Exhibit 23M(2)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
CITCO-QUAKER FUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
THE PENN STREET FUNDS, INC.
This Distribution and Service Plan and Agreement (the "Plan") is dated as
of the 10th day of December, 2003, by and between The Penn Street Funds, Inc.
(the "Company"), on behalf of each of its series (collectively, the "Funds" and
individually, a "Fund") and Citco-Quaker Funds Distributor, Inc. (the
"Distributor").
1. THE PLAN. This Plan is each Fund's written distribution and service plan
for Class C shares of each Fund (the "Shares"), designed to comply with the
provisions of Rule 12b-1 as it may be amended from time to time (the "Rule")
under the Investment Company Act of 1940 (the "1940 Act"). Pursuant to this Plan
each Fund will compensate the Distributor for its services in connection with
the distribution of Shares, and the ervice and maintenance of
shareholder accounts that hold Shares ("Accounts"). The Company, on behalf of
each Fund, may act as distributor of securities of which it is the issuer,
pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the Company's Xxxxxxxxxxxx
Xxxxxxxxx, (xx) xxx 0000 Xxx, (xxx) the Rule, (iv) Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc., or any applicable
amendment or successor to such rule (the "NASD Conduct Rules") and (v) any
conditions pertaining either to distribution-related expenses or to a plan of
distribution to which the Company is subject under any order on which the
Company relies, issued at any time by the U.S. Securities and Exchange
Commission ("SEC").
2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of each Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Directors" shall mean the members of the Company's Board
of Directors who are not "interested persons" (as defined in the 0000 Xxx) of
the Company and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Funds' respective books as
determined by the Distributor shall be deemed the Recipient as to such Shares
for purposes of this Plan.
3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT SERVICES.
(a) PAYMENTS TO THE DISTRIBUTOR. In consideration of the payments made by
the Company to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Funds. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which a Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Funds will make the
following payments to the Distributor:
(i) ADMINISTRATIVE SUPPORT SERVICE FEES. Within ten (10) days of the
end of each month, the Company, on behalf of each Fund, will make payment in the
amount of 0.0208% (0.25% on an annual basis) of the average of the aggregate net
asset value of each Fund's Shares computed as of the close of each business day
(the "Service Fee") during that month. Such Service Fee payments received from
the Company, on behalf of each Fund, will compensate the Distributor for
providing administrative support services with respect to Accounts. The
administrative support services in connection with Accounts may include, but
shall not be limited to, the administrative support services that a Recipient
may render as described in Section 3(b)(i) below.
(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE). Within
ten (10) days of the end of each month, the Company, on behalf of each Fund,
will make payment of 0.0625% per month (0.75% on an annual basis) of the average
of the aggregate net asset value of each Fund's Shares computed as of the close
of each business day (the "Asset-Based Sales Charge") during that month. Such
Asset-Based Sales Charge payments received from the Company will compensate the
Distributor for providing distribution assistance in connection with the sale of
each Fund's Shares.
The distribution assistance services to be rendered by the Distributor
in connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own
resources, or from an affiliate, for the interest and other borrowing costs of
the Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Funds; and (iv) paying
other direct distribution costs, including without limitation the costs of sales
literature, advertising and prospectuses (other than those prospectuses
furnished to current holders of the Funds' shares ("Shareholders")) and state
"blue sky" registration expenses.
(b) PAYMENTS TO RECIPIENTS. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Directors. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 0000 Xxx) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the
Distributor shall make the following payments to Recipients:
(i) SERVICE FEE. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of each Fund's Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (A) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (B) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, Advance Service Fee Payments may be made
more often than quarterly, and sooner than the end of the calendar quarter. In
the event Shares are redeemed less than one year after the date such Shares were
sold, the Recipient is obligated to and will repay the Distributor on demand a
pro rata portion of such Advance Service Fee Payments, based on the ratio of the
time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Funds, assisting in the
establishment and maintenance of accounts or sub-accounts in the Funds and
processing Share redemption transactions, making the Funds' investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of ervices and/or the
maintenance of Accounts, as the Distributor or the Funds may reasonably request.
(ii) DISTRIBUTION ASSISTANCE FEE (ASSET-BASED SALES CHARGE) PAYMENTS.
Irrespective of whichever alternative method of making service fee payments to
Recipients is selected by the Distributor, in addition the Distributor shall
make distribution assistance fee payments to each Recipient quarterly, within
forty-five (45) days after the end of each calendar quarter, at a rate not to
exceed 0.1875% (0.75% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares computed as of the close of
each business day constituting Qualified Holdings owned beneficially or of
record by the Recipient or its Customers for a period of more than one (1) year.
Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Funds may reasonably
request.
(c) A majority of the Independent Directors may at any time or from time
to time (i) increase or decrease the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the maximum rates set forth above, and/or
(ii) direct the Distributor to increase or decrease any Minimum Holding Period,
any maximum period set by a majority of the Independent Directors during which
fees will be paid on Shares constituting Qualified Holdings owned beneficially
or of record by a Recipient or by its Customers (the "Maximum Holding Period"),
or Minimum Qualified Holdings. The Distributor shall notify all Recipients of
any Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding
Period that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or Statement of Additional
Information or amendment to or revision of the prospectus or Statement of
Additional Information of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits that apply to such fees under the
NASD Conduct Rules relating to sales of shares of open-end funds
(e) Under the Plan, payments may also be made to Recipients: (i) by
Citco-Quaker Fund Advisors, Inc. ("CQFA") from its own resources (which may
include profits derived from the advisory fee it receives from the Funds), or
(ii) by the Distributor (a subsidiary of CQFA), from its own resources, from
Asset-Based Sales Charge payments or from the proceeds of its borrowings, in
either case, in the discretion of CQFA or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Directors still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Company's
Independent Directors at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Funds
or the Company liable to make any payment whatsoever to any person or entity
other than directly to the Distributor. The Distributor has no obligation to pay
any Service Fees or Distribution Assistance Fees to any Recipient if the
Distributor has not received payment of Service Fees or Distribution Assistance
Fees from the Company, on behalf the Funds.
4. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in effect, the
selection and nomination of persons to be Independent Directors of the Company
shall be committed to the discretion of the incumbent Independent Directors.
Nothing herein shall prevent the incumbent Independent Directors from soliciting
the
views or the involvement of others in such selection or nomination as long as
the final decision on any such selection and nomination is approved by a
majority of the incumbent Independent Directors.
5. REPORTS. While this Plan is in effect, the Treasurer of the Company shall
provide written reports to the Company's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly.
6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 0000
Xxx) of each Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Directors cast
in person at a meeting called for the purpose of voting on such agreement; and
(v) such agreement shall, unless terminated as herein provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Directors
cast in person at a meeting called for the purpose of voting on such
continuance.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has been
approved by a vote of the Board and its Independent Directors cast in person at
a meeting called on December 10, 2003, for the purpose of voting on this Plan.
Unless terminated as hereinafter provided, it shall continue in effect until
renewed by the Board in accordance with the Rule and thereafter from year to
year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders of the
relevant Funds at a meeting called for that purpose and all material amendments
must be approved by a vote of the Board and of the Independent Directors.
This Plan may be terminated at any time by a vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as defined
in the 0000 Xxx) of each Fund's outstanding Class C voting shares voting
separately. In the event of such termination, the Board and its Independent
Directors shall determine whether the Distributor shall be entitled to payment
from the Fund of all or a portion of the Service Fee and/or the Asset-Based
Sales Charge in respect of Shares sold prior to the effective date of such
termination.
8. SEVERABILITY. The terms of this agreement shall severable with respect to
each Fund.
The Penn Street Funds, Inc.
on behalf of each of its series
By:
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Xxxx Xxxxxxx, Treasurer
Citco-Quaker Funds Distributor, Inc.
By:
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Xxxx Xxxxxxx, Chief Financial Officer
