FIDELITY BOND ALLOCATION AGREEMENT Pearl Mutual Funds, Pearl Management Company, and Pearl Management Company Retirement Plan Dated June 27, 2006
EXHIBIT
C
CPP
4.4B
Pearl
Mutual Funds, Pearl Management Company, and
Pearl
Management Company Retirement Plan
Dated
June 27, 2006
PEARL MUTUAL FUNDS (“PMF”), a
Massachusetts business trust registered under the Investment Company Act of 1940
as an open-end diversified management investment company (including its two
Funds, Pearl Total Return Fund and Pearl Aggressive Growth Fund), PEARL MANAGEMENT COMPANY
(“PMC”), an Iowa corporation, and PEARL MANAGEMENT COMPANY RETIREMENT
PLAN (“PMCRP”), a retirement plan and trust established and maintained by
Pearl Management Company (each an “Insured” and collectively the “Insureds”)
make this Agreement:
1. Joint Insured Bond; Coverage
Amounts. This Agreement applies to the current joint insured fidelity
bond and any future joint insured fidelity bond insuring the same Insureds, all
as modified from time to time. PMC shall administer this Agreement on behalf of
each Insured.
PMF and
PMCRP each shall have primary coverage (minimum assured limit of liability)
under the fidelity bond in an amount at least equal to the amount required by
applicable laws and regulations from time to time. PMC shall have primary
coverage as determined and required by this Agreement.
The total
coverage (aggregate limit of liability) of the fidelity bond shall be determined
by PMF’s Board of Trustees from time to time and shall be equal to or in excess
of the total of the required primary coverage amounts of the three
Insureds.
Subject
to paragraph 2, the current fidelity bond and current amounts as of
June 27, 2006 are:
Bond: Financial Institution
Bond, Standard Form 14, issued by The Cincinnati Insurance Company, including
endorsements
Aggregate limit of liability:
$3,000,000
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Required primary coverage amounts:
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PMF
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$525,000
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PMCRP
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175,000
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PMC
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500,000
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2. Increased Coverage. The
primary coverage amount of PMF and the primary coverage amount of PMCRP shall
promptly be increased whenever required to comply with applicable federal
statutes and regulations, including but not limited to Rule 17g-1 under the
Investment Company Act of 1940. Each such increase shall automatically increase
the amount stated in paragraph 1 above as the required primary coverage amount
for that Insured, and this Agreement need not be amended to reflect the
increased amount.
PMC shall
promptly take action to increase the total coverage amount (aggregate limit of
liability) of the fidelity bond when and to the extent that (a) PMF’s Board
of Trustees decides to increase the total coverage amount or (b) an
increase in the total coverage amount is necessary because a required increase
in the primary coverage amount of PMF or PMCRP would otherwise cause the total
of the required primary coverage amounts of the three Insureds to exceed the
total coverage amount of the fidelity bond.
3. PMC Shall Pay All Premiums as PMC
Expense. Effective January 1, 2006, all premiums for the fidelity
bond, including the premium for each increase in the total coverage amount
(aggregate limit of liability) and including each future initial or renewal
premium, shall be paid by PMC as an expense of PMC. PMC waives with regard to
the fidelity bond the provisions of paragraph 4(l) of the Investment Management
Agreement between PMF and PMC,
which
provides that PMF shall pay “All expenses of bond and insurance coverage
required by law or deemed advisable by the Board.”
4. Allocation of Proceeds of
Bond. The fidelity bond is a “claims made” insurance policy. If a loss
occurs, proceeds of the fidelity bond shall be allocated in this
manner:
a. As
used in this Agreement, a “policy year” is the period of twelve months beginning
on the month and day on which the policy period begins. A “party loss” is the
insured loss (including all related expenses) of a party (which includes the
Trustees, Directors, Officers, and other insured employees and agents of a
party) that relates to a claim made by that party under the fidelity bond
relating to a particular policy year.
b. If
only one Insured incurs a party loss relating to a particular policy year, the
proceeds of the fidelity bond for that policy year are allocated to that
Insured.
c. If
more than one Insured incurs a party loss relating to a particular policy year,
the proceeds of the fidelity bond for that policy year shall first be allocated
among the Insureds in proportion to their required primary coverage amounts in
effect as of the beginning of that policy year, but the allocation to each
Insured shall not exceed that Insured’s party loss relating to that policy year.
If for the particular policy year, after initial allocation, there are remaining
proceeds of the fidelity bond and one or more Insureds have party losses that
have not been paid in full, the remaining proceeds shall be further allocated to
the Insured or Insureds having excess losses in proportion to their required
primary coverage amounts, with such allocation repeated until all such losses
have been paid or until the total coverage amount of the fidelity bond has been
exhausted.
d. If all
party losses relating to a particular policy year are not paid at the same time,
the Insureds who claim party losses for that policy year shall make appropriate
provisions which they deem suitable to the particular circumstances (taking into
account the amount of any payment received, the amounts, nature, and expected
results of any remaining claims, and all other relevant factors) to permit a
later reallocation of the amounts paid.
5. Notices. Each Insured shall
promptly give to the insurer all notices required of it under the fidelity bond
and shall send a copy of each such notice to the other Insureds.
6. Effective Date. This
Agreement shall be effective as of May 3, 2006, which is the effective date
of the endorsement increasing the total coverage amount of the fidelity bond to
$3,000,000. However, the effective date of paragraph 3 shall be January 1,
2006. This Agreement replaces the previous Fidelity Bond Allocation Agreement.
This Agreement has been approved by PMF’s Board of Trustees.
7. Amendment. This Agreement
may be amended from time to time by written agreement of all
Insureds.
8. Termination. Any Insured
may terminate this Agreement by giving the other Insureds at least sixty days
written notice. This Agreement shall terminate as to any Insured as of the date
when that Insured ceases to be an Insured under the fidelity bond. However, any
termination shall not affect the rights and obligations that have attached under
this Agreement to a terminating party before the termination becomes
effective.
Executed
at Muscatine, Iowa, as of June 27, 2006. This Agreement is executed in
multiple counterparts, each of which shall be deemed to be an original; but all
counterparts together shall constitute only one instrument.
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By
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/s/ Xxxxxx
X. Xxxx
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Xxxxxx
X. Xxxx
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President
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PEARL
MANAGEMENT COMPANY
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By
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/s/ Xxxxxxx
X. Xxxxxxxx
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Xxxxxxx
X. Xxxxxxxx
Vice President |
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PEARL MANAGEMENT COMPANY
RETIREMENT PLAN
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By
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/s/ Xxxxxx
X. Xxxx
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Xxxxxx
X. Xxxx
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Trustee
and Plan Administrator
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FIDELITY
BOND DEDUCTIBLE AGREEMENT
Pearl
Mutual Funds and Pearl Management Company
Dated
September 15, 2006
PEARL MUTUAL FUNDS, a
Massachusetts business trust registered under the Investment Company Act of 1940
as an open-end diversified management investment company, including its two
Funds, Pearl Total Return Fund and Pearl Aggressive Growth Fund (collectively
“PMF”), and PEARL MANAGEMENT
COMPANY (“PMC”), an Iowa corporation which serves as Manager and
investment adviser for PMF, make this Agreement:
1. Purposes. The purposes of
this Agreement are (a) to ensure that PMF’s protection under the joint
fidelity bond insuring PMF and PMC (the “fidelity bond”) shall not in any way be
reduced or diminished by the fact that the fidelity bond may provide for a
deductible amount and (b) to ensure full compliance with the requirements
of the Securities and Exchange Commission regarding a fidelity bond deductible
provision.
2. Fidelity Bond. This
Agreement applies to the current joint insured fidelity bond and any future
fidelity bond insuring PMF, all as modified from time to time. The fidelity bond
shall be provided and maintained in accordance with the decisions and
resolutions of the PMF Board of Trustees from time to time and in accordance
with all requirements of applicable laws and regulations.
3. Deductible. The fidelity
bond may provide for a deductible amount from time to time. The deductible
amount shall not exceed $25,000 unless the PMF Board of Trustees authorizes a
higher amount.
4. Indemnification. PMC shall
indemnify PMF for the portion of any loss that would be covered by the fidelity
bond but for the deductible. Any indemnification in accordance with this
Agreement shall be an expense of PMC, not reimbursed by PMF. With regard to the
fidelity bond and this Agreement, PMC waives the provisions of paragraph 4(l) of
the Investment Management Agreement between PMF and PMC, which provides that PMF
shall pay “All expenses of bond and insurance coverage required by law or deemed
advisable by the Board.”
5. Fidelity Bond Escrow Account.
PMC shall deposit and maintain in an escrow account at all times an
amount at least equal to the full amount of the deductible. The escrow account
may be maintained with a registered money market mutual fund or with a bank or
other financial institution. The account shall be held in the name of Pearl
Management Company, Fidelity Bond Escrow Account, or similar name. Interest or
dividend income on the account may be withdrawn by PMC at any time, provided
that the amount remaining in the account shall always be at least equal to the
amount required by this agreement. Any other payment or withdrawal from the
account shall be made solely for the purpose of indemnification of PMF as stated
in paragraph 4 and shall require the signatures of both the Chairman of the
Board of PMF and the President of PMC.
6. Notice of Loss. PMC shall
promptly notify PMF’s independent Trustees and independent registered public
accounting firm at any time there is a loss that would have been covered by the
fidelity bond but for the deductible.
7. Maintenance of Notice of Loss.
PMF (including PMC on behalf of PMF) shall maintain, in accordance with
Rule 31a-2(a) as modified from time to time, a copy of any notice of loss sent
to PMF’s independent Trustees.
8. Amendment. This Agreement
may be amended from time to time by written agreement of PMF and
PMC.
9. Term and Termination. This
Agreement shall continue so long as PMF is insured under the fidelity bond and
shall terminate if PMF ceases to be insured under the fidelity bond. PMF or PMC
may terminate this Agreement by giving the other party at least sixty days
written notice. However, any termination shall not affect the rights and
obligations that have attached under this Agreement to a terminating party
before the termination becomes effective.
Executed
at Muscatine, Iowa, as of the date stated above. This Agreement is executed in
multiple counterparts, each of which shall be deemed to be an original; but all
counterparts together shall constitute only one instrument.
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PEARL
MANAGEMENT COMPANY
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By
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/s/ Xxxxxx
X. Xxxx
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By
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/s/ Xxxxxxx
X. Xxxxxxxx
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Xxxxxx
X. Xxxx
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Xxxxxxx
X. Xxxxxxxx
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President
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Vice
President
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CPP
4.4E
FIDELITY
BOND COVERAGE AND ALLOCATION UPDATE
Pearl
Mutual Funds, Pearl Management Company, and
Pearl
Management Company Retirement Plan
Dated
November 15, 2006
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To:
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Directors
and Officers, Pearl Mutual Funds
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Xxxxxxx
X. Xxxxxxx, PMF CCO
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Xxxx,
Xxxx & Xxxxx LLC, attn. Xxxxx X. Xxxxxx
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Deloitte
& Touche LLP, attn. Xxxx X. Xxxxxxx
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From:
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Xxxxxx
X. Xxxx, President
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Xxxxx
X. Xxxxxxx, Senior Counsel
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Xxxxxxx
X. Xxxxxxxx, Vice President and PMC CCO
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Re:
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Fidelity
bond coverage and allocation update (CPP 4.4B);
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PMF
required primary coverage amount is increased to
$600,000
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At the
September 2006 Board meeting, Pearl Mutual Funds’ Board of Trustees approved the
fidelity bond and $525,000 minimum required primary coverage for PMF. See these
documents: Fidelity Bond Allocation Agreement dated June 27, 2006 (CPP
4.4B) and the PMF Board’s most recent fidelity bond resolution, adopted at the
September 2006 meeting (CPP 4.4C).
Rule
17g-1 under the Investment Company Act of 1940 requires these minimum amounts of
fidelity bond coverage for PMF, based on PMF’s gross assets at the end of the
most recent fiscal quarter:
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Gross
assets $100 million to $150 million
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$
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525,000 coverage
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Gross
assets $150 million to $250 million
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$
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600,000
coverage
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PMF’s
gross assets appear likely to exceed $150 million in the near future. PMF’s
total net assets, including Pearl Total Return Fund and Pearl Aggressive Growth
Fund, were approximately $149.4 million at yesterday’s close. Total gross assets
were slightly higher.
In
anticipation of PMF’s gross assets soon exceeding $150 million, PMF’s required
primary coverage amount under the Fidelity Bond Allocation Agreement is
increased from $525,000 to $600,000, effective November 15,
2006.
This
increase is made sooner than required by Rule 17g-1, which requires that the
minimum coverage be determined based on gross assets at the quarter-end
preceding the date of determination.
The
updated required primary coverage amounts are:
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Pearl
Mutual Funds (PMF)
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$
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600,000
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Pearl
Management Company Retirement Plan (PMCRP)
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175,000
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Pearl
Management Company (PMC)
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500,000
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Total
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1,275,000
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We
recommend that the total coverage (aggregate limit of liability) of the fidelity
bond remain at $3 million. This coverage substantially exceeds the total of the
three required primary coverage amounts, and this excess coverage continues to
be available for the protection of all three Insureds. If a loss occurs,
proceeds of the fidelity bond will be allocated among the Insureds as provided
in paragraph 4 of the Fidelity Bond Allocation Agreement.
The
Fidelity Bond Allocation Agreement provides that it need not be amended as a
result of an increase in PMF’s required primary coverage amount to comply with
Rule 17g-1; see paragraph 2.
PMC
continues to pay all premiums for the fidelity bond as an expense of PMC, as
provided in paragraph 3 of the Fidelity Bond Allocation Agreement.
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