
advisory services to each of the Funds.
The Adviser has undertaken to reimburse each Fund to the extent
that the aggregate annual operating expenses, including the investment
advisory fee and the administration fee but excluding interest, taxes,
brokerage commissions and other costs incurred in connection with the
purchase or sale of portfolio securities, and extraordinary items, exceed
that percentage of the average net assets of such Fund for such year, as
determined by valuations made as of the close of each business day of the
year, which is the most restrictive percentage provided by the state laws
of the various states in which the shares of such Fund are qualified for
sale. As of the date of this Statement of Additional Information, no such
state law provision was applicable to the Funds. Additionally, the
Adviser has voluntarily agreed to reimburse The Yacktman Focused Fund to
the extent aggregate annual operating expenses as described above do not
exceed specified percentages of such Fund's daily net assets as set forth
in the Prospectus. The Funds monitor their expense ratios on a monthly
basis. If the accrued amount of the expenses of either Fund exceeds the
expense limitation, the Fund creates an account receivable from the
Adviser for the amount of such excess. In such a situation the monthly
payment of the Adviser's fee will be reduced by the amount of such excess
(and if the amount of such excess in any month is greater than the monthly
payment of the Adviser's fee, the Adviser will pay each Fund the amount of
such difference), subject to adjustment month by month during the balance
of each Fund's fiscal year if accrued expenses thereafter fall below this
limit.
For services provided by the Adviser under the Advisory
Agreement for the fiscal years ended December 31, 1996, 1995 and 1994 The
Yacktman Fund paid the Adviser $4,086,939, $3,400,202 and $1,207,294,
respectively. The Adviser was not required to reimburse The Yacktman Fund
for excess expenses during such years. The Yacktman Focused Fund did not
commence operations until April 30, 1997.
Each Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Company or by the vote of a majority (as defined in the
Act) of the outstanding shares of the applicable Fund, and (ii) by the
vote of a majority of the directors of the Company who are not parties to
the Advisory Agreement or interested persons of the Adviser, cast in
person at a meeting called for the purpose of voting on such approval.
Each Advisory Agreement provides that it may be terminated at any time
without the payment of any penalty, by the Board of Directors of the
Company or by vote of the majority of the applicable Fund's stockholders
on sixty (60) days' written notice to the Adviser, and by the Adviser on
the same notice to the applicable Fund, and that it shall be automatically
terminated if it is assigned.
As set forth in the Prospectus under the caption "MANAGEMENT OF
THE FUNDS," the administrator to the Funds is Sunstone Financial Group,
Inc. (the "Administrator"). The administration agreement entered into
between the Funds and the Administrator (the "Administration Agreement")
will remain in effect as long as its continuance is approved at least
annually by the Board of Directors of the Company and the Administrator.
The Administration Agreement may be terminated on not less than 90 days'
notice, without the payment of any penalty, by the Board of Directors of
the Company or by the Administrator. For the fiscal years ended December
31, 1996, 1995 and 1994, The Yacktman Fund paid the Administrator
$235,034, $206,258 and $121,247, respectively, pursuant to the
Administration Agreement. Effective January 1, 1995, the Administration
Agreement was amended to provide that in addition to the services
previously provided by the Administrator, the Administrator will provide
fund accounting services. The Yacktman Focused Fund did not commence
operations until April 30, 1997.
The Advisory Agreements and the Administration Agreement provide
that the Adviser and Administrator, as the case may be, shall not be
liable to the Funds or its stockholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Advisory Agreements and the Administration
Agreement also provide that the Adviser and Administrator, as the case may
be, and their officers, directors and employees may engage in other
businesses, devote time and attention to any other business whether of a
similar or dissimilar nature, and render services to others.
EXCHANGE PRIVILEGE
Investors may exchange shares of either Fund having a value of
$1,000 or more for shares of the Portico Money Market Fund, the Portico
U.S. Government Money Market Fund or the Portico Tax-Exempt Money Market
Fund (collectively the "Portico Money Funds") at their net asset value and
at a later date exchange such shares and shares purchased with reinvested
dividends for shares of the Funds at net asset value. Investors who are
interested in exercising the exchange privilege should first contact the
Funds to obtain instructions and any necessary forms. The exchange
privilege does not in any way constitute an offering of, or recommendation
on the part of the Funds or the Adviser of, an investment in any of the
Portico Money Funds. Any investor who considers making such an investment
through the exchange privilege should obtain and review the Prospectus of
the applicable Portico Money Fund before exercising the exchange
privilege.
The exchange privilege will not be available if (i) the proceeds
from a redemption of shares are paid directly to the investor or at his or
her discretion to any persons other than the Funds or (ii) the proceeds
from redemption of the shares of the Portico Money Market Fund are not
immediately reinvested in shares of the Funds or another Portico Money
Fund through a subsequent exercise of the exchange privilege. There is
currently no limitation on the number of exchanges an investor may make.
The exchange privilege may be terminated by the Funds upon at least 60
days prior notice to investors.
For federal income tax purposes, a redemption of shares of a
Fund pursuant to the exchange privilege will result in a capital gain if
the proceeds received exceed the investor's tax-cost basis of the shares
redeemed. Such a redemption may also be taxed under state and local tax
laws, which may differ from the Code.
REDEMPTIONS IN KIND
Each of the Funds has reserved the right to pay the redemption
price of its shares in assets other than cash. In accordance with Rule
18f-1 under the Act, the Company has filed Form N-18F-1 with the
Securities and Exchange Commission pursuant to which each Fund has
committed to pay in cash all requests for redemption by any shareholder of
record, limited in amount with respect to each shareholder during any
ninety-day period to the lesser of (i) $250,000, or (ii) 1% of the net
asset value of the Fund at the beginning of the ninety-day period.
SYSTEMATIC WITHDRAWAL PLAN
An investor who owns shares of a Fund worth at least $10,000 at
the current net asset value may, by completing an application which may be
obtained from the Funds or Firstar Trust Company, create a Systematic
Withdrawal Plan from which a fixed sum will be paid to the investor at
regular intervals through redemption of shares of such Fund. To establish
the Systematic Withdrawal Plan, the investor deposits shares of the Funds
with the Company and appoints it as agent to effect redemptions of Fund
shares held in the account for the purpose of making monthly or quarterly
withdrawal payments of a fixed amount to the investor out of the account.
Fund shares deposited by the investor in the account need not be endorsed
or accompanied by a stock power if registered in the same name as the
account; otherwise, a properly executed endorsement or stock power,
obtained from any bank, broker-dealer or the Funds is required. The
investor's signature should be guaranteed by a bank, a member firm of a
national stock exchange or other eligible guarantor.
The minimum amount of a withdrawal payment is $100. These
payments will be made from the proceeds of periodic redemptions of shares
in the account at net asset value. Redemptions can be made monthly or
quarterly on any day the investor chooses or, if that day is a weekend day
or a holiday, on the following business day. Establishment of a
Systematic Withdrawal Plan constitutes an election by the investor to
reinvest in additional shares of the Funds, at net asset value, all income
dividends and capital gains distributions payable by the applicable Fund
on shares held in such account, and shares so acquired will be added to
such account. The investor may deposit additional shares in his account
at any time.
Withdrawal payments cannot be considered as yield or income on
the investor's investment, since portions of each payment will normally
consist of a return of capital. Depending on the size or the frequency of
the disbursements requested, and the fluctuation in the value of the
applicable Fund's portfolio, redemptions for the purpose of making such
disbursements may reduce or even exhaust the investor's account.
The investor may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying Firstar Trust Company in writing prior to
the 15th day of the month preceding the next payment.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Funds. As such, Firstar Trust
Company holds all securities and cash of the Funds, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Company. Firstar Trust Company does not
exercise any supervisory function over the management of the Funds, the
purchase and sale of securities or the payment of distributions to
stockholders. Firstar Trust Company also acts as each Fund's transfer
agent and dividend disbursing agent.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, serves as the independent accountants for the Funds.
DISTRIBUTION PLAN
As set forth in the Prospectus under the caption "PURCHASE OF
SHARES," The Yacktman Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. The Plan permits The Yacktman Fund
to employ one or more distributors of its shares. Payments under the Plan
may be made only to distributors so employed by The Yacktman Fund.
Payments under the Plan in any year are limited to 0.25% of the average
daily net assets of The Yacktman Fund. Under the Plan, The Yacktman Fund
paid distributors fees for the fiscal year ended December 31, 1996
totaling $476,920, representing 0.07% of The Yacktman Fund's average net
assets.
The Yacktman Fund will pay to each distributor a monthly fee for
distribution of The Yacktman Fund's shares at the rate of 0.65% per annum
of the aggregate average daily net asset value of The Yacktman Fund shares
beneficially owned by such distributor's existing brokerage clients who
established their Yacktman Fund accounts prior to December 31, 1992. For
purposes of the Plan, a client shall include (a) with respect to
individuals, the individual's spouse, children, trust or retirement
accounts for the benefit of any of the foregoing, the individual's estate
and any corporation of which the individual is an affiliate, (b) with
respect to corporations, its retirement plans and its affiliates, and (c)
with respect to clients who are investment advisers, financial planners or
others who exercise investment discretion or make recommendations
concerning the purchase or sale of securities, accounts for which they
exercise investment discretion or make recommendations concerning the
purchase or sale of securities. Beneficial ownership shall not include
ownership solely as a nominee. If after December 31, 1992, a client
ceases to be a client of a distributor and thereafter becomes a client of
another distributor, such client shall continue to be considered a client
whose Yacktman Fund account was established prior to December 31, 1992 if
the client beneficially owned shares of The Yacktman Fund at all times
after ceasing to be a client of the former distributor and prior to
becoming a client of the latter distributor except as may be necessary to
affect a transfer of the account. The Yacktman Fund shares owned by a
client will be deemed to include all shares purchased and not redeemed;
provided, however, that if at any time no shares of The Yacktman Fund are
beneficially owned by a client whose Yacktman Fund account was established
prior to December 31, 1992, no distribution fees thereafter will be paid
with respect to shares beneficially owned by such client.
The Plan was adopted in anticipation that The Yacktman Fund will
benefit from the Plan through increased sales of its shares, thereby
reducing The Yacktman Fund's expense ratio and providing an asset size
that allows the Adviser greater flexibility in management. The Plan may
be terminated at any time by a vote of the directors of the Company who
are not interested persons of the Company and who have no direct or
indirect financial interest in the Plan or any agreement related thereto
(the "Rule 12b-1 Directors") or by a vote of a majority of the outstanding
shares of Common Stock. Messrs. Hanson, Maliszewski and Upton are
currently the Rule 12b-1 Directors. The Plan will be automatically
terminated upon the closing of all Fund accounts established by existing
brokerage clients of distributors prior to December 31, 1992. Any change
in the Plan that would materially increase the distribution expenses of
the Funds provided for in the Plan requires approval of the stockholders
and the Board of Directors of each Fund, including the Rule 12b-1
Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Company will be committed
to the discretion of the directors of the Company who are not interested
persons of the Company. The Board of Directors of the Company must review
the amount and purposes of expenditures pursuant to the Plan quarterly as
reported to it by the distributors, if any, or officers of the Company.
Unless otherwise terminated, the Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors of the Company, including the Rule 12b-1 Directors.
ALLOCATION OF PORTFOLIO BROKERAGE
The Funds' securities trading and brokerage policies and
procedures are reviewed by and subject to the supervision of the Board of
Directors of the Company. Decisions to buy and sell securities for each
Fund are made by the Adviser subject to review by the Company's Board of
Directors. In placing purchase and sale orders for portfolio securities
for the Funds, it is the policy of the Adviser to seek the best execution
of orders at the most favorable price in light of the overall quality of
brokerage and research services provided, as described in this and the
following paragraph. Many of these transactions involve payment of a
brokerage commission by the Funds. In some cases, transactions are with
firms who act as principals of their own accounts. In selecting brokers
to effect portfolio transactions, the determination of what is expected to
result in best execution at the most favorable price involves a number of
largely judgmental considerations. Among these are the Adviser's
evaluation of the broker's efficiency in executing and clearing
transactions, block trading capability (including the broker's willingness
to position securities) and the broker's reputation, financial strength
and stability. The most favorable price to a Fund means the best net
price without regard to the mix between purchase or sale price and
commission, if any. Over-the-counter securities are generally purchased
and sold directly with principal market makers who retain the difference
in their cost in the security and its selling price. In some instances,
the Adviser feels that better prices are available from non-principal
market makers who are paid commissions directly. Although the Funds do
not initially intend to market their shares through intermediary broker-
dealers, the Funds may place portfolio orders with broker-dealers who
recommend the purchase of shares of the Funds to clients (if the Adviser
believes the commissions and transaction quality are comparable to that
available from other brokers) and may allocate portfolio brokerage on that
basis.
In allocating brokerage business for the Funds, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreements. Other clients of the Adviser
may indirectly benefit from the availability of these services to the
Adviser, and the Funds may indirectly benefit from services available to
the Adviser as a result of transactions for other clients. The Advisory
Agreements provide that the Adviser may cause the Fund to pay a broker
which provides brokerage and research services to the Adviser a commission
for effecting a securities transaction in excess of the amount another
broker would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which he exercises investment discretion. For the
fiscal years ended December 31, 1996, 1995 and 1994 The Yacktman Fund paid
brokerage commissions of $998,728, $1,170,042 and $506,695, respectively,
on total transactions of $652,310,636, $652,217,150 and $296,409,925,
respectively. All of the brokers to whom commissions were paid during
such fiscal years provided research services to the Adviser. The Yacktman
Focused Fund did not commence operations until April 30, 1997.
In the fiscal year ended December 31, 1996 and 1995, the Adviser
allocated brokerage to a broker that provides sub-transfer agency services
to The Yacktman Fund. Pursuant to a directed brokerage arrangement, this
broker reduced its sub-transfer agency fees by $363,016 and $422,748,
respectively, in the fiscal years ended December 31, 1996 and 1995, as a
result of Fund brokerage allocated to it.
TAXES
As set forth in the Prospectus under the caption "TAXES," each
Fund will endeavor to qualify annually for and elect tax treatment
applicable to a regulated investment company under Subchapter M of the
Code.
Each Fund intends to distribute all of its net investment income
and net capital gain each fiscal year. Dividends from net investment
income (including short-term capital gain) are taxable to investors as
ordinary income, while the tax treatment of distributions of net capital
gain generally will depend upon the Fund's holding period of the
underlying financial instruments or capital asset regardless of the
shareholder's holding period for the shares. Distributions from the Funds
are taxable to investors, whether received in cash or in additional shares
of the respective Funds. A portion of the Funds' income distributions may
be eligible for the 70% dividends-received deduction for domestic
corporate shareholders.
Any dividend or capital gain distribution paid shortly after a
purchase of shares of a Fund will have the effect of reducing the per
share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, even if the net asset value of the shares of a
Fund immediately after a dividend or distribution is less than the cost of
such shares to the investor, the dividend or distribution will be taxable
to the investor.
Redemption of shares will generally result in a capital gain or
loss for income tax purposes. The tax treatment of such capital gain or
loss will depend upon the investor's holding period. However, if a loss
is realized on shares held for six months or less, and the investor
received a capital gain distribution during that period, then such loss is
treated as a long-term capital loss to the extent of the capital gain
distribution received.
Investors may also be subject to state and local taxes.
Each Fund will be required to withhold federal income tax at a
rate of 31% ("backup withholding") from dividend payments and redemption
and exchange proceeds if an investor fails to furnish such Fund with his
social security number or other tax identification number or fails to
certify under penalty of perjury that such number is correct or that he is
not subject to backup withholding due to the underreporting of income.
The certification form is included as part of the share purchase
application and should be completed when the account is opened.
This section is not intended to be a full discussion of present
or proposed federal income tax laws and the effect of such laws on an
investor. Investors are urged to consult with their respective tax
advisers for a complete review of the tax ramifications of an investment
in a Fund.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered
investment companies, such as the Funds, to operate without an annual
meeting of stockholders under specified circumstances if an annual meeting
is not required by the Act. The Company has adopted the appropriate
provisions in its Bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Act.
The Company's Bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to
not less than ten percent (10%) of all the votes entitled to be cast at
such meeting, the Secretary of the Company shall promptly call a special
meeting of stockholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more stockholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Company's Secretary in
writing, stating that they wish to communicate with other stockholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all stockholders as recorded on the
books of the Funds; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all stockholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in
the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the Board of Directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
PERFORMANCE INFORMATION
Average annual total return measures both the net investment
income generated by, and the effect of any realized or unrealized
appreciation or depreciation of, the underlying investments in a Fund's
investment portfolio. A Fund's average annual total return figures are
computed in accordance with the standardized method prescribed by the
Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate
the initial amount invested to the ending redeemable value, according to
the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of
the period of a hypothetical $1,000
payment made at the beginning of such
period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value or the appropriate reinvestment dates as
described in the Prospectus, and (ii) deducts all recurring fees, such as
advisory fees, charged as expenses to all investor accounts.
Total return is the cumulative rate of investment growth which
assumes that income dividends and capital gains are reinvested. It is
determined by assuming a hypothetical investment at the net asset value at
the beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the
investment at the net asset value as of the end of the specified time
period, subtracting the amount of the original investment, and dividing
this amount by the amount of the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100.
The Yacktman Fund's average annual compounded returns for the
one-year period ended June 30, 1997 and for the period from the Fund's
commencement of operations (July 6, 1992) through June 30, 1997 were
26.48% and 14.62%, respectively. Such performance results reflect
reimbursements made by the Adviser during the fiscal year ended December
31, 1993 and the period from July 6, 1992 through December 31, 1992 to
keep aggregate annual operating expenses at or below 1.2% of average daily
net assets. The Yacktman Focused Fund's total return for the period May
1, 1997 through September 30, 1997 was 19.02%. Such performance results
reflect reimbursements made by the Adviser during the period to keep
aggregate annual operating expenses at or below 1.25% (annualized) of
average daily net assets. The foregoing performance results are based on
historical earnings and should not be considered as representative of the
performance of the Funds in the future. An investment in either Fund will
fluctuate in value and at redemption its value may be more or less than
the initial investment.
FINANCIAL STATEMENTS
The following audited financial statements are incorporated by
reference to the Annual Report, dated December 31, 1996, of the Company
(File No. 811-06628), as filed with the Securities and Exchange Commission
on February 3, 1997:
- Report of Independent Accountants
- Portfolio of Investments
- Statement of Assets & Liabilities
- Statement of Operations
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to the Financial Statements
The following unaudited financial statements are incorporated by
reference to the Semi-Annual Report, dated June 30, 1997, of the Company
(File No. 811-06628), as filed with the Securities and Exchange Commission
on August 6, 1997.
- Portfolio of Investments for The Yacktman Fund
- Statement of Assets & Liabilities for The Yacktman Fund
- Statement of Operations for The Yacktman Fund
- Statement of Changes in Net Assets for The Yacktman Fund
- Financial Highlights for The Yacktman Fund
- Notes to Financial Statements
<PAGE>
The Yacktman Focused Fund
PORTFOLIO OF INVESTMENTS
September 30, 1997 (Unaudited)
Number
of Shares Value
COMMON STOCKS 80.2%
Apparel/Shoes 5.7%
Fruit of the Loom, Inc.* 57,000 $1,603,125
Reebok International Ltd. 15,500 754,656
---------
2,357,781
---------
Banking 1.1%
The Yacktman Focused Fund
Wells Fargo & Company 1,700 467,500
---------
Conglomerates 4.7%
Whitman Corp. + 70,000 1,907,500
---------
Consumer Goods 23.3%
Department 56, Inc.* + 331,500 9,592,781
---------
Financial Services 7.3%
First Data Corp. 30,000 1,126,875
United Asset Management Corp. 65,000 1,864,688
---------
2,991,563
---------
Food/Beverage 2.2%
Tootsie Roll Industries 18,000 913,500
---------
Food/Tobacco 14.1%
Philip Morris Cos., Inc. + 140,000 5,818,750
---------
Health Care Services 1.3%
Lincare Holdings, Inc. * 11,000 554,812
---------
Medical Services 4.2%
Columbia/HCA Healthcare Corp. 45,000 1,293,750
HealthCare COMPARE Corp. * 6,000 383,250
---------
1,677,000
---------
Retailing 8.5%
AnnTaylor Stores Corp. * 110,000 1,636,250
Intimate Brands, Inc. 80,000 1,865,000
---------
3,501,250
---------
Services 7.8%
Franklin Covey Co.* 115,000 3,212,813
---------
Total Common Stocks
(cost $30,325,976) 32,995,250
----------
<PAGE>
The Yacktman Focused Fund
PORTFOLIO OF INVESTMENTS (Cont'd.)
September 30, 1997 (Unaudited)
Principal
Amount Value
US GOVERNMENT AGENCIES 5.1%
Federal Home Loan Bank
6.880%, 10/10/00 $500,000 $501,420
6.683%, 10/16/00 500,000 500,930
Federal National Mortgage
Association,
6.450%, 10/14/99 1,100,000 1,100,099
----------
Total US Government Agencies
(cost $2,101,648) 2,102,449
----------
COMMERCIAL PAPER 8.5%
Bridgestone/Firestone,
5.51%, 10/03/97 1,500,000 1,499,541
Great Lakes Chemical,
5.57%, 10/09/97 1,000,000 998,762
Working Capital Management,
5.55%, 10/02/97 1,000,000 999,846
--------
Total Commercial Paper
(cost $3,498,149) 3,498,149
--------
DEMAND NOTES 4.3%
(variable rate)
American Family Financial Services 192,608 192,608
Johnson Controls Inc. 952,268 952,268
Pitney Bowes Credit Corp. 183,750 183,750
Wisconsin Electric Power Company 455,217 455,217
---------
Total Demand Notes
(cost $1,783,843) 1,783,843
---------
Number
of Contracts Value
PUT OPTIONS PURCHASED 0.6%
Philip Morris Cos., Inc. Put Option
Expiring Jan. 1999 @ $26.625 320 $ 16,000
Philip Morris Cos., Inc. Put Option
Expiring Jan. 1999 @ $33.375 880 176,000
Philip Morris Cos., Inc. Put Option
Expiring Jan. 1999 @ $36.625 200 61,250
---------
Total Put Options Purchased
(cost $311,536) 253,250
----------
Total Investments
(cost $38,021,152) 98.7% 40,632,941
----------
<PAGE>
The Yacktman Focused Fund
PORTFOLIO OF INVESTMENTS (Cont'd.)
September 30, 1997 (Unaudited)
Number
of Contracts Value
PUT OPTIONS WRITTEN (0.6)%
HealthCare COMPARE Corp. Put Option
Expiring Feb. 1998 @ $55.00 250 (28,907)
Lincare Holdings, Inc. Put Option
Expiring Feb. 1998 @ $45.00 250 (42,188)
NIKE, Inc. Class B Put Option
Expiring Jan. 1999 @ $47.50 350 (166,250)
---------
Total Put Options Written
(premiums received $220,367) (237,345)
---------
Other Assets less Other Liabilities 1.9% 753,440
---------
Net Assets - 100% (equivalent
to $11.85 per share based on
3,472,364 shares outstanding) $41,149,036
==========
*Non-income producing
+ All or a portion of security pledged as collateral to cover written put
options
<PAGE>
The Yacktman Focused Fund
STATEMENT OF ASSETS & LIABILITIES
September 30, 1997 (Unaudited)
ASSETS:
Investments at value
Nonaffiliated issuers(cost $27,320,126) $27,827,347
Affiliated issuers (cost $10,701,026) 12,805,594
Cash 1,059,828
Dividends and interest receivable 133,487
Receivable for fund shares isssued 107,224
Prepaid expenses 42,878
Due from adviser 6,458
----------
Total Assets 41,982,816
----------
LIABILITIES:
Put options written at value
(Premiums received $220,367) 237,345
Payable for securities purchased 418,927
Shareholder distributions payable 104,171
Accrued investment advisory fees 29,971
Accrued expenses 22,854
Payable for fund shares redeemed 20,512
-----------
Total Liabilities 833,780
-----------
NET ASSETS $41,149,036
===========
NET ASSETS CONSIST OF:
Capital stock $38,031,716
Undistributed net investment income 4,517
Undistributed net realized gains 517,992
Unrealized net appreciation on investments 2,594,811
----------
Total Net Assets $41,149,036
==========
CAPITAL STOCK, $.0001 par value
Authorized 500,000,000
Issued and outstanding 3,472,364
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $11.85
===========
<PAGE>
The Yacktman Focused Fund
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1997 (Unaudited)
INVESTMENT INCOME:
Dividend income $120,578
Interest income 132,667
-------
253,245
-------
EXPENSES:
Investment advisory fees 89,111
Administration and accounting fees 20,959
Federal and state registration fees 19,543
Professional fees 14,881
Shareholder servicing fees 9,780
Custody fees 3,395
Reports to shareholders 2,096
Directors` fees and expenses 309
Miscellaneous costs 184
--------
Total expenses before reimbursements 160,258
Expense reimbursement (49,033)
--------
Net Expenses 111,225
--------
NET INVESTMENT INCOME 142,020
--------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 517,992
Change in unrealized appreciation
on investments 2,594,811
---------
Net gain on investments 3,112,803
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,254,823
=========
<PAGE>
The Yacktman Focused Fund
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
May 1, 1997(1)
through
September 30, 1997
OPERATIONS:
Net investment income $142,020
Net realized gain on
investments 517,992
Change in unrealized
appreciation on investments 2,594,811
---------
Net increase in net assets
resulting from operations 3,254,823
---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 40,864,180
Proceeds from reinvestment of
dividends 30,270
----------
40,894,450
Payments for shares redeemed 2,862,734
----------
Net increase 38,031,716
----------
DIVIDENDS PAID FROM:
Net investment income (137,503)
Net realized gains -
---------
(137,503)
---------
TOTAL INCREASE IN NET ASSETS 41,149,036
NET ASSETS:
Beginning of period -
-------
End of period (including
undistributed net
investment income of $4,517) $41,149,036
==========
TRANSACTIONS IN SHARES:
Shares sold 3,723,889
Issued in reinvestment of dividends 2,777
Shares redeemed (254,302)
=========
Net increase 3,472,364
=========
________
(1) Commencement of operations
<PAGE>
The Yacktman Focused Fund
FINANCIAL HIGHLIGHTS
(Unaudited)
May 1, 1997(1)
through
September 30, 1997
Net asset value, beginning
of period $10.00
Income from investment operations:
Net investment income 0.05
Net realized and unrealized
gains on investments 1.85
-------
Total from investment operations 1.90
-------
Less distributions:
Dividends from net investment
income (0.05)
Distributions from net realized
gains -
------
Total distributions (0.05)
------
Net asset value, end of period $11.85
======
Total Return 19.02%(2)
======
Supplemental data and ratios:
Net assets, end of period (000s) $41,149
======
Ratio of expenses to
average net assets 1.25%
======
Ratio of net investment income to
average net assets 1.60% (3) (4)
======
Portfolio turnover rate 35.15%
=======
Average commission rate paid
per share $0.0609
======
_____________
(1) Commencement of operations
(2) Not annualized
(3) Annualized
(4) Net of reimbursements. Without the fee waiver, the ratio of expenses
to average net assets would have been 1.80% and the ratio of net
inestment income to average net assets would have been 1.05%.
<PAGE>
The Yacktman Focused Fund
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
1. ORGANIZATION
The Yacktman Funds, Inc. (the "Funds") is registered as an open-end
management investment company under the Investment Company Act of 1940
(the "1940 Act"). The Funds consist of two investment portfolios: The
Yacktman Fund is a diversified fund and commenced operations July 2, 1992
and The Yacktman Focused Fund is a non-diversified fund that commenced
operations May 1, 1997. The objective of each of the Funds is to produce
long-term growth of capital with current income as a secondary objective.
Yacktman Asset Management Co. is the Funds' investment adviser (the
"Adviser").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
The financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
a) Investment Valuation - Securities which are traded on a recognized
stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at last sale
price on the national securities market. Exchange-traded securities for
which there were no transactions are valued at the current bid prices.
Securities traded on only over-the-counter markets are valued on the basis
of closing over-the-counter bid prices. Short-term debt instruments
maturing within 60 days are valued by the amortized cost method. Variable
rate demand notes are valued at cost which approximates market value. Put
options written or purchased by The Yacktman Focused Fund are valued at
the last sales price if such last sales price is between the current bid
and asked prices. Otherwise, put options are valued at the mean of the
current bid and asked prices. Any securities for which market quotations
are not readily available are valued at their fair value as determined in
good faith by the Board of Directors.
b) Put Options - Premiums received by The Yacktman Focused Fund upon
writing put options are recorded as an asset with a corresponding
liability which is subsequently adjusted to the current market value of
the option. When an option expires, is exercised, or is closed, the Fund
realizes a gain or loss, and the liability is eliminated. The Fund
continues to bear the risk of adverse movements in the price of the
underlying asset during the period of the option, although any potential
loss during the period would be reduced by the amount of the option
premium received. The Yacktman Focused Fund's activity in written put
options for the five months ended September 30, 1997 was as follows:
Number Of
Contracts Premiums
Options outstanding at 5/1/97 - -
Options written 1,860 $505,357
Options closed (1,010) (284,990)
Options exercised - -
Options expired - -
Options outstanding at 9/30/97 850 $220,367
c) Federal Income Taxes - It is the Fund's policy to meet the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all investment company net taxable income
and net capital gains to its shareholders in a manner which results in no
tax cost to the Fund. Therefore, no federal income tax provision is
required.
d) Distributions To Shareholders - Dividends from net investment income
are declared and paid quarterly. Distributions of net realized capital
gains, if any, are declared and paid at least annually. Distributions to
shareholders are recorded on the ex-dividend date.
e) Other - Investment transactions are accounted for on the trade date.
The Fund determines gain or loss realized from investment transactions by
comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date and
interest income is recognized on an accrual basis.
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. Government obligations, for The Yacktman Focused Fund
for the period ended September 30, 1997 were $32,898,294 and $2,680,484,
respectively. Purchases and sales of U.S. Government obligations were
$6,012,113 and $3,906,401, respectively. At September 30, 1997 gross
unrealized appreciation and depreciation on investments were as follows:
Appreciation $3,064.451
Depreciation (469,640)
Net appreciation on investments $2,594,811
=========
4. INVESTMENT ADVISORY AGREEMENT
The Fund has an agreement with the Adviser, with whom certain officers and
directors of the Fund are affiliated, to furnish investment advisory
services to the Fund. Under the terms of the agreement, The Yacktman
Focused Fund will pay the Adviser a monthly fee at the annual rate of 1%
of its average daily net assets. The agreement further stipulates that
the Adviser will reimburse the Fund for annual expenses exceeding certain
specified levels. In addition to the reimbursements required under the
agreement, the Adviser has voluntarily agreed to reimburse The Yacktman
Focused Fund for all expenses exceeding 1.25% of its average daily net
assets.
5. TRANSACTIONS WITH AFFILIATES
The following is an analysis of transactions for the period ended
September 30, 1997 for The Yacktman Focused Fund with "affiliated
companies" (an affiliated company is defined by the 1940 Act as a company
in which a Fund owns 5% or more of that company's outstanding voting
shares):
<TABLE>
<CAPTION>
Amount of
Amount of Gain (Loss)
Share Activity Dividends Realized
Balance Balance Credited on Sale of
Security Name 5/1/97 Purchases Sales 9/30/97 to Income Shares
<S> <C> <C> <C> <C> <C> <C>
Department 56, Inc. - 331,500 - 331,500 - -
Franklin Covey Co. - 115,000 - 115,000 - -
</TABLE>
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "OBJECTIVE AND
INVESTMENT APPROACH," The Yacktman Fund may invest in non-convertible
bonds and debentures assigned one of the two highest ratings of either
Standard & Poor's Corporation ("Standard & Poor's") or Moody's Investors
Service, Inc. ("Moody's"). As also set forth therein, The Yacktman
Focused Fund may invest in non-convertible bonds and debentures assigned
at least an investment grade by Standard & Poor's or Moody's (or unrated
but deemed by the Adviser to be of comparable quality), and up to 5% of
the assets of each of The Yacktman Fund and The Yacktman Focused Fund may
be invested in convertible bonds and debentures rated below investment
grade. As also set forth therein, the Funds may invest in commercial
paper and commercial paper master notes rated A-2 or better by Standard &
Poor's or P-2 by Moody's. A brief description of the ratings symbols and
their meanings follows.
Standard & Poor's Debt Ratings. A Standard & Poor's corporate
debt rating is a current assessment of the creditworthiness of an obligor
with respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights;
Investment Grade
AAA - Debt rated 'AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB - Debt rated 'BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of
speculation and 'C' the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB - Debt rated 'BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. The 'BB' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BBB-'
rating.
B - Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The 'B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC - Debt rated 'CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The 'CCC' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'B' or
'B-' rating.
CC - Debt rated 'CC' typically is applied to debt subordinated
to senior debt that is assigned an actual or implied 'CCC' rating.
C - Debt rated 'C' typically is applied to debt subordinated to
senior debt which is assigned an actual or implied 'CCC-' debt rating.
The 'C' rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no
interest is being paid.
D - Debt rated 'D' is in payment default. The 'D' rating
category is used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such period.
The 'D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
Moody's Bond Ratings.
Investment Grade
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 edged." Interest payments are protected by
a large, or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
some time 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.
Speculative Grade
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each of the
foregoing generic rating classifications. The modifier 1 indicates that
the company ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the company ranks in the lower end of its generic rating category.
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The three highest
categories are as follows:
A-1. This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2. Capacity for timely payment on issues with this
designation is satisfactory. However the relative degree of safety is not
as high as for issuers designated "A-1".
A-3. Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying a higher
designation.
Moody's Commercial Paper Ratings. Among the factors considered
by Moody's in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's industry
or industries which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet
such obligations. Relative differences in these factors determine whether
the issuer's commercial is rated P-1, P-2 or P-3.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statements
Financial Highlights included in Part A
Included in Part B are:
(i) the following audited financial statements of The Yacktman
Fund incorporated by reference to the Annual Report, dated
December 31, 1996 (File No. 811-06628), of The Yacktman Fund,
Inc. (as filed with the Securities and Exchange Commission on
February 3, 1997):
Report of Independent Accountants
Portfolio of Investments at December 31, 1996
Statement of Assets & Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and December 31, 1995
Financial Highlights
Notes to Financial Statements
(ii) the following unaudited financial statements of The Yacktman
Fund incorporated by reference to the Semi-Annual Report,
dated June 30, 1997 (File No. 811-06628), of The Yacktman
Funds, Inc. (as filed with the Securities and Exchange
Commission on August 6, 1997:
Portfolio of Investments at June 30, 1997
Statement of Assets & Liabilities as of June 30, 1997
Statement of Operations for the six months ended June 30, 1997
Statement of Changes in Net Assets for the six months ended
June 30, 1997 and for the year ended December 31, 1996
Financial Highlights
Notes to Financial Statements
(iii) the following unaudited financial statements of The Yacktman
Focused Fund:
Portfolio of Investments at September 30, 1997
Statement of Assets and Liabilities as of September 30, 1997
Statement of Operations for the period May 1, 1997 to
September 30, 1997
Statement of Changes in Net Assets for the period May 1, 1997
to September 30, 1997
Financial Highlights
Notes to Financial Statements
(b.) Exhibits
(1) Registrant's Articles of Incorporation, as amended.
(2) Registrant's Bylaws.
(3) None
(4) None.
(5.1) Investment Advisory Agreement with Yacktman Asset
Management Co.
(5.2) Investment Advisory Agreement with Yacktman Asset
Management Co., on behalf of The Yacktman Focused Fund;
Exhibit 5.2 to Amendment No. 7 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933 (filed February 13, 1997).
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin Trust Company.
(9.1) Amended and Restated Administration Agreement and Fund
Accounting Agreement; Exhibit 9.1 to Amendment No. 7 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933 (filed February 13, 1997).
(9.2) Transfer Agent Agreement with First Wisconsin Trust
Company.
(10) Opinion of Foley & Lardner, counsel for Registrant.
(11) Consent of Price Waterhouse LLP.
(12) None
(13) Subscription Agreement.
(14.1) Individual Retirement Custodial Account.
(14.2) Simplified Employee Pension Plans.
(14.3) Defined Contribution Retirement Plan.
(14.4) Model Section 403(b)(7) Plan.
(15) Restated Distribution Plan.
(15.1) List of Distributors.
(16) Schedule for Computation of Performance Quotations;
Exhibit 16 to Amendment No. 6 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933 (filed April 30, 1996).
(17) Financial Data Schedule.
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of September 30, 1997
Class A Common Stock (The 14,034
Yacktman Fund)
Class B Common Stock (The 806
Yacktman Focused Fund)
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or canceled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 10 through 14 of the
Statement of Additional Information pursuant to Rule 411 under the
Securities Act of 1933.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Registrant and Registrant's Administrator as
follows: the documents required to be maintained by paragraphs (5), (6),
(7), (10) and (11) of Rule 31a-1(b) will be maintained by the Registrant;
and all other records will be maintained by the Registrant's
Administrator.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to each person to whom a
prospectus is delivered.
With respect to stockholder meetings, Registrant undertakes to
call stockholder meetings in accordance with the provisions of Article I
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Chicago and
State of Illinois on the 21st day of October, 1997.
THE YACKTMAN FUNDS, INC.
(Registrant)
By: /s/ Donald A. Yacktman
Donald A. Yacktman,
President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Donald A. Yacktman President and Treasurer October 21, 1997
Donald A. Yacktman (Principal Executive,
Financial and Accounting
Officer) and a Director
/s/ Jon D. Carlson Director October 21, 1997
Jon D. Carlson
Director October __, 1997
Thomas R. Hanson
/s/ Stanislaw Maliszewski Director October 21, 1997
Stanislaw Maliszewski
Director October __, 1997
Stephen E. Upton
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of Incorporation, as
amended
(2) Registrant's Bylaws
(3) None
(4) None
(5.1) Investment Advisory Agreement with Yacktman
Asset Management Co.
(5.2) Investment Advisory Agreement with Yacktman
Asset Management Co., on behalf of The
Yacktman Focused Fund*
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin Trust
Company
(9.1) Amended and Restated Administration and Fund
Accounting Agreement with Sunstone Financial
Group, Inc.*
(9.2) Transfer Agent Agreement with First Wisconsin
Trust Company
(10) Opinion of Foley & Lardner, counsel for
Registrant
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement
(14.1) Individual Retirement Custodial Account
(14.2) Simplified Employee Pension Plans
(14.3) Defined Contribution Retirement Plan
(14.4) Model Section 403(b)(7) Plan
(15) Restated Distribution Plan
(15.1) List of Distributors
(16) Schedule for Computation of Performance
Quotations*
(17) Financial Data Schedule
(18) None
* Incorporated by reference
Exhibit 1
ARTICLES OF INCORPORATION
OF
THE YACKTMAN FUNDS, INC.
The undersigned sole incorporator, being at least eighteen years
of age, hereby adopts the following Articles of Incorporation for the
purpose of forming a Maryland corporation under the general laws of the
State of Maryland:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
THE YACKTMAN FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are to engage
in any lawful business for which corporations may be organized under the
Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is One Billion (1,000,000,000)
shares, all with a par value of One Hundredth of a Cent ($0.0001) per
share, to be known and designated as "Common Stock." The aggregate par
value of the authorized shares of the Corporation is One Hundred Thousand
Dollars ($100,000). The Board of Directors of the Corporation may
increase or decrease the aggregate number of authorized shares of Common
Stock pursuant to Section 2-105 of the Maryland General Corporation Law or
any successor provision thereto. The Board of Directors of the
Corporation may classify or reclassify any unissued shares of Common Stock
and may designate or redesignate the name of any class of outstanding
Common Stock. The Board of Directors may fix the number of shares of
Common Stock in any such class and, except as specifically set forth in
these Articles of Incorporation, may set or change the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption of any
class of unissued shares of Common Stock. A total of Seven Hundred
Million (700,000,000) shares of Common Stock shall initially be classified
as follows:
Class Fund Shares
A The Yacktman Fund 500,000,000
B The Yacktman Focused Fund 200,000,000
B. Notwithstanding the authority granted to the Board of
Directors of the Corporation with respect to the designation,
classification and reclassification of the unissued shares of Common Stock
of the Corporation, each class of Common Stock shall have the following
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the class, shall be entitled to one
(1) vote for each full share (and a fractional vote for each
fractional share) then standing in his or her name on the books
of the Corporation; provided, however, that shares of any class
of Common Stock owned, other than in a fiduciary capacity, by
the Corporation or by another corporation in which the
Corporation owns shares entitled to cast a majority of all the
votes entitled to be cast by all shares outstanding and entitled
to vote of such corporation, shall not be voted at any meeting
of stockholders. On any matter submitted to a vote of
stockholders all shares of the Corporation's Common Stock then
issued and outstanding and entitled to vote, irrespective of the
class, shall be voted in the aggregate and not by class, except
that: (a) when otherwise expressly provided by the Maryland
General Corporation Law, the Investment Company Act of 1940 and
the regulations thereunder, or other applicable law, shares
shall be voted by individual class; and (b) when the matter to
be acted upon does not affect any interest of a particular class
of the Corporation's Common Stock, then only shares of the
affected class shall be entitled to vote thereon. At all
elections of directors of the Corporation, each stockholder
shall be entitled to vote the shares owned of record by him for
as many persons as there are directors to be elected, but shall
not be entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation for the
issue or sale of shares of any class of the Corporation's Common
Stock, together with all assets in which such consideration is
invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any such funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the class of the
Corporation's Common Stock with respect to which such assets,
payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such class. Any assets,
income, earnings, profits and proceeds thereof, funds or
payments which are not readily attributable to any particular
class of the Corporation's Common Stock shall be allocable among
any one or more of the classes of the Corporation's Common Stock
in such manner and on such basis as the Board of Directors, in
its sole discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board of
Directors from time to time to one or more of the officers of
the Corporation.
3. The assets belonging to any class of the Corporation's
Common Stock shall be charged with the liabilities in respect of
such class of the Corporation's Common Stock, and shall also be
charged with the share of the general liabilities of the
Corporation allocated to such class determined as hereinafter
provided. The determination of the Board of Directors shall be
conclusive as to: (a) the amount of such liabilities, including
the amount of accrued expenses and reserves; (b) any allocation
of the same to a given class; and (c) whether the same are
allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to"
such class. Any liabilities which are not readily attributable
to any particular class of the Corporation's Common Stock shall
be allocable among any one or more of the classes of the
Corporation's Common Stock in such manner and on such basis as
the Board of Directors, in its sole discretion, shall deem fair
and equitable. The power to make such allocations may be
delegated by the Board of Directors from time to time to one or
more of the officers of the Corporation.
4. Shares of a class of the Corporation's Common Stock
shall be entitled to such dividends and distributions, in stock
or in cash or both, as may be declared from time to time by the
Board of Directors, acting in its sole discretion, with respect
to such class; provided, however, that dividends and
distributions on shares of a class of the Corporation's Common
Stock shall be paid only out of the lawfully available "assets
belonging to" such class as such phrase is defined in this
Article IV.
5. In the event of the liquidation or dissolution of the
Corporation, stockholders of a class of the Corporation's Common
Stock shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to
stockholders, but other than general assets not belonging to any
particular class, the assets belonging to such class, and the
assets so distributable to the holders of any class of the
Corporation's Common Stock shall be distributed among such
holders in proportion to the number of shares of such class of
the Corporation's Common Stock held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not belonging to any particular class of the
Corporation's Common Stock and available for distribution, such
distribution shall be made to the holders of all classes of the
Corporation's Common Stock in proportion to the net asset value
of the respective class of the Corporation's Common Stock
determined as set forth in the Bylaws of the Corporation.
6. Each share of each class of Common Stock of the
Corporation now or hereafter issued shall be subject to
redemption by the stockholders of the Corporation and, subject
to the suspension of such right of redemption as provided in the
Bylaws, each holder of shares of any class of Common Stock of
the Corporation, upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates,
if any, in proper form for transfer and after complying with any
other redemption procedures established by the Board of
Directors, shall be entitled to require the Corporation to
redeem all or any part of the shares of such class of Common
Stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares. In the event
that no certificates have been issued to the holder, the Board
of Directors may require the submission of a stock power with an
appropriate signature guarantee. All shares of any class of its
Common Stock redeemed by the Corporation shall be deemed to be
cancelled and restored to the status of authorized but unissued
shares. The method of computing the net asset value of shares
of each class of Common Stock of the Corporation for purposes of
the issuance and sale, or redemption, thereof, as well as the
time as of which such net asset value shall be computed, shall
be as set forth in the Bylaws. Payment of the net asset value
of each share of each class of Common Stock of the Corporation
surrendered to it for redemption shall be made by the
Corporation within seven (7) days after surrender of such stock
to the Corporation for such purpose, or within such other
reasonable period as may be determined from time to time by the
Board of Directors. The Board of Directors of the Corporation
may, upon reasonable notice to the stockholders of the
Corporation, impose a fee for the privilege of redeeming shares,
such fee to be not in excess of one percent (1.0%) of the
proceeds of any such redemption. The Board shall have
discretionary authority to rescind the imposition of any such
fee and to reimpose the redemption fee from time to time upon
reasonable notice. Any fee so imposed shall be uniform as to
all stockholders.
7. If, at any time when a request for transfer or
redemption of the shares of any class of Common Stock is
received by the Corporation or its agent, the value (computed as
set forth in the Bylaws) of the shares of such class in a
stockholder's account is less than Five Hundred Dollars
($500.00), after giving effect to such transfer or redemption,
the Corporation may cause the remaining shares of such class in
such stockholder's account to be redeemed in accordance with
such procedures as the Board of Directors shall adopt.
8. Each holder of shares of the Corporation's Common
Stock, irrespective of the class, may, upon request to the
Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer
and after complying with any other conversion procedures
established by the Board of Directors, convert such shares into
shares of any other class of the Corporation's Common Stock on
the basis of their relative net asset values (determined in
accordance with the Bylaws of the Corporation) less a conversion
charge or discount determined by the Board of Directors. Any
fee so imposed shall be uniform as to all stockholders.
9. No holder of shares of any class of Common Stock of
the Corporation shall, as such holder, have any right to
purchase or subscribe for any shares of any class of the Common
Stock of the Corporation which it may issue or sell (whether out
of the number of shares authorized by these Articles of
Incorporation, or out of any shares of any class of Common Stock
of the Corporation acquired by it after the issue thereof, or
otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
ARTICLE V
The number of directors constituting the Board of Directors
shall initially be five (5), and the names of the initial directors are
Donald A. Yacktman, Jon D. Carlson, Stanislaw Maliszewski, Stephen E.
Upton and Thomas R. Hanson. Thereafter, the number of directors shall be
such number as is fixed from time to time by the Bylaws.
ARTICLE VI
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, transfer agents,
registrars and/or disbursing agents for the stock and assets of the
Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such custodian, transfer agent,
registrar and/or disbursing agent.
ARTICLE VII
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the stockholders:
A. The Corporation may issue and sell shares of any class of
its own Common Stock in such amounts and on such terms and conditions, for
such purposes and for such amount or kind of consideration now or
hereafter permitted by the laws of the State of Maryland, the Bylaws and
these Articles of Incorporation, as its Board of Directors may determine;
provided, however, that the consideration per share to be received by the
Corporation upon the sale of any shares of any class of its Common Stock
shall not be less than the net asset value per share of such class of
Common Stock outstanding at the time as of which the computation of said
net asset value shall be made.
B. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase of shares
of any class of Common Stock and may, in addition, require such orders to
be in such minimum amounts as it shall determine.
C. The holders of any fractional shares of any class Common
Stock shall be entitled to the payment of dividends on such fractional
shares, to receive the net asset value thereof upon redemption, to share
in the assets of the Corporation upon liquidation and to exercise voting
rights with respect thereto.
D. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of dividends and
what receipts shall constitute principal and to make such allocation of
any particular receipt between principal and income as it may deem proper;
and (b) from time to time, in its discretion (i) to determine whether any
and all expenses and other outlays paid or incurred (including any and all
taxes, assessments or governmental charges which the Corporation may be
required to pay or hold under any present or future law of the United
States of America or of any other taxing authority therein) shall be
charged to or paid from principal or income or both, and (ii) to apportion
any and all of said expenses and outlays, including taxes, between
principal and income.
E. The Board of Directors shall have the power to determine
from time to time whether and to what extent and at what time and places
and under what conditions and regulations the books, accounts and
documents of the Corporation or any of them, shall be open to the
inspection of stockholders, except as otherwise provided by applicable
law; and except as so provided, no stockholder shall have any right to
inspect any book, account or document of the Corporation unless authorized
to do so by resolution of the Board of Directors.
ARTICLE VIII
The address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
ARTICLE IX
The address of the initial registered office is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
ARTICLE X
The name of the initial registered agent at such address is The
Corporation Trust, Incorporated, a Maryland corporation.
ARTICLE XI
The name and address of the sole incorporator is:
Name Address
Todd B. Pfister c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
IN WITNESS WHEREOF, the undersigned incorporator who executed
the foregoing Articles of Incorporation hereby acknowledges the same to be
his act and further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material respects
under the penalties of perjury.
Dated this ___ day of April, 1992.
Todd B. Pfister
Sole Incorporator
Exhibit 2
BYLAWS
OF
THE YACKTMAN FUND, INC.
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at such location as the Board of Directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election of
directors and the transaction of such other business as may properly come
before it, if the annual meeting shall be held, shall be held during the
month of May of each year (or during such other month as the Board of
Directors shall determine), commencing in 1993, at such date and time as
shall be fixed by the Board of Directors and stated in the notice of such
meeting, but in no event more than one hundred twenty (120) days after the
occurrence of the event requiring the meeting to elect directors. Any
business of the corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business
as is specifically required by statute to be stated in the notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Investment Company Act of 1940.
Section 3. Special Meeting. Special meetings of the stockholders may
be called by the board of directors, the president, any vice president, or
the secretary, and shall be called by the secretary upon the written
request of the holders of shares entitled to not less than ten percent
(10%) of all the votes entitled to be cast at such meeting; provided that
such holders prepay the costs to the corporation of preparing and mailing
the notice of the meeting. The business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
secretary shall give to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of such meeting under
applicable law, written or printed notice stating the time and place of
the meeting, and in the case of a special meeting (or where required by
applicable law) the purpose or purposes for which the meeting is called,
either by mail, by presenting it to him personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to
the stockholder at his post office address as it appears on the records of
the corporation, with postage thereon prepaid.
Section 5. Quorum. At any meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast a majority of the
votes thereat shall constitute a quorum; but this section shall not affect
any requirement under statute or under the charter for the vote necessary
for the adoption of any measure. If at any meeting a quorum is not
present or represented, the chairman of the meeting or the holders of a
majority of the stock present or represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of each class of
stock shall be entitled to vote at any meeting of stockholders except
shares owned, other than in a fiduciary capacity, by the corporation or by
another corporation in which the corporation owns shares entitled to cast
a majority of all the votes entitled to be cast by all shares outstanding
and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class of stock
entitled to vote at a meeting of stockholders shall be entitled to one
vote on each matter submitted to a vote. In all elections for directors
every stockholder shall have the right to vote the shares of each class
owned of record by him for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of cumulative
voting. A stockholder may vote the shares owned of record by him either
in person or by proxy executed in writing by the stockholder or by his
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize any action which may properly come before
the meeting, unless a greater number is required by statute or by the
charter.
Section 8. Informal Action. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall
be five (5). By vote of a majority of the entire board of directors, the
number of directors fixed by the charter or by these bylaws may be
increased or decreased from time to time to not more than fifteen nor less
than three, but the tenure of office of a director shall not be affected
by any decrease in the number of directors so made by the board.
Section 2. Election and Qualification. Until the first annual meeting
of stockholders and until successors are duly elected and qualify, the
board of directors shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders, the stockholders
shall elect directors to hold office until their successors are elected
and qualify. A director need not be a stockholder of the corporation, but
must be eligible to serve as a director of a registered investment company
under the Investment Company Act of 1940.
Section 3. Vacancies. Any vacancy on the board of directors occurring
between stockholders' meetings called for the purpose of electing
directors may be filled, if immediately after filling any such vacancy at
least two-thirds of the directors then holding office shall have been
elected to such office at an annual or special meeting of stockholders, in
the following manner: (i) for a vacancy occurring other than by reason of
an increase in directors, by a majority of the remaining members of the
board, although such majority is less than a quorum; and (ii) for a
vacancy occurring by reason of an increase in the number of directors, by
action of a majority of the entire board. A director elected by the board
to fill a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and qualifies.
If by reason of the death, disqualification or bona fide resignation of
any director or directors, more than sixty percent (60%) of the members of
the board of directors are interested persons of the corporation, as
defined in the Investment Company Act of 1940, such vacancy shall be
filled within thirty (30) days if it may be filled by the board, or within
sixty (60) days if a vote of stockholders is required to fill such
vacancy; provided that such vacancy may be filled within such longer
period as the Securities and Exchange Commission may prescribe by rules
and regulations, upon its own motion or by order upon application. In the
event that at any time less than a majority of the directors were elected
by the stockholders, the board or proper officer shall forthwith cause to
be held as promptly as possible, and in any event within sixty (60) days,
a meeting of the stockholders for the purpose of electing directors to
fill any existing vacancies in the board, unless the Securities and
Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the corporation shall
be managed under the direction of the board of directors, which may
exercise all of the powers of the corporation, except such as are by law
or by the charter or by these bylaws conferred upon or reserved to the
stockholders.
Section 5. Removal.
(a) At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed
directors.
(b) Notwithstanding any other provisions of these bylaws, the
secretary of the corporation shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of any
director upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting.
(c) Whenever ten or more stockholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's secretary in writing,
stating that they wish to communicate with other stockholders with a view
to obtaining signatures to a request for a meeting pursuant to subsection
(b) above and accompanied by a form of communication and request which
they wish to transmit, the secretary shall within five business days after
such application either: (1) afford to such applicants access to a list
of the names and addresses of all stockholders as recorded on the books of
the corporation; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
(d) If the secretary elects to follow the course specified in
clause (2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all stockholders of record at their
addresses as recorded on the books, unless within five (5) business days
after such tender the secretary shall mail to such applicants and file
with the Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority
of the board of directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
(e) After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
Section 6. Place of Meetings. Meetings of the board of directors,
regular or special, may be held at any place in or out of the State of
Maryland as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected board of directors shall be held without notice
immediately after and at the same general place as the annual meeting of
the stockholders, for the purpose of organizing the board, electing
officers and transacting any other business that may properly come before
the meeting.
Section 8. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and place as shall from
time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the board of
directors may be called at any time either by the board, the president, a
vice president or a majority of the directors in writing with or without a
meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all meetings of
the board of directors a majority of the entire board shall constitute a
quorum for the transaction of business, and the action of a majority of
the directors present at any meetings at which a quorum is present shall
be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by statute, the articles of
incorporation or these bylaws. If at any meeting a quorum is not present,
a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present. Members of the board of directors or a committee of
the board may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time; provided, however, that a
director may not participate in a meeting by means of a conference
telephone or similar communications equipment if the purpose of the
meeting is to approve the corporation's investment advisory agreement
and/or to approve the selection of the corporation's auditors, or if
participation in such a manner would otherwise violate the Investment
Company Act of 1940 or other applicable laws. Except as set forth in the
preceding sentence, participation in a meeting by these means constitutes
presence in person at the meeting.
Section 11. Executive and Other Committees. The board of directors may
appoint from among its members an executive and other committees composed
of two (2) or more directors. The board may delegate to such committees in
the intervals between meetings of the board any of the powers of the board
to manage the business and affairs of the corporation, except the power
to: (i) declare dividends or distributions upon the stock of the
corporation; (ii) issue stock of the corporation; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend
the bylaws; (v) approve any merger or share exchange which does not
require stockholder approval; or (vi) take any action required by the
Investment Company Act of 1940 to be taken by the independent directors of
the corporation or by the full board of directors.
Section 12. Informal Action. Except as set forth in the following
sentence, any action required or permitted to be taken at any meeting of
the board of directors or of a committee of the board may be taken without
a meeting, if a written consent to such action is signed by all members of
the board or the committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the board or committee.
Notwithstanding the preceding sentence, no action may be taken by the
board of directors pursuant to a written consent with respect to the
approval of the corporation's investment advisory agreement, the approval
of the selection of the corporation's auditors, or any action required by
the Investment Company Act of 1940 or other applicable law to be taken at
a meeting of the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting of each
newly elected board of directors there shall be elected a president, one
or more vice presidents, a secretary and a treasurer. The board may also
elect one or more assistant secretaries and assistant treasurers. No
officer need be a director. Any two or more offices, except the offices
of president and vice president, may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law, charter or these
bylaws to be executed, acknowledged or verified by two or more officers.
Each officer must be eligible to serve as an officer of a registered
investment company under the Investment Company Act of 1940. Nothing
herein shall preclude the employment of other employees or agents by the
corporation from time to time without action by the board.
Section 2. Term, Removal and Vacancies. The officers shall be elected
to serve until the next first meeting of a newly elected board of
directors and until their successors are elected and qualify. Any officer
may be removed by the board, with or without cause, whenever in its
judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any,
of the person so removed. A vacancy in any office shall be filled by the
board for the unexpired term.
Section 3. Bonding. Each officer and employee of the corporation who
singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance company
authorized to do business in Illinois and Wisconsin. Each such bond, which
may be in the form of an individual bond, a schedule or blanket bond
covering the corporation's officers and employees and the officers and
employees of the investment adviser to the corporation and other
corporations to which said investment adviser also acts as investment
adviser, shall be in such form and for such amount (determined at least
annually) as the board of directors shall determine in compliance with the
requirements of Section 17(g) of the Investment Company Act of 1940, as
amended from time to time, and the rules, regulations or orders of the
Securities and Exchange Commission thereunder.
Section 4. President. The president shall be the principal executive
officer of the corporation. He shall preside at all meetings of the
stockholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect, and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there be more
than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate.
Section 6. Secretary and Assistant Secretaries. The secretary shall
give notice of, attend and record the minutes of meetings of stockholders
and directors, keep the corporate seal and, when authorized by the board,
affix the same to any instrument requiring it, attesting to the same by
his signature, and shall have such further duties and powers as are
incident to his office or as the board may from time to time prescribe.
The assistant secretary, if any, or, if there be more than one, the
assistant secretaries in the order determined by the board, shall in the
absence or disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall have such other duties and powers
as the board may from time to time prescribe or the secretary delegate.
Section 7. Treasurer and Assistant Treasurers. The treasurer shall be
the principal financial and accounting officer of the corporation. He
shall be responsible for the custody and supervision of the corporation's
books of account and subsidiary accounting records, and shall have such
further duties and powers as are incident to his office or as the board of
directors may from time to time prescribe. The assistant treasurer, if
any, or, if there be more than one, the assistant treasurers in the order
determined by the board, shall in the absence or disability of the
treasurer, perform all duties and exercise the powers of the treasurer,
and shall have such other duties and powers as the board may from time to
time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive officers as
such shall not receive any salary for their services or reimbursement for
expenses from the corporation; provided that the corporation may pay fees
in such amounts and at such times as the board of directors shall
determine to directors who are not interested persons of the corporation
for attendance at meetings of the board of directors. Clerical employees
shall receive compensation for their services from the corporation in such
amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Act, or the rules, regulations or orders
of the Securities and Exchange Commission thereunder, (i) acting as agent,
accept from any source any compensation for the purchase or sale of any
property or securities to or for the corporation or any controlled company
of the corporation, as defined in such Act, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction. The
investment adviser to the corporation shall not profit directly or
indirectly from sales of securities to or from the corporation.
Section 3. Transactions with Affiliated Person. No affiliated person
of the corporation, as defined in the Investment Company Act of 1940, or
affiliated person of such person shall knowingly (i) sell any security or
other property to the corporation or to any company controlled by the
corporation, as defined in the Act, except shares of stock of the
corporation or securities of which such person is the issuer and which are
part of a general offering to the holders of a class of its securities,
(ii) purchase from the corporation or any such controlled company any
security or property except shares of stock of the corporation or
securities of which such person is the issuer, (iii) borrow money or other
property from the corporation or any such controlled company, or (iv)
acting as a principal effect any transaction in which the corporation or
controlled company is a joint or joint and several participant with such
person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation shall employ only one
investment adviser, the employment of which shall be pursuant to a written
agreement in accordance with Section 15 of the Investment Company Act of
1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each holder of shares of any class of stock
of the corporation shall be entitled to a certificate or certificates, in
such form as the board of directors shall from time to time approve,
representing and certifying the number of shares of such class of stock
owned by him in the corporation. Each certificate shall be signed,
manually or by facsimile signature, by the president or a vice president,
countersigned, manually or by facsimile signature, by the secretary, an
assistant secretary, the treasurer or an assistant treasurer and sealed
with the corporate seal or facsimile thereof. In case any officer who has
signed any certificate, or whose facsimile signature appears thereon,
ceases to be an officer of the corporation before the certificate is
issued, the certificate may nevertheless be issued with the same effect as
if the officer had not ceased to be such officer as of the date of its
issue. Each certificate shall contain on its face or back a full
statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms of each class of stock of the
corporation or shall state that the corporation will furnish such
information to the stockholder on request and without charge. Any
certificate representing stock which is restricted or limited as to
transferability also shall have a full statement of such restriction or
limitation plainly stated thereon or shall state that the corporation will
furnish such information to the stockholder on request and without charge.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen, destroyed or mutilated (or may delegate such authority to
one or more officers of the corporation) upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen,
destroyed or mutilated. The board or such officer may, in its or his
discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall maintain at its office
in Chicago, Illinois, or at the office of its principal transfer agent, if
any, an original or duplicate stock ledger containing the names and
addresses of all stockholders and the number of shares of each class of
stock held by each stockholder.
Section 4. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as
such, as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as other provided by the laws of Maryland.
Section 5. Transfer Agent and Registrar. The corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board of directors, where the shares of each class
of stock of the corporation shall be transferable. The corporation may
also maintain one or more registry offices, each in charge of a registrar
designated by the board, where the shares of such classes of stock shall
be registered.
Section 6. Transfers of Stock. Upon surrender to the corporation or a
transfer agent of a certificate for shares of any class duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 7. Fixing of Record Dates and Closing of Transfer Books. The
board of directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment
of any dividend or the allotment of any rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a
meeting of stockholders not less than ten (10) days, prior to the date on
which the particular action requiring such determination of stockholders
is to be taken. In lieu of fixing a record date, the board may provide
that the stock transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the stock transfer books are
closed or a record date is fixed for the purpose of determining
stockholders entitled to vote at a meeting of stockholders, such books
shall be closed for at least ten (10) days immediately preceding such
action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT ADVISER
Section 1. Inspection of Books. The board of directors shall
determine from time to time whether, and, if allowed, when and under what
conditions and regulations the accounts and books of the corporation
(except such as may by statute be specifically open to inspection) or any
of them, shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer shall, in
the performance of his duties, be fully protected in relying in good faith
on the books of account or reports made to the corporation by any of its
officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records and
Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the stockholders and filed within twenty (20) days thereafter at the
principal office of the corporation in the State of Illinois. If the
corporation is not required to hold an annual meeting of stockholders, the
statement of affairs shall be placed on file at the corporation's
principal office within one hundred twenty (120) days after the end of the
fiscal year. The proper officers of the corporation shall also prepare,
maintain and preserve or cause to be prepared, maintained and preserved
the accounts, books and other documents required by Section 2-111 of the
Maryland General Corporation Law and Section 31 of the Investment Company
Act of 1940 and shall prepare and file or cause to be prepared and filed
the reports required by Section 30 of such Act. No financial statement
shall be filed with the Securities and Exchange Commission unless the
officers or employees who prepared or participated in the preparation of
such financial statement have been specifically designated for such
purpose by the board of directors.
Section 4. Auditors. No independent public accountant shall be
retained or employed by the corporation to examine, certify or report on
its financial statements for any fiscal year unless such selection: (i)
shall have been approved by a majority of the entire board of directors
within thirty (30) days before or after the beginning of such fiscal year
or before the annual ratification by the stockholders; (ii) shall have
been ratified by the stockholders, provided that any vacancy occurring
between such annual ratification due to the death or resignation of such
accountant may be filled by the board of directors; and (iii) shall
otherwise meet the requirements of Section 32 of the Investment Company
Act of 1940.
Section 5. Custodianship. All securities owned by the corporation and
all cash, including, without limiting the generality of the foregoing, the
proceeds from sales of securities owned by the corporation and from the
issuance of shares of the capital stock of the corporation, payments of
principal upon securities owned by the corporation, and distributions in
respect of securities owned by the corporation which at the time of
payment are represented by the distributing corporation to be capital
distributions, shall be held by a custodian or custodians which shall be a
bank, as that term is defined in the Investment Company Act of 1940,
having capital, surplus and undivided profits aggregating not less than
$2,000,000. The terms of custody of such securities and cash shall
include provisions to the effect that the custodian shall deliver
securities owned by the corporation only (a) upon sales of such securities
for the account of the corporation and receipt by the custodian of payment
therefor, (b) when such securities are called, redeemed or retired or
otherwise become payable, (c) for examination by any broker selling any
such securities in accordance with "street delivery" custom, (d) in
exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other
securities, (f) upon exercise of subscription, purchase or other similar
rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h)
for the purpose of redeeming in kind shares of the capital stock of the
corporation, or (i) for other proper corporate purposes. Such terms of
custody shall also include provisions to the effect that the custodian
shall hold the securities and funds of the corporation in a separate
account or accounts and shall have sole power to release and deliver any
such securities and draw upon any such account, any of the securities or
funds of the corporation only on receipt by such custodian of written
instruction from one or more persons authorized by the board of directors
to give such instructions on behalf of the corporation, and that the
custodian shall deliver cash of the corporation required by this Section 5
to be deposited with the custodian only upon the purchase of securities
for the portfolio of the corporation and the delivery of such securities
to the custodian, for the purchase or redemption of shares of the capital
stock of the corporation, for the payment of interest, dividends, taxes,
management or supervisory fees or operating expenses, for payments in
connection with the conversion, exchange or surrender of securities owned
by the corporation, or for other proper corporate purposes. Upon the
resignation or inability to serve of any such custodian the corporation
shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the corporation held by the custodian
to be delivered directly to the successor custodian, and (c) in the event
that no successor custodian can be found, submit to the stockholders of
the corporation, before permitting delivery of such cash and securities to
anyone other than a successor custodian, the question whether the
corporation shall be dissolved or shall function without a custodian;
provided, however, that nothing herein contained shall prevent the
termination of any agreement between the corporation and any such
custodian by the affirmative vote of the holders of a majority of all the
shares of the capital stock of the corporation at the time outstanding and
entitled to vote. Upon its resignation or inability to serve, the
custodian may deliver any assets of the corporation held by it to a
qualified bank or trust company selected by it, such assets to be held
subject to the terms of custody which governed such retiring custodian,
pending action by the corporation as set forth in this Section 5.
Section 6. Termination of Custodian Agreement. Any employment
agreement with a custodian shall be terminable on not more than sixty (60)
days' notice in writing by the board of directors or the custodian and
upon any such termination the custodian shall turn over only to the
succeeding custodian designated by the board of directors all funds,
securities and property and documents of the corporation in its
possession.
Section 7. Checks and Requisitions. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefore, all promissory notes, all
assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
Section 8. Investment Advisory Contract. Any investment advisory
contract in effect after the first annual meeting of stockholders of the
corporation, to which the corporation is or shall become a party, whereby,
subject to the control of the board of directors of the corporation, the
investment portfolio with respect to any class of Common Stock of the
corporation shall be managed or supervised by the other party to such
contract, shall be effective and binding only upon the affirmative vote of
a majority of the outstanding voting securities of such class of Common
Stock of the corporation (as defined in the Investment Company Act of
1940), and the investment advisory contract currently in effect with
respect to any class of Common Stock shall be submitted to the holders of
shares of such class of Common Stock for ratification by the affirmative
vote of such majority. Any investment advisory contract to which the
corporation shall be a party whereby, subject to the control of the board
of directors of the corporation, the investment portfolio with respect to
any class of Common Stock of the corporation shall be managed or
supervised by the other party to such contract, shall provide, among other
things, that such contract cannot be assigned. Such investment advisory
contract shall prohibit the other party thereto from making short sales of
shares of capital stock of the corporation; and such investment advisory
contract shall prohibit such other party from purchasing shares otherwise
than for investment, and shall require such other party to advise the
corporation of any sales of shares of the capital stock of the corporation
made by such person or organization less than two months after the date of
any purchase by him or it of shares of the capital stock of the
corporation. Unless any such contract shall expressly otherwise provide,
any provisions therein for the termination thereof by action of the board
of directors of the corporation shall be construed to require that such
termination can be accomplished only upon the vote of a majority of the
entire board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the corporation in the
State of Maryland shall be in the City of Baltimore. The corporation
shall also have an office in Chicago, Illinois. The corporation may also
have offices at such other places within and without the State of Maryland
as the board of directors may from time to time determine. Except as
otherwise required by statute, the books and records of the corporation
may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal" and "Maryland".
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice of the
time, place or purpose of any meeting of stockholders or directors is
required to be given under the statute, the charter or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, either before or
after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom communication is
made unlawful by any law of the United States or any rule, regulation,
proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the board of
directors, the president shall have full power and authority, in the name
and on behalf of the corporation, (i) to attend, act and vote at any
meeting of stockholders of any company in which the corporation may own
shares of stock of record, beneficially (as the proxy or attorney-in-fact
of the record holder) or of record and beneficially, and (ii) to give
voting directions to the record stockholder of any such stock beneficially
owned. At any such meeting, he shall possess and may exercise any and all
rights and powers incident to the ownership of such shares which, as the
holder or beneficial owner and proxy of the holder thereof, the
corporation might possess and exercise if personally present, and may
delegate such power and authority to any officer, agent or employee of the
corporation.
Section 6. Dividends. Dividends upon any class of stock of the
corporation, subject to the provisions of the charter, if any, may be
declared by the board of directors in any lawful manner. The source of
each dividend payment shall be disclosed to the stockholders receiving
such dividend, to the extent required by the laws of the State of Maryland
and by Section 19 of the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Section 8. Amendments.
A. These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the stockholders by affirmative vote of not less
than a majority of the shares of all classes of stock present or
represented at any annual or special meeting of the stockholders at which
a quorum is in attendance.
B. These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the Board of Directors by affirmative vote of
a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the stockholders shall be
amended or repealed by the Board of Directors if the bylaws so adopted so
provides.
C. Any action taken or authorized by the stockholders or by
the Board of Directors, which would be inconsistent with the bylaws then
in effect but is taken or authorized by affirmative vote of not less than
the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be
given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Stockholders. The books of account of the
corporation shall be examined by an independent firm of public accountants
at the close of each annual fiscal period of the corporation and at such
other times, if any, as may be directed by the Board of Directors of the
corporation. A report to the stockholders based upon each such
examination shall be mailed to each stockholder of the corporation of
record on such date with respect to each report as may be determined by
the Board of Directors at his address as the same appears on the books of
the corporation. Each such report shall include the financial information
required to be transmitted to stockholders by rules or regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940 and shall be in such form as the Board of Directors shall determine
pursuant to rules and regulations of the Securities and Exchange
Commission.
Section 10. Information to Accompany Dividends. At the time of the
payment by the corporation of any dividend to the holders of any class of
stock of the corporation, each stockholder to whom such dividend is paid
shall be notified of the account or accounts from which it is paid and the
amount thereof paid from each such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sales of Shares. Shares of any class of Common Stock of
the corporation shall be sold by it for the net asset value per share of
such class of Common Stock outstanding at the time as of which the
computation of said net asset value shall be made as hereinafter provided
in these bylaws.
Section 2. Periodic Investment and Dividend Reinvestment Plans. The
corporation acting by and through the Board of Directors shall have the
right to adopt and to offer to the holders of each class of stock and to
the public a periodic investment plan and an automatic reinvestment of
dividend plan subject to the limitations and restrictions imposed thereon
and as set forth in the Investment Company Act of 1940 and any rule or
regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of shares of any
class of stock of the corporation issued in whole or in part in exchange
for securities, there may, at the discretion of the board of directors of
the corporation, be included in the value of said securities, for the
purpose of determining the number of shares of such class stock of the
corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates payable
in connection with the purchase of comparable securities on the New York
Stock Exchange) or other similar costs of acquisition of such securities
paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each class of Common
Stock of the corporation now or hereafter issued shall be subject to
redemption, as provided in the Articles of Incorporation of the
corporation.
Section 5. Suspension of Right of Redemption. The Board of Directors
of the corporation may suspend the right of the holders of any class of
Common Stock of the corporation to require the corporation to redeem
shares of such class:
(1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings, or (b) during which trading on the New York Stock
Exchange is restricted;
(2) for any period during which an emergency, as defined
by rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (a) disposal by
the corporation of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for the
corporation fairly to determine the value of its net assets; or
(3) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of these
bylaws, the following rules shall apply:
A. The net asset value of each share of each class of
Common Stock of the corporation shall be determined at such time
or times as may be disclosed in the then currently effective
Prospectus relating to such class of Common Stock of this
corporation. The Board of Directors may also, from time to time
by resolution, designate a time or times intermediate of the
opening and closing of trading on the New York Stock Exchange on
each day that said Exchange is open for trading as of which the
net asset value of each share of each class of Common Stock of
the corporation shall be determined or estimated.
Any determination or estimation of net asset value as
provided in this subparagraph A shall be effective at the time
as of which such determination or estimation is made.
The net asset value of each share of each class of Common
Stock of the corporation for purposes of the issue of such class
of Common Stock shall be the net asset value which becomes
effective as provided in this Subparagraph A, next succeeding
receipt of the subscription to such share of such class Common
Stock. The net asset value of each share of each class of
Common Stock of the corporation tendered for redemption shall be
the net asset value which becomes effective as provided in this
Subparagraph A, next succeeding the tender of such share of such
class of Common Stock for redemption.
B. The net asset value of each share of each class of
Common Stock of the corporation, as of the close of business on
any day, shall be the quotient obtained by dividing the value at
such close of the net assets belonging to such class (meaning
the assets belonging to such class and any other assets
allocated to such class less the liabilities belonging to such
class and any other liabilities allocated to such class
excluding capital and surplus) of the corporation by the total
number of shares of such class outstanding at such close.
(i) The assets belonging to any class of Common
Stock shall be that portion of the total assets of the
corporation as determined in accordance with the
provisions of Article IV of the Articles of
Incorporation of the corporation. The assets of the
corporation shall be deemed to include (a) all cash on
hand, on deposit, or on call, (b) all bills and notes
and accounts receivable, (c) all shares of stock and
subscription rights and other securities owned or
contracted for by the corporation, other than its own
common stock, (d) 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,
(e) all interest accrued on any interest-bearing
securities owned by the corporation, and (f) all other
property of every kind and nature including prepaid
expenses; the value of such assets to be determined as
follows: In determining the value of any assets of
the corporation for the purpose of obtaining the net
asset value of each share of a particular class of
Common Stock, securities traded over the counter or on
a national securities exchange are valued on the basis
of market value in their principal and most
representative market. Securities where the principal
and most representative market is a national
securities exchange are valued at the latest reported
sale price on such exchange. If there is no such sale
price reported for the valuation date, then such
securities are valued at the latest reported bid price
on such exchange. Securities, other than debt
securities, where the over-the-counter market is the
principal and most representative market are valued at
the mean between the latest bid and asked price
quotations. Debt securities (other than short-term
instruments) are valued at prices furnished by a
national brokerage firm's pricing service, subject to
review by the corporation's investment adviser and
determination of the appropriate price whenever a
furnished price is significantly different from the
previous day's furnished price. When market
quotations are not readily available, or when
restricted securities are being valued, such
securities are valued at fair value as determined in
good faith by the Board of Directors. All other
assets of the corporation shall be valued at fair
value as determined in good faith by the Board of
Directors, except that debt securities having
maturities of less than 60 days may be valued by the
amortized cost method.
(ii) The liabilities belonging to any class of
Common Stock shall be that portion of the total
liabilities of the corporation as determined in
accordance with the provisions of Article IV of the
Articles of Incorporation of the corporation. The
liabilities of the corporation shall be deemed to
include (a) all bills and notes and accounts payable,
(b) all administration expenses payable and/or accrued
(including investment advisory fees), (c) 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, (d) all reserves, if any, authorized or
approved by the Board of Directors for taxes,
including reserves for taxes at current rates based on
any unrealized appreciation in the value of the assets
of the corporation, and (e) all other liabilities of
the corporation of whatever kind and nature except
liabilities represented by outstanding capital stock
and surplus of the corporation.
(iii) For the purposes hereof: (a) shares of
each class of 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 belonging to such class; and (b)
shares of each class of Common Stock surrendered for
redemption by the corporation shall be deemed to be
outstanding until the time as of which the net asset
value for purposes of such redemption is determined or
estimated.
C. The net asset value of each share of each class of
Common Stock of the corporation, as of any time other than the
close of business on any day, may be determined by applying to
the net asset value as of the close of business on the preceding
business day, computed as provided in Paragraph C of this
Section of these bylaws, such adjustments as are authorized by
or pursuant to the direction of the Board of Directors and
designed reasonably to reflect any material changes in the
market value of securities and other assets held and any other
material changes in the assets or liabilities of the corporation
and in the number of its outstanding shares which shall have
taken place since the close of business on such preceding
business day.
D. In addition to the foregoing, the Board of Directors
is empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset value of
each share of each class of the Common Stock of the corporation.
INVESTMENT ADVISORY AGREEMENT
Agreement made this _____ day of _________________, 1992 between
The Yacktman Fund, Inc., a Maryland corporation (the "Fund"), and Yacktman
Asset Management Company, an Illinois corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"); and
WHEREAS, the Fund desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as its investment adviser.
NOW, THEREFORE, the Fund and the Adviser do mutually promise and
agree as follows:
1. Employment. The Fund hereby employs the Adviser to manage
the investment and reinvestment of the assets of the Fund for the period
and on the terms set forth in this Agreement. The Adviser hereby accepts
such employment for the compensation herein provided and agrees during
such period to render the services and to assume the obligations herein
set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the board of directors of the Fund may determine, direct the purchase
and sale of investment securities in the day to day management of the
Fund. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Fund, but without compensation or
reimbursement of expenses for such services from the Fund. Nothing herein
contained shall be deemed to require the Fund to take any action contrary
to its Articles of Incorporation, as amended or supplemented, or any
applicable statute or regulation, or to relieve or deprive the board of
directors of the Fund of its responsibility for and control of the affairs
of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund. The Adviser shall not be required to pay any
expenses of the Fund except as provided herein if the total expenses borne
by the Fund, including the Adviser's fee and the fees paid to the Fund's
Administrator but excluding all federal, state and local taxes, interest,
brokerage commissions and extraordinary items, in any year exceed that
percentage of the average net assets of the Fund for such year, as
determined by valuations made as of the close of each business day, which
is the most restrictive percentage provided by the state laws of the
various states in which the Fund's shares are qualified for sale or, if
the states in which the Fund's shares are qualified for sale impose no
such restrictions, 2%. The expenses of the Fund's operations borne by the
Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not officers of the Fund, the costs of
preparing and printing registration statements required under the
Securities Act of 1933 and the Act (and amendments thereto), the expense
of registering its shares with the Securities and Exchange Commission and
in the various states, the printing and distribution cost of prospectuses
mailed to existing shareholders, the cost of stock certificates (if any),
director and officer liability insurance, reports to shareholders, reports
to government authorities and proxy statements, interest charges, taxes,
legal expenses, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, insurance
premiums, brokerage and other expenses connected with the execution of
portfolio securities transactions, fees and expenses of the custodian of
the Fund's assets, expenses of calculating the net asset value and
repurchasing and redeeming shares, printing and mailing expenses, charges
and expenses of dividend disbursing agents, registrars and stock transfer
agents and the cost of keeping all necessary shareholder records and
accounts.
The Fund shall monitor its expense ratio on a monthly basis. If
the accrued amount of the expenses of the Fund exceeds the expense
limitation established herein, the Fund shall create an account receivable
from the Adviser in the amount of such excess. In such a situation the
monthly payment of the Adviser's fee will be reduced by the amount of such
excess, subject to adjustment month by month during the balance of the
Fund's fiscal year if accrued expenses thereafter fall below the expense
limitation.
4. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Fund shall pay to the Adviser an
advisory fee, paid monthly, based on the average net assets of the Fund,
as determined by valuations made as of the close of each business day of
the month. The advisory fee shall be 1/12 of 0.65% (0.65% per annum) on
the first $500,000,000 of average net assets of the Fund; 1/12 of 0.60%
(0.60% per annum) on the next $500,000,000 of average net assets of the
Fund; and 1/12 of 0.55% (0.55% per annum) on the average net assets of the
Fund in excess of $1,000,000,000. For any month in which this Agreement
is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which
it is in effect and the fee computed upon the average net asset value of
the business days during which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase or in connection with the initial
capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has agreed to permit the Fund
to use the name "Yacktman", if it so desires, it is understood and agreed
that the Adviser reserves the right to use and to permit other persons,
firms or corporations, including investment companies, to use such name,
and that the Fund will not use such name if the Adviser ceases to be the
Fund's sole investment adviser. During the period that this Agreement is
in effect, the Adviser shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Fund in the
manner required by the Act, and by the vote of the majority of the
outstanding voting securities of the Fund, as defined in the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the Fund
or by a vote of the majority of the outstanding voting securities of the
Fund, as defined in the Act, upon giving sixty (60) days' written notice
to the Adviser. This Agreement may be terminated by the Adviser at any
time upon the giving of sixty (60) days' written notice to the Fund. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for an
initial period beginning as of the date hereof and ending April 30, 1994
and indefinitely thereafter, but only so long as the continuance after
such initial period is specifically approved annually by (i) the board of
directors of the Fund or by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act, and (ii) the board
of directors of the Fund in the manner required by the Act, provided that
any such approval may be made effective not more than sixty (60) days
thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
YACKTMAN ASSET MANAGEMENT
COMPANY (the "Adviser")
Attest: ________________________ By: ___________________________
Secretary President
THE YACKTMAN FUND, INC.
(the "Fund")
Attest: _________________________ By: __________________________
Secretary President
EXHIBIT 8
CUSTODIAN AGREEMENT
THIS AGREEMENT made on May 29, 1992, between THE YACKTMAN FUND,
INC., a Maryland corporation (hereinafter called the "Fund") and FIRST
WISCONSIN TRUST COMPANY, a corporation organized under the laws of the
State of Wisconsin (hereinafter called "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two or the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of The Yacktman
Fund, Inc.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon
proper instructions from the The Yacktman Fund, Inc.;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including,
without limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by
the Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c)
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made, provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for any proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f) and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g) or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items. In the event of any
advance of cash for any purpose made by Custodian resulting from orders or
instructions of the Fund, or in the event that Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be security
therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 303 West Madison, Chicago, Illinois 60606, as the case may be. Upon
any termination of this Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund
to the Fund, but may deliver them to a bank or trust company or its own
selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report of not less than Two Million
Dollars ($2,000,000) as a Custodian for the Fund to be held under terms
similar to those of this Agreement, provided, however, that Custodian
shall not be required to make any such delivery or payment until full
payment shall have been made by the Fund of all liabilities constituting a
charge on or against the properties then held by Custodian or on or
against Custodian, and until full payment shall have been made to
Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository, provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above-written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRST WISCONSIN TRUST COMPANY
______________________________ By _________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: THE YACKTMAN FUND, INC.
_______________________________ By _________________________________
EXHIBIT 9.2
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this 29th day of May,
1992, by and between THE YACKTMAN FUND, INC. (hereinafter referred to as
the "Fund") and FIRST WISCONSIN TRUST COMPANY, a corporation organized
under the laws of the State of Wisconsin (hereinafter referred to as the
"Agent").
W I T N E S S E T H :
WHEREAS, the Fund is an open-ended management investment company
which is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in
the business of administering transfer and dividend disbursing agent
functions for the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection
with accumulation, open account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to:
A. Receive orders for the purchase of shares, with prompt delivery,
where appropriate, of payment and supporting documentation to
the Fund's custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Fund's
custodian;
D. Pay monies (upon receipt from the Fund's custodian, where
relevant) in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Fund;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Section Rule 17ad-10(e), a record of the total number of
shares of the Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable
transactions as agreed upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor
the total number of shares sold in each state. In addition, the
Fund shall identify to the Agent in writing those transactions
and assets to be treated as exempt from the Blue Sky reporting
to the Fund for each state. The responsibility of the Agent for
the Fund's Blue Sky state registration status is solely limited
to the initial compliance by the Fund and the reporting of such
transactions to the Fund.
2. Compensation
The Fund agrees to pay the Agent for performance of the duties listed
in this Agreement; the fees and out-of-pocket expenses include, but are
not limited to the following: printing, postage, forms, stationery,
record retention, mailing, insertion, programming, labels, shareholders
lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within
ten (10) business days following the mailing of the billing notice.
3. Representations of Agent
The Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of
Wisconsin;
C. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
E. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
4. Representations of the Fund
The Fund represents and warrants to the Agent that:
A. The Fund is an open-ended diversified investment company under
the Investment Company Act of 1940;
B. The Fund is a corporation organized, existing, and in good
standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have
been taken to authorize it to enter into and perform this
Agreement;
E. The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules
and regulations of governmental authorities having jurisdiction;
and
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to
be made, with respect to all shares of the Fund being offered
for sale.
5. Covenants of Fund and Agent
The Fund shall furnish the Agent a certified copy of the resolution
of the Board of Directors of the Fund authorizing the appointment of the
Agent and the execution of this Agreement. The Fund shall provide to the
Agent a copy of the Corporate Charter, bylaws of the Corporation, and all
amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules thereunder, the Agent agrees that all such records prepared
or maintained by the Agent relating to the services to be performed by the
Agent hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such section and rules
and will be surrendered to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
The Agent agrees to use reasonable care and act in good faith in
performing its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances
beyond its control, including acts of civil or military authority,
national or state emergencies, fire, mechanical or equipment failure,
flood or catastrophe, acts of God, insurrection or war. In the event of a
mechanical breakdown beyond its control, the Agent shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond the Agent's control. The Agent will
make every reasonable effort to restore any lost or damaged data, and the
correcting of any errors resulting from such a breakdown will be at the
Agent's expense. The Agent agrees that it shall, at all times, have
reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of The
Yacktman Fund, Inc. shall be entitled to inspect the Agent's premises and
operating capabilities at any time during regular business hours of the
Agent, upon reasonable notice to the Agent.
The Fund will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or
suit not resulting from the Agent's bad faith or negligence, and arising
out of or in connection with the Agent's duties on behalf of the Fund
hereunder.
Further, the Fund will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand,
action or suit as a result of the negligence of the Fund or the principal
underwriter (unless contributed to by the Agent's own negligence or bad
faith); or as a result of the Agent acting upon telephone instructions
relating to the exchange or redemption of shares received by the Agent and
reasonably believed by the Agent to have originated from the record owner
of the subject shares; or as a result of the Agent acting upon any
instructions executed or orally communicated by a duly authorized officer
or employee of the Fund, according to such lists of authorized officers
and employees furnished to the Agent and as amended from time to time in
writing by a resolution of the Board of The Yacktman Fund, Inc. of the
Fund; or as a result of acting in reliance upon any genuine instrument or
stock certificate signed, countersigned or executed by any person or
persons authorized to sign, countersign or execute the same.
In order for this section to apply, it is understood that if in any
case the Fund may be asked to indemnify or hold harmless the Agent, the
Fund shall be advised of all pertinent facts concerning the situation in
question, and it is further understood that the Agent will use reasonable
care to notify the Fund promptly concerning any situation which presents
or appears likely to present a claim for indemnification against the Fund.
The Fund shall have the option to defend the Agent against any claim which
may be the subject of this indemnification and, in the event that the Fund
so elects, the Agent will so notify the Fund, and thereupon the Fund shall
take over complete defense of the claim and the Agent shall sustain no
further legal or other expenses in such situation for which the Agent
shall seek indemnification under this section. The Agent will in no case
confess any claim or make any compromise in any case in which the Fund
will be asked to indemnify the Agent, except with the Fund's prior written
consent.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and
its shareholders and shall not be disclosed to any other party, except
after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where
the Agent may be exposed to civil or criminal contempt proceedings for
failure to comply after being requested to divulge such information by
duly constituted authorities.
8. Illinois Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of
Illinois.
9. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of
the parties.
B. After the first full year, this Agreement may be terminated upon
ninety (90) day's written notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the other
party.
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed and
delivered, or mailed to the principal place of business of the other
party.
E. In the event that the Fund gives to the Agent its written
intention to terminate and appoint a successor transfer agent, the Agent
agrees to cooperate in the transfer of its duties and responsibilities to
the successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be paid by the Fund.
THE YACKTMAN FUND, INC. FIRST WISCONSIN TRUST COMPANY
By: __________________________ By: _________________________________
Attest: _____________________ Attest: ___________________________
Assistant Secretary
F O L E Y & L A R D N E R
A T T O R N E Y S A T L A W
CHICAGO FIRSTAR CENTER SAN DIEGO
JACKSONVILLE 777 EAST WISCONSIN AVENUE SAN FRANCISCO
LOS ANGELES MILWAUKEE, WISCONSIN 53202-5367 TALLAHASSEE
MADISON TELEPHONE (414) 271-2400 TAMPA
ORLANDO FACSIMILE (414) 297-4900 WASHINGTON, D.C.
SACRAMENTO WEST PALM BEACH
WRITER'S DIRECT LINE
June 4, 1992 EXHIBIT 10
The Yacktman Fund, Inc.
303 West Madison Street
Chicago, Illinois 60606
Gentlemen:
We have acted as counsel for you in connection with the
preparation of a Registration Statement on Form N-1A relating to the sale
by you of an indefinite amount of The Yacktman Fund, Inc. Common Stock,
$0.0001 par value (such Common Stock being hereinafter referred to as the
"Stock") in the manner set forth in the Registration Statement to which
reference is made. In this connection we have examined: (a) the
Registration Statement on Form N-1A; (b) your Articles of Incorporation
and Bylaws, as amended to date; (c) corporate proceedings relative to the
authorization for issuance of the Stock; and (d) such other proceedings,
documents and records as we have deemed necessary to enable us to render
this opinion.
Based upon the foregoing, we are of the opinion that the shares
of Stock when sold as contemplated in the Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to
the Form N-1A Registration Statement. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the
Securities Act of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
/s/ Foley & Lardner
FOLEY & LARDNER
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 8 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated January 17, 1997, relating
to the financial statements and financial highlights appearing in the
December 31, 1996 Annual Report to Shareholders of The Yacktman Fund which
is also incorporated by reference into the Registration Statement. We
also consent to the references to us under the heading "Financial
Highlights" in the Prospectus and under the heading "Independent
Accountants" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
October 30, 1997
EXHIBIT 13
SUBSCRIPTION AGREEMENT
The Yacktman Fund, Inc.
303 West Madison Street
Chicago, Illinois 60606
Gentlemen:
The undersigned hereby subscribes to 10,000 shares of the Common
Stock, $.0001 par value per share, of The Yacktman Fund, Inc., in
consideration for which the undersigned agrees to transfer to you upon
demand cash in the amount of $100,000.
It is understood that a certificate or certificates representing
the shares subscribed for shall be issued to the undersigned upon request
at any time after receipt by you of payment therefor, and that said shares
shall be deemed to be fully paid and nonassessable.
The undersigned agrees that the shares are being purchased for
investment with no present intention of reselling or redeeming said
shares.
Dated and effective as of this ____ day of _________________,
1992.
YACKTMAN ASSET MANAGEMENT COMPANY
By:
Donald A. Yacktman, President
and Treasurer
Attest:
Jon D. Carlson, Vice
President and Secretary
ACCEPTANCE
The foregoing subscription is hereby accepted. Dated and
effective as of this ______ day of ____________________________, 1992.
By:
Donald A. Yacktman
President
(CORPORATE SEAL)
Attest:
Jon D. Carlson, Executive
Vice President
YACKTMAN FUND
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, (April 1 following the calendar year end in which the Depositor
reaches age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which Yacktman Asset
Management, Inc. serves as investment advisor, or any other regulated
investment company designated by the investment advisor. Shares of stock
of an Investment Company shall be referred to as Investment Company
Shares."
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The Custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the Depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian, and the Custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
YACKTMAN FUND SIMPLIFIED EMPLOYEE PENSION
Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benefits to all eligible employees under a SEP described in
section 408(k). Do not file this form with the IRS. See Pub. 560,
Retirement Plans for the Self-Employed, and Pub. 590, Individual
Retirement Arrangements (IRAs).
Instructions to the Employer
Simplified Employee Pension.-A SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your
employees' retirement income. Under a SEP, you can contribute to an
employee's individual retirement account or annuity (IRA). You make
contributions directly to an IRA set up by or for each employee with a
bank, insurance company, or other qualified financial institution. When
using Form 5305-SEP to establish a SEP, the IRA must be a Model IRA
established on an IRS form or a master or prototype IRA for which the IRS
has issued a favorable opinion letter. Making the agreement on Form 5305-
SEP does not establish an employer IRA described in section 408(c).
When Not To Use Form 5305-SEP.-Do not use this form if you:
1. Currently maintain any other qualified retirement plan. This
does not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section
414(n)).
5. Are a member of an affiliated service group (described in
section 414(m)), a controlled group of corporations (described in section
414(b)), or trades or businesses under common control (described in
sections 414(c) and 414(o)), unless all eligible employees of all the
members of such groups,trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even
if the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective
deferrals to a SEP.
Note: SEPs permitting elective deferrals cannot be established after
1996.
Eligible Employees.-All eligible employees must be allowed to participate
in the SEP. An eligible employee is any employee who: (1) is at least 21
years old, and (2) has performed "service" for you in at least 3 of the
immediately preceding 5 years.
Note: You can establish less restrictive eligibility requirements, but
not more restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations,or trades or businesses under common control,
service includes any work performed for any period of time for any other
member of such group,trades, or businesses.
Excludable Employees.-The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their
union, (2) nonresident alien employees who did not earn U.S.source income
from you, and (3) employees who received less than $400* in compensation
during the year.
Contribution Limits.-The SEP rules permit you to make an annual
contribution of up to 15% of the employee's compensation or $300,000*,
whichever is less. Compensation, for this purpose, does not include
employer contributions to the SEP or the employee's compensation in excess
of $160,000*. If you also maintain a Model Elective SEP or any other SEP
that permits employees to make elective deferrals, contributions to the
two SEPs together may not exceed the smaller of $300,000* or 15% of
compensation for any employee.
_________________
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But
you must contribute to the SEP-IRAs of all of the eligible employees who
actually performed services during the year of the contribution. This
includes eligible employees who die or quit working before the
contribution is made.
You may also not integrate your SEP contributions with, or offset
them by, contributions made under the Federal Insurance Contributions Act
(FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who
participate in your elective SEP, then you must make minimum contributions
to IRAs established on behalf of those employees.
Deducting Contributions.--You may deduct contributions to a SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with
or within which the calendar year ends. Contributions made for a
particular tax year must be made by the due date of your income tax return
(including extensions) for that tax year.
Completing the Agreement.--This agreement is considered adopted when:
- IRAs have been established for all your eligible employees;
- You have completed all blanks on the agreement form without
modification; and
- You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which employer
SEP contributions will be made may provide different rates of return and
different terms concerning, among other things, transfers and withdrawals
of funds from the IRAs.
3. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate, the
administrator of the SEP must furnish each participant within 30 days of
the effective date of any amendment to the SEP, a copy of the amendment
and a written explanation of its effects.
4. A statement that the administrator will give written
notification to each participant of any employer contributions made under
the SEP to that participant's IRA by the later of January 31 of the year
following the year for which a contribution is made or 30 days after the
contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-
SEP and provided the other documents and disclosures described in
Instructions to the Employer and Information for the Employee, are not
required to file the annual information returns, Forms 5500, 5500-C/R, or
5500-EZ for the SEP. However, under Title I of ERISA, this relief from
the annual reporting requirements may not be available to an employer who
selects, recommends, or influences its employees to choose IRAs into which
contributions will be made under the SEP, if those IRAs are subject to
provisions that impose any limits on a participant's ability to withdraw
funds (other than restrictions imposed by the Code that apply to all
IRAs). For additional information on Title I requirements, see the
Department of Labor regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
Simplified Employee Pension.--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (IRA).
Contributions must be made to either a Model IRA executed on an IRS form
or a master or prototype IRA for which the IRS has issued a favorable
opinion letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible employee will be the same
percentage of compensation (excluding compensation higher than $160,000*)
for all employees.
Your employer will provide you with a copy of the agreement
containing participation rules and a description of how employer
contributions may be made to your IRA. Your employer must also provide
you with a copy of the completed Form 5305-SEP and a yearly statement
showing any contributions to your IRA.
All amounts contributed to your IRA by your employer belong to you
even after you stop working for that employer.
Contribution Limits.--Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is
limited to the smaller of $30,000* or 15% of your compensation (currently
limited to $160,000) for that year. Compensation does not include any
amount that is contributed by your employer to your IRA under the SEP.
Your employer is not required to make contributions every year or to
maintain a particular level of contributions.
Tax Treatment of Contributions.--Employer contributions to your SEP-IRA
are excluded from your income unless there are contributions in excess of
the applicable limit. Employer contributions within these limits will not
be included on your Form W-2.
Employee Contributions.--You may contribute the smaller of $2,000 or 100%
of your compensation to an IRA. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered
by an employer retirement plan.
SEP Participation.--If your employer does not require you to participate
in a SEP as a condition of employment, and you elect not to participate,
all other employees of your employer may be prohibited from participating.
If one or more eligible employees do not participate and the employer
tries to establish a SEP for the remaining employees, it could cause
adverse tax consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Elective SEP
or other SEP. However, if you work for several employers, you may be
covered by a SEP of one employer and a different SEP or pension or profit-
sharing plan of another employer.
SEP-IRA Amounts--Rollover or Transfer to Another IRA.--You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place
those funds in another IRA or SEP-IRA. This is called a "rollover" and
can be done without penalty only once in any 1-year period. However,
there are no restrictions on the number of times you may make "transfers"
if you arrange to have these funds transferred between the trustees or the
custodians so that you never have possession of the funds.
Withdrawals.--You may withdraw your employer's contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 59-1/2, you may be subject
to a tax on early withdrawal.
Excess SEP Contributions.--Contributions exceeding the yearly limitations
may be withdrawn without penalty by the due date (plus extensions) for
filing your tax return (normally April 15), but is includible in your
gross income. Excess contributions left in your SEP-IRA account after
that time may have adverse tax consequences. Withdrawals of those
contributions may be taxed as premature withdrawals.
Financial Institution Requirements.--The financial institution where your
IRA is maintained must provide you with a disclosure statement that
contains the following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility
of retirement savings.
4. Situations and procedures for revoking your IRA, including the
name, address, and telephone number of the person designated to receive
notice of revocation. (This information must be clearly displayed at the
beginning of the disclosure statement.)
5. A discussion of the penalties that may be assessed because of
prohibited activities concerning your IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of
determining annual earnings and charges that may be assessed.
b. Describes whether, and for when, the growth projections are
guaranteed, or a statement of the earnings rate and the terms on which the
projections are based.
c. States the sales commission for each year expressed as a
percentage of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
<PAGE>
YACKTMAN FUND
SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL
RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
(Under Section 408(k) of the Internal Revenue Code)
makes the following agreement under
(Name of employer)
Section 408(k) of the Internal Revenue Code and the instructions to this
form.
Article I--Eligibility Requirements (Check appropriate boxes--see
Instructions.)
The employer agrees to provide for discretionary contributions in each
calendar year to the individual retirement account or individual
retirement annuity (IRA) of all employees who are at least ______ years
old (not to exceed 21 years old) and have performed services for the
employer in at least ______ years (not to exceed 3 years) of the
immediately preceding 5 years. This simplified employee pension (SEP) [_]
includes [_] does not include employees covered under a collective
bargaining agreement, [_] includes [_] does not include certain
nonresident aliens, and [_] includes [_] does not include employees whose
total compensation during the year is less than $400*.
__________________
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Article II--SEP Requirements (See Instructions.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
A. Based only on the first $160,000* of compensation.
B. Made in an amount that is the same percentage of compensation for
every employee.
C. Limited annually to the smaller of $30,000* or 15% of
compensation.
D. Paid to the employee's IRA trustee, custodian, or insurance company
(for an annuity contract).
Employer's Signature and date Name and title
YACKTMAN FUND
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
YACKTMAN FUND
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
YACKTMAN FUND
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Table of Contents
ARTICLE I INTRODUCTION . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . . 10
Section 3.1. Participation at Effective Date . . . . . . . . . . . 10
Section 3.2. Participation after Effective Date . . . . . . . . . . 10
Section 3.3. Reentry . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4. Participation by an Owner-Employee of More Than One
Trade or Business . . . . . . . . . . . . . . . . . . 10
ARTICLE IV CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 12
Section 4.1. Employer Profit Sharing Contributions . . . . . . . . 12
Section 4.2. Employer Pension Contributions . . . . . . . . . . . . 14
Section 4.3. Participant Voluntary Contributions . . . . . . . . . 14
Section 4.4. Time for Making Contributions . . . . . . . . . . . . 15
Section 4.5. Leased Employees . . . . . . . . . . . . . . . . . . . 15
Section 4.6. Rollovers and Transfers . . . . . . . . . . . . . . . 15
ARTICLE V. CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k)) . . . . . . . . . . . . . . . . 16
Section 5.1. Cash or Deferred Arrangement (Code Section 401(k)) . . 16
Section 5.2. Elective Deferrals . . . . . . . . . . . . . . . . . . 16
Section 5.3. Matching Contributions . . . . . . . . . . . . . . . . 21
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions . . . . . . . . . . . . . . 24
Section 5.5. Special Distribution Rules . . . . . . . . . . . . . . 25
Section 5.6. Definitions . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI SECTION 415 LIMITATIONS . . . . . . . . . . . . . . . 31
Section 6.1. Employers Maintaining Only this Plan . . . . . . . . . 31
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans . . . . . . . . . . . . . . 32
Section 6.3. Employers Maintaining Other Defined Contribution
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.4. Employers Maintaining Defined Benefit Plans . . . . . 33
Section 6.5. Definitions . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . 38
Section 7.1. Separate Accounts . . . . . . . . . . . . . . . . . . 38
Section 7.2. Vesting . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.3. Computation of Vesting Service . . . . . . . . . . . . 38
Section 7.4. Allocation of Forfeitures . . . . . . . . . . . . . . 39
ARTICLE VIII PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . 40
Section 8.1. Benefits Payable Under the Plan . . . . . . . . . . . 40
Section 8.2. Manner of Distributions . . . . . . . . . . . . . . . 41
Section 8.3. Commencement of Payments . . . . . . . . . . . . . . . 45
Section 8.4. Payment of Small Amounts . . . . . . . . . . . . . . . 49
Section 8.5. Persons Under Legal or Other Disability . . . . . . . 50
Section 8.6. Withdrawals from Profit Sharing Plan . . . . . . . . . 50
Section 8.7. Transfer of Benefits to Eligible Retirement Plan . . . 51
ARTICLE IX ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS . . . 52
Section 9.1. Custodial Account . . . . . . . . . . . . . . . . . . 52
Section 9.2. Receipt of Contributions . . . . . . . . . . . . . . . 52
Section 9.3. Investment of Account Assets . . . . . . . . . . . . . 52
Section 9.4. Exclusive Benefit . . . . . . . . . . . . . . . . . . 53
Section 9.5. Expenses . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.6. Voting . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.7. Reports of the Custodian and Administrator . . . . . . 53
Section 9.8. Limitation of Custodian's Duties and Liability . . . . 54
ARTICLE X AMENDMENT AND TERMINATION . . . . . . . . . . . . . . 56
Section 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.2. Termination . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XI FIDUCIARY RESPONSIBILITIES . . . . . . . . . . . . . . 58
Section 11.1. Administrator . . . . . . . . . . . . . . . . . . . . 58
Section 11.2. Powers of Administrator . . . . . . . . . . . . . . . 58
Section 11.3. Records and Reports . . . . . . . . . . . . . . . . . 58
Section 11.4. Other Administrative Provisions . . . . . . . . . . . 58
Section 11.5. Claims Procedure . . . . . . . . . . . . . . . . . . . 59
Section 11.6. Claims Review Procedure . . . . . . . . . . . . . 59
ARTICLE XII AMENDMENT AND CONTINUATION OF ORIGINAL PLAN . . . . . 61
ARTICLE XIII TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . 63
Section 13.1. Effect of Top-Heavy Status . . . . . . . . . . . . . . 63
Section 13.2. Additional Definitions . . . . . . . . . . . . . . . . 63
Section 13.3. Minimum Allocations . . . . . . . . . . . . . . . . . 65
Section 13.4. Benefit Limit Change . . . . . . . . . . . . . . . . . 66
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 67
Section 14.1. Rights of Employees and Participants . . . . . . . . . 67
Section 14.2. Merger With Other Plans . . . . . . . . . . . . . . . 67
Section 14.3. Non-Alienation of Benefits . . . . . . . . . . . . . . 67
Section 14.4. Failure to Qualify . . . . . . . . . . . . . . . . . . 67
Section 14.5. Mistake of Fact; Disallowance of Deduction . . . . . . 68
Section 14.6. Participation under Prototype Plan . . . . . . . . . . 68
Section 14.7. Gender . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.8. Headings . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.9. Governing Law . . . . . . . . . . . . . . . . . . . . 68
YACKTMAN FUND
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
ARTICLE I
INTRODUCTION
This Plan, which is made available by Yacktman Asset Management
Company has been adopted by the Employer named in the Adoption
Agreement(s) as a qualified money purchase pension and/or profit sharing
plan for its eligible employees which is intended to qualify under Code
Section 401(a). The Employer's Plan shall consist of the following
provisions, together with the Adoption Agreement(s).
ARTICLE II
DEFINITIONS
Section 2.1. "Account" means the account or accounts
maintained by the Custodian for a Participant, as described in Article
VII.
Section 2.2. "Administrator" means the plan administrator and
fiduciary of the Plan with authority and responsibility to control and
manage the operation and administration of the Plan in accordance with its
terms and to comply with the reporting, disclosure and other requirements
of ERISA. Unless a different Administrator is appointed by the Employer,
the Administrator shall be the Employer.
Section 2.3. "Beneficiary" means the person or persons
designated by a Participant or otherwise entitled to receive benefits in
the event of the Participant's death as provided herein. Such designation
shall be made in writing and in such form as may be required by the
Administrator, and shall be filed with the Administrator. Any designation
may include contingent or successive Beneficiaries. Where such
designation has been properly made, distribution of benefits shall be made
directly to such Beneficiary or Beneficiaries. The Beneficiary or
Beneficiaries designated by a Participant may be changed or withdrawn at
any time from time to time, by the Participant, but only by filing with
the Administrator a new designation, and revoking all prior designations.
The most recent valid designation on file with the Administrator at the
time of the Participant's death shall be the Beneficiary. Notwithstanding
the foregoing, in the event the Participant is married at the time of his
death, the Beneficiary shall be the Participant's surviving spouse unless
such spouse consented in writing to the designation of an alternative
Beneficiary after notice of the spouse's rights and such consent was
witnessed by a Plan representative appointed by the Administrator or a
notary public as provided in Section 8.2(a) hereof. In the event no valid
designation of Beneficiary is on file with the Administrator at the date
of death or no designated Beneficiary survives him, the Participant's
spouse shall be deemed the Beneficiary; in the further event the
Participant is unmarried or his spouse does not survive him, the
Participant's estate shall be deemed to be his Beneficiary.
Section 2.4. "Break in Service" means a Plan Year in which a
Participant fails to complete at least five hundred one (501) Hours of
Service. Breaks in Service and Years of Service will be measured on the
same vesting computation period.
Section 2.5. "Code" means the Internal Revenue Code of 1986,
as interpreted by applicable regulations and rulings issued pursuant
thereto, all as amended and in effect from time to time. Reference to a
Code Section shall include that Section, and any comparable section or
sections of any future legislation that amends, supplements or supersedes
that Section.
Section 2.6. "Compensation" is defined as wages within the
meaning of Section 3401(a) of the Code and all other payments of
compensation to the Employee by the Employer (in the course of the
Employer's trade or business) for which the Employer is required to
furnish the Employee a written statement under Sections 6041(d),
6051(a)(3) and 6052 of the Code, determined without regard to any rules
under Section 3401(a) that limit the remuneration included in wages based
on the nature or locations of the employment or the services performed.
For any Self-Employed Individual covered under the Plan, Compensation
shall mean such individual's Earned Income.
For Plan Years beginning after December 31, 1988, the maximum
amount of Compensation taken into account under the Plan for a Participant
in any Plan Year shall not exceed two hundred thousand dollars ($200,000)
or such greater amount as permitted by the Secretary of the Treasury,
except that the dollar increase in effect on January 1 of any calendar
year is effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effective on January 1, 1990. If
the Plan determines Compensation on a period of time that contains fewer
than 12 calendar months, then the annual compensation limit is an amount
equal to the annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
For purposes of this limitation, the family aggregation rules of
Code Section 414(q)(6) shall apply, except that the term "family" shall
include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age nineteen (19) before the close
of such year. If, as a result of the application of such rules the
adjusted two hundred thousand dollars ($200,000) limitation is exceeded,
then (except for purposes of determining the portion of Compensation up to
the integration level if the Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion
to each such individual's Compensation as determined under this Section
prior to the application of this limitation. If Compensation for any prior
Plan Year is taken into account in determining an Employee's contributions
or benefits for the current year, the Compensation for such prior year is
subject to the applicable annual compensation limit in effect for that
prior year. For this purpose, for years beginning before January 1, 1990,
the applicable annual compensation limit is $200,000.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the contrary,
for plan years beginning on or after January 1, 1994, the annual
Compensation of each employee taken into account under the plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
Section 2.7. "Custodial Account" means the account established
by the Custodian, in accordance with Article IX, in the name of the
Employer or for each Participant as elected in the Adoption Agreement.
Section 2.8. "Custodian" means Firstar Trust Company, or any
successor thereto.
Section 2.9. "Disability" means a mental or physical condition
of injury or sickness, as determined by the Administrator based upon the
report of a medical examiner satisfactory to the Employer, which prevents
a Participant from carrying out the duties of his position and which is
likely to be permanent. Any such determination by the Administrator shall
be made in a uniform and nondiscriminatory manner.
Section 2.10. "Earned Income" means net earnings from
self-employment in the trade or business with respect to which the Plan is
established for which the personal services of the individual are a
material income-producing factor. Net earnings shall be determined
without regard to items not included in gross income and the deductions
allocable to such items. Net earnings shall be reduced by contributions
by the Employer to a qualified plan to the extent deductible under Code
Section 404. Net earnings shall be determined with regard to the
deduction allowed to the Employer under Code Section 164(f) for taxable
years beginning after December 31, 1989.
Section 2.11. "Effective Date" means the date as of which this
Plan is initially effective as indicated in item 3 of the Adoption
Agreement.
Section 2.12. "Elective Deferrals" means any Employer
contributions made to the Plan at the election of a participating
Employee, in lieu of payment of an equal amount to the participating
Employee in cash as Compensation pursuant to Section 5.2 hereof, and shall
include contributions made pursuant to a salary reduction agreement or
other deferral method. With respect to any taxable year, a participating
Employee's Elective Deferrals are the sum of all employer contributions
made on behalf of such Employee pursuant to an election to defer under any
qualified CODA as described in Code Section 401(k), any simplified
employee pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code Section
457, any plan as described under Code Section 501(c)(18), and any employer
contributions made on the behalf of a participating Employee for the
purchase of an annuity contract under Code Section 403(b) pursuant to a
salary reduction agreement.
Section 2.13. "Employee" means an individual employed by the
Employer (including any eligible Self-Employed Individual) or any Related
Employer adopting this Plan except as excluded pursuant to item 4 of the
Adoption Agreement. The term Employee shall also include any individual
who is a Leased Employee, unless excluded pursuant to item 4 of the
Adoption Agreement.
Section 2.14. "Employer" means any entity adopting the Plan.
Section 2.15. "Employer Pension Contributions" means the
contributions made by the Employer pursuant to Section 4.2 hereof if
elected in item 6 of the Adoption Agreement (Pension Plan).
Section 2.16. "Employer Profit Sharing Contributions" means the
contributions made by the Employer pursuant to Section 4.1 hereof if
elected in item 6 of the Adoption Agreement (Profit Sharing Plan).
Section 2.17. "ERISA" means the Employee Retirement Income
Security Act of 1974, as interpreted and applied under regulations and
rulings issued pursuant thereto, all as amended and in effect from time to
time.
Section 2.18. "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled to
payment for the performance of duties for the Employer. These hours shall
be credited to the Employee for the computation period in which the duties
are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than five hundred one (501) Hours of service shall be credited under
this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours of Service under
this paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which are incorporated
herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours
of Service shall not be credited both under subsection (a) or subsection
(b), as the case may be, and under this subsection (c). These hours shall
be credited to the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation period in
which the award, agreement or payment is made.
(d) Solely for purposes of determining whether a Break in
Service, as defined in Section 2.4, for participation and vesting purposes
has occurred in a computation period, an individual who is absent from
work for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be determined,
eight (8) hours of service per normal workday of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence:
(i) by reason of the pregnancy of the
individual;
(ii) by reason of a birth of a child of the
individual;
(iii) by reason of the placement of a child with
the individual in connection with the
adoption of such child by such individual;
or
(iv) for purposes of caring for such child for a
period beginning immediately following such
birth or placement.
The Hours of Service credited under this Section 2.18 shall be credited
(i) in the computation period in which the absence begins if the crediting
is necessary to prevent a Break in Service in that period, or (ii) in all
other cases the following computation period.
(e) Hours of Service shall be determined on the basis of actual
hours for which an Employee is paid or entitled to payment unless a
different method of determining Hours of Service is selected in item 4(A)
of the Adoption Agreement.
(f) In the event the Employer maintains the plan of a
predecessor employer, service for such predecessor employer shall be
treated as service for the Employer. Hours of Service will be credited
for employment with members of an affiliated service group under Code
Section 414(m), a controlled group of corporations under Code Section
414(b), or a group of trades or businesses under common control under Code
Section 414(c) of which the Employer is a member and any other entity
required to be aggregated with the Employer pursuant to Code Section
414(o) and the Regulations thereunder. Hours of Service will also be
credited for any Leased Employee for purposes of this Plan under Code
Sections 414(n) or (o) and the Regulations thereunder, unless excluded
under item 4 of the Adoption Agreement.
Section 2.19. "Investment Advisor" means Yacktman Asset
Management Company.
Section 2.20. "Investment Company" means The Yacktman Fund,
Inc. and any other regulated investment company(ies) designated by the
Investment Advisor.
Section 2.21. "Investment Company Shares" means the shares of
each Investment Company.
Section 2.22. "Leased Employee" means any individual who is
considered a leased employee within the meaning of Code Sections 414(n) or
(o). For purposes of this Section, a Leased Employee means any person
who, pursuant to an agreement between the Employer and any other person
(which may include the Leased Employee), has performed services for the
Employer (or for the Employer and any Related Employer) in a capacity
other than as a common law employee on a substantially full-time basis for
a period of at least one year, and such services are of a type
historically performed by employees in the business field of the Employer.
Notwithstanding the foregoing, no individual shall be considered to be a
Leased Employee if (a) such individual is covered by a money purchase
pension plan providing: (i) a non-integrated employer contribution rate
of at least ten percent (10%) of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the individual's gross
income under Code Sections 125, 402(a)(8), 402(h) or 403(b), (ii)
immediate participation, and (iii) full and immediate vesting and (b)
Leased Employees do not constitute more than twenty percent (20%) of the
Employer's nonhighly compensated work force. Contributions or benefits
provided to a Leased Employee by the leasing organization which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
Section 2.23. "Matching Contribution" means an Employer
contribution made to the Plan or any other defined contribution plan on
behalf of a participating Employee on account of a participating
Employee's Elective Deferrals pursuant to Section 5.3 hereof or on account
of any employee contributions or elective deferrals made to any other
plan.
Section 2.24. "Net Profits" means the current or accumulated
earnings of the Employer before federal and state taxes and contributions
to this or any other qualified plan.
Section 2.25. "Normal Retirement Age" means age 65 or such
other age as selected in item 11 of the Adoption Agreement (Profit Sharing
Plan) and item 9 of the Adoption Agreement (Pension Plan). If the
Employer enforces a mandatory retirement age, the Normal Retirement Age
shall be the lesser of such mandatory retirement age or the age specified
in the Adoption Agreement.
Section 2.26. "Original Plan" means any defined contribution
plan which meets the requirements of Code Section 401 and referred to in
Article XII of the Plan.
Section 2.27. "Owner-Employee" means an individual who is a
sole proprietor, or who is a partner owning more than ten percent (10%) of
either the capital or profits interest of the partnership.
Section 2.28. "Participant" means each Employee (including any
eligible Self-Employed Individual) who has completed the requirements for
eligibility specified in Section 3.1 hereof. Each such Employee shall
become a Participant as of the earlier of: (i) the first day of the Plan
Year or (ii) the first day of the seventh month of the Plan Year beginning
after he completes such requirements.
Section 2.29. "Participant Voluntary Contributions" means
contributions by a Participant under the Plan pursuant to Section 4.3, if
elected in item 9 of the Adoption Agreement (Profit Sharing Plan) and item
8 of the Adoption Agreement (Pension Plan).
Section 2.30. "Pension Plan" means the feature of the Plan
pursuant to which the Employer makes Employer Pension Contributions. Such
feature applies only to the extent elected in item 6 of the Adoption
Agreement (Pension Plan).
Section 2.31. "Plan" means this prototype profit sharing plan
and/or money purchase pension plan, together with the appropriate Adoption
Agreement(s), as set forth herein and as may be amended from time to time.
As used herein, the term Plan shall mean either or both the money purchase
pension plan and the profit-sharing plan depending on whether the Employer
has adopted one or both plans.
Section 2.32. "Plan Year" means the twelve (12) consecutive
month period designated in item 2 of the Adoption Agreement. The first
Plan Year shall commence on the Effective Date.
Section 2.33. "Profit Sharing Plan" means the features of the
Plan pursuant to which all contributions, other than Employer Pension
Contributions, are made to the Plan, including any contributions pursuant
to the cash or deferred arrangement (Section 401(k)) described in Article
V hereof. Such features apply only to the extent elected in items 6
and/or 8 of the Adoption Agreement (Profit Sharing Plan).
Section 2.34. "Related Employer" means an organization which,
together with the Employer, constitutes (i) a controlled group of
corporations as defined in Code Section 414(b); (ii) trades or businesses
under common control as defined in Code Section 414(c); (iii) an
affiliated service group as defined in Code Section 414(m); or (iv) a
group of employers required to be aggregated under Code Section 414(o).
Section 2.35. "Self-Employed Individual" means an individual
who has Earned Income for the taxable year from the trade or business for
which.the Plan was established or who would have had Earned Income but for
the fact that the trade or business had no Net Profits for the taxable
year.
Section 2.36. "Valuation Date" means the last day of each Plan
Year and such other times as shall be determined by the Administrator.
Section 2.37. "Year of Employment" means the twelve (12)
consecutive month period, beginning on the date the Employee first
performs an Hour of Service or any anniversary thereof, in which the
Employee completes at least one thousand (1,000) Hours of Service or such
lesser number of Hours of Service as selected in item 4 of the Adoption
Agreement.
Section 2.38. "Year of Service" means a Plan Year in which the
Employee completes at least one thousand (1,000) Hours of Service or such
lesser number of Hours of Service as selected in item 7 of the Adoption
Agreement.
ARTICLE III
PARTICIPATION
Section 3.1. Participation at Effective Date. Each Employee
shall become a Participant on the Effective Date, if on the Effective Date
such Employee has completed the number of Years of Employment and has
attained age 21 or such lesser age as elected in item 4 of the Adoption
Agreement.
Section 3.2. Participation after Effective Date. Each Employee
who did not become a Participant as of the Effective Date, including
future Employees, shall be entitled to become a Participant in accordance
with Section 2.28 after such Employee has completed the number of Years of
Employment and has attained age 21 or such lesser age as elected in item 4
of the Adoption Agreement.
Section 3.3. Reentry. A former Participant shall become a
Participant immediately upon his return to employment with the Employer or
his return to an eligible class of Employees, whichever is applicable. In
the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee will
become a Participant in accordance with Section 3.2 above; provided that
if the Employee has previously satisfied the eligibility requirements of
Section 3.2, the Employee shall become a Participant immediately upon
becoming a member of the eligible class of Employees.
Section 3.4. Participation by an Owner-Employee of More Than
One Trade or Business.
(a) If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business with respect to which
this Plan is established, and one or more other trades or businesses, this
Plan and the plan established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy Code Sections
401(a) and (d) with respect to the employees of this and all such other
trades or businesses.
(b) If this Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or businesses,
the employees of each such other trade or business must be included in a
plan which satisfies Code Section 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for such
Owner-Employees under this Plan.
(c) If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which he does not control, and
such individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trade or business which he
or she does control must be as favorable as those provided for him or her
under the most favorable plan of the trade or business which he or she
does not control.
(d) For purposes of the preceding subparagraphs, an
Owner-Employee, or two or more Owner-Employees, shall be considered to
control a trade or business if such Owner-Employee, or such two or more
Owner-Employees together, own the entire interest in an unincorporated
trade or business, or, in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits interest in
such partnership. For purposes of the preceding sentence, an
Owner-Employee, or two or more Owner-Employees, shall be treated as owning
any interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to control within the meaning of the
preceding sentence.
(e) Employees and Owner-Employees of trades or businesses which
are under common control (within the meaning of Code Section 414(c)) and
Employees and Owner-Employees of the members of an affiliated service
group (within the meaning of Code Section 414(m)) or of a group of
aggregated employers (under Code Section 414(o)) will be treated as
employed by a single Employer for purposes of employee benefit
requirements of Code Section 414(m)(4).
ARTICLE IV
CONTRIBUTIONS
Section 4.1. Employer Profit Sharing Contributions.
(a) If elected in item 6 of the Adoption Agreement (Profit
Sharing Plan), the Employer shall make an Employer Profit Sharing
Contribution for each Plan Year ending on or after the Effective Date in
the amount determined under such Adoption Agreement.
(b) The total amount of such Employer Profit Sharing
Contribution for a Plan Year shall be allocated to the Account of each
eligible Participant as follows:
(i) Unless otherwise elected in item 6(C) of the Adoption
Agreement, the total amount of such Employer Profit Sharing Contribution
shall be allocated based on the ratio that such eligible Participant's
Compensation and/or Earned Income for the Plan Year bears to the total
Compensation and Earned Income of all eligible Participants for the Plan
Year.
(ii) If the Integration Formula is selected in item 6(C) of the
Adoption Agreement, the total amount of such Employer Profit Sharing
Contribution shall be allocated based on the ratio that such eligible
Participant's Compensation and/or Earned Income for the Plan Year in
excess of the integration level for the Plan Year bears to the total
Compensation and Earned Income for all eligible Participants in excess of
the integration level for the Plan Year; provided, however, that
contributions allocated to a Participant with respect to Compensation
and/or Earned Income in excess of the integration level shall not
represent a greater percentage of such excess Compensation and/or Earned
Income than the lesser of
(A) 200% of the base contribution
percentage, or
(B) the base contribution percentage
plus the greater of
(I) 5.7%, or
(II) the rate of tax under Code Section
3111(a) which is attributable to
old-age insurance in effect at the
beginning of the Plan Year.
Any Employer Profit Sharing Contribution remaining after the allocation in
this subsection (ii) shall be allocated in accordance with subsection (i)
above. The "integration level" shall be the taxable wage base or such
lesser level of Compensation and/or Earned Income selected in item 6(C) of
the Adoption Agreement. The "base contribution percentage" shall mean the
percentage of Compensation and/or Earned Income which is contributed under
the Plan with respect to each Participant's Compensation and/or Earned
Income not in excess of the integration level.
If the integration level exceeds the greater of ten thousand
dollars ($10,000) or one-fifth (1/5) of the taxable wage base but is not
more than eighty percent (80%) of the taxable wage base, the percentage
referred to in (I) above shall be reduced to 4.3% and a proportionate
reduction shall be made to the rate described in (II) above. If the
integration level is more than eighty percent (80%) but less than one
hundred percent (100%) of the taxable wage base, the percentage referred
to in (I) above shall be reduced to 5.4% and a proportionate reduction
shall be made to the rate described in (II) above. The "taxable wage
base" shall be the maximum amount of earnings which may be considered
wages for a year under Code Section 3121(a)(1) in effect as of the
beginning of the applicable Plan Year.
Notwithstanding the above, for any Plan Year in which the Plan
is top-heavy (as defined in Section 13.1 hereof) the Employer Profit
Sharing Contribution shall be allocated
(A) first, to each eligible Participant
based on the ratio that such
Participant's Compensation and/or
Earned Income for the Plan Year bears
to the total Compensation and Earned
Income of all eligible Participants for
the Plan Year, but not more than three
percent (3%) of such Participant's
Compensation and/or Earned Income,
(B) second, to each eligible Participant
based on the ratio that such
Participant's Compensation and/or
Earned Income in excess of the
integration level for the Plan Year
bears to the total Compensation and
Earned Income of all eligible
Participants in excess of the
integration level for the Plan Year,
but not more than three percent (3%) of
such Participant's excess Compensation
and/or Earned Income, and
(C) any remaining Employer Profit Sharing
Contribution shall be allocated
pursuant to the provisions of this
subsection (ii) above.
(c) A Participant will be considered eligible for an allocation
of the Employer Profit Sharing Contribution if the Participant (i) is
employed by the Employer on the last day of the Plan Year or (ii) has
completed at least Five Hundred one (501) Hours of Service during the Plan
Year.
(d) If elected in item 6(B) of the Adoption Agreement, Employer
Profit Sharing Contributions for a Plan Year shall not exceed the Net
Profits of the Employer for such Plan Year.
Section 4.2. Employer Pension Contributions.
(a) If elected in item 6 of the Adoption Agreement (Pension
Plan), the Employer shall make an Employer Pension Contribution for each
eligible Participant for each Plan Year ending on or after the Effective
Date in an amount determined under such Adoption Agreement.
(b) The total amount of such Employer Pension Contribution for
a Plan Year shall be allocated to the Account of each eligible Participant
as follows:
(i) Unless otherwise elected in item 6(B) of the Adoption
Agreement, each eligible Participant shall be allocated an amount equal to
the percentage of such eligible Participant's Compensation and/or Earned
Income as specified in the Adoption Agreement.
(ii) If the Integration Formula is selected in item 6(B) of the
Adoption Agreement, the total amount of such Employer Pension Contribution
shall be allocated in accordance with the method described in Section
4.1(b)(ii) above. Notwithstanding the foregoing, if the Integration
Formula is selected under the Profit Sharing Plan, the Employer Pension
Contribution shall be allocated in accordance with subsection (b)(i)
above.
(c) A Participant will be considered eligible for an Employer
Pension Contribution if the Participant (i) is employed by the Employer on
the last day of the Plan Year or (ii) has completed at least Five Hundred
one (501) Hours of Service during the Plan Year.
Section 4.3. Participant Voluntary Contributions.
(a) If elected in item 9 of the Adoption Agreement (Profit
Sharing Plan) or item 8 of the Adoption Agreement (Pension Plan), a
Participant may voluntarily contribute to the Plan an amount up to ten
percent (10%) of his aggregate Compensation for all years since becoming a
Participant under this Plan and all other qualified plans of the Employer.
Any Participant Voluntary Contributions shall be limited in accordance
with the provisions of Section 5.3, even if the Employer does not elect
the Cash or Deferred Arrangement (Section 401(k)) under item 8 of the
Adoption Agreement (Profit Sharing Plan). If the Profit Sharing Plan is
elected, all Participant Voluntary Contributions shall be deemed made to
such plan. Participant Voluntary Contributions shall be limited to
Participants who are not highly compensated employees (within the meaning
of Code Section 414(q)) if elected in the Adoption Agreement.
(b) A Participant shall be entitled to withdraw from his
appropriate Account at any time upon thirty (30) days' notice from the
Administrator to the Custodian (which notice shall specify the amount of
the withdrawal), a sum not in excess of the capital amount contributed by
him as Participant Voluntary Contributions under the provisions of this
Section 4.3, or the value of such Account, whichever is less, provided
that no ordinary income or capital gains attributable to such
contributions shall be subject to withdrawal. Notwithstanding anything to
the contrary herein, (i) all withdrawals are subject to the provisions of
Article VIII, and (ii) no forfeiture shall occur solely as a result of a
Participant's withdrawal of all or any portion of his Participant
Voluntary Contributions.
(c) No deductible voluntary employee contributions may be made
for taxable years beginning after December 31, 1986. Such contributions
made prior to that date will be maintained in a separate Account which
will be nonforfeitable at all times. The Account will share in the gains
or losses in the same manner as described in Section 9.3 of the Plan.
Subject to Section 8.2, a Participant may withdraw any part of the
deductible voluntary contribution Account by making a written application
to the Administrator.
Section 4.4. Time for Making Contributions. Employer Pension
Contributions and Employer Profit Sharing Contributions must be made no
later than the due date, including extensions thereof, for filing the
Employer's Federal income tax return for the year coincident with or
within which the Plan Year ends (or such later time as authorized by
Treasury Regulations). Participant Voluntary Contributions for any Plan
Year shall be made no later than thirty (30) days after the end of such
Plan Year. The Employer may establish a payroll deduction system or other
procedure to assist the making of Participant Voluntary Contributions and
shall transfer such contributions to the Custodian as soon as practicable
after collected.
Section 4.5. Leased Employees. Contributions or benefits
provided to a Leased Employee by the leasing organization (within the
meaning of Code Section 414(n)) which are attributable to services
performed for the Employer shall be treated as provided by the Employer
for purposes of this Plan.
Section 4.6. Rollovers and Transfers. In the discretion of
the Administrator according to such uniform and nondiscriminatory rules
established by the Administrator, and in accordance with Sections 402 and
408 of the Code, a Participant may make a rollover to the Plan or the Plan
may accept a direct transfer (including voluntary after-tax contributions)
from another plan qualified under Section 401(a) of the Code or from an
individual retirement account. If the Employer has adopted the Profit
Sharing Plan, any rollover or transfer shall be made to such Plan.
ARTICLE V. CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k))
Section 5.1. Cash or Deferred Arrangement (Code Section
401(k)). The provisions of this Article shall be effective as of the
first day of the Plan Year in which this cash or deferred arrangement is
elected in item 8 of the Adoption Agreement (Profit Sharing Plan). Under
no circumstances shall the provisions of this Article apply prior to the
time specified in the preceding sentence.
Section 5.2. Elective Deferrals. (a) Election. (i) An
Employee who has satisfied the minimum age and service requirements set
forth in item 8(A) of the Adoption Agreement (Profit Sharing Plan) may
elect to have Elective Deferrals made to the Plan pursuant to a salary
reduction agreement to the extent permitted in item 8(A) of the Adoption
Agreement (Profit Sharing Plan). Such an election shall be effective as
of the time specified in item 8(A) of the Adoption Agreement (Profit
Sharing Plan) and may not be made effective retroactively.
(ii) An eligible Employee may also base Elective Deferrals, to
the extent provided in item 8(A) of the Adoption Agreement (Profit Sharing
Plan), on cash bonuses that, at the Employee's election, may be
contributed to the Plan or received by the Employee. Such an election
shall be effective as of the time specified in item 8(A) of the Adoption
Agreement (Profit Sharing Plan) and may not be made effective
retroactively.
(b) Change in Rate. The rate at which Elective Deferrals are
made shall remain in effect until modified in accordance with item 8(A) of
the Adoption Agreement (Profit Sharing Plan). Notwithstanding the
foregoing, Elective Deferrals may be suspended entirely by an Employee at
any time by written notice to the Administrator. Any such suspension
shall be effective as soon as administratively practicable following the
Administrator's receipt of such notice.
(c) Vesting. A Participant shall at all times have a fully
vested and nonforfeitable interest in his Elective Deferrals.
(d) Excess Elective Deferrals. (i) No Participating Employee
shall be permitted to have Elective Deferrals made under this Plan or any
other qualified plan maintained by the Employer during any taxable year
pursuant to Code Sections 401(k), 408(k) or 403(b) in excess of the dollar
limitation contained in Code Section 402(g) in effect at the beginning of
such taxable year.
(ii) A Participating Employee may assign to the Plan any Excess
Elective Deferrals made during a taxable year of such Employee by
notifying the Administrator on or before the date specified below of the
Excess Elective Deferrals to be assigned to the Plan. Notwithstanding any
other provision of the Plan, Excess Elective Deferrals, plus any income
and minus any loss allocable thereto, may be distributed no later than
April 15 to any Participating Employee to whose Accounts Excess Elective
Deferrals were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year. A Participating Employee's
claim for Excess Elective Deferrals shall be made in writing and shall be
submitted to the Administrator not later than the March 1 immediately
preceding the relevant April 15. Such claim shall specify the amount of
the Participating Employee's Excess Elective Deferrals for the preceding
taxable year and shall be accompanied by the Participating Employee's
written statement that if such amounts are not distributed, such Excess
Elective Deferrals, when added to amounts deferred under other plans or
arrangements described in Code Sections 401(k), 408(k) or 403(b), exceed
the limit imposed on the Participating Employee by Code Section 402(g) for
the year of the deferral.
(iii) Excess Elective Deferrals shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to Excess Elective Deferrals is the sum of:
(A) income or loss allocable to the
participating Employee's Elective Deferrals
Account for the taxable year for which the
Excess Elective Deferrals occurred
multiplied by a fraction, the numerator of
which is such Participating Employee's
Excess Elective Deferrals for such taxable
year and the denominator of which is such
Participating Employee's Elective Deferrals
Account balance as of the end of the taxable
year without regard to any income or loss
occurring during such taxable year; and
(B) income or loss allocable to the
Participating Employee's Elective Deferrals
Account for the period between the end of
such taxable year and the date of
distribution under (A) above; or, at the
option of the Employer, ten percent (10%) of
the amount determined under (A) above
multiplied by the number of whole calendar
months between the end of such taxable year
and the date of distribution, counting the
month of distribution if distribution occurs
after the fifteenth (15th) of such month.
The amount of Excess Elective Deferrals that may be distributed with
respect to a Participating Employee shall be reduced by any Excess
Contributions previously distributed or recharacterized with respect to
such Participating Employee for the Plan Year beginning with or within
such taxable year. In no event may the amount distributed exceed the
Participating Employee's total Elective Deferrals for such taxable year.
(e) Actual Deferral Percentage. (i) The Actual Deferral
Percentage for Participating Employees who are Highly Compensated
Employees for each Plan Year and the Actual Deferral Percentage for
Participating Employees who are not Highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
(A) The Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Deferral
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(B) The Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Deferral
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided
that the Actual Deferral Percentage for
Participating Employees who are Highly
Compensated Employees does not exceed the
Actual Deferral Percentage for Participating
Employees who are not Highly Compensated
Employees by more than two (2) percentage
points.
(ii) The Actual Deferral Percentage for any Participating
Employee who is a Highly Compensated Employee for the Plan Year and who is
eligible to have Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) allocated to
his Accounts under two or more arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) were made
under a single arrangement. If a Highly Compensated Employee participates
in two or more cash or deferred arrangements that have different Plan
Years, contributions for such employee shall be aggregated for purposes of
this subsection (e). Contributions which are required to be aggregated
are any contributions made under all cash or deferred arrangements ending
with or within the same calendar year.
(iii) In the event that the Plan satisfies the requirements
of Code Sections 401(k), 401(a)(4) or 410(b) only if aggregated with one
or more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan, then
this subsection shall be applied by determining the Actual Deferral
Percentage of Participating Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code Section 401(k) only if they have the
same Plan Year.
(iv) For purposes of determining the Actual Deferral Percentage
of a Participating Employee who is a five (5) percent owner or one of the
ten (10) most highly-paid Highly Compensated Employees, the Elective
Deferrals (and Qualified Non-Elective Contributions and Qualified Matching
Contributions, or both) and Compensation of such Participating Employee
shall include the Elective Deferrals (and, if applicable, Qualified
Non-Elective Contributions and Qualified Matching Contributions, or both)
and Compensation for the Plan Year of Family Members. Family Members,
with respect to such Highly Compensated Employees, shall be disregarded as
separate employees in determining the Actual Deferral Percentage both for
Participating Employees who are not Highly Compensated Employees and for
Participating Employees who are Highly Compensated Employees.
(v) For purposes of determining the Actual Deferral Percentage
test, Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions must be made before the last day of the
twelve-month period immediately following the Plan Year to which such
contributions relate.
(vi) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Deferral Percentage test and the
amount of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(vii) The determination and treatment of the Actual Deferral
Percentage amounts of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(f) Distribution of Excess Contributions. (i) Notwithstanding
any other provision of this Plan, Excess Contributions, plus any income
and minus any loss allocable thereto, shall be distributed no later than
the last day of each Plan Year to Participating Employees to whose
Accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than two and one-half
(2-1/2) months after the last day of the Plan Year in which such excess
amounts arose, a ten percent (10%) excise tax will be imposed on the
Employer with respect to such amounts. Such distributions shall be made
to Highly Compensated Employees on the basis of the respective portions of
the Excess Contributions attributable to each of such Employees. Excess
Contributions shall be allocated to Participating Employees who are
subject to the family member aggregation rules of Code Section 414(q)(6)
in the manner prescribed by the regulations. Excess Contributions
(including any amounts recharacterized) shall be treated as Annual
Additions for purposes of Article VI of the Plan.
(ii) Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Contributions is the sum of:
(A) income or loss allocable to the
Participating Employee's Elective Deferrals
Account (and, if applicable, the Qualified
Non-Elective Contributions Account or the
Qualified Matching Contributions Account, or
both) for the Plan Year for which the Excess
Contributions occurred multiplied by a
fraction, the numerator of which is such
Participating Employee's Excess
Contributions for such Plan Year and the
denominator of which is such Participating
Employee's Account balance(s) attributable
to Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified
Matching Contributions, or both) as of the
end of the Plan Year without regard to any
income or loss occurring during such Plan
Year; and
(B) income or loss allocable to the
Participant's Elective Deferrals Account
(and, if applicable, the Qualified
Non-Elective Contribution Account or the
Qualified Matching Contribution Account, or
both) for the period between the end of such
Plan Year and the date of distribution
multiplied by the fraction determined under
(A) above; or, at the option of the
Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the
number of whole calendar months between the
end of such Plan Year and the date of
distribution, counting the month of
distribution if distribution occurs after
the fifteenth (15th) of such month.
(iii) Excess Contributions shall be distributed from the
Participating Employee's Elective Deferrals Account and Qualified Matching
Contributions Account (if applicable) in proportion to the Participating
Employee's Elective Deferrals and Qualified Matching Contributions (to the
extent used in the Actual Deferral Percentage test) for the Plan Year.
Excess Contributions shall be distributed from the Participating
Employee's Qualified Non-Elective Contributions Account only to the extent
that such Excess Contributions exceed the balance in the Participating
Employee's Elective Deferrals Account and Matching Contributions Account.
(g) Recharacterization. (i) A Participating Employee may
treat his Excess Contributions as an amount distributed to the
Participating Employee and then contributed by the Participating Employee
to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective Deferrals.
Amounts may not be recharacterized by a Highly Compensated Employee to the
extent that such amount in combination with other Participant Voluntary
Contributions would exceed any stated limit under the Plan on Participant
Voluntary Contributions. Recharacterizing Excess Contributions shall be
limited to Participants who are not Highly Compensated Employees if
elected in the Adoption Agreement.
(ii) Recharacterization must occur no later than two and
one-half (2-1/2) months after the end of the Plan Year in which such Excess
Contributions arose and is deemed to occur no earlier than the date the
last Highly Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts
will be taxable to the Participating Employee for such Participating
Employee's taxable year in which the Participating Employee would have
received them in cash.
Section 5.3. Matching Contributions. (a) The Employer shall
make Employer Matching Contributions to the Plan to the extent elected in
item 8(B) of the Adoption Agreement (Profit Sharing Plan).
(b) A Participant shall have a vested interest in his Matching
Contributions Account as determined under the vesting schedule elected in
item 8(B) of the Adoption Agreement (Profit Sharing Plan). Forfeitures
derived from Matching Contributions which become available because of the
vesting provisions above, shall be applied to reduce the Employer Matching
Contributions that would otherwise be due for the Plan Year, or subsequent
Plan Years.
(c) Actual Contribution Percentage. (i) The Actual
Contribution Percentage for Participating Employees who are Highly
Compensated Employees for each Plan Year and the Actual Contribution
Percentage for Participating Employees who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the following tests:
(A) The Actual Contribution Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Contribution
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(B) The Actual Contribution Percentage for
Participating Employees who are Highly
Compensated Employees for the Plan Year
shall not exceed the Actual Contribution
Percentage for Participating Employees who
are not Highly Compensated Employees for the
same Plan Year multiplied by two (2),
provided that the Actual Contribution
Percentage for Participating Employees who
are Highly Compensated Employees does not
exceed the Actual Contribution Percentage
for Participating Employees who are not
Highly Compensated Employees by more than
two (2) percentage points.
(ii) If one or more Highly Compensated Employees participate in
both a cash or deferred arrangement and a plan subject to the Actual
Contribution Percentage test maintained by the Employer and the sum of the
Actual Deferral Percentage and the Actual Contribution Percentage of those
Highly Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the Actual Contribution Percentage of those Highly
Compensated Employees who also participate in a cash or deferred
arrangement will be reduced (beginning with such Highly Compensated
Employee whose Actual Contribution Percentage is the highest) so that the
limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amount is reduced shall be treated as
an Excess Aggregate Contribution. The Actual Deferral Percentage and the
Actual Contribution Percentage of the Highly Compensated Employees are
determined after any corrections required to meet the Actual Deferral
Percentage and the Actual Contribution Percentage tests. Multiple use
does not occur if both the Actual Deferral Percentage and the Actual
Contribution Percentage of the Highly Compensated Employees does not
exceed 1.25 multiplied by the Actual Deferral Percentage and the Actual
Contribution Percentage of the Participating Employees who are not Highly
Compensated Employees.
(iii) For purposes of this subsection, the Contribution
Percentage for any Participating Employee who is a Highly Compensated
Employee and who is eligible to have Contribution Percentage Amounts
allocated to his account under two or more plans described in Code Section
401(a), or arrangements described in Code Section 401(k) that are
maintained by the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall be treated
as a single arrangement.
(iv) In the event that this Plan satisfies the requirements of
Code Sections 401(m), 401(a)(4) or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements
of such Code Sections only if aggregated with this Plan, then this
subsection shall be applied by determining the Contribution Percentage of
employees as if all such plans were a single plan. For plan years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy Code Section 401(m) only if they have the same plan year.
(v) For purposes of determining the Contribution Percentage of
a Participating Employee who is a five percent owner or one of the ten
(10) most highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participating Employee shall
include the Contribution Percentage Amounts and Compensation for the Plan
Year of Family Members. Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate employees in
determining the Contribution Percentage both for Participating Employees
who are not Highly Compensated Employees and for Participating Employees
who are Highly Compensated Employees.
(vi) For purposes of determining the Contribution Percentage
test, Employee Contributions are considered to have been made in the Plan
Year in which contributed to the Plan. Matching Contributions and
Qualified Non-Elective Contributions shall be considered made for a Plan
Year if made no later than the end of the twelve-month period beginning on
the day after the close of the Plan Year.
(vii) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Contribution Percentage test and
the amount of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(viii) The determination and treatment of the Contribution
Percentage of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(d) Distribution of Excess Aggregate Contributions. (i)
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participating Employees to whose
Accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated to
Participating Employees who are subject to the family member aggregation
rules of Code Section 414(q)(6) in the manner prescribed by the
regulations. If such Excess Aggregate Contributions are distributed more
than two and one-half (2-1/2) months after the last day of the Plan Year
in which such excess amounts arose, a ten percent (10%) excise tax will be
imposed on the Employer with respect to those amounts. Excess Aggregate
Contributions shall be treated as Annual Additions for purposes of Article
VI of the Plan.
(ii) Excess Aggregate Contributions shall be adjusted for any
income or loss up to the date of distribution. The income or loss
allocable to Excess Aggregate Contributions is the sum of:
(A) income or loss allocable to the
Participating Employee's Participant
Voluntary Contributions Account, Matching
Contributions Account, Qualified Matching
Contribution Account (if any, and if all
amounts therein are not used in the Actual
Deferral Percentage test) and, if
applicable, Qualified Non-Elective
Contributions Account and Elective Deferrals
Account for the Plan Year for which the
Excess Aggregate Contributions occurred
multiplied by a fraction, the numerator of
which is such Participating Employee's
Excess Aggregate Contributions for such Plan
Year and the denominator of which is the
Participating Employee's Account balance(s)
attributable to Contribution Percentage
Amounts as of the end of the Plan Year
without regard to any income or loss
occurring during such Plan Year; and
(B) income or loss allocable to the
Participating Employee's Participant
Voluntary Contribution Account, Matching
Contributions Account, Qualified Matching
Contribution Account (if any, and if all
amounts therein are not used in the Actual
Deferral Percentage test) and, if
applicable, Qualified Non-Elective
Contributions Account and Elective Deferrals
Account for the period between the end of
such Plan Year and the date of distribution
multiplied by the fraction determined under
(A) above; or, at the election of the
Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the
number of whole calendar months between the
end of such Plan Year and the date of
distribution, counting the month of
distribution if distribution occurs after
the fifteenth (15th) of such month.
(iii) Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer contributions for subsequent Plan Years.
(iv) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro rata basis from the Participating
Employee's Participant Voluntary Contributions Account, Matching
Contributions Account and Qualified Matching Contribution Account (and, if
applicable, the Participating Employee's Qualified Non-Elective
Contributions Account or Elective Deferrals Account, or both).
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions.
(a) Qualified Matching Contributions. The Employer may elect
to make Qualified Matching Contributions under the Plan in item 8(C) of
the Adoption Agreement. Qualified Matching Contributions may be made in
lieu of distributing Excess Contributions as provided in Section 5.2(f)
hereof. Qualified Matching Contributions may be either (i) additional
amounts contributed to the Plan by the Employer and allocated to the
Accounts of Participating Employees who are not Highly Compensated
Employees based on such Employees' Elective Deferrals or (ii) Matching
Contributions otherwise made to the Plan pursuant to Section 5.3(a) hereof
which the Employer designates as Qualified Matching Contributions. The
amount of Qualified Matching Contributions (if any) shall be determined by
the Employer for each year. All Qualifying Matching Contributions shall
be used to satisfy the Actual Deferral Percentage test pursuant to
regulations under the Code.
(b) The Employer may elect to make Qualified NonElective
Contributions under the Plan in item 8(C) of the Adoption Agreement.
Qualified Non-Elective Contributions may be made in lieu of distributing
Excess Contributions as provided in Section 5.2(f) or Excess Aggregate
Contributions as provided in Section 5.3(d) hereof. Qualified
Non-Elective Contributions may be either (i) additional amounts
contributed to the Plan by the Employer and allocated to the Accounts of
Participating Employees who are not Highly Compensated Employees based on
such Employees' Compensation or (ii) Profit Sharing Contributions
otherwise made to the Plan pursuant to Section 4.1(a) hereof which the
Employer designates as Qualified Non-Elective Contributions. The amount
of Qualified Non-Elective Contributions (if any) shall be determined by
the Employer for each year. All Qualified Non-Elective Contributions
shall be used to satisfy either the Actual Deferral Percentage test or the
Average Contribution Percentage test, or both, pursuant to regulations
under the Code.
(c) Separate accounts for Qualified Non-Elective Contributions
and Qualified Matching Contributions will be maintained for each
Participant consistent with Section 7.1 hereof. Each account will be
credited with the applicable contributions and earnings thereon.
(d) For purposes of the special distribution rules in Section
5.5, Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be treated as Elective Deferrals.
(e) Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be appropriately designated when contributed.
Section 5.5. Special Distribution Rules. Except as provided
below, Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions, and income allocable to each, are not
distributable to a Participant or a Beneficiary, in accordance with such
Participant's or Beneficiary's election, earlier than upon separation from
service, death, or disability.
(a) Financial Hardship. (i) If elected by the Employer in item
8(D) of the Adoption Agreement (Profit Sharing Plan), a Participant may
elect to withdraw all or any portion of his Elective Deferrals (excluding
net earnings credited thereto after December 31, 1988) on account of
financial hardship. For purposes of this Section 5.5, a financial
hardship shall mean an immediate and heavy financial need of the
Participant which cannot be satisfied from other resources reasonably
available to such Participant. Hardship withdrawals are subject to the
spousal consent requirements of Code Sections 401(a)(11) and 417.
(ii) A withdrawal is made on account of an immediate and heavy
financial need of a Participant only if it is made on account of: (A)
unreimbursed medical expenses described in Code Section 213(d) of the
Participant or the Participant's spouse or dependents (as defined in Code
Section 152); (B) the purchase (excluding mortgage payments) of a
principal residence for the Participant; (C) payment of tuition for the
next term of post-secondary education for the Participant or the
Participant's spouse, children or dependents; or (D) the need to prevent
the Participant's eviction from, or foreclosure on the mortgage of, the
Participant's principal residence or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
(iii) A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the Participant only if:
(A) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer; (B) all plans maintained by the Employer provide that the
Participant's Elective Deferrals and any other elective contributions or
employee contributions under this Plan and any other plan maintained by
the Employer (both qualified and nonqualified) will be automatically
suspended for twelve (12) months after the receipt of the hardship
distribution; (C) the distribution is not in excess of the amount of an
immediate and heavy financial need; and (D) all plans maintained by the
Employer provide that the Participant may not make Elective Deferrals for
the Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such taxable year less the amount of such Participant's
Elective Deferrals for the taxable year of the hardship distribution.
(iv) A request for a hardship distribution shall be made in
writing and in such form as may be prescribed by the Administrator.
Processing of applications and distributions of amounts under this
Section, on account of a bona fide financial hardship, shall be made as
soon as administratively feasible.
(b) Elective Deferrals at Age 59-1/2. Upon attaining age
fifty-nine and one-half (59-1/2), a Participant may elect to withdraw all or
any portion of his Elective Deferrals Account and/or Employer Matching
Contributions Account, as of the last day of any month, even if he is
still employed.
Section 5.6. Definitions. For purposes of this Article, the
following words and phrases shall have the following meanings:
(a) "Actual Deferral Percentage" means, for a specified group
of Participating Employees for a Plan Year, the average of the ratios
(calculated separately for each Participating Employee in such group) of
(i) the amount of Employer contributions actually paid over to the Plan on
behalf of such Participating Employee for the Plan Year to (ii) the
Participating Employee's Compensation for such Plan Year (whether or not
the Employee was a Participating Employee for the entire Plan Year).
Employer contributions on behalf of any Participating Employee shall
include: (i) any Elective Deferrals made pursuant to the Participating
Employee's deferral election, including Excess Elective Deferrals of
Highly Compensated Employees, but excluding Elective Deferrals that are
taken into account in the Contribution Percentage test (provided the
Actual Deferral Percentage test is satisfied both with and without
exclusion of these Elective Deferrals); and (ii) at the election of the
Employer, Qualified Non-Elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participating Employee but for the failure to make
Elective Deferrals shall be treated as a Participating Employee on whose
behalf no Elective Deferrals are made.
(b) "Aggregate Limit" means the sum of (i) one hundred
twenty-five percent (125%) of the greater of the Actual Deferral
Percentage of the Participating Employees who are not Highly Compensated
Employees for the Plan Year or the Actual Contribution Percentage of
Participating Employees who are not Highly Compensated Employees under the
Plan subject to Code Section 401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred arrangement and (ii) the
lesser of two hundred percent (200%) or two (2) plus the lesser of such
Actual Deferral Percentage or Actual Contribution Percentage. "Lesser" is
substituted for "greater" in (i) above and "greater" is substituted for
"lesser" after "two plus the" in (ii) above if it would result in a larger
Aggregate Limit.
(c) "Average Contribution Percentage" means the average of the
Contribution Percentages of the Employees in a group who are eligible to
make Participant Voluntary Contributions, or Elective Deferrals (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions.
(d) "Contribution Percentage" means the ratio (expressed as a
percentage) of the Participating Employee's Contribution Percentage
Amounts to the Participating Employee's Compensation for the Plan Year
(whether or not the Employee was a Participating Employee for the entire
Plan Year).
(e) "Contribution Percentage Amounts" means the sum of the
Participant Voluntary Contributions, Matching Contributions, and Qualified
Matching Contributions (to the extent not taken into account for purposes
of the Actual Deferral Percentage test) made under the Plan on behalf of
the Participating Employee for the Plan Year. Such Contribution
Percentage Amounts shall include forfeitures of Excess Aggregate
Contributions or Matching Contributions allocated to the Participating
Employee's Accounts which shall be taken into account in the year in which
such forfeiture is allocated. The Employer may elect to include Qualified
Non-Elective Contributions in the Contribution Percentage Amounts. The
Employer also may elect to use all or part of the Elective Deferrals for
the Plan Year in the Contribution Percentage Amounts so long as the Actual
Deferral Percentage test is satisfied both including and excluding the
Elective Deferrals that are included in the Contribution Percentage
Amounts.
(f) "Excess Aggregate Contributions" means, with respect to any
Plan Year, the excess of:
(i) the aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage actually
made on behalf of Highly Compensated Employees for such Plan Year, over
(ii) the maximum Contribution Percentage Amounts permitted by
the Actual Contribution Percentage test (determined by reducing
contributions made on behalf of Highly Compensated Employees in order of
their Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 5.2(d) hereof and then determining Excess
Contributions pursuant to Section 5.2(f) hereof.
(g) "Excess Contributions" means, with respect to any Plan
Year, the excess of:
(i) the aggregate amount of Employer contributions actually
taken into account in computing the Actual Deferral Percentage of Highly
Compensated Employees for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the
Actual Deferral Percentage test (determined by reducing contributions made
on behalf of Highly Compensated Employees in order of the Actual Deferral
Percentages, beginning with the highest of such percentages).
(h) "Excess Elective Deferrals" means those Elective Deferrals
that are includible in a Participating Employee's gross income for a
taxable year under Code Section 402(g) because they exceed the limitation
specified in Section 5.2(d)(i) hereof. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan.
(i) "Family Member" means the spouse, lineal ascendants and
descendants of the employee or former employee and the spouses of such
lineal ascendants and descendants, all within the meaning of Code Section
414(q)(6).
(j) "Highly Compensated Employee" means both highly compensated
active employees and highly compensated former employees.
(i) A highly compensated active employee includes any Employee
who performs service for the Employer during the determination year and
who, during the look-back year: (i) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Code Section
415(d)); (ii) received compensation from the Employer in excess of $50,000
(as adjusted pursuant to Code Section 415(d)) and was a member of the
top-paid group for such year; or (iii) was an officer of the Employer and
received compensation during such year that is greater than 50 percent of
the dollar limitation in effect under Code Section 415(b)(1)(A). The term
Highly Compensated Employee also includes: (i) employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the employee is one of the
100 employees who received the most compensation from the Employer during
the determination year; and (ii) employees who are 5 percent owners at any
time during the look-back year or determination year. If no officer has
satisfied the compensation requirement of (iii) above during either a
determination year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Employee. For this purpose,
the determination year shall be the Plan Year. The look-back year shall
be the twelve-month period immediately preceding the determination year.
(ii) A highly compensated former employee includes any Employee
who separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the employee's fifty-fifth (55th) birthday.
(iii) If an employee is, during a determination year or
look-back year, a Family Member of either a five percent owner who is an
active or former employee or a Highly Compensated Employee who is one of
the ten (10) most highly compensated employees ranked on the basis of
Compensation paid by the Employer during such year, then the Family Member
and the five percent owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the Family Member and five percent owner or
top-ten Highly Compensated Employee shall be treated as a single employee
receiving Compensation and Plan contributions or benefits equal to the sum
of such Compensation and contributions or benefits of the Family Member
and five percent owner or top-ten Highly Compensated Employee.
(iv) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of employees in
the top-paid group, the top 100 employees, the number of employees treated
as officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q).
(k) "Participating Employee" means an Employee who is eligible
to make Elective Deferrals or Participant Voluntary Contributions (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions. If an Employee
contribution is required as a condition of participation in the Plan, any
Employee who would be a Participant in the Plan if such Employee made such
a contribution shall be treated as a Participating Employee on behalf of
whom no Employee contributions are made.
(l) "Qualified Matching Contributions" means Matching
Contributions which are one hundred percent (100%) vested and
nonforfeitable at all times and which are distributable only in accordance
with the distribution provisions applicable to Elective Deferrals.
(m) "Qualified Non-Elective Contributions" means contributions
(other than Matching Contributions or Qualified Matching Contributions)
made by the Employer and allocated to Participating Employees' Accounts
that the Participating Employees may not elect to receive in cash until
distributed from the Plan, are one hundred percent (100%) vested and
nonforfeitable when made, and are distributable only in accordance with
the distribution provisions applicable to Elective Deferrals.
ARTICLE VI
SECTION 415 LIMITATIONS
Section 6.1. Employers Maintaining Only this Plan.
(a) If the Participant does not participate in, and has never
participated in another qualified plan, a welfare benefit fund (as defined
in Code Section 419(e)) or an individual medical account (as defined in
Code Section 415(1)(2)) maintained by the Employer, the amount of Annual
Additions which may be credited to a Participant's Account under this Plan
for a Limitation Year shall not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If the
Employer's contribution that would otherwise be contributed or allocated
to the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for
the Limitation Year will equal the Maximum Permissible Amount.
(b) Prior to the determination of the Participant's actual
compensation for a Limitation Year, the Maximum Permissible Amount may be
determined on the basis of the Participant's estimated annual compensation
for such Limitation Year. Such estimated annual compensation shall be
determined on a reasonable basis and shall be uniformly determined for all
Participants similarly situated. Any Employer contributions based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(c) As soon as it is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
Compensation for such Limitation Year.
(d) If, pursuant to Section 6.1(c) and notwithstanding the
provisions of Section 6.1(a) hereof which require a reduction of
contributions so as not to exceed the limitations of this Article VI,
there is an Excess Amount with respect to a Participant for a Limitation
Year, such Excess Amount shall be disposed of as follows:
(i) Any Participant Voluntary Contributions, to the extent that
the return would reduce the Excess Amount, shall be returned to the
Participant.
(ii) In the event that the Participant is covered by this Plan
at the end of the Limitation Year, remaining Excess Amounts after the
application of clause (i) shall be applied to reduce future Employer
contributions (including any allocation of forfeitures) for such
Participant under this Plan in the next Limitation Year (and each
succeeding year, as necessary).
(iii) In the event that the Participant is not covered by
this Plan at the end of the Limitation Year, remaining Excess Amounts
after the application of clause (i) shall not be distributed to the
Participant, but shall be held unallocated in a suspense account and shall
be applied to reduce future Employer contributions (including any
allocation of forfeitures) for all remaining Participants in the next
Limitation Year (and each succeeding year, as necessary).
(iv) If a suspense account is in existence at any time during
the Limitation Year pursuant to this Section, it will not participate in
the allocation of any investment gains and losses, and all amounts in the
suspense account must be allocated and reallocated to Participants'
Accounts before any Employer or Employee contributions may be made to the
Plan for such Limitation Year. Excess amounts may not be distributed to
Participants or former Participants.
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans.
(a) If, in addition to this Plan, the Participant is covered
under another qualified defined contribution plan which qualifies as a
Master or Prototype Plan or a welfare benefit fund (as defined in Code
Section 419(e)) or an individual medical account (as defined in Code
Section 415(1)(2)) maintained by the Employer during any Limitation Year,
the amount of Annual Additions which may be allocated under this Plan on
the Participant's behalf for such Limitation Year, shall not exceed the
Maximum Permissible Amount reduced by the Annual Additions credited to a
Participant's account under such other plans, welfare benefit funds or
individual medical accounts for the same Limitation Year. If the Annual
Additions with respect to the Participant under other defined contribution
plans and welfare benefit funds maintained by the Employer are less than
the Maximum Permissible Amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account under
this Plan would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated will be
reduced so that the Annual Additions under all such plans and funds for
the Limitation Year will equal the Maximum Permissible Amount. If the
Annual Additions with respect to the Participant under such other defined
contribution plans and welfare benefit funds in the aggregate are equal to
or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for
the Limitation Year.
(b) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in
subsection (a) above may be determined on the Participant's estimated
annual compensation for such Limitation Year. Such estimated annual
compensation shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly situated. Any
Employer contribution based on estimated annual compensation shall be
reduced by any Excess Amounts carried over from prior years.
(c) As soon as it is administratively feasible after the end of
the Limitation Year, the amounts referred to in subsection (a) above shall
be determined on the basis of the Participant's actual Compensation for
such Limitation Year.
(d) If a Participant's Annual Additions under this Plan and all
such other plans result in an Excess Amount for a Limitation Year, such
Excess Amount shall be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a welfare benefit
fund or individual medical account will be deemed to have been allocated
first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the
product of:
(i) the total Excess Amount allocated as of such date
(including any amount which would have been allocated but for the
limitations of Code Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as
of such date under this Plan, divided by (B) the total amount allocated as
of such date under all qualified master or prototype defined contribution
plans (determined without regard to the limitations of Code Section 415).
(f) Any Excess Amounts attributed to this Plan shall be
disposed of as provided in Section 6.1(d).
Section 6.3. Employers Maintaining Other Defined Contribution
Plans. If the Participant is covered under another plan which is a
qualified defined contribution plan which is not a Master or Prototype
Plan maintained by the Employer, Annual Additions allocated under this
Plan on behalf of any Participant shall be limited in accordance with the
provisions of Section 6.2, as though the other plan were a Master or
Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
Section 6.4. Employers Maintaining Defined Benefit Plans. If
the Participant is covered or was covered at any time under a qualified
defined benefit plan maintained by the Employer, the projected annual
benefit thereunder and the Annual Additions credited to any such
Participant's Account under this Plan and any other qualified defined
contribution plan in any Limitation Year will be limited so that the sum
of the Defined Contribution Fraction and the Defined Benefit Fraction with
respect to such Participant will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with
the Adoption Agreement.
Section 6.5. Definitions. For purposes of this Article VI,
the following terms shall be defined as follows:
(a) Annual Additions -- The sum of the following amounts
allocated to a Participant's Account for a Limitation Year: (i) all
Employer contributions; (ii) all Participant contributions (other than a
qualified rollover contribution as described in Code Section 402(a)(5));
(iii) all forfeitures; (iv) all amounts allocated, after March 31, 1984,
to an individual medical account (as defined in Code Section 415(1)(2))
which is part of a defined benefit or annuity plan maintained by the
Employer are treated as Annual Additions to a defined contribution plan;
and (v) amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are attributable
to post-retirement medical benefits allocated to the separate account of a
"key employee" (as defined in Code Section 419A(d)(3)) under a welfare
benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For the purposes of this Article VI, amounts reapplied under Sections
6.1(d) and 6.2(f) of the Plan to reduce Employer contributions shall also
be included as Annual Additions.
(b) Compensation is defined as wages within the meaning of
Section 3401(a) of the Code and all other payments of compensation to the
Employee by the Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish the Employee a
written statement under Sections 6041(d), 6051(a)(3) and 6052 of the Code,
determined without regard to any rules under Section 3401(a) that limit
the remuneration included in wages based on the nature or locations of the
employment or the services performed.
For Plan Years beginning after December 31, 1988, the maximum
amount of Compensation taken into account under the Plan for a Participant
in any Plan Year shall not exceed two hundred thousand dollars ($200,000)
or such greater amount as permitted by the Secretary of the Treasury,
except that the dollar increase in effect on January 1 of any calendar
year is effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effective on January 1, 1990. If
the Plan determines Compensation on a period of time that contains fewer
than 12 calendar months, then the annual compensation limit is an amount
equal to the annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the contrary,
for plan years beginning on or after January 1, 1994, the annual
Compensation of each employee taken into account under the plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Article, Compensation for a
Limitation Year is the Compensation actually paid or includible in gross
income during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a participant in a defined contribution plan
who is permanently and totally disabled (as defined in Code Section
22(e)(3)) is the Compensation such participant would have received for the
Limitation Year if the participant had been paid at the rate of
Compensation paid immediately before becoming permanently and totally
disabled. Such imputed Compensation for a disabled participant may be
taken into account only if the participant is not a highly compensated
employee (as defined in Code Section 414(q)) and contributions made on
behalf of such participant are nonforfeitable when made.
(c) Defined Benefit Fraction -- A fraction, the numerator of
which is the sum of a Participant's Projected Annual Benefits under all
the qualified defined benefit plans whether or not terminated) maintained
by the Employer determined at the end of the Limitation Year, and the
denominator of which is the lesser of (i) one hundred and twenty-five
percent (125%) of the dollar limitation for such Limitation Year under
Code Sections 415(b) and (d) (or such higher amount determined by the
Commissioner of Internal Revenue applicable to the calendar year with
which or within which the Limitation Year ends) or (ii) one hundred and
forty percent (140%) of the Participant's average Compensation (or Earned
Income) for the three highest consecutive calendar years of service during
which the Participant was in the Plan including any adjustments under Code
Section 415(b). Notwithstanding the above, if the Participant was a
Participant as of the first limitation year beginning after December 31,
1986 in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will
not be less than the product of 1.25 times the sum of the annual benefits
under such plans which the Participant had accrued as of the close of the
last Limitation Year beginning after January 1, 1987, disregarding any
changes in the terms and conditions of the Plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually
and in the aggregate satisfied the requirements of Code Section 415 for
all Limitation Years beginning before January 1, 1987.
(d) Employer -- The Employer that adopts this Plan and in the
case of a group of employers which constitutes (i) a controlled group of
corporations (as defined in Code Section 414(b) as modified by Code
Section 415(h)); (ii) trades or businesses (whether or not incorporated)
which are under common control (as defined in Section 414(c) as modified
by Code Section 415(h)); (iii) an affiliated service group (as defined in
Code Section 414(m)); or (iv) a group of entities required to be
aggregated (pursuant to Code Section 414(o)) all such employers shall be
considered a single employer for purposes of applying the limitations of
this Article VI.
(e) Excess Amount -- The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(f) Limitation Year -- A calendar year or any other twelve (12)
consecutive month period adopted by the Employer in item 12 of the
Adoption Agreement (Profit Sharing Plan) or item 10 of the Adoption
Agreement (Pension Plan). All qualified plans maintained by the Employer
shall use the same Limitation Year. If the Limitation Year is amended to
a different twelve (12) consecutive month period, the new Limitation Year
shall begin on the date within the Limitation Year in which the amendment
is made.
(g) Master or Prototype Plan -- A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(h) Maximum Permissible Amount -- For a Limitation Year, the
Maximum Permissible Amount with respect to any Participant shall be the
lesser of (i) the Defined Contribution Dollar Limitation or (ii)
twenty-five percent (25%) of the Participant's Compensation for the
Limitation Year. The Compensation limitation described in (ii) shall not
apply to any contribution for medical benefits (within the meaning of Code
Sections 401(h) or 419A(f)(2)) which is otherwise treated as an Annual
Addition under Code Sections 415(1)(1) or 419A(d)(2). If a short
Limitation Year is created because of an amendment changing the Limitation
Year to a different twelve (12) consecutive month period, the Maximum
Permissible Amount shall not exceed the defined contribution dollar
limitation in Code Section 415(c)(1)(A) multiplied by a fraction, the
numerator of which is the number of months in the short Limitation Year
and the denominator of which is twelve (12).
(i) Projected Annual Benefit -- A Participant's annual
retirement benefit (adjusted to the actuarial equivalent of a straight
life annuity if expressed in a form other than a straight life or
qualified joint and survivor annuity) under the Plan, assuming that the
Participant will continue employment until the later of current age or
Normal Retirement Age, and that the Participant's Compensation for the
Limitation Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation Years.
(j) Defined Contribution Fraction -- A fraction, the numerator
of which is the sum of the Annual Additions credited to the Participant's
account under this and all other qualified defined contribution plans
(whether or not terminated) maintained by the Employer for the current and
all prior Limitation Years (including the Annual Additions attributable to
the Participant's non-deductible employee contributions to all qualified
defined benefit plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years and the Annual
Additions attributable to all welfare benefit funds (as defined in Code
Section 419(e)) and individual medical accounts (as defined in Code
Section 415(1)(2) maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior Limitation Years of service with the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The maximum
aggregate amount in any Limitation Year is the lesser of (i) one hundred
and twenty-five percent (125%) of the dollar limitation determined under
Code Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or
(ii) thirty-five percent (35%) of the Participant's Compensation for such
Limitation Year.
If the Employee was a participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 5, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of: (i) the excess of the sum of the
fractions over 1.0 times (ii) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The
annual addition for any Limitation Year beginning before January 1, 1987,
shall not be computed to treat all Employee contributions as Annual
Additions.
(k) Defined Contribution Dollar Limitation -- For a Limitation
Year, thirty thousand dollars ($30,000) or, if greater, one-fourth of the
defined benefit dollar limitation set forth in Code Section 415(b)(1) as
in effect for such Limitation Year.
(l) Highest Average Compensation -- The average Compensation
for the three consecutive Years of Service with the Employer which
produces the highest average.
ARTICLE VII
PARTICIPANTS' ACCOUNTS
Section 7.1. Separate Accounts. Separate Accounts will be
maintained for each Participant for each of the following types of
contributions, and the income, expenses, gains and losses attributable
thereto:
(a) Employer Profit Sharing Contributions pursuant to Section
4.1 hereof;
(b) Employer Pension Contributions pursuant to Section 4.2
hereof;
(c) Participant Voluntary Contributions pursuant to Section 4.3
hereof;
(d) Elective Deferrals pursuant to Section 5.2 hereof;
(e) Matching Contributions pursuant to Section 5.3 hereof;
(f) Rollover Contributions pursuant to Section 4.6 hereof.
The Custodian shall establish such other separate Accounts as may be
necessary under the Plan. These Accounts shall be for accounting purposes
only and the Custodian shall not be required to establish separate
Custodial Accounts for these contributions.
Section 7.2. Vesting. (a) A Participant shall at all times
have a fully vested and nonforfeitable interest in all his Accounts except
his Employer Profit Sharing Contributions Account and/or his Employer
Pension Contributions Account.
(b) A Participant shall have a vested interest in his Employer
Profit Sharing Contributions Account and/or his Employer Pension
Contributions Account as determined under the vesting schedule elected in
item 7 of the Adoption Agreement.
Section 7.3. Computation of Vesting Service. All of a
Participant's Years of Service with the Employer shall be counted to
determine the nonforfeitable percentage of his Employer Profit Sharing
Contributions Account and/or his Employer Pension Contributions Account
except those Years of Service excluded under item 7 of the Adoption
Agreement. A former Participant who had a nonforfeitable right to all or
a portion of his Account balance derived from Employer contributions at
the time of his termination shall receive credit for Years of Service
prior to his Break in Service upon completing a Year of Service after his
return to the employ of the Employer. A former Participant who did not
have a nonforfeitable right to any portion of his Account balance derived
from Employer contributions at the time of termination from service will
be considered a new employee for vesting purposes, if the number of
consecutive one year Breaks in Service equals or exceeds the greater of
(i) five (5) years or (ii) the aggregate number of Years of Service before
such Breaks in Service. If such a former Participant's Years of Service
before termination from service may not be disregarded pursuant to the
preceding sentence, such former Participant's prior Years of Service shall
not be cancelled hereunder.
Section 7.4. Allocation of Forfeitures.
(a) As of the end of the Plan Year, forfeitures derived from
Employer Profit Sharing Contributions Accounts which become available for
reallocation during such Plan Year because of the operation of the vesting
provisions of Section 7.2(b), shall be allocated to the Employer Profit
Sharing Contribution Accounts of the Participants who are eligible to
share in an Employer Profit Sharing Contributions for the Plan Year. Such
amounts shall be allocated according to the ratio that each such
Participant's Compensation or Earned Income for the Plan Year bears to the
total Compensation and Earned Income of all such Participants for the Plan
Year. Forfeitures under this subsection (a) will be allocated only for
the benefit of Participants of the Employer adopting this Plan.
(b) Forfeitures derived from Employer Pension Contributions
which become available for reallocation during a Plan Year shall be
applied to reduce the Employer Pension Contributions that would otherwise
be due for such Plan Year under Section 4.2. Forfeitures under this
subsection (b) will only be used to reduce the Employer Pension
Contributions of the Employer adopting this Plan.
(c) If a benefit is forfeited because a Participant or
Beneficiary cannot be found, such benefit will be reinstated if a claim is
made by the Participant or Beneficiary.
(d) No forfeiture will occur solely as a result of a
Participant's withdrawal of any Employee contributions.
ARTICLE VIII
PAYMENT OF BENEFITS
Section 8.1. Benefits Payable Under the Plan.
(a) Normal Retirement. A Participant's interest in all
Employer contributions allocated to his Accounts shall be fully vested and
nonforfeitable on and after his Normal Retirement Age. Such Participant
may retire at any time on or after that date and shall be entitled to
receive, in accordance with the provisions of Sections 8.2 and 8.3 hereof,
the total amount credited to his Accounts. Any Participant who is
employed beyond his Normal Retirement Age shall continue to share in
Employer contributions until his actual retirement.
(b) Death Benefits. Upon the death of a Participant while
employed by the Employer, the total amount credited to such Participant's
Accounts (plus such Participant's share of the Employer contributions for
the year of his death), shall be payable to such Participant's Beneficiary
in accordance with Sections 8.2 and 8.3 hereof. Upon the death of a
Participant following his termination of employment with the Employer, the
vested portion of his Accounts which has not been distributed shall be
payable to such Participant's Beneficiary in accordance with Sections 8.2
and 8.3 hereof.
(c) Other Termination of Employment. A Participant who
terminates employment with the Employer on account of Disability shall be
entitled to receive, in accordance with Sections 8.2 and 8.3 hereof, the
total amount credited to his Account. A Participant whose employment with
the Employer is terminated prior to his Normal Retirement Date for any
reason other than death or Disability shall be entitled to receive, in
accordance with the provisions of Sections 8.2 and 8.3 hereof, the
portions of his Accounts that have vested pursuant to Section 7.2 hereof.
(d) Forfeitures. Any amounts in a Participant's Accounts which
are not payable under subsection (c) above when his employment with the
Employer is terminated shall remain in such Accounts and shall continue to
share in profits or losses on investments under Section 9.3 hereof until
such former Participant incurs five (5) consecutive Breaks in Service,
whereupon they shall be forfeited and administered in accordance with
Section 7.4 hereof. In the event a former Participant is reemployed by
the Employer before incurring five (5) consecutive Breaks in Service his
Accounts shall continue to vest in accordance with the vesting schedule
specified in the applicable Adoption Agreement. Notwithstanding the
foregoing, if a terminated Participant receives a distribution on account
of termination of his participation in the Plan of his entire vested
interest in the Pension Plan or the Profit Sharing Plan, such
Participant's nonvested interest in the relevant plan shall be treated as
a forfeiture and administered in accordance with Section 7.4 hereof. If
the Participant elects to have distributed less than the entire vested
portion of his Account balance derived from Employer contributions, the
part of the nonvested portion that will be treated as a forfeiture is the
total nonvested portion multiplied by a fraction, the numerator of which
is the amount of the distribution attributable to Employer contributions
and the denominator of which is the total value of the vested Employer
derived Account balance. For purposes of this Section, if the value of an
employee's vested account balance is zero, the Employee shall be deemed to
have received a distribution of such vested account balance. A
Participant's vested account balance shall not include accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B) for plan years beginning prior to January 1, 1989. If a
Participant receives or is deemed to receive a distribution pursuant to
this subsection (d) and such Participant subsequently resumes employment
covered under the Plan, the forfeited amounts shall be restored from
current forfeitures, or if those are insufficient by a special Employer
contribution, provided that the Participant repays to the Plan the full
amount of the distribution attributable to Employer contributions prior to
the earlier of (i) five (5) years after the Participant is reemployed, or
(ii) the time the Participant incurs five (5) consecutive Breaks in
Service. In the event a former Participant is reemployed after incurring
five (5) consecutive Breaks in Service, separate Accounts will be
maintained for Employer contributions allocated before and after the Break
in Service, and Years of Service earned after his return to employment
shall be disregarded in determining the Participant's vested percentage in
his prebreak Employer contributions.
Section 8.2. Manner of Distributions.
(a) Distributions From Pension Plan. Distributions from the
Pension Plan shall be made as follows:
(i) A Participant's vested interest in the Plan shall be paid
by purchasing an annuity contract from a licensed insurance company,
unless the Participant elects to receive his interest in one of the
alternate forms of benefit described in subsection (c) below. If a
Participant is not married at his annuity starting date, the annuity
contract shall provide a monthly benefit for his life. If a Participant
is married at his annuity starting date, the annuity shall be in the form
of a qualified joint and survivor annuity. A "qualified joint and survivor
annuity" is an immediate annuity for the life of the Participant with a
survivor annuity for the life of the spouse which is equal to fifty
percent (50%) of the amount of the annuity which is payable during the
joint lives of the Participant and the spouse and which is the amount of
benefit which can be purchased with the Participant's vested Account
balance. The Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan. Any annuity
contract purchased hereunder and distributed in accordance with this
Section 8.2 shall be nontransferable and shall comply with the terms of
this Plan. For purposes of this Section, the earliest retirement age
shall be the Participant's age on the earliest date on which the
Participant could elect to receive retirement benefits.
(ii) Unless an optional form of benefit is selected in
accordance with subsection (c) below, if a Participant has a spouse and
dies prior to his annuity starting date (the date annuity payments
commence), the Participant's vested Account balance in the Plan shall be
applied toward the purchase of a life only annuity contract from a
licensed insurance company providing a benefit for the life of the
surviving spouse. The surviving spouse may elect to have such annuity
distributed within a reasonable period after the Participant's death.
(iii) For any distribution subject to the annuity
requirements in subsection (i) above, a Participant or Beneficiary may
elect in writing, within the ninety (90) day period ending on the annuity
starting date (the date annuity or any other form of benefit payments
commence), to receive his vested interest in the Plan in one of the
alternate forms of benefit set forth in subsection (c) below in lieu of
the form of benefit otherwise payable hereunder. Any waiver of the joint
and survivor annuity by a married Participant shall not be effective
unless: (A) the Participant's spouse consents in writing to the election;
(B) the election designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the spouse expressly permits designations by
the Participant without any further spousal consent); (C) the spouse's
consent acknowledges the effect of the election; and (D) the spouse's
consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the joint and survivor annuity
shall not be effective unless the election designates a form of benefit
payment which may not be changed without spousal consent (or the spouse
expressly permits designations by the Participant without any further
spousal consent). If it is established to the satisfaction of a Plan
representative that there is no spouse or that the spouse cannot be
located, a waiver will be deemed a qualified election. Any consent by a
spouse obtained under this provision (or establishment that the consent of
a spouse may not be obtained) shall be effective only with respect to such
spouse. A consent that permits designations by the Participant without
any requirement of further consent by such spouse must acknowledge that
the spouse has the right to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the spouse voluntarily
elects to relinquish either or both of such rights. A revocation of a
prior election may be made by a Participant without the consent of the
spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant and the spouse have
received notice as provided in subsection (v) below.
(iv) A Participant may elect in writing to waive the surviving
spouse benefit otherwise payable under subsection (ii) above. The benefit
may be waived at any time during the period which begins on the first day
of the Plan Year in which the Participant attains age 35 and ends on the
date of the Participant's death. A Participant and the spouse may waive
the pre-retirement survivor death benefit prior to age 35, provided that
such early waiver becomes invalid in the Plan Year the Participant attains
age 35 and a new waiver must be made pursuant to this subsection (iv). If
the Participant separates from service prior to the first day of the Plan
Year in which he attains age 35, the surviving spouse benefit may be
waived, with respect to the Participant's account balance as of the date
of separation, at any time during the period which begins on the date of
such separation and ends on the date of the Participant's death.
Notwithstanding the foregoing, any election by a Participant to waive the
surviving spouse benefit payable under subsection (ii) above shall not be
effective unless: (A) the Participant's spouse consents in writing to the
election; (B) the spouse's consent acknowledges the effect of the
election; and (C) the spouse's consent is witnessed by a Plan
representative or notary public. If it is established to the satisfaction
of a Plan representative that there is no spouse or that the spouse cannot
be located, a waiver will be deemed a qualified election. Any consent by
a spouse obtained under this provision (or establishment that the consent
of a spouse may not be obtained) shall be effective only with respect to
such spouse. A revocation of a prior election may be made by a
Participant without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be limited.
No consent obtained under this provision shall be valid unless the
Participant and the spouse have received notice as provided in subsection
(v) below.
(v) The Administrator shall provide the Participant and the
Spouse, as applicable, with a written explanation of: (A) the terms and
conditions of the annuity described in subsections (i) or (ii), as
applicable; (B) the Participant's or Spouse's, as applicable, right to
waive the payment of benefits in the form of an annuity; (C) the rights of
the Participant's spouse; and (D) the right to make, and the effect of,
the revocation of a previous election to waive the payment of benefits in
the form of an annuity described in subsections (i) or (ii) hereof. In
the case of the annuity described in subsection (i), such explanation
shall be provided no less than thirty (30) days and no more than ninety
(90) days prior to the annuity starting date. In the case of the annuity
described in subsection (ii), such explanation shall be provided within
the applicable period for such Participant. The applicable period for a
Participant is whichever of the following periods ends last: (A) the
period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35; (B) a
reasonable period ending after the individual becomes a Participant; (C) a
reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (B) and (C) is the end of
the two-year period beginning one year prior to the date the applicable
event occurs, and ending one year after that date. In the case of a
Participant who separates from service before the Plan Year in which age
35 is attained, notice shall be provided within the two-year period
beginning one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to employment with
the Employer, the applicable period for such Participant shall be
redetermined. A written explanation comparable to the notices described
above shall be provided to a Participant who is waiving the surviving
spouse benefit prior to attaining age 35.
(vi) The Administrator shall be responsible for the purchase of
any annuity contracts required to be purchased in accordance with the
terms of this Plan.
(b) Distributions from Profit Sharing Plan. Distributions from
the Profit Sharing Plan shall be made in the form elected by the
Participant (or Beneficiary) as described in subsection (c) below.
Notwithstanding the foregoing, if the Profit Sharing Plan is a direct or
indirect transferee of a defined benefit plan, a money purchase pension
plan (including a target benefit plan), or a stock bonus or profit sharing
plan or is an amendment of an original Plan which is (or was) subject to
the survivor annuity requirements of Code Sections 401(a)(11) or 417 then
distributions shall be made in accordance with the provisions of
subsection (a) above. This amendment is effective on the first day of the
first plan year beginning on or after December 12, 1994, or, if later, 90
days after December 12, 1994. Notwithstanding any provision of this plan
to the contrary, to the extent that any optional form of benefit under
this plan permits a distribution prior to the employee's retirement,
death, disability, or severance from employment, and prior to plan
termination, the optional form of benefit is not available with respect to
benefits attributable to assets (including the post-transfer earnings
thereon) and liabilities that are transferred, within the meaning of
section 414(l) of the Internal Revenue Code, to this plan from a money
purchase pension plan qualified under section 401(a) of the Internal
Revenue Code (other than any portion of those assets and liabilities
attributable to voluntary employee contributions).
(c) Optional Forms of Distribution. All distributions required
under this subsection shall be determined and made in accordance with the
Income Tax Regulations under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of
such Regulations.
(i) Amounts payable to a Participant shall be distributed in
one of the following forms as elected by the Participant, with spousal
consent, as applicable:
(A) a lump sum; or
(B) installments over a period certain not to
exceed the life expectancy of the
Participant or the joint life expectancy of
the Participant and his Beneficiary.
Such election shall be made in writing and in such form as shall be
acceptable to the Administrator. If the Participant fails to elect any of
the methods of distribution described above within the time specified for
such election, the Administrator shall distribute the Participant's
Account in the form of a single sum cash payment by the April 1 following
the calendar year in which the Participant attains age seventy and
one-half (70-1/2).
(ii) If a Participant's benefit is to be distributed in
installment payments under (B) above, the amount distributed for each
calendar year, beginning with distributions for the first distribution
calendar year, must at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy. The life
expectancy (or joint and last survivor expectancy) is calculated using the
attained age of the Participant (or Beneficiary) as of the Participant's
(or Beneficiary's) birthday in the applicable calendar year reduced by one
for each calendar year which has elapsed since the date life expectancy
was first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and, if life expectancy is being recalculated,
such succeeding calendar year.
Unless otherwise elected by the Participant (or the
Participant's spouse) by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Participant (or spouse) and shall apply to all
subsequent years. The life expectancy of a nonspouse Beneficiary may not
be recalculated. Life expectancy and joint life expectancy are computed
by use of the expected return multiples in Tables V and VI of Section
1.72-9 of the Income Tax Regulations.
Notwithstanding anything herein to the contrary, for calendar
years beginning before January 1, 1989, if the Participant's spouse is not
the designated Beneficiary, the method of distribution selected must
assure that at least fifty percent (50%) of the present value of the
amount available for distribution is paid within the life expectancy of
the Participant. For calendar years beginning after December 31, 1988,
the amount to be distributed each year shall not be less than the quotient
obtained by dividing the Participant's benefit by the lesser of (A) the
applicable life expectancy or (B) if the Participant's spouse is not the
designated Beneficiary, the applicable divisor determined from the table
set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant shall be distributed
using the applicable return multiple specified in Section 1.72-9 of the
Income Tax Regulations as the relevant divisor without regard to Section
1.401(a)(9)-2 of the Income Tax Regulations.
(iii) The minimum distribution required for the
Participant's first distribution calendar year must be made on or before
the Participant's required beginning date as described in Section 8.3(c)
hereof. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which such
required beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
(e) In any case where the Participant or Beneficiary has
determined payment to be on an installment basis, such Participant or
Beneficiary may by written request directed to the Administrator, at any
time following commencement of such installment payments, accelerate all
or any portion of the unpaid balance.
(f) For purposes of this Section a "spouse" shall include the
spouse or surviving spouse of a Participant, provided that a former spouse
shall be treated as the spouse or surviving spouse and a current spouse
will not be treated as a spouse or surviving spouse to the extent provided
under a qualified domestic relations order as described in Code Section
414(p).
(g) The payment of benefits in either a lump sum or in
installments under this Section 8.2 may be made in cash or in Investment
Company Shares.
Section 8.3. Commencement of Payments. (a) Subject to the
provisions of this Section 8.3, payment of benefits, under whichever
method is selected, shall be made or commence as soon as administratively
practicable after the Valuation Date immediately following the
Participant's retirement, death or other termination of employment.
(b) If the Participant's vested Account balance in the Pension
Plan or the Profit Sharing Plan exceeds (or at the time of any prior
distribution exceeded) three thousand five hundred dollars ($3,500), no
distribution of that interest shall be made prior to the time the
Participant's Account becomes immediately distributable without the
written consent of the Participant and, in the case of the Pension Plan,
the Participant's spouse (or where either the Participant or the spouse
has died, the survivor). The consent of the Participant and the
Participant's spouse shall be obtained in writing within the ninety (90)
day period ending on the annuity starting date. The annuity starting date
is the first day of the first period for which an amount is paid as an
annuity or any other form. The Administrator shall notify the Participant
and the Participant's spouse of the right to defer any distribution until
the Participant's Account balance is no longer immediately distributable.
Such notification shall include a general description of the material
features, and an explanation of the relative values of the optional forms
of benefit available under the Plan in a manner that would satisfy the
notice requirements of Code Section 417(a)(3), and shall be provided no
less than thirty (30) days and no more than ninety (90) days prior to the
annuity starting date; provided that if a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days after the notice required
under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(1) the Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular
distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified joint and
survivor annuity while the Account balance is immediately distributable.
(Furthermore, if payment in the form of a qualified joint and survivor
annuity is not required with respect to the Participant pursuant to
Section 8.2(b) of the Plan, only the Participant need consent to the
distribution of an Account balance that is immediately distributable.)
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Code
Sections 401(a)(9) or 415. In addition, upon termination of this Plan if
the Plan does not offer an annuity option (purchased from a commercial
insurance company), the Participant's Account balance may, without the
Participant's consent, be distributed to the Participant or transferred to
another defined contribution plan (other than an employee stock ownership
plan as defined in Code Section 4975(e)(7)) within the same controlled
group.
An Account balance is immediately distributable if any part of
the Account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains (or would have attained if not
deceased) the later of his Normal Retirement Age or age sixty-two (62).
For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after December 31, 1988, a Participant's vested
Account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B).
(c) Unless the Participant (or the Participant's Beneficiary,
if the Participant is dead) elects to defer commencement under (b) above,
distribution of benefits shall begin no later than the sixtieth (60th) day
after the close of the Plan Year in which occurs the latest of (i) the
Participant's attainment of age 65 (or normal retirement age, if earlier);
(ii) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or (iii) the date the Participant
terminates service with the Employer. Notwithstanding the foregoing, the
failure of a Participant and the spouse to consent to a distribution while
a benefit is immediately distributable, within the meaning of Section 8.1
of the Plan, shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this Section.
(d) Notwithstanding anything herein to the contrary, payment of
benefits to a Participant shall commence by the Participant's required
beginning date, even if the Participant is still employed. A
Participant's required beginning date is the April 1 of the calendar year
following the calendar year in which the Participant attains age seventy
and one-half (70-1/2); provided that the required beginning date of a
Participant who attains age 70-1/2 before January 1, 1988, shall be
determined in accordance with (i) or (ii) below:
(i) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year following
the calendar year in which the later of retirement or attainment of age
seventy and one-half (70-1/2) occurs.
(ii) The required beginning date of a Participant who is a
5-percent owner during any year beginning after December 31, 1979, is the
first day of April following the later of the calendar year in which the
Participant attains age seventy and one-half (70-1/2), or the earlier of the
calendar year with or within which ends the Plan Year in which the
Participant becomes a 5-percent owner, or the calendar year in which the
Participant retires.
The required beginning date of a Participant who is not a 5-percent owner
who attains age seventy and one-half (70-1/2) during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
A Participant is treated as a 5-percent owner for purposes of
this subsection (d) if such Participant is a 5-percent owner as defined in
Code Section 416(i) (determined in accordance with Code Section 416, but
without regard to whether the Plan is top-heavy) at any time during the
Plan Year ending with or within the calendar year in which such owner
attains age sixty-six and one-half (66-1/2) or any subsequent Plan Year.
Once distributions have begun to a 5-percent owner under this
subsection (d), they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
Distributions may be delayed pursuant to an election made prior
to January 1, 1984, under Section 242 of the Tax Equity and Fiscal
Responsibility Act of 1982; provided that the method of distribution
selected must be in accordance with the requirements of Code Section
401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of
1984. If such an election is revoked, any subsequent distribution must
satisfy the requirements of Code Section 401(a)(9). If a designation is
revoked subsequent to the date distributions are required to begin, the
Plan must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to
satisfy Code Section 401(a)(9), but for such Section 242(b)(2) election.
For calendar years beginning after December 31, 1988, such distributions
must meet the minimum distribution incidental benefit requirements in
Section 1.401(a)(9)-2 of the Income Tax Regulations. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another Beneficiary (one not
named in the designation) under the designation will not be considered to
be a revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by altering
the relevant measuring life).
(e)(i) If a Participant dies after benefit payments have
begun, the Participant's remaining interest in the Plan shall be
distributed to his designated Beneficiary at least as rapidly as under the
method of distribution being used prior to the Participant's death.
(ii) If the Participant dies before benefit payments have
commenced, distribution of the Participant's entire interest in the Plan
shall be completed by the December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death, except to the extent
that an election is made to receive distributions in accordance with the
following: (A) if any portion of the Participant's interest is payable to
a designated Beneficiary, distributions may be made over the life or over
a period certain not greater than the life expectancy of the designated
Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Participant died; (B)
if the designated Beneficiary is the Participant's surviving spouse, the
date distributions are required to begin in accordance with (A) above
shall not be earlier than the later of December 31 of the calendar year
immediately following the calendar year in which the Participant died and
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2).
If the Participant has not made an election pursuant to this
subsection (ii) by the time of his death, the designated Beneficiary must
elect the method of distribution no later than the earlier of December 31
of the calendar year in which distributions would be required to begin
under this subsection (e) or December 31 of the calendar year which
contains the fifth anniversary of the date of death of the Participant.
If the Participant has no designated Beneficiary, or if the designated
Beneficiary does not elect a method of distribution, distribution of the
Participant's entire interest in the Plan must be completed by December 31
of the calendar year containing the fifth anniversary of the Participant's
death.
For purposes of this subsection (ii), if the surviving spouse
dies after the Participant, but before payments to such spouse begin, the
provisions of this subsection (ii), with the exception of paragraph (B)
above, shall be applied as if the surviving spouse were the Participant.
Any amount paid to a child of the Participant will be treated as if it had
been paid to the surviving spouse if the amount becomes payable to the
surviving spouse when the child reaches the age of majority.
For the purposes of this subsection (e), distribution of a
Participant's interest is considered to begin on the Participant's
required beginning date (or the date distribution is required to begin to
the surviving spouse). If a distribution in the form of an annuity
irrevocably commences to the Participant before the required beginning
date, the date the distribution is considered to begin is the date
distribution actually commences.
(iii) A Participant's interest in the Plan is his Account
balance as of the last valuation date in the calendar year immediately
preceding the distribution calendar year (the valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to
the Account balance as of dates in the valuation calendar year after the
valuation date and decreased by distributions made in the valuation
calendar year after the valuation date. If any portion of the minimum
distribution for the first distribution calendar year is made in the
second distribution calendar year on or before the required beginning
date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
The distribution calendar year is a calendar year for which a
minimum distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the calendar
year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after
the Participant's death, the first distribution calendar year is the
calendar year in which distributions are required to begin pursuant to
subsection (ii) above.
For purposes of this subsection (e), the designated Beneficiary
is the individual who is designated as the Beneficiary under the Plan in
accordance with Code Section 401(a)(9) and the proposed regulations
thereunder.
Section 8.4. Payment of Small Amounts. Notwithstanding
anything herein to the contrary, if the present value of the Participant's
vested interest in the Pension Plan does not exceed (nor at the time of
any prior distribution exceeded) three thousand five hundred dollars
($3,500) as of the date the Participant's employment with the Employer
terminates, the Administrator shall distribute the present value of such
interest to the Participant in a lump sum as soon as administratively
practicable after the end of the Plan Year in which termination occurs.
Likewise, if the total present value of the Participant's vested interest
in the Profit Sharing Plan and Cash or Deferred Arrangement does not
exceed (nor at any time of any prior distribution exceeded) three thousand
five hundred dollars ($3,500) as of the date the Participant's employment
with the Employer terminates, the Administrator shall distribute the
present value of this interest to the Participant in a lump sum as soon as
administratively practicable after the end of the Plan Year in which
termination occurs. A Participant whose entire vested interest in the
Pension Plan and/or the Profit Sharing Plan has been distributed or who
has no vested interest in the Pension Plan and/or the Profit Sharing Plan
shall be deemed cashed out from the Pension Plan and/or the Profit Sharing
Plan, as applicable.
Section 8.5. Persons Under Legal or Other Disability. In the
event a Participant or Beneficiary is declared incompetent and a guardian
or other person legally charged with the care of his person or of his
property is appointed, any benefits to which such Participant or
Beneficiary is entitled shall be paid to such guardian or other person
legally charged with the care of his person or of his property.
Section 8.6. Withdrawals from Profit Sharing Plan. (a) If
elected in item 10 of the Adoption Agreement (Profit Sharing Plan), a
Participant shall be permitted to withdraw the specified percentage of his
vested Employer Profit Sharing Account while he is still employed after
attainment of age fifty-nine and one-half (59-1/2) or prior to attainment of
such age on account of a financial hardship; provided, that such
Participant has been an active Participant in the Plan for at least five
(5) years. A Participant may not make another withdrawal on account of
financial hardship under this Section 8.6 until he has been an active
Participant for at least an additional five (5) years from the date of his
last hardship withdrawal. For purposes of this Section 8.6, a financial
hardship shall mean a financial need or emergency which requires the
distribution of a Participant's Plan account in order to meet such need or
emergency. The determination of the existence of a financial hardship and
the amount required to be distributed to meet the hardship shall be made
by the Administrator in accordance with such uniform and nondiscriminatory
rules as may be established by the Administrator. A request for a
withdrawal shall be made in writing in a form prescribed by the
Administrator and shall be made in accordance with procedures and
limitations established by the Administrator. Notwithstanding the above,
no withdrawal under this Section 8.6 shall be permitted if the Integration
Formula is selected in item 6 of the Adoption Agreement (Profit Sharing
Plan).
(b) If a distribution is made pursuant to this Section 8.6 at a
time when the Participant has a nonforfeitable right to less than one
hundred percent (100%) of his Account balance derived from Employer
contributions and the Participant may increase the nonforfeitable
percentage in the Account:
(i) A separate Account will be established for the
Participant's interest in the Plan as of the time of the distribution; and
(ii) At any relevant time the Participant's nonforfeitable
portion of the separate Account will be equal to an amount ("X")
determined by the formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula above: P is the nonforfeitable
percentage at the relevant time, AB is the Account balance at the relevant
time, D is the amount of the distribution, and R is the ratio of the
Account balance at the relevant time to the Account balance after
distribution.
Section 8.7. Transfer of Benefits to Eligible Retirement Plan.
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article VIII, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover.
(b) An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the distributee, except
that an eligible rollover distribution does not include (i) any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (iii) the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities).
(c) An eligible retirement plan is an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described
in Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(d) A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to the interest
of the spouse or former spouse.
(e) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE IX
ESTABLISHMENT OF
CUSTODIAL ACCOUNT; INVESTMENTS
Section 9.1. Custodial Account. (a) Unless the Employer
elects otherwise in the Adoption Agreement, the Custodian shall open and
maintain separate Custodial Accounts for each individual that the Employer
shall from time to time certify to the Custodian as a Participant in the
Plan. Such Custodial Accounts shall reflect the various Participant
Accounts described at Section 7.1 hereof.
(b) If the Employer so elects in the Adoption Agreement the
Custodian shall open and maintain a single Custodial Account in the name
of the Employer. If only a single Custodial Account is established, the
Employer shall be responsible for maintaining the records for the
individual Participant accounts.
(c) In the event that separate balances are not maintained for
the portion of a Participant's Account balance derived from Employer
contributions and Participant Voluntary Contributions, the Account balance
derived from Participant Voluntary Contributions shall be the
Participant's total account balance multiplied by a fraction, the
numerator of which is the total amount of Participant Voluntary
Contributions (less any withdrawals) and the denominator of which is the
sum of the numerator and the total Employer contributions (including
Elective Deferrals) made on behalf of such Participant.
Section 9.2. Receipt of Contributions. The Custodian shall
accept such contributions of money on behalf of Participants as it may
receive from time to time from the Employer. The Custodian may, in its
sole discretion, also accept money or Investment Company Shares held under
a preceding plan of the Employer qualified under Code Section 401(a) or
which qualify as rollover contributions or transfers under Section 4.6 of
the Plan. All such contributions shall be accompanied by written
instructions, in a form acceptable to the Custodian, from the Employer
specifying the Participant Accounts to which they are to be credited.
Section 9.3. Investment of Account Assets. (a) Upon written
instructions given by the Employer on a uniform and nondiscriminatory
basis as between Participants, the Custodian shall invest and reinvest
contributions credited to a Participant Account(s) in Investment Company
Shares. All Participant Accounts shall share in the profits or losses of
the investments on a pro rata basis (i.e., in the ratio that the
Participant's Account balance bears to all Account balances, other than
Accounts which are self-directed under subsection (b) below), subject to
adjustment by the Administrator on a fair and equitable basis for
contributions, distributions and/or withdrawals during the year. The
amount of each contribution credited to a Participant Account to be
applied to the purchase of Investment Company Shares shall be invested by
the Custodian at the applicable offering price. These purchases shall be
credited to such Account with notation as to cost. The Custodian shall
have no discretionary investment responsibility and in no event be liable
to any person for following investment instructions given by the Employer
or the Participant in the manner provided herein.
(b) Each Participant, through his separate Participant
Account(s), shall be the beneficial owner of all investments held in such
Account(s). The Employer however shall direct the Custodian (in a
nondiscriminatory manner) regarding the selection of specific Investment
Company Shares to be purchased for the Accounts of the Participants. The
Employer may permit (in a nondiscriminatory manner) the individual
Participants to select and direct the purchase of specific Investment
Company Shares for their own Account(s). In such a situation, the
Employer shall transmit all such directions to the Custodian.
Notwithstanding the foregoing, unless otherwise elected in the Adoption
Agreement the individual Participant may direct the investment of his
Account(s) and select the specific Investment Company Shares for purchase
for his individual Account(s) by directly communicating with the
Custodian.
(c) All income, dividends and capital gain distributions
received on the Investment Company Shares held in each Participant Account
shall be reinvested in such shares which shall be credited to such
Account. If any distribution on Investment Company Shares may be received
at the election of the Participant in additional shares or in cash or
other property, the Custodian shall elect to receive it in additional
shares. All investments acquired by the Custodian shall be registered in
the name of the Custodian or its registered nominee.
Section 9.4. Exclusive Benefit. The Custodial Account or
Accounts established hereby shall not be used or diverted to purposes
other than the exclusive benefit of Participants or their Beneficiaries.
Section 9.5. Expenses. All expenses and charges in respect of
the Plan and the Custodial Account, including, without limitation, the
Custodian's fees and commissions and taxes of any kind upon or with
respect to the Plan, shall be paid by the Employer; provided, however,
that the Custodian shall be authorized to pay such charges and expenses
from the Plan if the Employer shall fail to make payment within thirty
(30) days after it has been billed therefor by the Custodian or such
charges have otherwise become due.
Section 9.6. Voting. The Custodian shall deliver, or cause to
be executed and delivered, to the Employer all notices, prospectuses,
financial statements, proxies and proxy soliciting materials received by
the Custodian relating to investments held in Participants' Accounts. The
Custodian shall vote all proxies only in accordance with instructions
received from the Employer.
Section 9.7. Reports of the Custodian and Administrator. (a)
The Custodian shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions required to be performed
hereunder. Not later than sixty (60) days after the close of each
calendar year (or after the Custodian's resignation or removal), the
Custodian shall file with the Employer a written report reflecting the
receipts, disbursements and other transactions effected by it during such
year (or period ending with such resignation or removal) and the assets of
this Plan at its close. Such report shall be open to inspection by any
Participant for a period of thirty (30) days immediately following the
date on which it is filed with the Employer. Upon the expiration of such
thirty (30) day period, the Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to
its acts, transactions, duties, obligations or responsibilities as shown
in or reflected by such report, except with respect to any such acts or
transactions as to which the Employer shall have filed written objections
with the Custodian within such thirty (30) day period.
(b) Annual reports provided to the Employer by the Custodian
shall be, in the Custodian's discretion, on a calendar year basis unless
otherwise required by law. The Employer shall compute the valuation of
all Plan assets at least annually at the fair market value as of the last
day of each calendar year.
(c) The Custodian shall keep such records, make such
identifications and file such returns and other information concerning the
Plan as may be required of the Custodian under the Code or forms adopted
thereunder.
(d) The Administrator shall be solely responsible for the
filing of any reports or information required under the Code or forms
adopted thereunder.
Section 9.8. Limitation of Custodian's Duties and Liability.
(a) The Custodian's duties are limited to those set forth in this Plan,
and the Custodian shall have no other responsibility in the administration
of the Plan or for compliance by the Employer with any provision thereof.
The Custodian shall not be responsible for the collection of contributions
provided for under the Plan; the purpose or propriety of any distribution;
or any action or nonaction taken by the Employer or pursuant to the
Employer's request. The Custodian shall have no responsibility to
determine if instructions received by it from the Employer, or the
Employer's designated agent, comply with the provisions of the Plan. The
Custodian shall not have any obligation either to give advice to any
Participant on the taxability of any contributions or payments made in
connection with the Plan or to determine the amount of excess contribution
and net income attributable thereto. The Custodian may employ suitable
agents and counsel and pay their reasonable expenses and compensation, and
such agents or counsel may or may not be agent or counsel for the
Employer, and may be the Investment Advisor or an Investment Company.
(b) The Employer shall at all times fully indemnify and hold
harmless the Custodian, its agents, counsel, successors and assigns, from
any liability arising from distributions made or actions taken, and from
any and all other liability whatsoever which may arise in connection with
this Plan, except liability arising from the negligence or willful
misconduct of the Custodian. The Custodian shall be under no duty to take
any action other than as herein specified with respect to this Plan unless
the Employer shall furnish the Custodian with instructions in a form
acceptable to the Custodian; or to defend or engage in any suit with
respect to this Plan unless the Custodian shall have first agreed in
writing to do so and shall have been fully indemnified to the satisfaction
of the Custodian. The Custodian (and its agents) may conclusively rely
upon and shall be protected in acting upon any written order from the
Employer or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting to
take any other action. No amendment to the Plan shall place any greater
burden on the Custodian without its written consent. The Custodian shall
not be liable for interest on any cash balances maintained in the Plan.
(c) The Employer shall have the sole authority to enforce the
terms of the Plan on behalf of any and all persons having or claiming any
interest therein by virtue of the Plan.
(d) The Custodian, its agents, counsel, successors and assigns,
shall not be liable to the Employer, or to any Participants or Beneficiary
for any depreciation or loss of assets, or for the failure of this Plan to
produce any or larger net earnings. The Custodian further shall not be
liable for any act or failure to act of itself, its agents, employees, or
attorneys, so long as it exercises good faith, is not guilty of negligence
or willful misconduct, and has selected such agents, employees, and
attorneys with reasonable diligence. The Custodian shall have no
responsibility for the determination or verification of the offering or
redemption prices or net asset values of Investment Company Shares, and
shall be entitled to rely for such prices and net asset values upon
statements issued by or on behalf of the Investment Company issuing the
Investment Company Shares. The Custodian shall have no duty to inquire
into the investment practices of such Investment Company; such Investment
Company shall have the exclusive right to control the investment of its
funds in accordance with its stated policies, and the investments shall
not be restricted to securities of the character now or hereafter
authorized for trustees by law or rules of court. The Custodian shall not
be liable or responsible for any omissions, mistakes, acts or failures to
act of such Investment Company, or its successors, assigns or agents.
Notwithstanding the foregoing, nothing in this Plan shall relieve the
Custodian of any responsibility or liability under ERISA.
ARTICLE X
AMENDMENT AND TERMINATION
Section 10.1. Amendment. (a) The Employer reserves the right
at any time and from time to time to amend or terminate the Plan. No part
of the Plan shall by reason of any amendment or termination be used for or
diverted to purposes other than the exclusive benefit of Participants and
their Beneficiaries, and further that no amendment or termination may
retroactively change or deprive any Participant or Beneficiary of rights
already accrued under the Plan except insofar as such amendment is
necessary to preserve the qualification and tax exemption of the Plan
pursuant to Code Section 401. No amendment shall increase the duties of
the Custodian or otherwise adversely affect the Custodian unless the
Custodian expressly agrees thereto. However, if the Employer amends any
provision of this Plan (including a waiver of the minimum funding
requirements under Code Section 412(d)) other than by changing any
election made in the Adoption Agreement, adopting an amendment stated in
the Adoption Agreement which allows the Plan to satisfy Code Section 415,
to avoid duplication of minimum benefits under Code Section 416 or to add
certain model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan, such Employer shall no longer
participate under this prototype plan and the Employer's Plan shall be
deemed to be an individually designed plan. The Employer hereby
irrevocably delegates (retaining, however, the right and power to change
any election made in the Adoption Agreement) to the Investment Advisor the
right and power to amend the Plan at any time, and from time to time, and
the Employer by adopting the Plan shall be deemed to have consented
thereto. The Investment Advisor shall notify the Employer of any
amendment to the Plan. For purposes of any Investment Advisor amendments,
the mass submitter shall be recognized as the agent of the Investment
Advisor. If the Investment Advisor does not adopt the amendments made by
the mass submitter, it will no longer be identical to or a minor modifier
of the mass submitter plan.
(b) No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's accrued benefit
except to the extent permitted by Code Sections 412(c)(8) and 411(d)(6).
For purposes of this subsection, a Plan amendment which has the effect of
decreasing a Participant's Account balance or eliminating an optional form
of benefit, with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit. Furthermore,
if the vesting schedule of a Plan is amended, in the case of an Employee
who is a Participant as of the later of the date such amendment is adopted
or the date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
(c) Notwithstanding subsection (a) above, an Employer may amend
the Plan by adding overriding plan language to the Adoption Agreement
where such language is necessary to satisfy Code Sections 415 or 416
because of the required aggregation of multiple plans under such Code
Sections.
Section 10.2. Termination. Upon complete discontinuance of the
Employer's Profit Sharing Contributions (if the Employer has adopted a
Profit Sharing Plan by completing the appropriate Adoption Agreement) or
termination or partial termination of the Plan, each affected
Participant's Account shall become nonforfeitable. Upon termination or
partial termination of the Plan, the Employer shall instruct the Custodian
whether currently to distribute to each Participant the entire amount of
the Participant's Account, in such one or more of the methods described in
Article VIII, or whether to continue the Plan and to make distributions
therefrom as if the Plan had continued; provided that, in the event the
Plan is continued, the Plan must continue to satisfy the requirements of
Code Section 401(a). The Employer shall in all events exercise such
discretion in a nondiscriminatory manner. The Plan shall continue in
effect until the Custodian shall have completed the distribution of all of
the Plan asset and the accounts of the Custodian have been settled.
ARTICLE XI
FIDUCIARY RESPONSIBILITIES
Section 11.1. Administrator. The Administrator shall have the
power to allocate fiduciary responsibilities and to designate other
persons to carry out such fiduciary responsibilities; provided such
allocation is in writing and filed with the Plan records. The
Administrator may employ one or more persons to render advice to the
Administrator with regard to its responsibilities under the Plan, and
consult with counsel, who may be counsel to the Employer.
Section 11.2. Powers of Administrator. The Administrator shall
administer the Plan in accordance with its terms and shall have all powers
necessary to carry out its terms. The Administrator shall have
discretionary authority to determine eligibility for benefits and to
interpret and construe the terms of the Plan, and any such determination,
interpretation or construction shall be final and binding on all parties
unless arbitrary and capricious. Any such discretionary authority shall be
carried out in a uniform and nondiscriminatory manner.
Section 11.3. Records and Reports. The Administrator, or those
to whom it has delegated fiduciary duties, shall keep a record of all
proceedings and actions, and shall maintain all such books of account,
records and other data as shall be necessary for the proper administration
of the Plan. The Administrator, or those to whom it has delegated
fiduciary duties, shall have responsibility for compliance with the
provisions of ERISA relating to such office, including filing with the
Secretary of Labor and Internal Revenue Service of all reports required by
the Code and/or ERISA and furnishing Participants and Beneficiaries with
descriptions of the Plan and reports required by ERISA.
Section 11.4. Other Administrative Provisions.
(a) No bond or other security shall be required of the
Administrator, and/or any officer or Employee of the Employer to whom
fiduciary responsibilities are allocated, except as may be required by
ERISA.
(b) The Administrator or the Employer may shorten, extend or
waive the time (but not beyond sixty days) required by the Plan for filing
any notice or other form with the Administrator or the Employer, or taking
any other action under the Plan, except a response to an appeal under
Section 11.6, from a decision of the Administrator.
(c) The Administrator or the Employer may direct that such
reasonable expenses as may be incurred in the administration of the Plan
shall be paid out of the funds of the Plan, unless the Employer shall pay
them.
(d) The Administrator, the Custodian, and any other persons
performing fiduciary duties under the Plan shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims,
and no such person shall be liable, to the maximum extent permitted by
ERISA, for any act of commission or omission in accordance with the
foregoing standard.
Section 11.5. Claims Procedure. Any claim relating to benefits
under the Plan shall be filed with the Administrator on a form prescribed
by the Administrator. If a claim is denied in whole or in part, the
Administrator shall give the claimant written notice of such denial within
ninety (90) days after the filing of such claim, which notice shall
specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was
based;
(c) Any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is needed; and
(d) An explanation of the Plan's procedure for review of the
denial of the claim.
In the event that the claim is not granted and notice of denial of a claim
is not furnished by the ninetieth (90th) day after such claim was filed,
the claim shall be deemed to have been denied on that day for the purpose
of permitting the claimant to request review of the claim.
Section 11.6. Claims Review Procedure.
(a) Any person whose claim filed pursuant to Section 11.5 has
been denied in whole or in part by the Administrator may request review of
the claim by the Employer, by filing a written request with the
Administrator. The claimant shall file such request (including a
statement of his position) with the Employer no later than sixty (60) days
after the mailing or delivery of the written notice of denial provided for
in Section 11.5, or, if such notice is not provided, within sixty (60)
days after such claim is deemed denied pursuant to Section 10.5. The
claimant shall be permitted to review pertinent documents. A decisions
shall be rendered by the Employer and communicated to the claimant not
later than sixty (60) days after receipt of claimant's written request for
review. However, if the Employer finds it necessary, due to special
circumstances (for example, the need to hold a hearing), to extend this
period and so notifies the claimant in writing, the decision shall be
rendered as soon as practicable, but in no event later than one hundred
and twenty (120) days after the claiman'ts request for review. The
employer's decision shall be in writing and shall specifically set forth:
(i) The reasons for the decision; and
(ii) The pertinent Plan provisions on
which the decision is based.
Any such decision of the Employer shall bind the claimant and the
Employer, and the Administrator shall take appropriate action to carry out
such decision.
(b) Any person whose claim has been denied in whole or in part
must exhaust the administrative review procedures provided in subsection
(a) above prior to initiating any claim for judicial review.
ARTICLE XII
AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
Notwithstanding any of the foregoing provisions of the Plan to
the contrary, an employer that has previously established an Original Plan
may, in accordance with the provisions of the Original Plan, amend and
continue the Original Plan in the form of this Plan and become an Employer
hereunder, subject to the following:
(a) subject to the conditions and limitations of the Plan, each
person who is a Participant under the Original Plan immediately prior to
the effective date of the amendment and continuation thereof in the form
of this Plan will continue as a Participant in this Plan;
(b) no election may be made in the Adoption Agreement if such
election would reduce the benefits of a Participant under the Original
Plan to less than the benefits to which he would have been entitled if he
had resigned from the employ of the Employer on the date of the Amendment
and continuation of the Original Plan in the form of this Plan;
(c) the amounts, if any, of a Participant's or former
Participant's Accounts immediately prior to the effective date of the
amendment and continuation of the Original Plan in the form of this Plan
shall be reduced to cash, deposited with the Custodian and constitute the
opening balances in such Participant's Account under this Plan;
(d) amounts being paid to individuals in accordance with the
provisions of the Original Plan shall continue to be paid under this Plan,
but in the form that they were being paid under the Original Plan;
(e) any Beneficiary designation in effect under the Original
Plan immediately before its amendment and continuation in the form of this
Plan which effectively meets the requirements contained in Section 2.3
hereof shall be deemed to be a valid Beneficiary designation pursuant to
Section 2.3 of this Plan, unless and until the Participant or former
Participant revokes such Beneficiary designation or makes a new
Beneficiary designation under this Plan. If the Beneficiary designation
form does not meet the requirements of Section 2.3 hereunder, the
Participant's spouse shall be deemed to be his Beneficiary. If the
Participant is unmarried, or his spouse does not survive him, his estate
shall be deemed his Beneficiary.
(f) if the Original Plan's vesting schedule (or this Plan's
vesting schedule) or the Plan is amended or changed in any way that
directly or indirectly affects the computation of a Participant's
nonforfeitable interest in his Account derived from Employer
contributions, each such Participant with at least three (3) Years of
Service with the Employer may elect, within a reasonable period after the
adoption of the amendment or change, to have his nonforfeitable percentage
computed under the Plan without regard for the amendment or change. For
any Participant who does not have at least one (1) Hour of Service in any
Plan Year beginning after December 31, 1988, the preceding sentence shall
be applied by substituting "five (5) Years of Service" for "three (3)
Years of Service" where such language appears therein. Any such election
must be made during the period commencing on the date of the amendment or
change and ending on the latest of: (i) sixty (60) days after that date;
(ii) sixty (60) days after the effective date of the amendment or change;
or (iii) sixty (60) days after such Participant is issued written notice
of the amendment or change by the Plan Administrator or Employer.
ARTICLE XIII
TOP-HEAVY PROVISIONS
Section 13.1. Effect of Top-Heavy Status. The Plan shall be a
"Top-Heavy Plan" for any Plan Year commencing after December 31, 1983, if
any of the following conditions exist:
(a) If the Top-Heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group.
(b) If this Plan is a part of a Required Aggregation Group but
not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds sixty percent (60%).
If the Plan is a Top-Heavy Plan in any Plan Year beginning after December
31, 1983, the provisions of Sections 13.3 through 13.6 shall supersede any
conflicting provisions of the Plan or the Adoption Agreement.
Section 13.2. Additional Definitions. Solely for purposes of
this Article, the following terms shall have the meanings set forth below:
(a) "Key Employee" means any Employee or former Employee (and
the Beneficiaries of such Employee) who at any time during the
Determination Period was an officer of the Employer if such individual's
annual compensation exceeds 50 percent of the dollar limitation under Code
Section 415(b)(1) (A), an owner (or considered an owner under Code Section
318) of one of the ten largest interests in the Employer if such
individual's compensation exceeds 100 percent (100%) of the dollar
limitation under Code Section 415(c)(1)(A), a five percent (5%) owner of
the Employer, or one percent (1%) owner of the Employer who has an annual
compensation of more than $150,000. Annual compensation means
compensation as defined in Code Section 415(c)(3), of the Code, but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Employee's gross income
under Code Sections 125, 402(a)(8), 402(h) or 403(b). The determination
period is the plan year containing the Determination Date and the four (4)
preceding Plan Years.
The determination of who is a Key Employee will be made in accordance with
Code Section 416(i)(1) and the Regulations thereunder.
(b) "Determination Date" means the last day of the preceding
Plan Year. For the first Plan Year of the Plan Determination Date shall
mean the last day of that year.
(c) "Top-Heavy Ratio" means:
(i) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the five (5) year
period ending on the Determination Date(s) has or has had accrued
benefits, the Top-Heavy Ratio for this plan alone or for the Required or
Permissive Aggregation Group as appropriate is a fraction, the numerator
of which is the sum of the account balances of all Key Employees as of the
determination date(s) (including any part of any account balance
distributed in the five (5) year period ending on the Determination
Date(s)), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5)
year period ending on the Determination Date(s)), both computed in
accordance with Code Section 416 and the Regulations thereunder. Both the
numerator and denominator of the Top-Heavy Ratio are increased to reflect
any contribution not actually made as of the Determination Date, but which
is required to be taken into account on that date under Code Section 416
and the Regulations thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which during
the five (5) year period ending on the Determination Date(s) has or has
had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the numerator
of which is the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined in accordance
with (i) above, and the present value of accrued benefits under the
aggregated defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of the
account balances under the aggregated defined contribution plan or plans
for all participants, determined in accordance with (i) above, and the
present value of accrued benefits under the defined benefit plan or plans
for all participants as of the Determination Date(s), all determined in
accordance with Code Section 416 and the Regulations thereunder. The
accrued benefits under a defined benefit plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any distribution of
an accrued benefit made in the five (5) year period ending on the
Determination Date.
(iii) For purposes of (i) and (ii) above the value of
account balances and the present value of accrued Valuation Date that
falls within or ends with the twelve (12) month period ending on the
Determination Date, except as provided in Code Section 416 and the
Regulations thereunder for the first and second plan years of a defined
benefit plan. The account balances and accrued benefits of a participant
(A) who is not a Key Employee but who was a Key Employee in a prior year,
or (B) who has not been credited with at least one (1) hour of service
with any employer maintaining the plan at any time during the five (5)
year period ending on the Determination Date will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in accordance
with Code Section 416 and the Regulations thereunder. Deductible employee
contributions will not be taken into account for purposes of computing the
Top-Heavy Ratio. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
(iv) The accrued benefit of a participant other than a Key
Employee shall be determined under (i) the method, if any, that uniformly
applies for accrual purposes under all defined benefit plans maintained by
the employer, or (ii) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional rule of Code Section 411(b)(1)(C).
(d) "Permissive Aggregation Group" means the Required
Aggregation Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required Aggregation Group,
would continue to satisfy the requirements of Code Sections 401(a)(4) and
410.
(e) "Required Aggregation Group" means (i) each qualified plan
of the Employer in which at least one Key Employee participates or
participated at any time during the five (5) year period ending on the
Determination Date (regardless of whether the plan has terminated), and
(ii) any other qualified plan of the Employer which enables a plan
described in (i) to meet the requirements of Code Sections 401(a)(4) or
410.
(f) "Valuation Date" means (i) in the case of a defined
contribution plan, the Determination Date, and (ii) in the case of a
defined benefit plan, the date as of which funding calculations are
generally made within the twelve (12) month period ending on the
Determination Date.
(g) "Employer" means the employer or employers whose employees
are covered by this Plan and any other employer which must be aggregated
with any such employer under Code Sections 414(b), (c), (m) and (o).
(h) "Present Value" means the value based on an interest rate
of five percent (5%) and mortality assumptions based on the 1971 GAM
Mortality Table or such other interest rate or mortality assumptions as
may be specified in the Adoption Agreement.
Section 13.3. Minimum Allocations. (a) For any year in which
the Plan is a Top-Heavy Plan, each Participant who is not a Key Employee
and who is not separated from service at the end of the Plan Year shall
receive allocations of Employer contributions and forfeitures under this
Plan at least equal to three percent (3%) of Compensation (as defined in
Section 2.6) for such year or, if less, the largest percentage of the
first two hundred thousand dollars ($200,000) of compensation allocated on
behalf of the Key Employee for the Plan Year where the Employer has no
defined benefit plan which designates this Plan to satisfy Code Section
401. This minimum allocation shall be determined without regard for any
Social Security contribution and shall be provided even though under other
provisions the Participant would not otherwise be entitled to receive an
allocation or would have received a lesser allocation because of (i) the
Participant's failure to complete One Thousand (1,000) Hours of Service
(or any equivalent provided in the Plan), or (ii) the Participant's
failure to make mandatory Employee contributions to the Plan, or (iii)
Compensation less than a stated amount.
(b) The provision in (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan
or plans of the employer and the employer has provided in the Adoption
Agreement that the minimum allocation or benefit requirement applicable to
top-heavy plans will be met in the other plan or plans.
(c) The minimum allocation required (to the extent required to
be nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
(d) For purposes of subsection (a) above, neither Elective
Deferrals nor Employer Matching Contributions shall be taken into account
for the purposes of satisfying the minimum top-heavy benefits requirement.
Section 13.4. Benefit Limit Change. If the Employer maintains
both the Plan and a defined benefit plan which cover one or more of the
same Key Employees and the plans are Top-Heavy in a Plan Year, then
Section 6.5(c) and (j) hereof shall be amended to substitute "one hundred
percent (100%)" for the number "one hundred and twenty-five percent
(125%)" where the latter appears therein.
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Rights of Employees and Participants. No Employee
or Participant shall have any right or claim to any benefit under the Plan
except in accordance with the provisions of the Plan, and then only to the
extent that there are funds available therefor in the hands of the
Custodian. The establishment of the Plan shall not be construed as
creating any contract of employment between the Employer and any Employee
or otherwise conferring upon any Employee or other person any legal right
to continuation of employment, nor as limiting or qualifying the right of
the Employer to discharge any Employee without regard to the effect that
such discharge might have upon his rights under the Plan.
Section 14.2. Merger With Other Plans. The Plan shall not be
merged or consolidated with, nor transfer its assets or liabilities to,
any other plan unless each Participant, Beneficiary and other person
entitled to benefits, would (if the Plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is
equal to or greater than the benefit he would have been entitled to
receive if the Plan had terminated immediately prior to the merger,
consolidation or transfer.
Section 14.3. Non-Alienation of Benefits. The right to receive
a benefit under the Plan shall not be subject in any manner to
anticipation, alienation, or assignment, nor shall such right be liable
for or subject to debts, contracts, liabilities or torts, either
voluntarily or involuntarily. Any attempt by the Participant, Beneficiary
or other person to anticipate, alienate or assign his interest in or right
to a benefit or any claim against him seeking to subject such interest or
right to legal or equitable process shall be null and void for all
purposes hereunder to the extent permitted by ERISA and the Code.
Notwithstanding the foregoing or any other provision of the Plan, the
Administrator shall recognize and give effect to a qualified domestic
relations order with respect to child support, alimony payments or marital
property rights if such order is determined by the Administrator to meet
the applicable requirements of Code Section 414(p). If any such order so
directs, distribution of benefits to the alternate payee may be made at
any time, even if the Participant is not then entitled to a distribution.
The Administrator shall establish reasonable procedures relating to notice
to the Participant and determinations respecting the qualified status of
any domestic relations order.
Section 14.4. Failure to Qualify. Notwithstanding anything in
this Plan to the contrary, all contributions under the Plan made prior to
the receipt by the Employer of a determination by the Internal Revenue
Service to the effect that the Plan is qualified under Code Section 401
shall be made on the express condition that such a determination will be
received, and in the event that the Internal Revenue Service determines
upon initial application for a determination that the Plan is not so
qualified or tax exempt, all contributions made by the Employer or
Participants prior to the date of determination must be returned within
one (1) year from the date of such determination, but only if the
application for qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan is
adopted or such later date as the Secretary of the Treasury may prescribe.
Section 14.5. Mistake of Fact; Disallowance of Deduction.
Notwithstanding anything in this Plan to the contrary, any contributions
made by the Employer which are conditioned on the deductibility of such
amount under Code Section 404, to the extent of the amount disallowed, or
which are made because of a mistake of fact must be returned to the
Employer within one year after such disallowance or such mistaken
contribution.
Section 14.6. Participation under Prototype Plan. If the Plan
as adopted by the Employer either fails to attain or maintain
qualification under the Code, such Plan will no longer participate in this
prototype plan and will be considered an individually designed plan.
Section 14.7. Gender. Where the context admits, words used in
the singular include the plural, words used in the plural include the
singular, and the masculine gender shall include the feminine and neuter
genders.
Section 14.8. Headings. The headings of Sections are included
solely for convenience of reference, and if there is any conflict between
such headings and the text of the Plan, the text shall control.
Section 14.9. Governing Law. Except to the extent governed by
ERISA and any other applicable federal law, the Plan shall be construed,
administered and enforced according to the laws of the state in which the
Employer has its principal place of business.
YACKTMAN FUND
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PENSION PLAN)
The undersigned Employer hereby adopts and establishes the Yacktman
Fund Prototype Defined Contribution Retirement Plan. This Plan is subject
to the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name:
Address:
Telephone Number: (___) Employer Identification Number:
Type of Entity: [_] Corporation [_] Partnership [_] Sole
Proprietorship [_] Other (please describe)
Employer's Taxable Year is [_] calendar year or [_] fiscal year beginning
______________________.
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name:
Address:
Telephone Number: (___)
Plan Year is the [_] calendar year, [_] Employer's fiscal year, or [_]
year beginning
3. EFFECTIVE DATE
Execution of this Adoption Agreement (check one):
[_] Establishes a new plan.
[_] Is an amendment to an Original Plan. This amendment is effective
_____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective __________, 19__. (You need not
complete items 4, 5 or 6 and check item 7(A)(1)).
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an employee must satisfy the
following Age and Service Requirements:
(1) An Employee must complete ____ (enter 1 or 2 years) Year(s) of
Employment. If more than 1 year is selected, you must also
check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive month period
beginning on the date an Employee first performs an Hour of
Service or an anniversary thereof during which the Employee has
completed ________ (insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of the method
elected below. Only one method may be elected. The method elected
shall be applied to all Employees covered under the Plan.
[_] On the basis of actual hours for which an Employee is paid or
entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of Service if the
Employee would be credited with at least 1 Hour of Service
during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of Service if the
Employee would be credited with at least 1 Hour of Service
during the week.
[_] On the basis of months worked:
An Employee shall be credited with 190 Hours of Service if the
Employee would be credited with at least 1 Hour of Service
during the month.
(2) An Employee must attain age ____ (not greater than age 21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective
bargaining agreement between the Employer and employee
representatives under which retirement benefits were the subject
of good faith bargaining. The term "employee representatives"
does not include any organization more than one-half of whose
members are officers, executives or owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PENSION CONTRIBUTIONS
(A) The Employer Pension Contribution for each Plan Year shall be
____% (not more than 25%) of the aggregate Compensation and Earned
Income of eligible Participants. This contribution will be
reduced by the amount of any forfeitures allocated to the accounts
of Participants for such Plan Year.
(B) Allocation Formulas
The Employer Pension Contributions shall be allocated pursuant to the
following formula (check one):
(1) [_] Compensation Formula
Employer Pension Contributions shall be allocated based on each
eligible Participant's total Compensation for the Plan Year.
Note: If the Integration Formula is elected under the Profit Sharing
Plan, the Compensation Formula must be elected under this Plan.
(2) [_] Integration Formula
Employer Pension Contributions (and forfeitures) shall be
allocated based on each eligible Participant's Compensation in
excess of the Integration Level and total Compensation for the
Plan Year, subject to the limitations set forth in Section 4.2(b)
of the Plan.
[_] The Integration Level shall be the taxable wage base for FICA
tax purposes.
[_] The Integration Level shall be $_________ (not to exceed the
FICA taxable wage base).
Note: If the Plan is top-heavy all eligible Participants must first
be allocated 3% of their total Compensation and any remaining
contribution may be allocated pursuant to the Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Pension Contribution Account under the
following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable and
fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not more
than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with the
following schedule:
Years of Less 6 or
Service than 2 2 3 4 5 more
Vested
Percentage 0% 20% 40% 60% 80% 100%
(B) A "Year of Service" shall mean any Plan year in which an Employee
completes at least ____ (insert 1,000 or less) Hours of Service.
Years of Service shall include all Years of Service with the
Employer except as noted below (check one, both or none):
(1) [_] All Years of Service prior to the effective date of this
Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for
non-highly compensated employees.
[_] Participant Voluntary Contributions are not permitted.
9. NORMAL RETIREMENT AGE
The Normal Retirement Age Shall be age ___ [insert an age not to exceed
65].
10. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of
________________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Profit Sharing Plan)
which is either (i) a qualified defined contribution plan other than a
Master or Prototype Plan or (ii) a qualified defined benefit plan in
which any Participant in this Plan is (or was) a participant or could
become a participant, or if the Employer maintains a welfare benefit
fund or an individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and 6.4
of the Plan will automatically apply.
11. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of the
Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____%
Mortality Table: _____________________________
12. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
[_] The Custodian shall establish a single Custodial Account in the
name of the Employer and the Employer shall keep all records for
the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
13. CUSTODIAN
The undersigned as Employer hereby appoints First Wisconsin Trust
Company as Custodian.
14. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Custodian with advance notice
from time to time. If not separately included, any acceptance fee
listed in the attached schedule will be deducted from the initial
contribution received from the Employer. Any acceptance or other
Custodian fees included will be deducted equally from each
Owner-Employee's contribution or Account. Annual maintenance fees for
each Participant's Account and any fees directly related to activity in
that Participant's Account shall be deducted annually and activity fees
will be deducted at the time incurred. Sufficient Investment Company
Shares will be redeemed to cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to
such additional charges as will reasonably compensate the Custodian for
the services performed.
15. FUNDING WAIVER
In the event the Employer obtains a funding waiver under Code Section
412 from the Internal Revenue Service, the Employer shall amend the
Plan by adding language which will override the affected provisions of
the Plan and this Adoption Agreement (attach appropriate overriding
language to this Adoption Agreement to comply with the Code).
Note: An Employer that amends the Plan because of a waiver of the
minimum funding requirements under Code Section 412 will no longer
participate in this prototype Plan and will be considered to have
adopted an individually designed plan.
16. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain or
maintain tax qualification of the Plan or if it amends the Plan other
than by a change in the Adoption Agreement. The Employer agrees that
whenever a Participant contribution is made, the Employer will
determine that the Participant has received the appropriate current
Investment Company prospectus. The Employer represents that the
Participant has received such prospectus by depositing contributions
with the Custodian.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides post-retirement
medical benefits allocated to separate accounts for key employees, as
defined in Code Section 419A(d)(3) or an individual medical account, as
defined in Code Section 415(l)(2)) in addition to this Plan (or the
Profit Sharing Plan), it may not rely on an opinion letter issued by
the National Office of the Internal Revenue Service as evidence that
this Plan is qualified under Code Section 401. If the Employer adopts
or maintains multiple plans and wishes reliance that the Plan is
qualified, application for an individual determination letter should be
made to the appropriate District Office of the Internal Revenue
Service.
17. ADDITIONAL INFORMATION
This Plan is sponsored by:
Yacktman Asset Management Company
303 West Madison, Suite 1925
Chicago, IL 60606
(312) 201-1200
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any amendments
made to this Plan or of the discontinuance or abandonment of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer: Date:
Name of person signing above (please print):
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under the
Plan.
FIRST WISCONSIN TRUST COMPANY
By: Date:
<PAGE>
YACKTMAN FUND
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PROFIT-SHARING PLAN)
The undersigned Employer hereby adopts and establishes the Yacktman
Fund Prototype Defined Contribution Retirement Plan. This Plan is subject
to the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name:
Address:
Telephone Number: (___) Employer Identification Number:
Type of Entity: [_] Corporation [_] Partnership [_] Sole
Proprietorship [_] Other (please describe)
Employer's Taxable Year is [_] calendar year or [_] fiscal year beginning
_____________________.
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name:
Address:
Telephone Number: (___) Plan Year is the [_] calendar year,
[_] Employer's fiscal year,
or [_] year beginning __________________.
3. EFFECTIVE DATE
Execution of this Adoption Agreement (elect one):
[_] Establishes a new plan. [_]Is an amendment to an Original Plan. This
amendment is effective ____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective ______________, 19__. (You need
not complete items 4, 5 or 6 and check item 7(A)(l).)
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an Employee must satisfy the
following Age and Service Requirements (please fill in the
blanks):
(1) An Employee must complete ____ (enter 1 or 2 years) Year(s) of
Employment. If more than 1 year is selected, you must also
check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive month period
beginning on the date an Employee first performs an Hour of
Service or an anniversary thereof during which the Employee has
completed _________ (insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of the method
elected below. Only one method may be elected. The method elected
shall be applied to all Employees covered under the Plan.
[_] On the basis of actual hours for which an Employee is paid or
entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of Service if the
Employee would be credited with at least 1 Hour of Service
during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of Service if the
Employee would be credited with at least 1 Hour of Service
during the week.
[_] On the basis of months worked:Employee shall be credited with
190 Hours of Service if the Employee would be credited with
at least 1 Hour of Service during the month.
(2) An Employee must attain age _____ (not greater than age 21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective bargaining
agreement between the Employer and employee representatives under
which retirement benefits were the subject of good faith
bargaining. The term "employee representatives" does not include
any organization more than one-half of whose members are officers,
executives or owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in item 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PROFIT SHARING CONTRIBUTIONS
(A) The Employer Profit Sharing Contributions for each Plan Year shall
be
(check one):
[_] A discretionary amount determined by the Employer, but not more
than 15% of the aggregate Compensation and Earned Income of
Participants eligible to share in such contribution for the Plan
Year.
[_] An amount equal to ____% (not more than 15%) of the aggregate
Compensation and Earned Income of Participants eligible to share
in such contribution for the Plan Year.
(B) Employer Profit Sharing Contributions:
[_] Shall be made out of Net Profits.[_]May be made without regard
to Net Profits.
(C) Allocation Formulas
The Employer Profit Sharing Contributions (and) forfeitures) shall be
allocated to the accounts of eligible Participants pursuant to the
following formula
(elect one):
(1) [_] Compensation Formula
Employer Profit Sharing Contributions (and forfeitures) shall be
allocated based on each eligible Participant's total Compensation
for the Plan Year.
NOTE: If the Integration Formula is selected under the Pension Plan,
the Compensation Formula must be selected under this Plan.
(2) [_] Integration Formula
Employer Profit Sharing Contributions (and forfeitures) shall be
allocated based on each eligible Participant's Compensation in
excess of the Intregration Level and total Compensation for the
Plan Year, subject to the limitation set forth in Section 4.1(b)
of the Plan.
[_] The Integration Level shall be the taxable wage base for FICA
tax purposes.
[_] The Integration Level shall be $_________ (not to exceed the
FICA taxable wage base).
NOTE: If the Plan is top-heavy all eligible Participants must first
be al1ocated 3% of their total Compensation and any remaining
contributions may be allocated pursuant to the Intregration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Profit Sharing Contribution Account under
the following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable and
fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not more
than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with the
following schedule:
Years of Less 6 or
Service than 2 2 3 4 5 more
Vested
Percentage 0% 20% 40% 60% 80% 100%
(B) A "Year of Service" shall mean any Plan Year in which an Employee
completes at least ____ (insert 1,000 or less) Hours of Service.
Years of Service shall include all Years of Service with the
Employer except as noted below (check one, both or none).
(1) [_] All Years of Service prior to the effective date of this
Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. CASH OR DEFERRED ARRANGEMENT (Section 401(k))
Please check one:
[_] This Plan will include a cash or deferred arrangement (complete
the remainder of this Section). The Effective Date of this Cash
or Deferred Arrangement (Section 401(k)) is ________________,
l9__.
[_] This Plan will not include a cash or deferred arrangement (do not
complete the remainder of this Section).
(A) Elective Deferrals.
(1) An Employee shall be eligible to make Elective Deferrals under
Article V of the Plan upon satisfying the following eligibility
requirements:
[_] An Employee must complete _____ (not greater than 1 year)
Years of Employment.
[_] An Employee must attain age ____ (not greater than
21).[_]Union Employees are excluded from making Elective
Deferrals.
[_] All Employees are eligible to make Elective Deferrals.
(2) An Employee may elect to make Elective Deferrals to the Plan
equal to a percentage of regular salary or wages for a pay
period as specified in a salary reduction agreement. The
maximum percentage of Elective Deferrals shall be _____%.
[_] Elective Deferrals may be based on cash bonuses paid to the
Employee. The maximum percentage of such Elective Deferrals
shall be _____%.
(3) An Employee may change the rate of his Elective Deferrals:
[_] On the first day of each Plan Year.[_]And on the following
additional dates:______________________
(4) [_] Recharacterization of excess contributions will be
available only for non-highly compensated employees.
(B) Matching Contributions
(1) [_] The percentage of Elective Deferrral contributions which
are matched is:[_]____%.
[_] of the first _____% of Elective Deferrals.[_]A percentage
determined by the Employer, but will not be more than 100%.
(2) Matching Contributions are made:
[_] Each pay period in which Elective Deferrals are made.
[_] At the end of the Plan Year for Employees meeting the
requirements for annual contributions.
(3) Matching Contributions will vest under the following schedule
(elect one):
[_] Employee shall at all times have a nonforfeitable and fully
vested interest in any Matching Contributions.
[_] An Employee shall be fully vested in any Matching
Contributions after ____ (not more than 3) Years of Service.
[_] An Employee shall become vested in any Matching Contributions
in accordance with the following schedule:
Nonforfeitable
Years of Less 6 or
Service than 2 2 3 4 5 more
Vested
Percentage 0% 20% 40% 60% 80% 100%
(C) Special Contributions
[_] The Employer may make Qualified Matching Contributions subject
to Section 5.4 of the Plan.
[_] The Employer may make Qualified Non-Elective Contributions,
subject to Section 5.4 of the Plan.
Note: These special contributions are used to satisfy the
nondiscrimination tests which apply to elective deferral and matching
contributions.
(D) Hardship Withdrawals
[_] Withdrawals on account of financial hardship are allowed in
accordance with Section 5.5(a) of the Plan.
[_] Withdrawals on account of financial hardship are not allowed.
9. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for
non-highly compensated employees.
[_] Participant Voluntary Contributions are not permitted.
10. WITHDRAWAL OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
[_] A Participant who has participated in the Plan for at least 5
years may withdraw up to _____% of his vested Employer Profit
Sharing Contribution Account after attaining age 59-1/2 or on account
of a financial hardship in accordance with Section 8.6 of the
Plan.
Note: Withdrawals are not permitted if the Integration Formula is
selected in item 6(C)(2).
[_] Withdrawals are not permitted.
11. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ___ [insert an age not to exceed
65].
12. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of
_______________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Pension Plan) which
is either (i) a qualified defined contribution plan other than a Master
or Prototype Plan or (ii) a qualified defined benefit plan in which any
Participant in this Plan is (or was) a participant or could become a
participant, or if the Employer maintains a welfare benefit fund or an
individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and 6.4
of the Plan will automatically apply.
13. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of the
Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____% Mortality Table:
_____________________________
14. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
[_] The Custodian shall establish a single Custodial Account in the
name of the Employer and the Employer shall keep all records for
the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
15. CUSTODIAN
The undersigned as Employer hereby appoints First Wisconsin Trust
Company as Custodian.
16. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Custodian with advance notice.
If not separately included, any acceptance fee listed in the attached
schedule will be deducted from the initial contribution received from
the Employer. Any acceptance or other Custodian fees included will be
deducted equally from each Owner-Employee's contribution or Account.
Annual maintenance fees for each Participant's Account and any fees
directly related to activity in that Participant's Account shall be
deducted annually and activity fees will be deducted at the time
incurred. Sufficient Investment Company Shares will be redeemed to
cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to
such additional charges as will reasonably compensate the Custodian for
the services performed.
17. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain or
maintain tax qualification of the Plan or if it amends the Plan other
than by a change in the Adoption Agreement. The Employer agrees that
whenever a Participant Contribution is made, the Employer will
determine that the Participant has received the appropriate current
Investment Company prospectus. The Employer represents that the
Participant has received suchprospectus by depositing contributions
with the Custodian.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 3l, l985, a welfare benefit
fund, as defined in Code Section 4l9(e), which provides post-retirement
medical benefits allocated to separate accounts for key employees, as
defined in Code Section 4l9A(d)(3) or an individual medical account, as
defined in Code Section 4l5(l)(2)) in addition to this Plan (or the
Pension Plan), it may not rely on an opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Code Section 40l. If the Employer adopts or
maintains multiple plans and wishes reliance that the Plan is
qualified, application for an individual determination letter should be
made to the appropriate District Office of the Internal Revenue
Service.
18. ADDITIONAL INFORMATION
This Plan is sponsored by:
Yacktman Asset Management, Inc., ______________________,
______________________, (___) ___ -
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any amendments
made to this Plan or of the discontinuance or abandonment of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer:
Name of person signing above (please print):
Date:
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under the
Plan.
FIRST WISCONSIN TRUST COMPANY
By: Date:
YACKTMAN FUND
SECTION 403(b)(7) RETIREMENT PLAN
<PAGE>
YACKTMAN FUND
SECTION 403(b)(7) RETIREMENT PLAN
<PAGE>
YACKTMAN FUND
SECTION 403(b)(7) RETIREMENT PLAN
Table of Contents
Page
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 7
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . 17
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . 18
PROHIBITED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 19
LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ADMINISTRATIVE INFORMATION . . . . . . . . . . . . . . . . . . . . . 23
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 7
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
THE INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . 16
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . 17
PROHIBITED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 18
CHANGES IN APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . 19
ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ADMINISTRATIVE INFORMATION . . . . . . . . . . . . . . . . . . . . . 22
YACKTMAN FUND
SECTION 403(b)(7) RETIREMENT PLAN
PLAN DOCUMENT
Employees of certain exempt organizations and schools may have a
portion of their compensation set aside for their retirement years in a
mutual fund custodial account plan. The employee is not taxed on the
amount set aside or the earnings thereon until the accumulated funds are
withdrawn, normally at retirement.
Under the Yacktman Fund Section 403(b)(7) Retirement Plan,
contributions are held by the authorized custodian (the "Custodian") and
are invested in the shares of the regulated investment company managed by
Yacktman Asset Management Co., the Investment Advisor. The Yacktman Fund
403(b)(7) Retirement Plan (the "Plan") is designed to allow eligible
employers described in Article I to make employer contributions to the
Plan and to allow eligible employees to elect to have their employer make
contributions to the Plan on their behalf pursuant to a salary reduction
agreement. This Plan is intended to comply with the provisions of the
Employee Retirement Income Security Act of 1974 (the "Act") and the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE I
ELIGIBILITY
A. Any person who performs services as an employee for an
employer which is an organization described in Section 501(c)(3) of the
Code and is exempt from tax under Section 501(a) of the Code, or who
performs services for an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or political subdivision of a State or an agency or
instrumentality of either, and who obtains the consent of such employer to
participate herein, is eligible to adopt this Plan.
B. Any employer which is an organization described in Section
501(c)(3) of the Code and is exempt from tax under Section 501(a) of the
Code, or is an educational institution (as defined in Section
170(b)(1)(A)(ii) of the Code) if the educational organization is
maintained by a State or a political subdivision of a State or an agency
or instrumentality of either (the "Employer") may, but is not required to,
adopt this Plan for some or all of its eligible employees in accordance
with Article I, paragraph D below. It is, however, necessary for the
Employer if it does not adopt this Plan to cooperate to the extent of
executing the proper documents allowing the employee to establish a
custodial account and to reduce the employee's salary and apply the amount
of the reduction to contributions for the employee under this Plan.
C. An eligible individual shall not be entitled to elect to
have his Employer make contributions to the Plan pursuant to a salary
reduction agreement unless the Employer has established a plan or program
which allows all employees of the Employer (except as otherwise permitted
by the Code) the opportunity to have contributions made pursuant to such
an agreement. An Employer may exclude from participation employees who
are participants in an eligible deferred compensation plan under Section
457 of the Code, a qualified cash or deferred arrangement under Section
401(k) of the Code or another Section 403(b) annuity contract, and
nonresident aliens and certain students.
D. In lieu of or in addition to a salary reduction
arrangement, an Employer may make contributions on behalf of its
employees, but an Employer is not obligated to do so. If an Employer
makes contributions (other than contributions made pursuant to a salary
reduction agreement), this Plan as adopted by such Employer must satisfy
the nondiscrimination requirements as set forth in Section 403(b)(12) of
the Code, including the limitation under Section 401(a)(17) of the Code on
the amount of compensation that may be taken into account.
E. An eligible individual is not disqualified from
participation by reason of the fact that his Employer provides any other
retirement plan for its employees. However, the contributions under this
Plan or any other Section 403(b) plan will be affected by the Employer's
contributions to such other retirement plan.
ARTICLE II
PARTICIPATION
An eligible employee who wishes to establish this Plan (the
"Individual") may do so by completing the Section 403(b)(7) Application
and Salary Reduction Agreement or Transfer Form (as applicable), obtaining
the Employer's signature and returning all necessary forms to Yacktman
Fund. An eligible Employer may adopt this Plan by either having the
Individual follow the procedure described in the preceding sentence or by
obtaining the Individual's signature on the Application and following the
procedure itself thereafter.
The Application and the Salary Reduction Agreement, if
applicable, are incorporated herein by reference as part of the Plan. The
Plan will be effective upon written acceptance by or on behalf of the
Custodian of the Application. If the Employer maintains a written Section
403(b) plan for which this Plan serves as a funding vehicle, the terms and
conditions of such plan shall take precedence over the provisions of this
Plan to the extent such provisions are inconsistent.
ARTICLE III
CONTRIBUTIONS
A. An Employer may contribute cash to the Plan in any taxable
year in any amount which (a) is not an "excess contribution" as defined in
Section 4973(c) of the Code and (b) if such contribution is made pursuant
to a Salary Reduction Agreement between the Employer and the Individual,
does not exceed the limitation on "elective deferrals" contained in
Section 402(g) of the Code. Neither the Investment Advisor nor the
Custodian shall be responsible for determining the amount an Employer may
contribute on behalf of the Individual, nor shall either be responsible to
recommend or compel Employer contributions under the Plan.
If during any taxable year the Employer contributes an amount
which is an "excess contribution", such excess contribution (plus any
income attributable thereto) shall, upon written request, be paid to the
Individual by the Custodian or applied towards a contribution for the next
subsequent year. In the event that an amount contributed during a
calendar year exceeds the limitation on "elective deferrals" contained in
Section 402(g) of the Code and the Individual notifies the Custodian, in
writing, of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Individual not later than the
following April 15. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining that an excess contribution
or excess elective deferral has been made or for distributing such excess
amount except in accordance with the specific written instructions of the
Individual.
B. In addition, the Individual or the Employer may (a)
transfer or cause to be transferred to the Plan the cash surrender or
redemption value of a Section 403(b) annuity or variable annuity or the
assets of another Section 403(b)(7) custodial account for which
contributions were previously made on the Individual's behalf or (b)
contribute to the Plan any amount distributed from a Section 403(b)
annuity or custodial account which qualifies as a "rollover contribution"
within the meaning of Section 403(b)(8) of the Code. Neither the
Investment Advisor nor the Custodian shall be responsible for the tax
treatment to the Individual of any transfer or rollover contribution or
for losses resulting from any acts, omissions or delays of any party
transferring or rolling over assets to the Individual's account.
C. Employer contributions to the Plan (including permissible
salary reduction contributions) are not taxable income in the taxable year
contributed. The maximum amount which may be contributed to the Plan on
an Individual's behalf may not exceed the lesser of:
(1) 25% of compensation (as defined in Section 415(c) of the
Code) or $30,000 whichever is less. For this purpose, "compensation"
generally means amounts included in your taxable income, but does not
include Section 403(b) contributions.
(2) The Individual's "exclusion allowance" under Section
403(b)(2) of the Code, which is calculated as 20% of Includible
Compensation times the number of years of service minus the aggregate
amount previously contributed by the Employer (including salary
reduction contributions), under a Section 403(b) plan and excluded
from the Individual's gross income for prior tax years. "Includible
Compensation" (as defined in Section 403(b)(3) of the Code) is
current taxable compensation from a school or other eligible
employer, but does not include amounts contributed by an eligible
employer to a qualified retirement plan which were not currently
taxed to the employee or Section 403(b) contributions. (A special
minimum exclusion allowance applies to certain church employees whose
adjusted gross income is $17,000 or less under Section 403(b)(2)(D)
of the Code.)
(3) For amounts contributed pursuant to a Salary Reduction
Agreement, $9,500, as adjusted for cost-of-living increases in
accordance with Sections 402(g)(5) and 415 of the Code, less any
salary reduction contributions made during the year under a qualified
cash or deferred arrangement under Section 401(k) of the Code, a
simplified employee pension under Section 408(k) of the Code or any
other Section 403(b) annuity or custodial account.
If employed by an educational institution, hospital, home health
service agency, health and welfare service agency or a church or
convention or association of churches, the Individual may elect to be
governed by one of three alternate limitations: (a) in lieu of the
limitation described in (1) above, an amount equal to the lesser of 25% of
Includible Compensation plus $4,000, or $15,000; (b) that the limitation
described in (2) above not apply; or (c) for the year in which the
Individual's employment terminates, replace the 25% of compensation (but
not the $30,000) limitation described in (1) above with an amount which is
equal to the contributions which could have been made, but were not, under
Code Section 403(b), during a ten-year period ending on the date of
termination. The final "catch-up" contribution in (c) cannot exceed
$30,000 and may only be used once. The alternate limitations available to
employees of educational institutions, hospitals, home health service
agencies, health and welfare service agencies or churches or conventions
or associations of churches are mutually exclusive and an election of one
of the alternatives is irrevocable.
In addition, any employee of such an employer who has completed
at least 15 years of service, may increase the amount described in (3)
above by the lesser of:
(a) $3,000;
(b) $15,000, less amounts excluded in prior
years under this special catch up election;
or
(c) the excess of $5,000 multiplied by the
number of years of service minus any salary
reduction contributions under a Section
403(b) annuity, a Section 401(k) plan or a
simplified employee pension made by the
employer on behalf of the employee for prior
taxable years.
D. The interest of the Individual in the Plan and the assets
in his custodial account shall be nonforfeitable at all times, may not be
assigned, and shall not be subject to alienation, assignment, trustee
process, garnishment, attachment, execution or levy of any kind, except
with regard to payment of the expenses of the Custodian as authorized by
the provisions of this Plan. Notwithstanding the foregoing or any other
provision herein to the contrary, the Custodian may recognize a qualified
domestic relations order with respect to child support, alimony payments
or marital property rights if such order contains sufficient information
for the Employer to determine that it meets the applicable requirements of
Section 414(p) of the Code. If any such order so directs, distribution of
benefits to the alternate payee may be made at any time even if the
Individual is not then entitled to a distribution.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
All contributions made to the Plan shall be used by the
Custodian to purchase shares of the regulated investment company managed
by the Investment Advisor. Such regulated investment company will be
referred to as the "Investment Company," and the shares of the Investment
Company will be referred to as "Investment Company Shares". Unless
otherwise directed by the Employer, contributions shall be allocated to a
separate custodial account ("Custodial Account") established for the
Individual. The Individual (or the Individual's beneficiary) may direct
the Custodian to invest his Custodial Account in the shares of the
Investment Company or other regulated investment companies as may be made
available by the Investment Advisor in the future. The Individual (or the
Individual's beneficiary) may direct the Custodian to transfer all or any
part of his Custodial Account assets from one Investment Company to
another at any time. In directing the Custodian to invest contributions
and/or Custodial Account assets, the Individual (or the Individual's
beneficiary) shall designate a percentage allocation to any or all of the
then available Investment Companies. Any changes in the allocation of
future contributions or current Custodial Account assets will be effective
only when the Custodian receives written authorization from the Individual
(or the Individual's beneficiary). All dividends and capital gains shall
be reinvested in additional Investment Company Shares.
ARTICLE V
DISTRIBUTIONS
A. The Individual, or his beneficiary or estate in the event
of his death, shall be entitled to distribution of the assets in his
Custodial Account upon the occurrence of one of the following events:
(a) The Individual's attainment of age 59-1/2.
(b) The Individual terminates his employment.
(c) The Individual becomes disabled.
(d) The Individual's death.
Note that distributions prior to age 59-1/2 may be subject to a 10%
additional tax under the Code.
For purposes of the Plan, the Individual shall be considered
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long continued and
indefinite duration.
B. In addition, an Individual may request distribution of the
assets in his Custodial Account (to the extent attributable to
contributions made pursuant to a Salary Reduction Agreement, not including
any earnings thereon) upon incurring a substantial financial hardship. A
substantial financial hardship shall exist if the Individual incurs
immediate and heavy financial need and that need cannot be met by other
resources reasonably available to the Individual.
The Individual shall be eligible to receive a hardship
distribution from his Custodial Account after the Custodian's receipt of
written notification from the Employer indicating: (a) that the
Individual has incurred a substantial financial hardship and (b) the
specific amount needed to meet the substantial financial hardship. The
amount distributed from the Custodial Account shall not exceed the amount
specified in the notification.
For purposes of this Plan, a substantial financial hardship
shall mean medical expenses incurred by the Individual, his spouse or a
dependent, purchase (excluding mortgage payments) of a principal residence
for the Individual, payment of tuition and related educational expenses
for the next 12 months of post-secondary education for the Individual, his
spouse or a dependent, the need to prevent the eviction of the Individual
from his principal residence or foreclosure on the mortgage of the
Individual's principal residence, or such other events as may be approved
by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
In determining whether the need cannot be met by other resources
reasonably available to the Individual, the Employer may rely on the
Individual's certification, executed in a form and manner specified by the
Employer, that the need cannot be relieved:
(a) through reimbursement or compensation by
insurance or otherwise;
(b) by reasonable liquidation of the Individual's
assets, to the extent such liquidation would not
itself cause an immediate and heavy financial
need;
(c) by cessation of elective deferrals under the
Plan; and
(d) by other distributions or nontaxable [at the time
of the loan] loans from plans maintained by the
Employer or by any other employer, or by
borrowing from commercial sources on reasonable
commercial terms.
In the event the Individual is unwilling or unable to provide
the certification described above, or in the event the Employer determines
that it cannot reasonably rely on the certification provided by an
Individual, then the requirements of this Paragraph B shall be deemed
satisfied only if all of the following conditions are satisfied:
(a) the distribution is not in excess of the amount
of the immediate and heavy financial need of the
Individual;
(b) the Individual has obtained all distributions,
other than hardship distributions, and all
nontaxable (at the time of the loan) loans from
plans maintained by the Employer;
(c) the Individual's elective deferrals under this
Plan and all other plans maintained by the
Employer shall be suspended for at least 12
months after receipt of the hardship
distribution; and
(d) under this Plan and all other plans maintained by
the Employer, the Individual may not make
elective deferrals for the Individual's taxable
year immediately following the taxable year of
the hardship distribution in excess of the
limitation on elective deferrals in effect for
such next taxable year under Section 402(g) of
the Code less the amount of such Individual's
elective deferrals for the taxable year of the
hardship distribution.
The Employer shall be responsible for:
(a) determining that a substantial financial
hardship exists;
(b) designating the amount necessary to meet such a
substantial financial hardship; and
(c) notifying the Custodian in writing of its
decisions.
If the Employer does not process hardship distributions in
accordance with the standards set forth under this Plan and applicable
law, the hardship distribution provisions under this Paragraph B shall be
ineffective. Neither the Custodian nor the Investment Advisor shall be
responsible for determining that a substantial financial hardship exists
or the amount necessary to satisfy such hardship and may rely on any
written notification from the Employer certifying the existence and the
amount of a substantial financial hardship.
Any determination under this Paragraph B is to be made in
accordance with uniform and nondiscriminatory standards established by the
Employer. The Individual has the responsibility of providing the Employer
with any and all documents, financial data or other information which the
Employer deems necessary in order to make the determination.
C. The Individual may elect a form of distribution from among
the following alternatives:
(a) A single sum payment in cash;
(b) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the life expectancy of the Individual; or
(c) Equal or substantially equal monthly, quarterly,
or annual payments over a period not extending
beyond the joint and last survivor life
expectancy of the Individual and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After the later to occur of the Individual's
retirement or attainment of age 70 1/2 (the "Required Beginning Date"),
certain restrictions may apply to Individual's ability to change the
period over which payments are made. In no event shall the Custodian or
the Investment Advisor have any responsibility for determining, or giving
advice with respect to, life expectancies or minimum distribution
requirements.
If the Individual fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Individual's Custodial Account in the
form of a single sum cash payment by the April 1 following the calendar
year in which occurs the Required Beginning Date. If the Individual
elects a mode of distribution under subparagraphs (b) or (c) of this
Paragraph C, except as otherwise required by Section 403(b)(10) of the
Code, the amount of the monthly, quarterly or annual payments shall be
determined by dividing the entire interest of the Individual in the
Custodial Account at the close of the prior year by the number of years
remaining in the period specified by the Individual's election.
D. Unless the Individual (or his spouse) elects not to have
life expectancy recalculated, the Individual's life expectancy (and the
life expectancy of the Individual's spouse, if applicable) will be
recalculated annually using their attained ages as of their birthdays in
the year for which the minimum annual payment is being determined. The
life expectancy of the designated beneficiary (other than the spouse) will
not be recalculated. The minimum annual payment may be made in a series
of installments (e.g., monthly, quarterly, etc.) as long as the total
payments for the year made by the date required are not less than the
minimum amounts required.
E. The Individual must receive distributions from the Plan in
accordance with Regulations prescribed by the Secretary of the Treasury
pursuant to Section 403(b)(10) of the Code which are hereby incorporated
by reference, or in the absence of such regulations, in accordance with
Section 401(a)(9) of the Code. In general, these provisions require that
certain minimum distributions must commence not later than the April 1
following the calendar year in which the Individual retires or attains age
70-1/2.
F. If the Individual dies before his entire interest in the
Custodial Account is distributed to him, the remaining undistributed
balance of such interest shall be distributed to the beneficiary or
beneficiaries, if any, designated by the Individual. If no designation of
a beneficiary shall have been made, distribution shall be made to the
Individual's surviving spouse, or the Individual's estate, in that order.
If the Individual dies after installment payments have
commenced, the beneficiary shall continue to receive distributions in
accordance with the payment method specified by the Individual or may
elect, in writing, to receive a lump sum distribution.
If the Individual dies prior to the commencement of benefits,
the beneficiary may elect, in writing, to receive the distribution in one
of the following forms:
(a) A single sum payment in cash made by the
December 31 of the year containing the fifth
anniversary of the Individual's death; or
(b) Equal or substantially equal monthly,
quarterly, or annual payments commencing not
later than the December 31 following the
year of the Individual's death over a period
not to exceed the life expectancy of the
beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Individual's
spouse, distributions may be delayed until the December 31 of the year in
which the Individual would have attained age 70-1/2. A beneficiary must
receive distributions from the Plan in accordance with the regulations
prescribed by the Secretary of the Treasury pursuant to Section 403(b)(10)
of the Code, including the incidental death benefit requirements, which
are hereby incorporated by reference, or in the absence of such
Regulations, in accordance with Section 401(a)(9) of the Code.
G. The Individual may designate a beneficiary or
beneficiaries, and may, in addition, name a contingent beneficiary. Such
designation shall be made in writing in a form acceptable to the
Custodian. The Individual may, at any time, revoke his or her designation
of a beneficiary or change the beneficiary by filing notice of such
revocation or change with the Custodian. Notwithstanding the foregoing,
in the event the Individual is married at the time of his death, the
beneficiary shall be the Individual's surviving spouse unless such spouse
consented in writing to the designation of an alternative beneficiary
after notice of the spouse's rights and such consent was witnessed by a
notary public or representative of the Employer. In the event no valid
designation of beneficiary is on file with the Employer or the Custodian
at the date of death or no designated beneficiary survives him, the
Individual's spouse shall be deemed the beneficiary; in the further event
the Individual is unmarried or his spouse does not survive him, the
Individual's estate shall be deemed to be his beneficiary.
H. In the case of any distribution constitutes an "eligible
rollover distribution" as defined in Section 402(c)(4) of the Code, the
Custodian shall provide the Individual or spousal beneficiary with the
option of (a) receiving the distribution directly, (b) having the
distribution transferred to an individual retirement account or eligible
403(b) program that accepts such "direct rollovers", or (c) to the extent
required under regulations issued by the Secretary of the Treasury, a
combination of (a) and (b).
If the Individual or spousal beneficiary timely elects the
transfer option and provides the Custodian with such information as the
Custodian may prescribe regarding the transferee plan or account,
including the name of the transferee plan or account and identity of the
trustee or custodian, the distribution amount shall be transferred to the
successor trustee or custodian in a "direct rollover" in accordance with
Sections 403(b)(10) and 401(a)(31) of the Code. The Custodian may elect
to accomplish the "direct rollover" by delivering to the Individual or
spousal beneficiary a check, for the full amount of the distribution, but
made payable to the trustee or custodian of the transferee plan or
account. The Individual or spousal beneficiary shall then be responsible
for delivering the check to the trustee or custodian or the transferee
plan.
If the Individual or spousal beneficiary elects payments made
directly to the Individual or spousal beneficiary, distribution shall be
accomplished by delivering to the Individual or spousal beneficiary a
check, for the amount of the distribution less applicable required
withholding, made payable to the Individual or spousal beneficiary.
If the Individual or spousal beneficiary fails to make a timely
election, or if the Individual or spousal beneficiary elects the transfer
option but fails to provide the Custodian with appropriate information to
enable the Custodian to implement the transfer, the Custodian shall,
subject to applicable consent requirements, cause the Individual's or
spousal beneficiary's distribution to be paid directly to the Individual
or spousal beneficiary, less applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Individual's or spousal beneficiary's election between
receiving a distribution directly or having the distribution transferred
to an individual retirement account or eligible 403(b) program in a
"direct rollover."
ARTICLE VI
ADMINISTRATION
Except as otherwise provided in this Plan, the Custodian shall
perform solely the duties assigned to the Custodian hereunder as agent on
behalf of the Individual and any beneficiary. The Custodian shall not be
deemed to be a fiduciary in carrying out the following duties:
(a) Receiving contributions pursuant to the
provisions of this Plan.
(b) Holding, investing and reinvesting the
contributions in Investment Company Shares.
(c) Registering any property held by the Custodian in
its own name, or in nominee or bearer form that
will pass delivery.
(d) Making distributions from the Custodial Account
in cash.
The Custodian shall mail to the Individual all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Individual shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Code, the Custodian shall file with
the Individual a written report of the Custodian's transactions relating
to the Custodial Account during the period from the last previous
accounting, and shall file such other reports with the Internal Revenue
Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Individual shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Individual.
All written notices or communications to the Individual or the
Employer shall be effective when sent by first class mail to the last
known address of the Individual or the Employer on the Custodian's
records. All written notices or communications to the Custodian shall be
mailed or delivered to the Custodian at its designated mailing address,
and no such written notice of communications shall be effective until the
Custodian's actual receipt thereof. The Custodian shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken
by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives
and which appear to have been sent by the Individual, the Employer, or any
other person.
The Custodian shall make payments from the Custodial Account in
accordance with written directions received from the Individual, and it
need not make inquiry as to the rightfulness of such distribution. If the
Custodian has reason to believe that a distribution may be due, it may,
but shall not be required to make the distribution at the request of any
beneficiary who appears to be entitled thereto. The Custodian shall
properly withhold from any payment to the Individual or beneficiary such
amounts as may be required to satisfy any income or other tax withholding
requirements.
The Custodian shall use ordinary care and reasonable diligence
in the performance of its duties as Custodian. The Custodian shall have
no responsibilities other than those provided for herein or in the Act or
Code and shall not be liable for a mistake in judgment, for any action
taken in good faith, or for any loss that is not a result of its gross
negligence, except as provided for herein or in the Act or Code and shall
not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence,
except as provided by the Act or regulations promulgated thereunder.
The Individual and the Employer agree to indemnify and hold the
Custodian harmless from and against any liability that the Custodian may
incur in the administration of the Custodial Account, unless arising from
the Custodian's own negligence or willful misconduct or from a violation
of the provisions of the Act or Regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction
of the Individual with respect to the investment of contributions, or to
make suggestions to the Individual with respect to the investment,
retention or disposition of any contributions or assets held in the
Custodial Account.
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian, taxes, and its fees for maintaining the Custodial Account which
are set forth in the Application or in accordance with any schedule of
fees subsequently adopted by the Custodian. The Custodian may make
changes in the fee schedule at any time. The Custodian may sell
Investment Company Shares and use the proceeds of sale to pay the
foregoing expenses.
The Custodian will send account statements periodically, and
after all transactions. Statements will include any information as the
law may require, and in particular the amount of contributions, earnings,
distributions, and total account valuation at the end of the year. The
Custodian will also send a statement to the Internal Revenue Service as
required by law.
The Custodian may resign as Custodian of any Individual's
Custodial Account upon sixty (60) days' prior notice to the Investment
Advisor and thirty (30) days' prior notice to each Individual who will be
affected by such resignation.
ARTICLE VII
THE INVESTMENT ADVISOR
The Individual and the Employer delegate to the Investment
Advisor the following powers with respect to the Plan: to remove the
Custodian and select a successor Custodian; and to amend this Plan as
provided in Article VIII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time, and shall be exercised only when similarly exercised
with respect to all other Individuals adopting the Plan.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of the Plan except as provided in this
Article VII of the Plan, and none of them shall incur any liability of any
nature to the Individual or beneficiary or other person in connection with
any act done or omitted to be done in good faith in the exercise of any
power or authority herein delegated to the Investment Advisor.
The Individual and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Individual at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Individual and the Employer delegate to the Investment
Advisor the power to amend this Plan (including retroactive amendments).
The Individual or the Employer may amend the Application
(including retroactive amendment) by submitting to the Custodian a copy of
such amended Application, and evidence satisfactory to the Custodian that
the Plan, as amended by such amended Application, will continue to qualify
under the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Individual and his beneficiaries;
(b) the Individual to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to this Plan. The Individual also reserve the right to
terminate his adoption of the Plan in the event that he shall be unable to
secure a favorable ruling from the Internal Revenue Service with respect
to this Plan. In the event of such termination, the Custodian shall
distribute the Custodial Account to the Individual. The Individual also
reserves the right to transfer the assets of his Custodial Account to such
other form of Section 403(b)(7) retirement plan as he may determine, upon
written instructions to the Custodian in such form as the Custodian may
reasonably require.
ARTICLE IX
PROHIBITED TRANSACTIONS
Except as provided in Section 408 of the Act or Section 4975 of
the Code, the Custodian:
A. Shall not cause the Plan to engage in a transaction if it
knows or should know that such transaction constitutes a direct or
indirect:
(a) Sale or exchange or leasing of any property
between the Plan and a party in interest;
(b) lending of money or other extension of
credit between the Plan and a party in
interest;
(c) furnishing of goods, services, or facilities
between the Plan and a party in interest;
(d) transfer to, or use by or for the benefit
of, a party in interest, of any assets of
the Plan;
(e) acquisition, on behalf of the Plan, of any
employer security or employer real property
in violation of Section 407(a) of the Act.
B. Shall not permit the Plan to hold any employer security or
employer real property if it knows or should know that holding such
security or real property violates Section 407(a) of the Act.
C. Shall not deal with the assets of the Plan in its own
interest or for its own account.
D. Shall not in any capacity act in any transaction involving
the Plan on behalf of a party (or represent a party) whose interests are
adverse to the interests of the Plan or the interests of its participants
or beneficiaries.
E. Shall not receive any consideration for its own account
from any party dealing with the Plan in connection with a transaction
involving the assets of the Plan; provided that nothing in this Article IX
shall be construed to prohibit the payment to the Custodian of any fees
otherwise authorized under the terms of this Plan.
ARTICLE X
LEGAL COMPLIANCE
Section 403(b) of the Code requires that tax sheltered custodial
account arrangements (other than arrangements maintained by a church or
convention or association of churches) satisfy certain participation and
nondiscrimination requirements.
In general, salary reduction contributions made pursuant to an
Individual's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make salary reduction contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Employer must satisfy the
nondiscrimination requirements of Section 403(b)(12) of the Code.
It should be understood that neither the Investment Advisor nor
the Custodian is in a position to render legal or tax advice and that the
information contained in and the documents furnished with this description
merely represent the Investment Advisor's understanding of the statutes
and regulations affecting the establishment and qualification of a Section
403(b)(7) plan. Accordingly, an Individual is urged to consult his
attorney or tax advisor in connection with the adoption of the Plan
compliance with applicable legal requirements, and the submission of a
ruling request on his behalf.
ARTICLE XI
ERISA RIGHTS
If the program as adopted by the Employer constitutes an
"employee pension benefit plan" under the Employee Retirement Income
Security Act of 1974 ("ERISA"), as a participant in the Plan, you are
entitled to certain rights and protections. This law provides that all
Plan participants shall be entitled to:
Examine, without charge, at the office of the plan
administrator (and at other specified locations, if
appropriate), all Plan documents, including copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as detailed annual reports.
Obtain copies of all Plan documents and other Plan
information upon written request to the plan administrator. The
plan administrator may make a reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The
plan administrator is required by law to furnish each
Participant with a copy of this summary annual report.
Obtain a statement telling you whether you have a current
vested interest in your account and whether, under the terms of
the Plan, you will be entitled to receive a retirement benefit
if you stop working under the Plan now. If you do not have a
current vested interest or right to a benefit at normal
retirement age, the statement will tell you how many more years
you have to work to obtain these rights. This statement must be
requested in writing and is not required to be given more than
once a year. The Plan must provide the statement free of
charge.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the operation of
the Plan. The people who operate your Plan, called "fiduciaries" of the
Plan, have a duty to do so prudently and in the interest of you and other
Plan participants and beneficiaries.
No one, including your employer or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining your benefits or exercising your rights under ERISA. If your
claim for your benefit is denied in whole or in part you must receive a
written explanation of the reason for the denial. You have the right to
have the plan administrator review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the plan
administrator and do not receive them within 30 days, you may file suit in
a federal court. In such a case, the court may require the plan
administrator to provide the materials and pay you up to $100 a day until
you receive the materials, unless the materials were not sent because of
reasons beyond the control of the plan administrator. If you have a claim
for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that Plan
fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these
costs and fees. If you lose, the court may order you to pay these costs
and fees, for example, if it finds your claim is frivolous.
If you have any questions about your Plan, you should contact
the plan administrator. If you have any questions about this statement or
about your rights under ERISA, you should contact the nearest Area Office
of the U.S. Labor-Management Services Administration, Department of Labor.
ADMINISTRATIVE INFORMATION
Plan Name: _______________________________________
Employer: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: _________________________________
Administrator: _______________________________________
_______________________________________
_______________________________________
(___) _________________________________
EIN: _________________________________
The Administrator shall be the agent for service of
legal process.
Plan Number: ____
Type of Plan: Defined Contribution, Section 403(b)(7) Plan
Funding Medium: Custodial Accounts
Plan Year: _______________________________________
EXHIBIT 15
DISTRIBUTION PLAN
OF
THE YACKTMAN FUND, INC.
WHEREAS, The Yacktman Fund, Inc. (the "Fund") is in the process
of registering with the Securities and Exchange Commission as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Fund intends to act as a distributor of shares of
its Common Stock, $.0001 par value ("Common Stock"), as defined in Rule
12b-1 under the Act, and desires to adopt a Distribution Plan pursuant to
such Rule, and the Board of Directors has determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit
the Fund and its shareholders; and
WHEREAS, the Fund may employ one or more distributors (each a
"Distributor") to distribute shares of Common Stock to their existing
brokerage clients ("Clients") for a limited period following the
commencement of the offering of the Fund's shares to the public.
NOW, THEREFORE, the Fund hereby adopts this Distribution Plan
(the "Plan") in accordance with Rule 12b-1 under the Act on the following
terms and conditions:
1. Appointment of Distributors. The President of the Fund is
authorized to execute and deliver, in the name and on behalf of the Fund,
written agreements in substantially the form attached hereto as Exhibit A
or in any other form duly approved by the Fund's Board of Directors
("Distribution Agreements") with broker-dealers that are registered with
the Securities and Exchange Commission and members of the National
Association of Securities Dealers, Inc. Such Distribution Agreements
shall require the Distributors to sell shares of Common Stock to their
respective Clients as set forth therein. The Fund shall not be obligated
to execute any Distribution Agreement with any qualifying broker-dealer.
2. Payments to Distributors. The Fund shall pay to each
Distributor a distribution fee for distribution of the Fund's shares at
the rate of 0.65% per annum of the aggregate average daily net asset value
of the shares of Common Stock beneficially owned by such Distributor's
Clients who established their Fund accounts prior to December 31, 1992;
provided, however, that the maximum amount of all distribution fees paid
to all Distributors by the Fund in any year shall not exceed 0.25% of the
average daily net assets of the Fund. Any distribution fees not paid
because of the foregoing limitation shall not be paid in subsequent years.
Such distribution fee shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Directors shall
determine. For purposes of determining the fees payable under this
paragraph 2, the aggregate average daily net asset value of the shares of
Common Stock beneficially owned by Clients will be computed in the manner
specified in the Fund's Registration Statement on Form N-1A (as the same
is in effect from time to time) in connection with the computation of the
net asset value of shares of Common Stock for purposes of purchases and
redemptions. The shares of Common Stock beneficially owned by a Client
shall be deemed to include all shares of Common Stock purchased and not
redeemed by the Client; provided, however, that if at any time no shares
of Common Stock are beneficially owned by a Client whose Fund account was
established prior to December 31, 1992, no distribution fees thereafter
shall be paid with respect to shares of Common Stock beneficially owned by
such Client. For purposes of this Plan and any Distribution Agreements
entered into by the Fund, a Client shall include (a) with respect to
individuals, the individual's spouse, children, trust or retirement
accounts for the benefit of any of the foregoing, the individual's estate
and any corporation of which the individual is an affiliate, (b) with
respect to corporations, its retirement plans and its affiliates, and (c)
with respect to Clients who are investment advisers, financial planners or
others who exercise investment discretion or make recommendations
concerning the purchase or sale of securities, accounts for which they
exercise investment discretion or make recommendations concerning the
purchase or sale of securities. Beneficial ownership shall not include
ownership solely as a nominee. If after December 31, 1992, a Client
ceases to be a Client of a Distributor and thereafter becomes a Client of
another Distributor, such Client shall continue to be considered a Client
whose Fund account was established prior to December 31, 1992 if the
Client beneficially owned shares of Common Stock at all times after
ceasing to be a Client of the former Distributor and prior to becoming a
Client of the latter Distributor except as may be necessary to affect a
transfer of the account.
3. Permitted Expenditures. The amount set forth in paragraph
2 of this Plan shall be paid for a Distributor's services as distributor
of the shares of the Fund and may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of the
Fund's shares, including but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, employees of the
Distributor who engage in or support distribution of shares. No payments
may be made pursuant to this Plan except pursuant to paragraph 2.
4. Effective Date of Plan. This Plan shall not take effect
until (a) it has been approved by a vote of at least a majority (as
defined in the Act) of the outstanding shares of Common Stock and (b)
(together with any related agreements) by votes of a majority of both (i)
the Board of Directors of the Fund and (ii) those Directors of the Fund
who are not "interested persons" of the Fund (as defined in the Act) and
have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in
person at a meeting (or meetings) called for the purpose of voting on this
Plan and such related agreements.
5. Continuance. Unless otherwise terminated pursuant to
paragraph 6 below, this Plan shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 4(b).
6. Reports. Any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to this Plan or any related
agreement shall provide to the Fund's Board of Directors and the Board
shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
7. Termination. This Plan may be terminated at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority
of the outstanding shares of Common Stock. This Plan shall be
automatically terminated upon the closing of all Fund accounts established
by Clients of Distributors prior to December 31, 1992.
8. Amendments. This Plan may not be amended to increase
materially the amount of payments provided for in paragraph 2 hereof
unless such amendment is approved in the manner provided for initial
approval in paragraph 4 hereof.
9. Selection of Directors. While this Plan is in effect, the
selection and nomination of Directors who are not interested persons (as
defined in the Act) of the Fund shall be committed to the discretion of
the Directors who are not interested persons.
10. Records. The Fund shall preserve copies of this Plan and
any related agreements and all reports made pursuant to paragraph 6
hereof, for a period of not less than six years from the date of this
Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
Exhibit 15.1
The following broker-dealers have entered into Distribution
Agreements with Registrant pursuant to the Registrant's Distribution Plan
under Rule 12b-1. A copy of the form of Distribution Agreement is
included in Exhibit 15 and is incorporated by reference pursuant to Rule
411 under the Securities Act of 1933.
Birkelbach Investment
McDonald & Company
Roney & Company
Vestor Capital Management
Charleston Securities
Fourth Street Financial
Chicago Corporation
Thomas White & Company
American Capital
William Blair & Company
Tucker Anthony
Pittsburgh Financial
Judge & Associates
IFS Investors Securities
MW Management Company
Advisory Financial
Rochdale Securities
CJ Lawrence
Shearson Lehman
Edward D. Jones
Linsco Private Ledger
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<NAME> THE YACKTMAN FUND
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