UNITED STATES File No. 333-27925
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 File No. 811-8231
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. 1 [ X ]
Post- Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 1 [ X ]
SPIRIT OF AMERICA INVESTMENT FUND, INC.
(Exact name of Registrant as specified in charter)
477 Jericho Turnpike
Syosset, New York 11791
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: (516) 921-4200
Mr. David Lerner
SSH Securities, Inc.
477 Jericho Turnpike
Syosset, New York 11791
(Name and address of Agent for Service)
Copies to:
Ms. Sandra L. Adams
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Approximate Date of Proposed Public offering: As soon as practicable
after the effective date of this Registration Statement.
__________________________________________________________________
Registrant will file a Notice pursuant to Rule 24f-2 within ninety
days after its fiscal year end.
Registrant hereby amends the Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to
delay its effective date until Registrant shall file a further
amendment which specifically states that such Registration Statement
shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until such Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to Section 8(a), may determine.
As filed with the U.S. Securities and Exchange Commission on December
17, 1997.
TABLE OF CONTENTS
Registration Statement of Spirit of America Investment Fund, Inc.
Page
1. Cross Reference Sheet 4
2. Spirit of America Investment Fund, Inc.
Part A - Prospectus 6
3. Spirit of America Investment Fund, Inc.
Part B - Statement of Additional Information 36
4. Spirit of America Investment Fund, Inc.
Part C - Other Information 55
5. Signature Page 60
6. Index to Exhibits 61
<PAGE>
SPIRIT OF AMERICA INVESTMENT FUND, INC.
CROSS REFERENCE SHEET Pursuant to Rule 481(a)
N-1A Item
Information Required in Prospectus Caption in Prospectus
Part A
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Description of the
Fund; General
Information
5. Management of the Fund Management of the
Fund; General
Information; Risk
Considerations
5A. Management's Discussion of Fund Per- Not Applicable
formance
6. Capital Stock and Other Securities Dividends,
Distributions and
Taxes; General
Information
7. Purchase of Securities Being Offered Purchase and Sale of
Shares; General
Information
8. Redemption or Repurchase Purchase and Sale of
Shares; General
Information
9. Legal Proceedings Not Applicable
Location in Statement
Of Additional
Part B Information (Caption)
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Management of the
Fund; General
Information
13. Investment Objective and Policies Description of the
Fund
14. Management of the Registrant Management of the
Fund
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Other Services Management of the
Fund; Expenses of the
Fund; General
Information
17. Brokerage Allocation and other
Practices Portfolio Transaction
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption, and Pricing Purchase of Shares;
Redemption and
Repurchase of Shares;
Dividends,
Distributions and
Taxes; Shareholder
Services
20. Tax Status Description of the
Fund; Dividends,
Distributions and
Taxes
21. Underwriters General Information
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements;
Report of Independent
Auditors
Part C Other Information
Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration
Statement.
<PAGE>
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
Subject to Completion
Preliminary Prospectus dated ______________, 1997
SPIRIT OF AMERICA INVESTMENT FUND, INC.
477 Jericho Turnpike
Syosset, New York 11791
(800) ___________
Prospectus January __, 1998
Spirit of America Investment Fund, Inc. (the "Fund") is an open-end
diversified mutual fund which seeks growth of capital and current
income. The Fund seeks to achieve its investment objective by
investing in the equity securities of companies in the real estate
industry. The Fund's investment adviser is Spirit of America
Management Corp. ("Spirit Management").
This Prospectus sets forth the information you should know before
investing in the Fund. Please read it carefully and keep it for
future reference. Additional information about the Fund contained
in a Statement of Additional Information dated January __, 1998 has
been filed with the Securities and Exchange Commission (the "SEC").
It may be obtained free of charge by calling the Fund's distributor,
SSH Securities, Inc. at (800) __________. Additionally, the SEC
maintains a Web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference in this
Prospectus and other information regarding the Fund. The Statement
of Additional Information is incorporated by reference in this
Prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE
SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATIONS TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Table of Contents
Page
A Brief Summary of the Fund. . . . . . . . . . . . . . .
Expense Information. . . . . . . . . . . . . . . . . . .
Description of the Fund. . . . . . . . . . . . . . . . .
Investment Objective . . . . . . . . . . . . . . . . . .
Investment Policies. . . . . . . . . . . . . . . . . . .
Investment Practices . . . . . . . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . . . . .
Certain Fundamental Investment Limitations . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . .
Special Services . . . . . . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . .
Dividends, Distributions and Taxes . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . .
General Information. . . . . . . . . . . . . . . . . . .
Distributor Investment Adviser
SSH Securities, Inc. Spirit of America Management Corp.
477 Jericho Turnpike 477 Jericho Turnpike
Syosset, New York 11791 Syosset, New York 11791
(800)_______________ (800) _______________
<PAGE>
A Brief Summary of the Fund
What is the Fund's Investment Objective?
The Fund seeks growth of capital and current income by investing in
the equity securities of companies in the real estate industry.
There can be no assurance that the Fund will be able to achieve its
investment objective. See "Investment Objective" and "Investment
Policies."
Who is the Investment Adviser?
The Fund's investment adviser is Spirit of America Management Corp.,
a recently organized investment manager. See "Management of the
Fund" and "Risk Considerations."
Who may want to Invest in the Fund?
The Fund may be appropriate for investors who are willing to ride out
stock market fluctuations in pursuit of potentially high long-term
returns. The Fund is designed for those looking for income and
growth through an investment that focuses on a wide range of equity
securities in the real estate industry.
What risks are associated with an investment in the Fund?
The value of the Fund's investments will be affected by conditions
in the real estate industry. Real estate is a cyclical industry that
is sensitive to interest rates, economic conditions, property tax
rates and other factors. The price of shares of the Fund will
fluctuate as the daily price of the equity securities and debt
instruments in which the Fund invests fluctuate, so that your shares,
when redeemed, may be worth more or less than their original cost.
An investment in the Fund may be suitable for long-term investors who
may wish to consider investing a portion of their overall equity
portfolio in a real estate mutual fund. By itself, the Fund does not
constitute a balanced investment plan. See "Risk Considerations."
Does the Fund pay dividends?
The Fund intends to make distributions quarterly in March, June,
September and December. These distributions may include ordinary
income and capital gains (each of which is taxable) and a return of
capital (which is generally non-taxable). All dividends and
distributions are paid in additional shares (without sales charge)
unless payment in cash is requested. See "Dividends, Distributions
and Taxes."
How do I make an investment in the Fund?
Shares of the Fund may be purchased through broker-dealers or
directly through SSH Securities, Inc., the Fund's principal
distributor. Shares can be purchased for a minimum initial
investment of $1,000 and subsequent investments can be made for as
little as $50. Purchases of shares are subject to a maximum sales
charge of 5.25%. For detailed information about purchasing shares,
see "How to Purchase Shares." In addition, the Fund offers several
time and money saving services to investors. Be sure to ask about the
Automatic Investment Plan, Retirement Plans and the Systematic
Withdrawal Plan.
How do I sell my shares?
Shares of the Fund may be redeemed at the current net asset value per
share next determined after receipt by the transfer agent of a
redemption request in proper form. Signature guarantees may be
required for certain redemption requests. See "How to Redeem
Shares."
EXPENSE INFORMATION
Shareholder Transaction Expenses are one of several factors to
consider when you invest in the Fund. The following table summarizes
your maximum transaction costs and estimated annual expenses for an
investment in the Fund.
Maximum sales charge imposed on purchases
(as a percentage of offering price)(1) . . . . . . . . . . .5.25%
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price). . . . . . . . None
Deferred sales charge (as a percentage of
original purchase price)(2). . . . . . . . . . . . . . . . . None
Redemption Fees (as a percentage of amount redeemed)(3). . . None
(1) Reduced for purchases of $100,000 and over, decreasing to zero
for purchases of $1 million and over. See "How to Purchase
Shares - Sales Charge."
(2) Investments of $1 million or more are not subject to any sales
charge at the time of purchase, but a contingent deferred sales
charge of 1.00% may be imposed on certain redemptions made
within one year of the date of purchase. See "How to Purchase
Shares - Sales Charge."
(3) The Fund's transfer agent charges $15.00 per redemption for
redemptions remitted by wire. Purchases and redemptions may
also be made through broker-dealers and others who may charge a
fee for their services.
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management fees(4) . . . . . . . . . . . . . . . .0.97%
12b-1 fees(4) . . . . . . . . . . . . . . . . . . 0.30%
Other Expenses (4). . . . . . . . . . . . . . . . 0.70%
Total Fund operating expenses (after fee waivers)(4)1.97%
(4) The above table reflects Spirit Management's voluntary
undertaking to waive all or a portion of its fees and to
reimburse certain expenses to limit the total operating expenses
of the Fund for the first year of operations to 1.97% of the
Fund's average daily net assets. Spirit Management reserves the
right to terminate this waiver or any reimbursement at any time,
in its sole discretion. Any reductions in Spirit Management's
fee are subject to reimbursement by the Fund within the
following three years, to the extent such reimbursement would
not cause total operating expenses to exceed 1.97%. Absent such
waiver, total operating expenses would be 2.22% of the Fund's
average daily net assets on an annualized basis. In subsequent
years, overall expenses for the Fund may not fall below the
percentage limitation until the Adviser has been fully
reimbursed for fees foregone or expenses it paid under the
Advisory Agreement. "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year. Spirit Management
has not previously provided investment advisory services to
registered investment companies.
Example
Based on the level of expenses listed above, an investor would pay
the following expenses on a $1,000 investment assuming (i) imposition
of the maximum sales charge, (ii) 5% annual return and (iii)
redemption at the end of each time period:
1 year 3 years
$ 62 $102
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN. The purpose of the foregoing table is to assist the
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly.
Long-term shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of Securities Dealers, Inc.
(the "NASD"). See "Management of the Fund - Distribution Services
Agreement."
DESCRIPTION OF THE FUND
The Fund is a diversified investment company. The Fund's investment
objective is fundamental and cannot be changed without a shareholder
vote. Except as noted, the Fund's investment policies are not
fundamental and can be changed without a shareholder vote. The Fund
will not change these policies without notifying its shareholders.
There is no guarantee that the Fund will achieve its investment
objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek growth of capital and
current income by investing in equity securities of companies in the
real estate industry. To a lesser extent the Fund will invest in
mortgage-backed securities and taxable debt obligations of
municipalities or their affiliates.
INVESTMENT POLICIES
Under normal circumstances, at least 60% of the Fund's total assets
will be invested in equity securities of real estate investment
trusts ("REITs") and other real estate industry companies. For
purposes of the Fund's investments, a "real estate industry company"
is a company that derives at least 50% of its gross revenues or net
profits from either (a) the ownership, development, construction,
financing, management or sale of commercial, industrial or
residential real estate or (b) products or services related to the
real estate industry, like building supplies or mortgage servicing.
The equity securities in which the Fund will invest for this purpose
consist of common stock, shares of beneficial interest of REITs and
securities with common stock characteristics, such as preferred stock
and debt securities convertible into common stock ("Real Estate
Equity Securities").
The Fund may invest up to 40% of its total assets in (a) securities
that directly or indirectly represent participations in, or are
collateralized by and payable from, mortgage loans secured by real
property ("Mortgage-Backed Securities"), such as mortgage pass-
through certificates, real estate mortgage investment conduit
("REMIC") certificates and collateralized mortgage obligations
("CMOs"), (b) taxable investment grade securities issued by or on
behalf of states and municipal governments, other U.S. territories
and possessions of the United States, and their authorities,
agencies, instrumentalities and political subdivisions ("taxable
municipal obligations"), and (c) short-term investments. These
instruments are described below. See "Risk Considerations" for a
description of the risks associated with the Fund's transactions in
REMICs, CMOs, other types of mortgage-backed securities and taxable
municipal obligations.
The Fund may purchase or sell debt securities on a forward commitment
basis or enter into standby commitment agreements and engage in
portfolio management techniques such as selling short. See
"Investment Practices."
As to any investment in Real Estate Equity Securities, Spirit
Management's analysis will focus on determining the degree to which
the company involved can achieve sustainable growth in cash flow and
dividend paying capability. Spirit Management believes that the
primary determinant of this capability is the economic viability of
property markets in which the company operates and that the secondary
determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will
purchase Real Estate Equity Securities when, in the judgment of
Spirit Management, their market price does not adequately reflect
this potential. In making this determination, Spirit Management will
take into account fundamental trends in underlying property markets
as determined by site visits conducted by individuals knowledgeable
in local real estate markets, price-earnings ratios (as defined for
real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities,
dividend payment history, and such other factors which Spirit
Management may determine from time to time to be relevant.
For temporary defensive purposes, the Fund may invest up to 100% of
its total assets in short-term, liquid, high-grade debt securities,
which may include U.S. Government securities, bank deposits, money
market instruments, repurchase agreements and short-term debt
securities, including notes and bonds (rated A-1, AA or better by
Standard & Poors Ratings Group ("S&P") or rated Prime-1, Aa or better
by Moody's Investors Service, Inc. ("Moody's"). The Fund will assume
a temporary defensive posture only when economic and other factors
affect the real estate industry market to such an extent that Spirit
Management believes there are extraordinary risks in being invested
primarily in Real Estate Securities. For a description of the types
of securities in which the Fund may invest while in a temporary
defensive position, please see the Statement of Additional
Information.
INVESTMENT PRACTICES
REAL ESTATE INVESTMENT TRUSTS
The Fund may invest without limitation in shares of REITs. REITs are
pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or a combination
of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily
from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages
and derive income from the collection of interest payments. Similar
to investment companies such as the Fund, REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"). The Fund will indirectly bear its proportionate share of
expenses incurred by REITs in which the Fund invests in addition to
the expenses incurred directly by the Fund.
MORTGAGE-BACKED SECURITIES
The Fund may invest in Mortgage-Backed Securities including mortgage
pass-through certificates and multiple-class pass-through securities,
such as REMIC pass-through certificates, CMOs and stripped mortgage-backed
securities ("SMBs"), and other types of Mortgage-Backed
Securities that may be available in the future.
Mortgage-Backed Securities also include CMOs and REMIC pass-through
or participation certificates, which may be issued by, among others,
U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes
and the principal of and interest on the mortgage assets may be
allocated among the several classes of CMOs or REMIC certificates in
various ways. Each class of CMOs or REMIC certificates, often
referred to as a "tranche," is issued at a specific adjustable or
fixed interest rate and must by fully retired no later than its final
distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets
such as whole loans or private mortgage pass-through securities. Debt
service on CMOs is provided from payments of principal and interest
on collateral of mortgaged assets and any reinvestment income
thereon.
A REMIC is a CMO that qualifies for special tax treatment under the
Code and invests in certain mortgages primarily secured by interests
in real property and other permitted investments. Investors may
purchase Irregulars and "residual" interest shares of beneficial
interest in REMIC trusts although the Fund does not intend to invest
in residual interests.
The Fund may invest in guaranteed mortgage pass-through securities
which represent participation interests in pools of residential
mortgage loans and are issued by U.S. governmental or private
agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal
National Mortgage Association ("Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"). Ginnie Mae certificates
are guaranteed by the full faith and credit of the United States
Government for timely payment of principal and interest on the
certificates. Fannie Mae certificates are guaranteed by Fannie Mae,
a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie
Mac certificates are guaranteed by Freddie Mac, a corporate
instrumentality of the United States Government, for timely payment
of interest and the ultimate collection of all principal of the
related mortgage loans.
TAXABLE MUNICIPAL OBLIGATIONS
The Fund will invest in taxable municipal securities. These
instruments generally include debt obligations issued by
municipalities and local agencies within the United States to obtain
funds for various public purposes, including construction of a wide
range of public facilities, refunding outstanding obligations,
obtaining funds for community improvement projects and lending such
funds to other public institutions and facilities. In addition,
certain types of taxable industrial development bonds are issued by
or on behalf of public authorities to provide for the construction,
equipment, repair or improvement of certain privately operated or
local facilities. These obligations, including those which are
guaranteed by state, local and municipal agencies or
instrumentalities, may or may not be backed by the full faith and
credits or the taxing authority of the agency or instrumentality
issuing the obligation. Unlike tax-tree municipal securities, the
interest on taxable municipal securities generally will be included
in gross income for federal income tax purposes and may be subject
to income taxes imposed by any state or political subdivision. It is
the Fund's current investment strategy, to limit its investments in
taxable municipal securities to less than 25% of the Fund's net
assets.
The Fund will only invest in taxable municipal obligations which on
the date of investment are within the four highest credit ratings of
Moody's (Aaa, Aa, A, Baa for bonds; MIG-1, MIG-2, MIG-3, MIG-4 for
notes; P-1, Aa or better for commercial paper) or S&P (AAA, AA, A,
BBB for bonds; SP-1, SP-2 for notes; A-1, AA or better for commercial
paper) or are comparably rated by another nationally recognized
statistical rating organization or, if unrated, determined by Spirit
Management to be of comparable quality. Although bonds and notes
rated in the fourth credit rating category are commonly referred to
as investment grade, they may have speculative characteristics.
SHORT SALES
The Fund may attempt to limit exposure to a possible decline in the
market value of portfolio securities through short sales of
securities which Spirit Management believes possess volatility
characteristics similar to those being hedged. The Fund also may use
short sales in an attempt to realize gain. To effect a short sale,
the Fund borrows a security from a brokerage firm to make delivery
to the buyer. The Fund is then obligated to replace the borrowed
security by purchasing it at the market price at the time of
replacement. No short sale will be effected which will, at the time
of making such short sale transaction, cause the aggregate market
value of all securities sold short to exceed 15% of the value of the
Fund's net assets.
SHORT-TERM INVESTMENTS
The short-term investments in which the Fund may invest are:
corporate commercial paper and other short-term commercial
obligations, in each case rated or issued by companies with similar
securities outstanding that are rated Prime-1, Aa or better by
Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated
Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; and
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities with remaining maturities not exceeding
18 months.
RATINGS ON DEBT SECURITIES
In addition to the permissible limits on short-term investments with
reference to ratings noted above, the Fund may invest in investment
grade debt securities (BBB or higher by S&P or Baa or higher by
Moody's or, if not so rated, are of equivalent credit quality as
determined by Spirit Management). Securities rated BBB by S&P or Baa
by Moody's are considered to have speculative characteristics.
Sustained periods of deteriorating economic conditions or rising
interest rates are more likely to lead to a weakening in the issuer's
capacity to pay interest and repay principal than in the case of
higher-rated securities. The Fund expects that it will not retain a
debt security which is downgraded below BBB or Baa or, if unrated,
determined by Spirit Management to have undergone similar credit
quality deterioration, subsequent to purchase by the Fund.
OTHER INVESTMENTS AND LIMITATIONS
While the Fund has no current intention of engaging in any of the
following investment practices, it may in the future determine to do
so to the extent indicated: (i) invest up to 15% of its net assets
in rights or warrants; (ii) invest up to 15% of its net assets in the
convertible securities of companies whose common stocks are eligible
for purchase by the Fund; (iii) enter into repurchase agreements of
up to seven days' duration; (iv) enter into forward commitment
transactions as long as the Fund's aggregate commitments under such
transactions are not more than 15% of the Fund's total assets; (v)
enter into standby commitment agreements; and (vi) invest in illiquid
securities unless, as a result, more than 15% of its net assets would
be so invested.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities will generally include direct
placements or other securities that are subject to legal or
contractual restrictions on resale or for which there is not readily
available market (e.g., when trading in the security is suspended or,
in the case of unlisted securities, when market makers do not exist
or will not entertain bids or offers) and repurchase agreements not
terminable within seven days. Securities that may be resold without
registration pursuant to Rule 144A may be treated as liquid for these
purposes, subject to the supervision and oversight of the Board of
Directors. These securities may include securities issued by certain
REITs that are not publicly traded.
REPURCHASE AGREEMENTS
A repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell that security to the seller at an
agreed upon price on an agreed upon date, normally not more than
seven days from the date of purchase. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for
the period the buyer's money is invested in the security. Such
agreements permit the Fund to keep all of its assets at work while
retaining overnight flexibility in pursuit of investments of a
longer-term nature. If a vendor defaults on its repurchase
obligation, the Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the
repurchase price. If a vendor goes bankrupt, the Fund might be
delayed in, or prevented from, selling the collateral for its
benefit. Spirit Management monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements.
GENERAL
The successful use of the foregoing investment practices draws upon
Spirit Management's skills and experience with respect to such
instruments and usually depends on its ability to forecast price
movements correctly. Should prices move unexpectedly, the Fund may
not achieve the anticipated benefits of the transactions or may
realize losses and thus be in a worse position than if such
strategies had not been used.
FUTURE DEVELOPMENTS
The Fund may, following written notice to its shareholders, take
advantage of other investment practices that are not currently
contemplated for use by the fund or are not available but may yet be
developed, to the extent such investment practices are consistent
with the Fund's investment objective and legally permissible for the
Fund. Such investment practices, if they arise, may involve risks
that exceed those involved in the activities described above.
PORTFOLIO TURNOVER
Spirit Management anticipates that the Fund's annual rate of turnover
will not exceed 100%. A 100% annual turnover rate would occur if all
of the securities in the Fund's portfolio are replaced once in a
period of one year. A higher rate of portfolio turnover (100% or
more) involves correspondingly greater brokerage and other expenses
than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the
realization of substantial net short-term capital gains. See
"Dividends, Distributions and Taxes" in the Fund's Statement of
Additional Information.
RISK CONSIDERATIONS
GENERAL
Investments in common stocks and other equity securities of real
estate investment trusts and other real estate industry companies and
the use by the Fund of various investment techniques involve risks
different from, and, in certain cases, greater than the risks
presented by equity securities generally. An investment in the Fund
is subject to certain risks associated with the direct ownership of
real estate and with the real estate industry in general, including
possible declines in the value of real estate, general and local
economic conditions, environmental problems and changes in interest
rates. To the extent the Fund invests in taxable municipal debt
obligations, the credit quality of these instruments will depend upon
the financial strength of the issuing municipality or other public
body. These risks and certain others are discussed in this
Prospectus. An investment in the Fund is suitable for moderately
aggressive, long-term investors who may wish to consider investing
a portion of their overall equity portfolio in a real estate mutual
fund.
REAL ESTATE INDUSTRY
Although the Fund does not invest directly in real estate, it does
invest primarily in Real Estate Equity Securities and does have a
policy of concentration of its investments in the real estate
industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with
the real estate industry in general. These risks include, among
others: possible declines in the value of real estate; risks related
to general and local economic conditions; possible lack of
availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from,
environmental problems; casualty or condemnation losses; uninsured
damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments
are concentrated geographically, by property type or in certain other
respects, the Fund may be subject to certain of the foregoing risks
to a greater extent.
In addition, if the Fund receives rental income or income from the
disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely
affect the Fund's ability to retain its tax status as a regulated
investment company. See "Dividends, Distributions and Taxes" in the
Statement of Additional Information. Investments by the Fund in
securities of companies providing mortgage servicing will be subject
to the risks associated with refinancings and their impact on
servicing rights.
REITs
Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in
general. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be
affected by the quality of any credit extended. REITs are dependent
upon management skills, are not diversified, are subject to heavy
cash flow dependency, default by borrowers and self-liquidation.
REITs are also subject to the possibilities of failing to qualify for
tax free pass-through of income under the Internal Revenue Code (the
"Code").
REITs (especially mortgage REITs) are also subject to interest rate
risks. When interest rates decline, the value of a REIT's investment
in fixed rate obligations can be expected to rise. Conversely, when
interest rates rise, the value of a REIT's investment in fixed rate
obligations can be expected to decline. In contrast, as interest
rates on adjustable rate mortgage loans are reset periodically,
yields on a REIT's investments in such loans will gradually align
themselves to reflect changes in market interest rates, causing the
value of such investments to fluctuate less dramatically in response
to interest rate fluctuations than would investments in fixed rate
obligations.
Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited
volume and may be subject to more abrupt or erratic price movements
than larger company securities. Historically, small capitalization
stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common
Stocks.
MORTGAGE-BACKED SECURITIES
Investing in Mortgage-Backed Securities involves certain unique risks
in addition to those risks associated with investment in the real
estate industry in general. These risks include the failure of a
counterparts to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest
rates decline, the value of an investment in fixed rate obligations
can be expected to rise. Conversely, when interest rates rise, the
value of an investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage
loans are reset periodically, yields on investments in such loans
will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less
dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities,
such as those in which the Fund may invest, differ from those of
traditional fixed income securities. The major differences typically
include more frequent interest and principal payments (usually
monthly), the adjustability of interest rates, and the possibility
that prepayments of principal may be made substantially earlier than
their final distribution dates.
Prepayment rates are influenced by changes in current interest rates
and a variety of economic, geographic, social and other factors, and
cannot be predicted with certainty. Both adjustable rate mortgage
loans and fixed rate mortgage loans may be subject to a greater rate
of principal prepayments in a declining interest rate environment and
to a lesser rate of principal prepayments in an increasing interest
rate environment. Early payment associated with Mortgage-Backed
Securities causes these securities to experience significantly
greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and
prepayment rate scenarios, the Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct
or indirect governmental or agency guarantee. When the Fund reinvests
amounts representing payments and unscheduled prepayments of
principal, it may receive a rate of interest that is lower than the
rate on existing adjustable rate mortgage pass-through securities.
Thus, Mortgage-Backed Securities, and adjustable rate mortgage pass-
through securities in particular, may be less effective than other
types of U.S. Government securities as a means of locking in interest
rates.
SHORT SALE
A short position may be adversely affected by imperfect correlation
between movements in the price of the security sold short and the
securities being hedged. The Fund will realize a gain on the
security sold short if the security declines in price between the
date of the short sale and the date on which the Fund replaces the
borrowed security. The Fund will incur a loss if the price of the
security increases between those dates. The amount of any gain will
be decreased, and the amount of any loss increased, by the amount of
any premium or interest the Fund may be required to pay in connection
with a short sale.
TAXABLE MUNICIPAL OBLIGATIONS
The principal risk factors associated with ownership by the Fund of
taxable municipal obligations would be the risk of fluctuations in
interest rates whereby an increase in interest rates causes a decline
in the value of the debt obligation and the risk of default among one
or more issuers of taxable municipal obligations which are held by
the Fund. Another risk of the Fund investing in taxable municipal
obligations would be the inability to readily find a buyer at or near
the market price should the Fund need to quickly dispose of one or
more of its positions in taxable municipal obligations.
SECURITIES RATINGS
The ratings of securities by S&P, Moody's, and other ratings services
are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The
rating of an issuer is heavily weighted by past developments and does
not necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the time
it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating category.
ABSENCE OF OPERATING HISTORY
While principals of Spirit Management have experience in the purchase
and sale of the type of investments permitted by the Fund, neither
Spirit Management nor its principals have previously served as an
adviser to a mutual fund and do not have other advisory clients.
CERTAIN FUNDAMENTAL INVESTMENT LIMITATIONS
In addition to its fundamental investment objective, the Fund has
adopted the following fundamental investment limitations, which may
not be changed without the approval of its shareholders. Additional
investment policies and limitations are set forth in the Statement
of Additional Information.
The Fund may not: (i) with respect to 75% of its total assets, have
such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer
(other than the U.S. Government and its agencies or
instrumentalities) not greater in value than 5% of the Fund's total
assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if
as a result (a) the value of the holdings of the Fund in the
securities of such issuer exceeds 15% of its total assets, or (b) the
Fund owns more than 25% of the outstanding securities of any one
class of securities of such issuer; (iii) invest 25% or more of its
total assets in the securities of issuers conducting their principal
business activities in any one industry, other than the real estate
industry in which the Fund will invest at least 25% or more of its
total assets, except that this restriction does not apply to U.S.
Government securities; (iv) purchase or sell real estate, except that
it may purchase and sell securities of companies which deal in real
estate or interests therein, including Real Estate Equity Securities;
or (v) borrow money except for temporary or emergency purposes or to
meet redemption requests, in an amount not exceeding 5% of the value
of its total assets at the time the borrowing is made.
HOW TO PURCHASE SHARES
General
You can purchase shares of the Fund through broker-dealers or
directly through SSH Securities, Inc. (the "Distributor"), the Fund's
principal distributor. Shares are sold at the net asset value next
determined after receipt by the Fund's transfer agent, FPS Services,
Inc. (the "Transfer Agent"), plus an initial maximum sales charge of
up to 5.25% of the offering price (5.54% of the net amount invested)
reduced on investments of $100,000 or more. The minimum initial
investment is $1,000. Shares of the Fund are offered only to
residents of states in which the shares are registered or qualified.
No share certificates will be issued in connection with the purchase
of Fund shares. See "Sales Charge."
Purchase orders for shares of the Fund that are received by the
Transfer Agent in proper form by the close of the New York Stock
Exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day that
the NYSE is open for trading, will be purchased at the Fund's next
determined net asset value (plus any applicable sales charge).
Orders for Fund shares received after 4:00 p.m. Eastern time will be
purchased at the net asset value (plus any applicable sales charge)
determined on the following business day.
The Fund and the Transfer Agent each reserves the right to reject any
purchase order in whole or in part. The Fund reserves the right to
suspend the offering of shares of the Fund. The Fund also reserves
the right to vary the initial and subsequent investment minimums, or
to waive the minimum investment requirements for any investor. The
Fund will not accept for purchase order a check which has been
endorsed by a third party.
When you sign your account application, you will be asked to certify
that your Social Security or taxpayer identification number is
correct and that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you violate IRS regulations,
the IRS can require the Fund to withhold 31% of your taxable
distributions and redemptions.
Purchases by Mail
Shares may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the Transfer Agent,
together with a check payable to "Spirit of America Investment Fund,
Inc." The check or money order and application should be mailed to
FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903. If this is an initial purchase, please send
a minimum of $1,000 (including IRA and SEP accounts).
Purchases by Wire
Before making an initial investment by wire, an investor must first
telephone the Transfer Agent at (800)452-4892 or (610) 239-4600 in
order to be assigned an account number. The investor's name, account
number, taxpayer identification number or social security number and
address must be specified in the wire. In addition, an account
application should be promptly forwarded to: FPS Services, Inc., 3200
Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.
Shareholders having an account with a commercial bank that is a
member firm of the Federal Reserve System may purchase shares of the
Fund by requesting their bank to transmit funds by wire to: United
Missouri Bank K.C. N.A., ABA #10-10-00695/Attention: FPS Services,
Inc., A/C 98-7037-071-9/"Spirit of America Investment Fund, Inc.",
along with the shareholder's name and account number as specified on
the shareholder's account registration.
Additional investments may be made at any time through the wire
procedures described above, which must include a shareholder's name
and account number. The shareholder's bank may impose a fee for
investments by wire. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal
Reserve wire systems. Shareholders may be subject to 31% withholding
if original application is not received.
Purchases through Broker-Dealers
The Fund may accept telephone orders only from broker-dealers or
service organizations that have been previously approved by the Fund.
It is the responsibility of such broker-dealers or service
organizations to promptly forward purchase orders and payments for
the same to the Fund. Brokers, financial institutions, service
organizations, banks and bank trust departments through which an
investor purchases shares of the Fund, may charge the shareholder a
transaction fee or other fee for their services at the time of
purchase. Minimums of broker/dealers or accounts opened through a
fund network may apply.
For any order to be confirmed at the current day's offering price,
it must be received by the Transfer Agent or the selling dealer by
4:00 p.m. Eastern time on the same day. For any dealer order to be
confirmed at the current day's offering price, it not only must be
received by the dealer prior to 4:00 p.m. Eastern time on that day,
but it must be communicated to the Transfer Agent by 5:00 p.m.
Eastern time on that day. It is the responsibility of that dealer
to communicate the details of the order to the Transfer Agent. Orders
received by dealers after 4:00 p.m. Eastern time are confirmed at the
public offering price on the following business day.
Purchases by Telephone
The Fund only accepts telephone purchases from brokers, financial
institutions or service organizations. Individuals are not able to
make purchases by telephone.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by
mail, bank wire, automatic investing or direct deposit. The minimum
for subsequent investments is $50 for all accounts.
When making subsequent investments by mail, please return the bottom
portion of a previous confirmation with your investment in the
envelope that is provided with each confirmation statement. Your
check should be made payable to "Spirit of America Investment Fund,
Inc." and mailed to FPS Services, Inc., c/o United Missouri Bank KC,
N.A., P.O. Box 412797, Kansas City, Missouri 64141-2797. Orders to
purchase shares are effective on the day the Transfer Agent receives
your check or money order.
All investments must be made in U.S. dollars and, to avoid fees and
delays, checks must be drawn only on banks located in the United
States. A charge (minimum of $20) will be imposed if any check used
for the purchase of shares is returned. Investors who purchase Fund
shares by check or money order may not receive redemption proceeds
until there is reasonable belief that the check has cleared, which
may take up to fifteen calendar days after the purchase date.
Sales Charge
The sales charge a shareholder pays depends on the dollar amount
invested, as shown in the table below.
Total Sales Charge Amount Paid to
as a Percentage of Dealer as a
Offering Net Amount Percentage of
Price Invested Offering Price
Under $100,000 5.25% 5.54% 5.00%
$100,000 but less
than $250,000 4.50% 4.71% 4.25%
$250,000 but less
than $500,000 3.75% 3.90% 3.50%
$500,000 but less
than $1,000,000 3.00% 3.09% 2.75%
$1,000,000 or more* 0% 0% 0%
* No sales charge is payable at the time of purchase on investments
of $1 million or more, although for such investments the Fund imposes
a contingent deferred sales charge of 1.00% in the event of certain
redemptions within one year of the purchase. The contingent deferred
sales charge incurred upon redemption is paid to the Distributor in
reimbursement for distribution-related expenses. A commission will
be paid to authorized dealers who initiate and are responsible for
purchases of $1 million or more.
The Distributor will pay the dealer concession to those selected
dealers who have entered into an agreement with the Distributor. The
dealer's concession may be changed from time to time. The
Distributor may from time to time offer incentive compensation to
dealers which sell shares of the Fund subject to sales charges,
allowing such dealers to retain an additional portion of the sales
load. On some occasions, such cash or incentives will be conditioned
upon the sale of a specified minimum dollar amount of the shares of
the Fund during a specified period of time. A dealer who receives
all or substantially all of the sales load may be considered an
"underwriter" under the Securities Act of 1933, as amended. All such
sales charges are paid to the securities dealer involved in the
trade, if any. No sales charge will be assessed on the reinvestment
of dividends or distributions.
Reduced Sales Charges
The sales charge may be reduced through Rights of Accumulation or
Letter of Intent. To qualify for a reduced sales charge, an investor
must so notify his or her distributor at the time of each purchase
of shares which qualifies for the reduction.
Rights of Accumulation
For investors who already have an account with the Fund, reduced
sales charges based upon the sales charge schedule are applicable to
subsequent purchases. The sales charge on each additional purchase
is determined by adding the current market value of the shares the
investor currently owns to the amount being invested. The reduced
sales charge is applicable only to current purchases. It is the
investor's responsibility to notify the Transfer Agent at the time
of subsequent purchases that the account is eligible for the Right
of Accumulation. The investor must also give the account numbers of
his accounts, and those accounts held in the name of his spouse or
for minor children, the age of such children and the specific
relationship of each such person to the investor.
Letter of Intent
An investor may qualify for a reduced sales charge immediately by
signing a non-binding Letter of Intent stating the investor's
intention to invest during the next 13 months a specified amount
which, if made at one time, would qualify for a reduced sales charge.
The first investment cannot be made more than 90 days prior to the
date of the Letter of Intent. Any redemptions made during the
13-month period will be subtracted from the amount of purchases in
determining whether the Letter of Intent has been completed. During
the term of the Letter of Intent, the Transfer Agent will hold shares
representing 5% of the indicated amount in escrow for payment of a
higher sales load if the full amount indicated in the Letter of
Intent is not purchased. The escrowed shares will be released when
the full amount indicated has been purchased. If the full amount
indicated is not purchased within the 13-month period, a
shareholder's escrowed shares will be redeemed in an amount equal to
the difference in the dollar amount of sales charge actually paid and
the amount of sales charge the shareholder would have had to pay on
his or her aggregate purchases if the total of such purchases had
been made at a single time. It is the shareholder's responsibility
to notify the Transfer Agent at the time the Letter of Intent is
submitted that there are prior purchases that may apply.
The term "single purchaser" refers to (i) an individual, (ii) an
individual and spouse purchasing shares of the Fund for their own
account or for trust or custodial accounts of their minor children,
or (iii) a fiduciary purchasing for any one trust, estate or
fiduciary account, including employee benefit plans created under
Sections 401 and 457 of the Code including related plans of the same
employer.
Sales at Net Asset Value
The Fund may sell shares at net asset value (i.e., without any
initial sales charge) to certain categories of investors, including:
(i) investment advisory clients of the Adviser or its affiliates;
(ii) officers and present or former Directors of the Fund; directors
and present and full-time employees of selected dealers or agents;
or the spouse, sibling, direct ancestor or direct descendant
(collectively "relatives") of any such person; or any trust,
individual retirement account or retirement plan account for the
benefit of any such person or relative; or the estate of any such
person or relative, if such shares are purchased for investment
purposes (such shares may not be resold except to the Fund); (iii)
the Adviser, the Distributor, and their affiliates; and certain
employee benefit plans for employees of the Adviser and the
Distributor; (iv) persons who establish to the Distributor's
satisfaction that they are investing, within such time period as may
be designated by the Distributor, proceeds of redemption of shares
of such other registered investment companies as may be designated
from time to time by the Distributor; and (v) employer-sponsored
qualified pension or profit-sharing plans (including Section 401(k)
plans), custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee pension
("SEP") contributions are made), if such plans or accounts are
established or administered under programs sponsored by
administrators or other persons that have been approved by the
Distributor.
How to Redeem Shares
Shareholders may redeem their shares of the Fund on any business day
that the NYSE is open for business. Redemptions will be effective
at the net asset value next determined after receipt by the Transfer
Agent of a redemption request meeting the requirements described
below.
Redemption by Mail
Shareholders may redeem their shares by submitting a written request
for redemption to FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903.
A written redemption request to the Transfer Agent must be in good
order, which means that it must: (i) identify the shareholder's
account name and account number; (ii) state the number of shares or
dollar amount to be redeemed, and (iii) be signed by each registered
owner exactly as the shares are registered. To prevent fraudulent
redemptions, a signature guarantee for the signature of each person
in whose name an account is registered is required for all written
redemption requests exceeding $10,000 or where proceeds are to be
mailed to an address other than the address of record. A guarantee
may be obtained from any commercial bank, credit union, member firm
of a national securities exchange, registered securities association,
clearing agency or savings and loan association. A credit union must
be authorized to issue signature guarantees. Signature guarantees
will be accepted from any eligible guarantor institution that
participates in a signature guarantee program. Notary public
endorsements will not be accepted. The Transfer Agent may require
additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians and retirement
plans.
A redemption request will not be deemed to be properly received until
the Transfer Agent receives all required documents in proper form.
Questions with respect to the proper form for redemption requests
should be directed to the Transfer Agent at (800) 452-4892.
Redemption by Telephone
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by
calling the Transfer Agent at (800) 452-4892 or (610) 239-4600 during
normal business hours. In order to arrange for redemption by wire
or telephone after an account has been opened, or to change the bank
or account designated to receive redemption proceeds, a written
request with a signature guarantee must be sent to the Transfer
Agent.
The Fund reserves the right to refuse a wire or telephone redemption
if it is believed advisable to do so. Procedures for redeeming Fund
shares by wire or telephone may be modified or terminated at any
time.
During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event,
shareholders should follow the procedures for redemption by mail.
Neither the Fund nor any of its service contractors will be liable
for any loss or expense in acting upon telephone instructions that
are reasonably believed to be genuine. In this regard, the Fund and
the Transfer Agent require personal identification information before
accepting a telephone redemption. To the extent that the Fund or the
Transfer Agent fails to use reasonable procedures to verify the
genuineness of telephone instructions, the Fund may be liable for
losses due to fraudulent or unauthorized instructions. The Fund
reserves the right to refuse a telephone redemption if it is believed
advisable to do so. Written confirmation will be provided for all
redemption transactions initiated by telephone. Proceeds from a
telephone redemption shall only be sent to the shareholder's address
of record or wired to the shareholder's bank account on file with the
Transfer Agent.
General Redemption Information
When a request for redemption is made shortly after the purchase of
shares, you will not receive the redemption proceeds until the
check(s) received for the shares purchased has cleared. Although the
redemption proceeds may be delayed, the redemption request will be
processed at the net asset value next determined after receipt of the
redemption request in good order. The Fund will mail the redemption
proceeds as soon as the purchase check clears, which may take up to
15 calendar days or more. You may avoid such delays by purchasing
shares by federal funds wire.
Redemption proceeds may be wired directly to any bank previously
designated by an investor on his or her new account application.
There is a $15.00 charge for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at higher
rates. It should also be noted that banks may impose a fee for wire
services. In addition, there may be fees for redemptions made
through brokers, financial institutions and service organizations.
The Fund will satisfy redemption requests for cash to the fullest
extent feasible, as long as such payments would not, in the opinion
of the Board of Directors, result in the need for the Fund to sell
assets under disadvantageous conditions or to the detriment of the
remaining shareholders of the Fund. Pursuant to the Fund's Articles
of Incorporation, however, payment for shares redeemed may also be
made in-kind, or partly in cash and partly in-kind.
The Fund has elected, pursuant to Rule 18f-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), to redeem its
shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund, during any 90 day period for any one
shareholder. Any portfolio securities paid or distributed in-kind
would be in readily marketable securities and valued in the manner
described below. See "Net Asset Value." In the event that an in-kind
distribution is made, a shareholder may incur additional
expenses, such as brokerage commissions, on the sale or other
disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of
payment for more than seven days during any period when (1) trading
on the NYSE is restricted or the NYSE is closed for other than
customary weekends and holidays, (2) the SEC has by order permitted
such suspension for the protection of the Fund's shareholders, or (3)
an emergency exists making disposal of portfolio securities or
valuation of net assets of the Fund not reasonably practicable.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to involuntarily redeem shares in any account
at its then current net asset value if at any time the total
investment does not have a value of at least $500 as a result of
shareholder redemptions, but not market fluctuations. A shareholder
will be notified that the value of his or her account is less than
the required minimum and will be allowed at least 60 days to bring
the value of the account up to the minimum before the redemption is
processed.
SPECIAL SERVICES
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional
purchases of shares of the Fund through an automatic investment plan.
The automatic investment plan provides a convenient method by which
investors may have monies deducted directly from their bank account
for investment in the Fund. An investor may authorize the automatic
withdrawal of funds from his or her bank account by opening an
account with a minimum of $1,000 and completing the automatic
investment plan form enclosed with this Prospectus. Subsequent
monthly investments are subject to a minimum required amount of $50.
The Fund may alter, modify or terminate this plan at any time.
Systematic Cash Withdrawal Plan
The Fund offers a Systematic Cash Withdrawal Plan as another option
which may be utilized by an investor who wishes to withdraw funds
from his or her account on a regular basis. To participate in this
option, an investor must either own or purchase shares having a value
of $10,000 or more. Automatic payments by check will be mailed to
the investor on either a monthly, quarterly, semi-annual or annual
basis in amounts of $50 or more. All withdrawals are processed on
the 25th of the month or, if such day is not a business day, on the
next business day and paid promptly thereafter. For information
about starting a systematic cash withdrawal plan, call the Transfer
Agent at (800) 452-4892.
Retirement Plans
The Fund is available for investment by pension and profit sharing
plans including Individual Retirement Accounts, SEP, Keogh, 401(k)
and 403(b)(7) plans through which an investor may purchase Fund
shares. For details concerning any of these retirement plans, please
call the Transfer Agent at (800) 452-4892 or (610) 239-4700.
Net Asset Value
The offering price and net asset value per share is calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m.,
Eastern Time. Currently, the NYSE is closed on the following
holidays or days on which the following holidays are observed: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas.
The net asset value per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities, and dividing by the total number of outstanding shares.
Expenses are accrued daily and applied when determining the net asset
value. The Fund's equity securities are valued based on market
quotations or, when no market quotations are available, at fair value
as determined in good faith by, or under direction of, the Board of
Directors. Market quotations are generally the last reported sales
price on the principal exchange on which the security trades, or if
no sale price is reported, the mean of the latest bid and asked
prices is used. Securities traded over-the-counter are priced at the
mean of the latest bid and asked prices. When market quotations are
not readily available, securities and other assets are valued at fair
value as determined in good faith by the Board of Directors.
Securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked
prices provided by investment dealers in accordance with procedures
established by the Board of Directors.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Directors believes
represents fair value. When a security is valued at amortized cost,
it is valued at its cost when purchased, and thereafter by assuming
a constant amortization to maturity of any discount or premium,
regardless of the impact on fluctuating interest rates on the market
value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of
Directors.
MANAGEMENT OF THE FUND
Board of Directors
The Fund is managed by its Board of Directors and all powers and
authorities are exercised by or under the direction of the Board of
Directors.
Investment Adviser
Subject to the policies of, review by, and overall control of the
Board of Directors of the Fund, Spirit of America Management Corp.
("Spirit Management"), 477 Jericho Turnpike, Syosset, New York 11791,
has been retained to act as the Fund's manager and investment adviser
pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"). Spirit Management was incorporated in 1997 and is a
registered investment adviser under the Investment Advisers Act of
1940, as amended. Spirit Management is engaged in the business of
managing the investments of the Fund. Mr. David Lerner is the sole
shareholder, director and controlling person of Spirit Management.
Spirit Management supervises the management of the Fund including,
among other things, reporting to the Directors regarding economic and
statistical information as requested by the Directors. Spirit
Management invests the Fund's assets, manages the Fund's business
affairs and supervises the Fund's day-to-day operations. Spirit
Management provides the Fund with advice on buying and selling
securities in accordance with the Fund's investment policies and
limitations. Spirit Management also furnishes office space and
certain administrative and clerical services, and employs the
personnel needed with respect to Spirit Management's responsibilities
under the Advisory Agreement.
Under the Advisory Agreement, the Fund pays Spirit Management a fee
at the annual rate of 0.97% of the Fund's average daily net assets.
The fee is higher than the management fees paid by most U.S.
registered investment companies, although Spirit Management believes
that the fee is generally comparable to the management fees paid by
other open-end registered investment companies that invest in
securities similar to the Fund. The fee is accrued daily and paid
monthly.
From time to time, Spirit Management may voluntarily waive all or a
portion of its management fee and/or reimburse the Fund for certain
expenses without further notification of the commencement or
termination of such waiver or reimbursement. Any such waiver or
absorption will have the effect of lowering the overall expense ratio
of the Fund and increasing the Fund's overall return to investors at
the time any such amounts are waiver and/or absorbed. Spirit
Management has voluntarily agreed to waive all or a portion of its
fee, and/or to reimburse expenses of the Fund to the extent necessary
in order to limit net operating expenses for the first year of
operations to an annual rate of not more than 1.97% of the Fund's
average daily net assets. Any amounts waived or reimbursed by Spirit
Management are subject to reimbursement by the Fund within the
following three years, provided that the Fund is able to effect such
reimbursement and remain in compliance with the stated expense
limitation.
The person primarily responsible for the day-to-day management of the
Fund's portfolio since inception is Ronald W. Weiss. Mr. Weiss has
been associated with Spirit Management since its inception for the
purpose of advising the Fund with respect to its investments. Mr.
Weiss has spent over twenty years in the real estate finance and
investment banking industry, which includes debt and equity
financing, real estate investment trusts, asset management, new
investment product development and venture capital transactions for
financial services firms. Most recently, Mr. Weiss was Senior Vice
President of Gilford Securities, Inc., New York, NY from April, 1996
to May, 1997. Mr. Weiss was Senior Real Estate Investment Trust
Analyst and Vice President of First Albany Corporation, New York, NY
from 1994 through April of 1996. Prior to that, Mr. Weiss was
Managing Director and Real Estate General Counsel for Primerica
Corporation, New York, NY from 1991 to 1994. From 1972 through 1990
he served as founder, Chairman and CEO of Shearson Lehman Real Estate
Corporation, Executive Vice President of Shearson Lehman Brothers,
Inc., and an officer and director of thirty-five Shearson subsidiary
companies.
EXPENSES OF THE FUND
In addition to the payments to Spirit Management under the Advisory
Agreement described above, the Fund pays certain other costs,
including, but not limited to: (i) custody, transfer agent and
administrator expenses, (ii) fees of the Directors who are not
affiliated with Spirit Management, (iii) legal and auditing expenses,
(iv) clerical, accounting and other office costs, (v) costs of
printing the Fund's prospectuses and shareholder reports, (vi) costs
of maintaining the Fund's existence, (vii) interest charges, taxes,
brokerage fees and commissions, (viii) costs of stationery and
supplies, (ix) expenses and fees related to registration and filing
with the SEC and with state regulatory authorities, and (x) such
promotional, shareholder servicing and other expenses as may be
contemplated by the Distribution Services Agreement, described below.
DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the 1940 Act permits an
investment company to pay expenses associated with the distribution
of its shares in accordance with a duly adopted plan. The Fund has
adopted a Rule 12b-1 plan (the "Plan") and has entered into a
Distribution Services Agreement (the "Agreement") with SSH
Securities, Inc. ("SSH" or the "Distributor"). The Plan permits the
Fund to pay the Distributor from the assets of the Fund, a monthly
fee which may not exceed an annual rate of 0.30% of the Fund's
aggregate average daily net assets.
The Plan provides that SSH will use the distribution services fee
received from the Fund in its entirety for payments (i) to compensate
broker-dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of the Fund,
and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's
shareholders. Distribution services fees received from the Fund will
not be used to pay any interest expenses, carrying charges or other
financing costs or allocation of overhead of SSH. The Plan also
provides that SSH may use its own resources to finance the
distribution of the Fund's shares.
The Fund is not obligated under the Plan to pay any distribution
services fee in excess of the amounts set forth above. Distribution
expenses accrued by SSH in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. The Fund intends to operate the Plan in accordance
with its terms and within the rules of the NASD concerning sales
charges.
The fees paid to the Distributor under the Plan are subject to review
and approval by the Fund's independent Directors who have the
authority to reduce the fees or terminate the Plan at any time. All
payments to the Plan shall be made for the purpose of selling shares
issued by the Fund or servicing shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net
investment income and capital gains to shareholders each year.
Normally, dividends are declared in March, June, September and
December. Capital gains, if any, will normally be distributed in
December but may be made more frequently as deemed advisable by the
Board of Directors. All such dividends and distributions are taxable
to the shareholder whether or not reinvested in shares. The Fund
will distribute the return of capital it receives from the REITs in
which the Fund invests. The REITs pay distributions based on cash
flow, without regard to depreciation and amortization. As a result,
a portion of the distributions paid to the Fund and subsequently
distributed to shareholders is a return of capital. The final
determination of the amount of the Fund's return of capital
distributions for the period will be made after the end of each
calendar year.
Each income dividend and capital gains distribution, if any, declared
by the Fund on its outstanding shares will be paid in additional
shares of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such income dividend or distribution unless payment in cash
is specified by the shareholder by written request to the Fund.
Election to receive income dividends and distributions in cash may
be made at the time shares are initially purchased or may be changed
at any time prior to the record date for a particular dividend or
distribution. There is no sales or other charge in connection with
the reinvestment of dividends and capital gains distributions.
If you buy shares just before the Fund deducts a distribution from
its net asset value, you will pay the full price for the shares and
then receive a portion of the price back as a taxable distribution.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which remains
uncashed for a period of more than one year may be reinvested in the
shareholder's account at the then current net asset value, and the
dividend option may be changed from cash to reinvest.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Code so it will not pay federal taxes on either
income or capital gains distributed to shareholders, although there
can be no assurance that they will so qualify. Dividends representing
net investment income and distributions of net short-term capital
gains are taxable as ordinary income.
The excess of net capital gains over the net capital losses realized
and distributed by the Fund to its shareholders as capital gains
distributions is expected to be taxable to the shareholders as mid-term
or long-term capital gains, irrespective of the length of time
a shareholder may have held his or her stock. Capital gains
distributions are not eligible for the dividends-received deduction
referred to above.
Distributions received by a shareholder may include nontaxable
returns of capital, which will reduce a shareholder's basis in shares
of the Fund. If that basis is reduced to zero (which could happen if
the shareholder does not reinvest distributions and returns of
capital are significant), any further returns of capital will be
taxable as capital gain.
Under the current federal tax law, the amount of an income dividend
or capital gains distribution declared by the Fund during October,
November and December of a year to shareholders of record as of a
specified date in such a month that is paid during January of the
following year is includable in the prior year's taxable income of
shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of
the Fund will have the effect of reducing the net asset value of such
shares by the amount of such dividend or distribution. Furthermore,
a dividend or distribution made shortly after the purchase of such
shares by a shareholder, although in effect a return of capital to
that particular shareholder, would be taxable to him or her as
described above. If a shareholder held shares six months or less and
during that period received a distribution taxable to such
shareholder as long-term capital gain, any loss realized on the sale
of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of
the Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, 403(b)(7) retirement plan or corporate
pension or profit-sharing plan, will not be taxable to the plan.
Distributions from such plans will be taxable to individual
participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
The Fund will be required to withhold 31% of any payments made to a
shareholder if the shareholder has not provided a certified taxpayer
identification number to the Fund, or if they are otherwise subject
to backup withholding.
Shareholders will be advised annually as to the federal tax status
of income dividends and capital gain and return of capital
distributions made by the Fund for the preceding year. Distributions
by the Fund may be subject to state and local taxes. Shareholders are
urged to consult their tax advisers regarding their own tax
situation.
PERFORMANCE INFORMATION
Performance information such as total return for the Fund may be
quoted in advertisements or in communications to shareholders. Such
performance information may be useful in reviewing the performance
of the Fund and for providing a basis for comparison with other
investment alternatives. However, because the net investment return
of the Fund changes in response to fluctuations in market conditions,
interest rates and Fund expenses, any given performance quotation
should not be considered representative of the Fund's performance for
any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.
The Fund's total return is the change in value of an investment in
the Fund over a particular period, assuming that all distributions
have been reinvested. Thus, total return reflects not only income
earned, but also variations in share prices at the beginning and end
of the period. Average annual return reflects the average percentage
change per year in the value of an investment in the Fund. Aggregate
total return reflects the total percentage change over the stated
period. Please refer to the Statement of Additional Information for
more information on performance.
From time to time, the Fund advertises its total return. Such
advertisements disclose the Fund's average annual compounded total
return for the periods prescribed by the SEC. The Fund's total return
for each such period is computed by finding, through the use of a
formula prescribed by the SEC, the average annual compounded rate of
return over the period that would equate an assumed initial amount
invested to the value of the investment at the end of the period. For
purposes of computing total return, income, dividends and capital
gains distributions paid on shares of the Fund are assumed to have
been reinvested when paid and the maximum sales charges applicable
to purchases and redemptions of the Fund's shares are assumed to have
been paid. The Fund's advertisements may quote performance rankings
or ratings of the Fund by financial publications or independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. or compare the Fund's performance to various
indices.
GENERAL INFORMATION
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the NASD and subject to seeking
best price and execution, the Fund may consider sales of its shares
as a factor in the selection of dealers to enter into portfolio
transactions with the Fund.
ORGANIZATION
Spirit of America Investment Fund, Inc. is a Maryland corporation
organized on May 15, 1997. The authorized capital stock of the Fund
is one billion (1,000,000,000) shares, par value of $0.001 per share.
Under Maryland Law, the Fund's Board of Directors may increase the
number of authorized shares without approval of the shareholders.
All of the shares of the Fund currently outstanding and offered by
this Prospectus are of a single class.
Each share of common stock carries one vote on matters submitted to
a vote of stockholders. A shareholder in the Fund will be entitled
to his or her share pro rata with other holders of the same class of
shares of all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net
asset value of the Fund represented by the redeemed shares. The Fund
is empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives, and
additional classes of shares. If an additional portfolio or class
were established in the Fund, each share of the portfolio or class
would normally be entitled to one vote for all purposes. Shares are
freely transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to receive
the net assets of the Fund. Certain additional matters relating to
the Fund's organization are discussed in its Statement of Additional
Information.
SHAREHOLDER MEETINGS
Under Maryland law, the Fund is not required and does not intend to
hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act.
Shareholders of 10% or more of the Fund's outstanding shares may
request that a special meeting be called to consider the removal of
any directors. The Fund will assist in the communication with other
shareholders.
THE ADMINISTRATOR
The Fund has retained FPS Services, Inc. ("FPS"), 3200 Horizon Drive,
P.O. Box 61503, King of Prussia, PA 19406-0903, to provide
administrative services to the Fund. Such services relate to
administration, operations and compliance. For such services, the
Fund has agreed to pay FPS a fee, subject to a minimum annual fee of
$55,000, as compared to an asset based fee computed at the annual
rate of 0.15% of the first $50 million of total average net assets,
0.10% of the next $50 million of total average net assets and 0.05%
of total average net assets in excess of $100 million.
TRANSFER AGENT AND FUND ACCOUNTANT
FPS also acts as transfer agent and maintains the records of each
shareholder's account, answers shareholder inquiries, processes
purchases and redemptions and acts as dividend disbursing agent. FPS
also performs certain accounting and pricing services for the Fund,
including the daily calculation of the Fund's net asset value per
share. The Fund intends to be fully year 2000 compliant by December,
1999.
CUSTODIAN
The Bank of New York serves as custodian for the safekeeping of
securities, cash and other assets of the Fund.
PRINCIPAL DISTRIBUTOR
SSH Securities, Inc., located at 477 Jericho Turnpike, Syosset, New
York 11791, is the principal distributor of shares of the Fund.
SHAREHOLDER REPORTS AND INQUIRIES
The Fund issues unaudited financial information semiannually and
audited financial statements annually. Shareholder inquiries should
be addressed to the Fund c/o FPS Services, Inc., 3200 Horizon Drive,
P. O. Box 61503, King of Prussia, PA 19406-0903. Purchase and
redemption transactions should be made through FPS Services, Inc. by
calling (800) 452-4892.
<PAGE>
[OUTSIDE BACK COVER]
INVESTMENT ADVISER
Spirit of America Management Corp.
477 Jericho Turnpike
Syosset, NY 11791
(800) _________________
DISTRIBUTOR
SSH Securities, Inc.
477 Jericho Turnpike
Syosset, NY 11791
(800) _________________
SHAREHOLDER SERVICES/TRANSFER AGENT
FPS Services, Inc.
3200 Horizon Drive, P. O. Box 61503
King of Prussia, PA 19406-0903
(800) 452-4892
(610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Ruthann G. Niosi, Esq., P.C.
91 East End Avenue
New York, New York 10028
AUDITORS
Tait Weller & Baker
Two Penn Center, Suite 700
Philadelphia, PA 19102-1707
<PAGE>
Subject to Completion -- December __, 1997
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective.
This Statement of Additional Information
shall not constitute a prospectus.
SPIRIT OF AMERICA INVESTMENT FUND, INC.
477 Jericho Turnpike
Syosset, New York 11791
Toll Free (800)___________
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1998
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Spirit of America Investment Fund, Inc. (the
"Fund") dated ______________, 1998. No investment in shares should
be made without first reading the Prospectus. This Statement of
Additional Information is intended to provide additional information
regarding activities and operations of the Fund, and should be read
in conjunction with the Prospectus. A copy of the Prospectus may be
obtained without charge by contacting SSH Securities, Inc. at the
address or telephone number shown above.
TABLE OF CONTENTS
Page
Investment Policies and Techniques . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . .
Expenses of the Fund . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . . . . .
Dividends, Distributions and Taxes . . . . . . . . . . .
Brokerage and Portfolio Transactions . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . .
General Information. . . . . . . . . . . . . . . . . . .
Financial Statements
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Prospectus
concerning a description of securities and investment practices of
the Fund. You should read it together with the sections in the
Prospectus entitled "Investment Objective", "Investment Policies" and
"Investment Practices."
The investment practices described below are not fundamental and may
be changed by the Board of Directors without the approval of the
shareholders of the Fund. Shareholders will, however, be given
contemporaneous written notification of any changes in the investment
policies.
Convertible Securities
Although the Fund has no current intention of purchasing convertible
securities, the Fund may invest up to 15% of its total assets in
convertible securities of issuers whose common stocks are eligible
for purchase by the Fund. Convertible securities include bonds,
debentures, corporate notes and preferred stocks. Convertible
securities are instruments that are convertible at a stated exchange
rate into common stock. Prior to their conversion, convertible
securities have the same general characteristics as nonconvertible
securities which provide a stable stream of income with generally
higher yields than those of equity securities of the same or similar
issuers. The market value of convertible securities tends to decline
as interest rates increase and, conversely, to increase as interest
rates decline. While convertible securities generally offer lower
interest yields than non-convertible debt securities of similar
quality, they do enable the investor to benefit from increases in the
market price of the underlying common stock.
When the market price of the common stock underlying a convertible
security increases, the price of the convertible security
increasingly reflects the value of the underlying common stock and
may rise accordingly. As the market price of the underlying common
stock declines, the convertible security tends to trade increasingly
on a yield basis, and thus may not depreciate to the same extent as
the underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They are consequently
of higher quality and entail less risk than the issuer's common
stock, although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible security sells
above its value as a fixed income security.
Forward Commitments, When-Issued Securities and Delayed Delivery
Transactions
Although the Fund may purchase securities on a when-issued basis, or
purchase or sell securities on a forward commitment basis or purchase
securities on a delayed delivery basis, the Fund does not have the
current intention of doing so in the foreseeable future. The Fund
will normally realize a capital gain or loss in connection with these
transactions.
No forward commitments will be made by the Fund if, as a result, the
Fund's aggregate commitments under such transactions would be more
than 15% of the then current value of the Fund's total assets. The
Fund's right to receive or deliver a security under a forward
commitment may be sold prior to the settlement date, but the Fund
will enter into forward commitments only with the intention of
actually receiving or delivering the securities, as the case may be.
To facilitate such transactions, the Fund's custodian will maintain,
in a segregated account of the Fund, liquid assets having value equal
to, or greater than, any commitments to purchase securities on a
forward commitment basis and, with respect to forward commitments to
sell portfolio securities of the Fund, the portfolio securities
themselves. If the Fund, however, chooses to dispose of the right to
receive or deliver a security subject to a forward commitment prior
to the settlement date of the transaction, it may incur a gain or
loss. In the event the other party to a forward commitment
transaction were to default, the Fund might lose the opportunity to
invest money at favorable rates or to dispose of securities at
favorable prices.
Standby Commitment Agreements
Although the Fund has no current intention of entering into standby
commitments, the Fund may purchase a security subject to a standby
commitment agreement. The related commitment fee will be recorded
on the date on which the security can reasonably be expected to be
issued and the value of the security will thereafter be reflected in
the calculation of the Fund's net asset value. The cost basis of the
security will be adjusted by the amount of the commitment fee. In the
event the security is not issued, the commitment fee will be recorded
as income on the expiration date of the standby commitment. The Fund
will at all times maintain a segregated account with its custodian
of liquid assets in an aggregate amount equal to the purchase price
of the securities underlying the commitment.
There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued,
on the delivery date may be more or less than its purchase price.
Since the issuance of the security underlying the commitment is at
the option of the issuer, the Fund will bear the risk of capital loss
in the event the value of the security declines and may not benefit
from an appreciation in the value of the security during the
commitment period if the issuer decides not to issue and sell the
security to the Fund.
Short Sales
To secure the Fund's obligation to replace any borrowed security, it
will place in a segregated account, an amount of cash or U.S.
Government securities equal to the difference between the market
value of the securities sold short at the time of the short sale, and
any cash or U.S. Government securities originally deposited with the
broker in connection with the short sale (excluding the proceeds of
the short sale). The Fund will thereafter maintain daily the
segregated amount at such a level that the amount deposited in it
plus the amount originally deposited with the broker as collateral
will equal the greater of the current market value of the securities
sold short, or the market value of the securities at the time they
were sold short.
Repurchase Agreements
The Fund may enter into repurchase agreements pertaining to U.S.
Government Securities with member banks of the Federal Reserve System
or Primary dealers (as designated by the Federal Reserve Bank of New
York) in such securities. There is no percentage restriction on the
Fund's ability to enter into repurchase agreements. Currently, the
Fund intends to enter into repurchase agreements only with its
custodian and such primary dealers. A repurchase agreement arises
when a buyer purchases a security and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally one day or
a few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate which is effective for
the period of time the buyer's money is invested in the security and
which is related to the current market rate rather than the coupon
rate on the purchased security. This results in a fixed rate of
return insulated from market fluctuations during such period. Such
agreements permit the Fund to keep all of its assets at work while
retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. The Fund requires continual maintenance by its
Custodian for its account in the Federal Reserve/Treasury Book Entry
System of collateral in an amount equal to, or in excess of, the
resale price. In the event a vendor defaulted on its repurchase
obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the
repurchase price. In the event of a vendor's bankruptcy, the Fund
might be delayed in, or prevented from, selling the collateral for
its benefit. The Fund's Board of Directors has established
procedures, which are periodically reviewed by the Board, pursuant
to which the Adviser monitors the creditworthiness of the dealers
with which the Fund enters into repurchase agreement transactions.
Illiquid Securities
Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than
seven days. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation.
Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede
such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities
Act, including repurchase agreements, commercial paper, foreign
securities, municipal securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market
in which the unregistered security can be readily resold or on an
issuer's ability to honor a demand for repayment. The fact that there
are contractual or legal restrictions on resale to the general public
or to certain institutions may not be indicative of the liquidity of
such investments.
The Fund may invest in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration
transactions by an issuer not involving any public offering. Section
4(2) instruments are restricted in the sense that they can only be
resold through the issuing dealer to institutional investors and in
private transactions; they cannot be resold to the general public
without registration.
Rule 144A under the Securities Act allows a broader institutional
trading market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a safe harbor.
from the registration requirements of the Securities Act for resales
of certain securities to qualified institutional buyers. An
insufficient number of qualified institutional buyers interested in
purchasing certain restricted securities held by the Fund, however,
could affect adversely the marketability of such portfolio securities
and the Fund might be unable to dispose of such securities promptly
or at reasonable prices.
The Adviser, under the supervision of the Board of Directors, will
monitor the liquidity of restricted securities in the Fund's
portfolio. In reaching liquidity decisions, the Adviser will
consider, among other factors, the following: (1) the frequency of
trades and quotes for the security; (2) the number of dealers making
quotations to purchase or sell the security; (3) the number of other
potential purchasers of the security; (4) the number of dealers
undertaking to make a market in the security; (5) the nature of the
security (including its unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the
transfer); and (6) any applicable Securities and Exchange Commission
(the "Commission") interpretation or position with respect to such
type of security.
Rights and Warrants
The Fund has no current intention to invest in rights and warrants,
although the Fund may invest up to 15% of its net assets in rights
or warrants only if the underlying equity securities are themselves
deemed appropriate by Spirit of America Management Corp. (the
"Adviser") for inclusion in the Fund's portfolio. Rights and warrants
entitle the holder to buy equity securities at a specific price for
a specific period of time. Rights are similar to warrants except that
they have a substantially shorter duration. Rights and warrants may
be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or
voting rights with respect to the underlying securities nor do they
represent any rights in the assets of the issuing company. The value
of right or warrant does not necessarily change with the value of the
underlying security, although the value of a right or warrant may
decline because of a decrease in the value of the underlying
security, the passage of time or a change in perception as to the
potential of the underlying security, or any combination thereof. If
the market price of the underlying security is below the exercise
price set forth in the warrant on the expiration date, the warrant
will expire worthless. Moreover, a right or warrant ceases to have
value if it is not exercised prior to the expiration date.
Portfolio Turnover
It is the Fund's policy to sell any security whenever, in the
judgment of the Adviser, its appreciation possibilities have been
substantially realized or the business or market prospects for such
security have deteriorated, irrespective of the length of time that
such security has been held. The Adviser anticipates that the Fund's
annual rate of portfolio turnover will not exceed 100%. A 100% annual
turnover rate would occur if all securities in the Fund's portfolio
were replaced once within a period of one year.
INVESTMENT RESTRICTIONS
The following restrictions, which supplement those set forth in the
Fund's Prospectus, may not be changed without approval by the vote
of a majority of the Fund's outstanding voting securities, which
means the affirmative vote of the holders of (i) 67% or more of the
shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the
outstanding shares, whichever is less.
To reduce investment risk, as a matter of fundamental policy the
Fund may not:
(i) pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings;
(ii) make loans except through (a) the purchase of debt
obligations in accordance with its investment
objectives and policies; or (b) the use of
repurchase agreements;
(iii) participate on a joint or joint and several basis in
any securities trading account;
(iv) invest in companies for the purpose of exercising
control;
(v) issue any senior security within the meaning of the
Investment Company Act of 1940 (the "1940 Act");
(vi) (a) purchase or sell commodities or commodity
contracts including futures contracts; (b) invest in
interests in oil, gas, or other mineral exploration
or development programs; (c) purchase securities on
margin, except for such short-term credits as may be
necessary for the clearance of transactions; and (d)
act as an underwriter of securities, except that the
Fund may acquire restricted securities under
circumstances in which, if such securities were
sold, the Fund might be deemed to be an underwriter
for purposes of the Securities Act.
MANAGEMENT OF THE FUND
Directors and Officers
The Directors and principal officers of the Fund, their ages and
their principal occupations during the past five years are set forth
below. Each Director who is an "interested person" of the Fund, as
that term is defined in the 1940 Act, is indicated by an asterisk.
Directors
DAVID LERNER*, 61, 477 Jericho Turnpike, Syosset, New York 11791;
Chairman of the Board of Directors, President and Treasurer of the
Fund; President and a Director of newly formed Spirit of America
Management Corp., the Fund's investment adviser, and Director, Chief
Executive Officer and President of SSH Securities, Inc., the Fund's
principal distributor. Mr. Lerner has been associated with David
Lerner Associates, Inc., a registered broker-dealer, for over
twenty-one years as President and founder. Mr. Lerner received his B.A.
and M.B.A degrees from the City University of New York, New York, NY.
STANLEY THUNE, 60, 31 Brearly Road, Princeton, New Jersey 08540;
Director; President and Chief Executive Officer, Freight Management
Systems, Inc., from April 1993 to present. Mr. Thune is also
President and CEO of Energy Conservation Management, Inc. (July 1995
to present). Mr. Thune is involved in property development and
construction, including the purchase and development of raw land
leading to either sale to individual builders or home construction
by the development company. Previously, Mr. Thune was President and
CEO of Residuals Management Group from September 1989 to April 1993
and of Air & Water Technologies Corporation, Branchburg, New Jersey,
from 1986 to April 1993. Mr. Thune received his B.S. in Chemical
Engineering from The City College of New York and his M.B.A. from
Baruch School of Business, The City University of New York.
HERBERT GRANT, 73, 409 Old Courthouse Road, New Hyde Park, New York
11040; Director; For the past 42 years, Mr. Grant has been owned
and/or operated various Automobile Dealerships. He is presently the
owner of Central Avenue Chrysler, Plymouth, Jeep, Eagle in Yonkers,
New York, which is the fifth largest dealership in New York. Mr.
Grant also owns Nanuet Chrysler-Jeep, Mazda, Subaru, located in
Nanuet, New York. Mr. Grant received a B.S. degree from New York
University and his J.D. degree from University of Miami Law School.
ALLEN KAUFMAN, 60, Director; 223 Hamlet Drive, Jericho, New York
11797; President and Chief Executive Officer of K.G.K. Agency, Inc.,
a property and casualty insurance agency located in Woodbury, New
York, since 1963; Graduate of C.C.N.Y. Baruch School of Business
Administration (B.B.A. degree). Mr. Kaufman majored in real estate
and insurance.
DANIEL LERNER*, 36, 477 Jericho Turnpike, Syosset, New York 11791;
Director; Vice President of SSH Securities, the Fund's principal
distributor; Senior Vice President - Investment Counselor and
Assistant Director of Training for David Lerner Associates, Inc., a
registered broker-dealer, Syosset, New York from 1984 to present.
Mr. Lerner received his B.A. from the State University of New York
at Binghamton. Daniel Lerner is the son of David Lerner.
Officers
DAVID LERNER, 61, 477 Jericho Turnpike, Syosset, New York 11791;
President and Treasurer (see biography above).
CONSTANCE FERREIRA, 46, 477 Jericho Turnpike, Syosset, New York
11791; Vice President and Secretary; Chief Operating Officer of
Spirit of America Management Corp., the Fund's investment adviser,
and Chief Operating Officer and Chief Financial Officer of SSH
Securities, Inc., the Fund's principal distributor; Chief Operating
Officer with David Lerner Associates, Inc., a registered broker-dealer
located in New York. Ms. Ferreira has been associated with
David Lerner Associates, Inc. for over twenty-one years.
The Fund pays each of its Directors who is not an affiliated person
of the Adviser or Distributor an annual retainer of $1,000 and $250
per Board meeting and committee meeting attended, as well as
reimbursement for out-of-pocket expenses relating to attendance at
such meetings.
COMPENSATION TABLE
Directors and Officers
Estimated total
Compensation from Fund
complex paid
Estimated Aggregate to Directors
Compensation from for Fiscal year
Fund for fiscal Ended 10/31/98
Name of Director/ Year ended 10/31/98
Officer
David Lerner* $ 0 $ 0
Stanley Thune $ 5,000 $ 5,000
Herbert Grant $ 5,000 $ 5,000
Allen Kaufman $ 5,000 $ 5,000
Daniel Lerner* $ 0 $ 0
Connie Ferreira $ 0 $ 0
The Adviser
Spirit of America Management Corp. (the "Spirit Management" or
"Adviser"), 477 Jericho Turnpike, Syosset, New York, New York 11791,
of which Mr. David Lerner is the sole shareholder and director,
manages the Fund and provides it with investment advice pursuant to
an Advisory Agreement. Under the agreement, Spirit Management manages
the Fund's investments, including the provision of investment
advisory services and order placement facilities for the Fund
(subject to overall control and direction of the Fund's Board of
Directors) and pays all compensation of Directors and officers of the
Fund who are affiliated persons of Spirit Management. Spirit
Management or its affiliates also furnishes the Fund, without charge,
with management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
The Advisory Agreement is terminable without penalty by a vote of a
majority of the Fund's outstanding voting securities or by a vote of
majority of the Fund's Directors on 60 days' written notice, or by
the Adviser on 60 days' written notice, and will automatically
terminate in the event of its assignment. The Advisory Agreement
provides that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser, or of reckless disregard
of its obligations thereunder, the Adviser shall not be liable for
any action or failure to act in accordance with its duties
thereunder.
The Advisory Agreement provides that the Adviser will reimburse the
Fund for its expenses (exclusive of interest, taxes, brokerage,
expenditures pursuant to the Distribution Services Agreement
described below, and extraordinary expenses as to the extent
permitted by applicable state securities laws and regulations) which
in any year exceed the limits prescribed by any state in which the
Fund's shares are qualified for sale. The Fund may not qualify its
shares for sale in every state. Expense reimbursements, if any, are
accrued daily and paid monthly.
The Advisory Agreement became effective on ___________, 1998. The
Advisory Agreement will continue in effect until _______, 2000 and
thereafter for successive twelve-month periods provided, however,
that such continuance is specifically approved at least annually by
a vote of a majority of the Fund's outstanding voting securities or
by the Fund's Board of Directors, including in either case approval
by a majority of the Directors who are not parties to the Advisory
Agreement or interested persons of any such party as defined by the
1940 Act.
Service Provider to the Fund
FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King
of Prussia, PA 19406-0903 has been engaged by the Fund to provide the
back office services on the Fund's behalf. Pursuant to an agreement
entitled "Investment Company Services Agreement" (the "Agreement"),
FPS provides the services commonly and separately referred to as:
Fund Administration, Fund Accounting, Transfer Agency and Custody
Administration. The Agreement was approved by the Board of Directors
at the organizational meeting of the Fund which was held on
July 9, 1997. The management of the Fund oversees FPS in the
fulfillment of its obligations under the Agreement and FPS reports
to the Board on a quarterly basis with regard to those obligations.
Included among the many tasks which FPS performs on behalf of the
Fund are: (1) coordination and monitoring, through the Fund
Administration function, the activities of any other third party
service provider providing services to the Fund (e.g. the Fund's
independent auditors, printers, etc.); (2) providing the Fund with
necessary office space, telephones and other communications
facilities and personnel competent to perform the responsibilities
under the Agreement; (3) maintenance of such books and records of
the Fund as may be required by applicable federal or state law; (4)
prepares and, after approval by the Fund, files and arranges for the
distribution of proxy materials and periodic reports to shareholders
of the Fund as required by applicable law; (5) prepares and, after
approval by the Fund, arranges for the filing of such registration
statements and other documents with the U.S. Securities and Exchange
Commission and any other federal or state regulatory authorities as
may be required by applicable law; (6) reviews and submits to the
officers of the Fund for their approval, invoices or other requests
for payment of the Fund's expenses and instructs the custodian to
issue checks in payment thereof; and (7) takes such other action with
respect to the Fund as may be deemed by FPS to appropriately perform
its duties under the Agreement.
Pursuant to the Agreement, FPS receives a fee for performing
Administrative Services at the greater of a flat fee of $55,000 as
compared to an asset based fee computed at the annual rate of 0.15%
of the first $50 million of total average net assets, 0.10% of the
next $50 million of total average net assets and 0.05% of total net
assets in excess of $100 million. FPS also receives fees under the
Agreement for providing the other services mentioned.
EXPENSES OF THE FUND
Distribution Plan Pursuant to Rule 12b-1
The Fund has adopted a distribution plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Distribution services fees are
accrued daily and paid monthly and are charged as expenses of the
Fund as accrued. The initial sales charge and distribution services
fees provide the financing of the distribution of the Fund's shares.
Under the Plan, the principal financial officer of the Fund
reports the amounts expended under the Rule 12b-1 Plan and the
purposes for which such expenditures were made to the Directors of
the Fund for their review on a quarterly basis. Also, the Plan
provides that the selection and nomination of Directors who are not
interested persons of the Fund, as defined in the 1940 Act, are
committed to the discretion of such disinterested Directors then in
office.
The Adviser may from time to time and from its own funds or such
other resources as may be permitted by rules of the Commission make
payments for distribution services to the Distributor; the latter may
in turn pay part or all of such compensation to brokers or other
persons for their distribution assistance.
In the event that the Plan is terminated or not continued (i)
no distribution services fees (other than current amounts accrued but
not yet paid) would be owed by the Fund to the Distributor, and (ii)
the Fund would not be obligated to pay the Distributor for any
amounts expended under the Plan not previously recovered by the
Distributor from distribution services fees in respect of shares or
through deferred sales charges.
The Plan provides that it will continue in full force and effect from
year to year so long as such continuance is specifically approved by
a vote of the Directors, including a vote of the disinterested
Directors, cast in person at a meeting called for the purpose of
voting on the plan. All material amendments to the Plan must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, and in either case, by a majority of
the disinterested Directors, cast in person at a meeting called for
the purpose of voting on such approval; and the Plan may not be
amended in order to increase materially the costs that shareholders
may bear pursuant to the Plan without the approval of a majority of
the holders of the outstanding voting shares of the Fund. The
Plan may be terminated (a) by the Fund without penalty at any
time by a majority vote of the holders of the outstanding voting
securities of the Fund, or by a majority vote of the Directors who
are not "interested persons" as defined in the 1940 Act, or (b) by
the Distributor. To terminate the Plan, any party must give the
other parties 60 days' written notice; to terminate the Plan only,
the Fund need give no notice to the Distributor. The
Plan will terminate automatically in the event of its assignment.
SHAREHOLDER SERVICES
The following information supplements that set forth in the Fund's
Prospectus under the heading "How to Purchase Shares."
Automatic Investment Plan
Investors may purchase shares of the Fund through an automatic
investment program utilizing electronic funds transfers drawn on the
investor's own bank account. Under such a program, pre-authorized
monthly drafts for a fixed amount (at least $50) are used to purchase
shares through the selected dealer or selected agent designated by
the investor at the public offering price next determined after the
Distributor receives the proceeds from the investor's bank. In
electronic form, drafts can be made on or about a date each month
selected by the shareholder. Investors wishing to establish an
automatic investment program in connection with their initial
investment should complete the appropriate portion of the Application
Form found in the Prospectus. Current shareholders should contact SSH
Securities, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
RETIREMENT PLANS
The Fund may be a suitable investment vehicle for part or all of the
assets held in various types of retirement plans, such as those
listed below. The Fund has available forms of such plans pursuant to
which investments can be made in the Fund. Persons desiring
information concerning these plans should contact SSH Securities,
Inc. at the telephone number on the cover of this Statement of
Additional Information, or write to:
SSH Securities, Inc.
477 Jericho Turnpike
Syosset, New York 11791
Traditional Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment, may
be entitled to establish and make contributions to an IRA. Taxation
of the income and gains paid to an IRA by the Fund is deferred until
distribution from the IRA.
Roth IRAs. The Taxpayers Relief Act has created the new Roth IRA.
While contributions to a Roth IRA are not currently deductible, the
amounts within the accounts accumulate tax-free and qualified
distributions will not be included in a shareholder's taxable income.
The contribution limit is $2,000 annually ($4,000 for joint returns)
in aggregate with contributions to Traditional IRAs. Certain income
phaseouts apply.
Education IRAs. The Taxpayers Relief Act has also created the new
Education IRA. Like the Roth IRA, contributions are non-deductible,
but the investment earnings accumulate tax-free, and distributions
used for higher education expenses are not taxable. Contributions
limits are $500 per account and certain income phaseouts apply.
Employer-Sponsored Qualified Retirement Plans. Sole proprietors,
partnerships and corporations may sponsor qualified money purchase
pension and profit-sharing plans, including Section 401(k) plans
("qualified plans"), under which annual tax-deductible contributions
are made within prescribed limits based on compensation paid to
participating individuals.
Simplified Employee Pension Plan ("SEP"). Sole proprietors,
partnerships and corporations may sponsor a SEP under which they make
annual tax-deductible contributions to an IRA established by each
eligible employee within prescribed limits based on employee
compensation.
403(b)(7) Retirement Plan. Certain tax-exempt organizations and
public educational institutions may sponsor retirements plans under
which an employee may agree that monies deducted from his or her
compensation (minimum $25 per pay period) may be contributed by the
employer to a custodial account established for the employee under
the plan.
Distributions from retirement plans are subject to certain Code
requirements in addition to normal redemption procedures. For
additional information please contact SSH Securities, Inc.
Systematic Withdrawal Plan
Any shareholder who owns or purchases shares of the Fund having a
current net asset value of at least $10,000 may establish a
systematic withdrawal plan under which the shareholder will receive
payments from his or her account on a regular basis. Systematic
withdrawal plan participants must elect to have their dividends and
distributions from the Fund automatically reinvested in additional
shares of the Fund.
Shares of the Fund owned by a participant in the Fund's systematic
withdrawal plan will be redeemed as necessary to meet withdrawal
payments and such withdrawal payments will be subject to any taxes
applicable to redemptions. Shares acquired with reinvested dividends
and distributions will be liquidated first to provide such withdrawal
payments and thereafter other shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the investor's
principal may be depleted. A systematic withdrawal plan may be
terminated at any time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a shareholder's
account reaches a certain minimum level. Therefore, redemptions of
shares under the plan may reduce or even liquidate a shareholder's
account and may subject the shareholder to the Fund's involuntary
redemption provisions.
Statements and Reports
Each shareholder of the Fund receives semi-annual and annual reports
which include a portfolio of investments, financial statements and,
in the case of the annual report, the report of the Fund's
independent auditors, as well as a monthly cumulative dividend
statement and a confirmation of each purchase and redemption. By
contacting his or her broker, a shareholder can arrange for copies
of his or her account statements to be sent to another person.
NET ASSET VALUE
A more complete discussion of the Fund's determination of net asset
value is contained in the Prospectus. The net asset value per share
is computed by dividing the value of the assets of the Fund, less its
liabilities, by the number of shares outstanding.
The net asset value of all outstanding shares will be computed on a
pro-rata basis for each outstanding share based on the proportionate
participation in the Fund represented by the value of shares. All
income earned and expenses incurred by the Fund will be borne on a
pro-rata basis by each outstanding share.
Portfolio securities are valued and net asset value per share is
determined as of the close of regular trading on the New York Stock
Exchange ("NYSE") which currently is 4:00 p.m. (Eastern Time), on
each day the NYSE is open for trading.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Federal Income Taxes
The Fund intends to qualify and elect to be treated as a "regulated
investment company" under sections 851 through 855 of the Code. To
so qualify, the Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from sale
or other disposition of stock or securities or foreign currency, or
certain other income (including, but not limited to, gains from
options, futures and forward contracts) derived with respect to its
business of investing in stock, securities or currency; and (ii)
diversify its holdings so that, at the end of each quarter of its
taxable year, the following two conditions are met: (a) at least 50%
of the value of the Fund's assets is represented by cash, U.S.
government securities, securities of other regulated investment
companies and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the
value of the Fund's assets is invested in securities of any one
issuer (other than U.S. government securities or securities of other
regulated investment companies).
If the Fund qualifies as a regulated investment company for any
taxable year and makes timely distributions to its shareholders of
90% or more of its net investment income for that year, it will not
be subject to federal income tax on the portion of its taxable income
for the year (including any net capital gain) that it distributes to
shareholders.
The Fund intends to also avoid the 4% federal excise tax that would
otherwise apply to certain undistributed income for a given calendar
year if it makes timely distributions to the shareholders equal to
the sum of (i) 98% of its ordinary income for that year; (ii) 98% of
its capital gain net income and foreign currency gains for the twelve
month period ending on October 31 of that year; and (iii) any
ordinary income or capital gain net income from the preceding
calendar year that was not distributed during that year. For this
purpose, income and gain retained by the Fund that is subject to
corporate income tax will be considered to have been distributed by
the Fund by year-end. For federal income and excise tax purposes,
dividends declared and payable to shareholders of record as of a date
in October, November or December of a given year but actually paid
during the immediately following January will be treated as if paid
by the fund on December 31 of that calendar year, and will be taxable
to these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the Fund's taxable
income (including any net capital gain) so that the Fund will not be
subject to federal income or excise taxes. However, exchange control
or other regulations on the repatriation of investment income,
capital or the proceeds of securities sales, if any exist or are
enacted in the future, may limit the Fund's ability to make
distributions sufficient in amount to avoid being subject to one or
both of such federal taxes.
Dividends and Distributions
The Fund intends to make timely distributions of the Fund's taxable
income (including any net capital gain) so that the Fund will not be
subject to federal income and excise taxes. The excess of net capital
gains over the net capital losses realized and distributed by the
Fund to its shareholders is expected to be taxable to the
shareholders as mid-term or long-term capital gains, irrespective of
the length of time a shareholder may have held his Fund shares.
Dividends of the Fund's net ordinary income and distributions of any
net realized short-term capital gain are taxable to shareholders as
ordinary income. Due to distributions of amounts representing a
return of capital the Fund will receive from REITs in which the Fund
is invested, distributions made by the Fund may also include
nontaxable returns of capital, which will reduce a shareholder's
basis in shares of the Fund. If a shareholder's basis is reduced to
zero (which could happen if shareholder does not reinvest
distributions and returns of capital are significant), any further
returns of capital will be taxable as capital gain.
After the end of the taxable year, the Fund will notify shareholders
of the federal income tax status of any distributions made by the
Fund to shareholders during such year.
It is the present policy of the Fund to distribute to shareholders
all net investment income quarterly and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate and
there can be no assurance that the Fund will pay any dividends. The
amount of any dividend or distribution paid on shares of the Fund
must necessarily depend upon the realization of income and capital
gains from the Fund's investments.
Sales and Redemptions
Any gain or loss arising from a sale or redemption of Fund shares
generally will be capital gain or loss except in the case of a dealer
or a financial institution, and will be long-term capital gain or
loss if such shareholder has held such shares for more than one year
at the time of the sale or redemption; otherwise it will be short-term
capital gain or loss. However, if a shareholder has held shares
in the Fund for six months or less and during that period has
received a distribution taxable to the shareholder as a long-term
capital gain, any loss recognized by the shareholder on the sale of
those shares during the six-month period will be treated as a long-term
capital loss to the extent of the dividend. In determining the
holding period of such shares for this purpose, any period during
which a shareholders risk of loss is offset by means of options,
short sales or similar transactions is not counted.
Backup Withholding
The Fund may be required to withhold United States federal income tax
at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who
have been notified by the Internal Revenue Service that they are
subject to backup withholding. Corporate shareholders and certain
other shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any amounts
so withheld may be credited against a United States shareholder's
United States federal income tax liability or refunded.
BROKERAGE AND PORTFOLIO TRANSACTION
The management of the Fund has the responsibility for allocating its
brokerage orders and may direct orders to any broker. It is the
Fund's general policy to seek favorable net prices and prompt
reliable execution in connection with the purchase or sale of all
portfolio securities. In the purchase and sale of over-the-counter
securities, it is the Fund's policy to use the primary market makers
except when a better price can be obtained by using a broker. The
Board of Directors has approved, as in the best interests of the Fund
and the shareholders, a policy of considering, among other factors,
sales of the Fund's shares as a factor in selection of broker-dealers
to execute portfolio transactions, subject to best execution. The
Adviser is authorized under the Advisory Agreement to place brokerage
business with such brokers and dealers. The use of brokers who supply
supplemental research and analysis and other services may result in
the payment of higher commissions than those available from other
brokers and dealers who provide only the execution of portfolio
transactions. In addition, the supplemental research and analysis and
other services that may be obtained from brokers and dealers through
which brokerage transactions are affected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are expected to be made
independently from those for other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held
in the portfolio of the Fund and one or more of such accounts.
Simultaneous transactions are likely when several accounts are
managed by the same Adviser, particularly when a security is suitable
for the investment objectives of more than one of such accounts. If
two or more accounts managed by the Adviser are simultaneously
engaged in the purchase or sale of the same security, the
transactions will be allocated to the respective accounts both as to
amount and price, in accordance with a method deemed equitable to
each account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of the Adviser.
Purchases and sales of portfolio securities are determined by the
Adviser and are placed with broker dealers by the Adviser.
The extent to which commissions that will be charged by broker-dealers
selected by the Fund may reflect an element of value for
research cannot presently be determined. To the extent that research
services of value are provided by broker-dealers with or through whom
the Fund places portfolio transactions, the Adviser may be relieved
of expenses which it might otherwise bear. Research services
furnished by broker-dealers could be useful and of value to the
Adviser in servicing its other clients as well as the Fund.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking best execution, the
Fund may consider sales of shares of the Fund as a factor in the
selection of brokers to execute portfolio transactions for the Fund.
PERFORMANCE INFORMATION
General
From time to time, advertisements quoting performance rankings of the
Fund as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc., and advertisements presenting the historical
record of payments of income dividends by the Fund may also from time
to time be sent to investors or placed in newspapers and/or magazines
such as The Wall Street Journal, The New York Times, Barrons,
Investor's Daily, Money Magazine, Changing Times, Business Week and
Forbes or other media on behalf of the Fund.
Total return may be used to compare the performance of the Fund
against certain widely acknowledged standards or indices for stock
and bond market performance such as the Standard & Poor's 500
Composite Index and the Dow Jones Industrial Average. The Fund may
compare its total return to that of the National Association of Real
Estate Investment Trusts (NAREIT) Equity REIT Index.
Average Annual Total Return
From time to time the Fund may advertise its total return for prior
periods. The Fund's total return is its average annual compounded
total return for its most recently completed one, five, and ten-year
periods (or the period since the Fund's inception). The Fund's total
return for such a period is computed by finding, through the use of
a formula prescribed by the Commission below, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment at
the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of the Fund
are assumed to have been reinvested when paid and the maximum sales
charge applicable to purchase of Fund shares is assumed to have been
paid. This calculation can be expressed as follows:
P(1 + T)n = ERV
Where:
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical investment payment of $1,000
n = period covered by the computation, expressed in
terms of years.
T = average annual total return
Cumulative Total Return
The Fund may also quote the cumulative total return in addition to
the average annual total return. These quotations are computed the
same way, except the cumulative total return will be based on the
actual return for a specified period rather than on the average
return over one-,five- and ten year periods, or fractional portion
thereof.
GENERAL INFORMATION
Capitalization
The authorized capital stock of the Fund currently consists of
1,000,000,000 shares of Common Stock each having a par value of $.001
per share. All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and issue
any unissued shares to any number of additional series and classes
without shareholder approval. Accordingly, the Directors in the
future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives, policies
or restrictions, may create additional classes or series of shares.
Any issuance of shares of another class or series would be governed
by the 1940 Act and the law of the State of Maryland. If shares of
another series were issued in connection with the creation of a
second portfolio, each share of either portfolio would normally be
entitled to one vote for all purposes. Generally, shares of both
portfolios would vote as a single series on matters, such as the
election of Directors, that affected both portfolios in substantially
the same manner. As to matters affecting each portfolio differently,
such as approval of the Advisory Agreement and changes in investment
policy, shares of each portfolio would vote as a separate series.
Procedures for calling a shareholders' meeting for the removal of
Directors of the Fund, similar to those set forth in Section 16(c)
of the 1940 Act, will be available to shareholders of the Fund.
Custodian
The Bank of New York, New York, NY will act as the Fund's custodian.
The Fund's securities and cash are held under a custodian agreement
by rules adopted under the 1940 Act which permit the Fund to maintain
its securities and cash in the custody of certain eligible banks and
securities depositories.
Principal Distributor
SSH Securities, Inc., 477 Jericho Turnpike, Syosset, New York 11791,
serves as the Fund's principal Distributor, and as such may solicit
orders from the public to purchase shares of the Fund. Under the
Underwriting Agreement, the Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations thereunder,
against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended.
[LEGAL PROCEEDINGS DELETED]
Independent Auditors
Tait Weller & Baker, have been appointed as independent auditors for
the Fund.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to SSH Securities, Inc. at the address or telephone number shown
on the front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the Fund
with the Securities and Exchange Commission under the Securities Act
of 1933. Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or may
be examined, without charge, at the offices of the Securities and
Exchange Commission in Washington, D.C.
<PAGE>
SPIRIT OF AMERICA INVESTMENT FUND, INC.
Form N-1A
Part C -- Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
(To be filed by amendment.)
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Articles of Incorporation are incorporated by
reference to Registrant's initial Registration
Statement on Form N-1A, File number 333-27925
filed May 28, 1997.
(2) By-Laws are incorporated by reference
to Registrant's initial Registration Statement on
Form N-1A, File number 333-27925 filed May 28, 1997.
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders
-- None
(5) Investment Advisory Contracts -- Investment
Advisory Agreement between Spirit of America
Management Corp. and the Registrant is filed
herewith.
(6) (a) Underwriting Agreement --Underwriting
Agreement between SSH Securities, Inc. and
the Registrant is filed herewith.
(b) Distribution Services Agreement --
Distribution Services Agreement between SSH
Securities, Inc. and the Registrant is filed
herewith.
(c) Selected Dealer Agreement -- to be filed by
amendment.
(7) Bonus, Profit Sharing, Pension or Other
Similar Contracts -- None
(8) Custodian Agreements -- Custodian Agreement
between The Bank of New York and Registrant is
filed herewith.
(9) Investment Company Services Agreement --
Investment Company Services Agreement is filed
herewith.
(10) Opinion and Consent of Ruthann G. Niosi, Esq.,
P.C. regarding the legality of the securities
being issued -- To be filed by amendment
(11) Consent of Independent Auditors -- (To be
filed by Amendment.)
(12) Financial Statements Omitted from Item 23. --
None
(13) Agreements or Understandings Made in
Consideration for Providing the Initial
Capital -- (To be filed by Amendment.)
(14) Model Plan -- None
(15) Plan of Distribution pursuant to Rule 12b-1 -
filed herewith.
(16) Schedule for Computation of Performance
Quotations -- (To be filed in a Post-Effective
Amendment.)
(17) Financial Data Schedule -- None.
(18) Plan of Distribution pursuant to Rule 18f-3
with respect to Multiple Class Shares -- not
applicable
(19) Director's Powers of Attorney --
a. David Lerner Filed herewith
b. Herbert Grant Filed herewith
c. Allen Kaufman Filed herewith
d. Daniel Lerner Filed herewith
Item 25. Persons Controlled by or Under Common Control with
Registrant.
The Registrant is a recently organized corporation and
David Lerner owns 100% of its issued and outstanding
stock.
Item 26. Number of Holders of Securities.
None.
Item 27. Indemnification.
It is the Registrant's policy to indemnify its
directors and officers, employees and other agents to
the maximum extent permitted by Section 2-418 of the
General Corporation Law of the State of Maryland,
which is incorporated by reference herein, and as set
forth in Article EIGHT of Registrant's Articles of
Incorporation, filed as Exhibit 1 hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit 2 hereto, and Section 10 of the proposed
Distribution Services Agreement, to be filed by
amendment. The Adviser's liability for any loss
suffered by the Registrant or its shareholders is set
forth in Section 4 of the proposed Advisory Agreement,
filed as Exhibit 5 hereto.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in
the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of
the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal
underwriters only if (1) a final decision on the
merits was issued by the court or other body before
whom the proceeding was brought that the person to be
indemnified (the "indemnitee") was not liable by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling
conduct") or (2) a reasonable determination is made,
based upon a review of the facts, that the indemnitee
was not liable by reason of disabling conduct, by (a)
the vote of a majority of a quorum of the directors
who are neither "interested persons" of the Registrant
as defined in section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the
proceeding ("disinterested, non-party directors"), or
(b) an independent legal counsel in a written opinion.
The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers,
investment adviser or principal underwriters in
defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless
it is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured
against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of
disinterested, non-party directors of the Registrant,
or an independent legal counsel in a written opinion,
shall determine, based on a review of readily
available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to
indemnification.
Item 28. Business and Other Connections of Investment Adviser.
Since the date of its incorporation on April 24, 1997,
Spirit of America Management Corp. has not been
engaged in any other business other than acting as
adviser to Registrant.
During the past twenty-one years, David Lerner, a
director and officer of the Adviser, has served as the
Chief Executive Officer and Director of David Lerner
Associates, Inc. (and David Lerner Government
Securities Associates, Inc., a government securities
dealer). The business address of such companies is
477 Jericho Turnpike, Syosset, New York 11791.
For information as to any other business, vocation or
employment of a substantial nature in which each
Director or officer of the Registrant's investment
adviser has been engaged for his own account or in the
capacity of Director, officer, employee, partner or
director, reference is made to Form ADV (File
#801-54782) filed by it under the Investment Advisers
Act of 1940.
Item 29. Principal Underwriter.
(a) SSH Securities, Inc., the Registrant's
distributor, does not act as principal
underwriter, depositor or investment adviser for
any other investment company.
(b) The table below sets forth certain information
with respect to each director, officer and control
person of SSH Securities, Inc.
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
David Lerner Director, Chairman of the
Chief Executive Board, Director,
477 Jericho Turnpike Officer and President and
Syosset, NY 11791 President Treasurer
Constance Ferreira Vice President, Vice President and
477 Jericho Turnpike Chief Operating Secretary
Syosset, NY 11791 Officer and Chief
Financial Officer
Daniel E. Chafetz Chief Compliance None
477 Jericho Turnpike Officer
Syosset, NY 11791
Daniel Lerner Vice President Director
477 Jericho Turnpike
Syosset, NY 11791
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All records described in Section 31(a) of the 1940 Act
and the Rules 17 CFR 270.31a-1 to 31a-3 promulgated
thereunder, are maintained by the Fund's Investment
Adviser, Spirit of America Management, Inc., 477
Jericho Turnpike, Syosset, New York 11791, except for
those maintained by the Fund's Custodian, The Bank of
New York, 48 Wall Street, New York, New York 10172 and
the Fund's Administrator, Transfer Agent and Fund
Accounting Services Agent, FPS Services Inc., 3200
Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.
Item 31. Management Services.
There are no management-related service contracts not
discussed in Part A or Part B.
Item 32. Undertakings.
(a) Registrant hereby undertakes to file an amendment
to this Registration Statement with certified
financial statements showing the initial capital
received before accepting subscriptions from any
person in excess of 25 if Registrant proposes to
raise its initial capital pursuant to Section
14(a)(3) of the 1940 Act.
(b) Registrant hereby undertakes to file a
post-effective amendment within four to six months
from the effective date of this Registration
Statement under the Securities Act of 1933.
Registrant understands that such post-effective
amendment will contain reasonably current
financial statements which need not be certified
by independent public accountants.
(c) Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a
copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
(d) The Registrant hereby undertakes to promptly call
a meeting of shareholders for the purpose of
voting upon the question of removal of any
director or directors when requested in writing to
do so by the record holders of not less than 10
percent of the Registrant's outstanding shares and
to assist its shareholders in accordance with the
requirements of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder
communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, as amended, the Registrant
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Syosset, and State of New York on the 17th day of December,
1997.
Spirit of America Investment Fund, Inc.
Registrant
By /s/ David Lerner*
David Lerner, President
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
Signature Capacity Date
/s/ David Lerner* Chairman of the Board 12/17/97
David Lerner President & Director
/s/ Herbert Grant* Director 12/17/97
Herbert Grant
/s/ Allen Kaufman* Director 12/17/97
Allen Kaufman
/s/ Daniel Lerner* Director 12/17/97
Daniel Lerner
/s/ Constance Ferreira* Principal Financial and 12/17/97
Constance Ferreira Accounting Officer
/s/ Stanley S. Thune Director 12/17/97
Stanley S. Thune
/s/ Sandra L. Adams
* By Sandra L. Adams, as
Attorney-in-Fact and Agent
pursuant to Power of Attorney
The Spirit of America Investment Fund, Inc.
Index to Exhibits to Form N-1A
Exhibit No.
EX-99.B5 Investment Advisory Agreement
EX-99.B6 Underwriting Agreement
EX-99.B8 Custodian Agreement
EX-99.B9 Investment Company Services Agreement
EX-99.B15 Distribution and Services Plan Pursuant to Rule 12b-1
EX-99.B19 Powers of Attorney
(a) David Lerner
(b) Herbert Grant
(c) Allen Kaufman
(d) Daniel Lerner
(e) Constance Ferreira
Investment Advisory Agreement
AGREEMENT made this 16th day of December, 1997 by and between
Spirit of America Investment Fund, Inc. (the "Fund"), a Maryland
corporation and Spirit of America Management Corp. (the "Adviser"), a
corporation operating as a registered investment adviser and duly
organized and existing under the laws of the State of New York.
1. Duties of Adviser. The Fund hereby appoints the Adviser
to act as investment adviser to the Fund for the period and on such
terms set forth in this Agreement. The Fund employs the Adviser to
manage the investment and reinvestment of the assets of the Fund, to
determine in its discretion the assets to be held uninvested, to
provide the Fund with records concerning the Adviser's activities
which the Fund is required to maintain, and to render regular reports
to the Fund's officers and Board of Directors concerning the
Adviser's discharge of the foregoing responsibilities. The Adviser
shall discharge the foregoing responsibilities subject to the control
of the Board of Directors of the Fund, and in compliance with the
objectives, policies and limitations set forth in the Fund's
Prospectus and Statement of Additional Information. The Adviser
accepts such employment and agrees to render the services and to
provide, at its own expense, the office space, furnishings, equipment
and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
The Adviser may employ or contract with other persons to assist
it in the performance of this Agreement (herein, a "Sub-Adviser");
provided that the retention of any Sub-Adviser shall be approved as
may be required by the 1940 Act. A Sub-Adviser may perform under the
supervision of the Adviser any or all services described herein.
Sub-Advisers may include other investment advisory or management
firms and officers or employees who are employed by the Adviser and
the Fund. The fees or other compensation of any Sub-Adviser shall be
paid by the Adviser and no obligation may be incurred on the Fund's
behalf to any such person.
2. Portfolio Transactions. The Adviser shall provide the
Fund with a trading department. The Adviser shall select the brokers
or dealers that will execute the purchases and sales of securities
for the Fund, and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities
transactions for the Fund are obtained. The Fund will bear all
expenses, not specifically assumed by the Adviser, incurred in its
operations and offering of its shares, including, without limitation,
brokerage commissions and custody expenses. Subject to policies
established by the Board of Directors of the Fund and communicated to
the Adviser, it is understood that the Adviser will not be deemed to
have acted unlawfully, or to have breached a fiduciary duty to the
Fund or in respect of the Fund, or be in breach of any obligation
owing to the Fund or in respect of the Fund under this Agreement, or
otherwise, solely by reason of its having caused the Fund to pay a
member of a securities exchange, a broker or a dealer a commission
for effecting a securities transaction for the Fund in excess of the
amount of commission that another member of an exchange, broker or
dealer would have charged, if the Adviser determines in good faith
that the commission paid was reasonable in relation to the brokerage
or research services provided by such member, broker or dealer,
viewed in terms of that particular transaction or the Adviser's
overall responsibilities with respect to the accounts, including the
Fund, as to which it exercises investment discretion. The Adviser
will promptly communicate to the officers and Directors of the Fund
such information relating to Fund transactions as they may reasonably
request.
3. Compensation of the Adviser. For the services to be
rendered by the Adviser as provided in Section 1 and 2 of this
Agreement, the Fund shall pay to the Adviser within five business
days after the end of each calendar month, a monthly fee of one
twelfth of 0.97% of the average daily net assets of the Fund. The
net asset value shall be calculated in the manner provided in the
Fund's Prospectus and Statement of Additional Information then in
effect.
In the event of termination of this Agreement, the fee provided
in this Section 3 shall be paid on a pro rata basis, based on the
number of days when this Agreement was in effect.
Any amounts waived or reimbursed by the Adviser are subject to
reimbursement by the Fund within the following three years, provided
the Fund is able to effect such reimbursement and remain in
compliance with the expense limitations stated in the Prospectus.
4. Reports. The Fund and the Adviser agree to furnish to
each other such information regarding their operations with regard to
their affairs as each may reasonably request.
5. Status of Adviser. The services of the Adviser to the
Fund are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others so long as its services to the Fund
are not impaired thereby.
6. Liability of Adviser. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard by the
Adviser of its obligations and duties hereunder, the Adviser shall
not be subject to any liability whatsoever to the Fund, or to any
shareholder of the Fund, for any error of judgement, mistake of law
or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any
losses that may be sustained in connection with the purchase,
holding, redemption or sale of any security on behalf of the Fund.
7. Duration and Termination. This Agreement shall become
effective on the date that the Fund's registration statement is
declared effective by the U.S. Securities and Exchange Commission,
provided that first it is approved by the Board of Directors of the
Fund, including a majority of those Directors who are not parties to
this Agreement or interested persons of any party hereto, in the
manner provided in Section 15(c) of the 1940 Act, and by the holders
of a majority of the outstanding voting securities of the Fund; and
shall continue in effect for two years. Thereafter, this Agreement
may continue in effect only if such continuance is approved at least
annually by: (i) the Fund's Board of Directors or, (ii) by the vote
of a majority of the outstanding voting securities of the Fund; and
in either event by a vote of a majority of those Directors of the
Fund who are not parties to this Agreement or interested persons of
any such party in the manner provided in Section 15(c) of the 1940
Act. This Agreement may be terminated by the Fund, at any time,
without the payment of any penalty, by the Board of Directors of the
Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any
time, without the payment of any penalty, upon not more than 60 days'
written notice to the Fund. This Agreement will automatically
terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or
mailed postage prepaid, to the other party at the principal office of
such party.
As used in this Section 7, the terms "assignment", "interested
person", and "a vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in Section
2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and
Rule 18f-2 thereunder.
8. Name of Fund. The parties agree that the Adviser has a
proprietary interest in the name "Spirit of America Investment Fund,
Inc." and the Fund agrees to promptly take such action as may be
necessary to delete from its name and/or the name of the Fund any
reference to such name promptly after receipt from the Adviser of a
written request therefore.
9. Severability. If any provisions of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
10. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
New York, without giving effect to the conflicts of law principles
thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable
provisions of the 1940 Act, the latter shall control.
11. Records. All records held by the Adviser which are
required to be maintained and preserved by the Fund in order to
comply with Rules 31 a-1 and 31 a-2 of the 1940 Act remain the
property of the Fund and will be surrendered promptly by the Adviser
upon the request of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of this 16th day of December, 1997.
Spirit of america investment fund, inc. Spirit of America Management Corp.
/s/ David Lerner /s/ David Lerner
David Lerner, President David Lerner, President
UNDERWRITING AGREEMENT
This Agreement, dated as of the 16th day of December, 1997, made
by and between Spirit of America Investment Fund, Inc. (the "Fund"),
a corporation duly organized under the laws of the state
of Maryland and operating as a registered investment company under
the Investment Company Act of 1940, as amended (the "Act"); and SSH
Securities, Inc. ("SSH"), a registered broker-dealer existing
as a corporation duly organized and existing under the laws of New
York (together, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized by its Articles of Incorporation
to issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which Series are identified on
Schedule "A" attached hereto, and which Schedule "A"may be amended from
time to time by mutual agreement among the Parties; and
WHEREAS, SSH is a broker-dealer registered with the U.S.
Securities and Exchange Commission and a member in good standing of the
National Association of Securities Dealers, Inc.(the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement
providing for the distribution by SSH of the shares of the Fund (the "Shares");
NOW, THEREFORE, in consideration of the promises and agreementsof the
Parties contained herein and in exchange of good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. Appointment.
The Fund hereby appoints SSH as its exclusive agent for the
distribution of the Shares in such of the fifty United States of America,
the District of Columbia and Puerto Rico, as SSH deems appropriate and SSH
hereby accepts such appointment under the terms of this Agreement. The Fund
agrees that it will not sell any shares to any person except to fill orders
for the shares received through SSH; provided, however, that the foregoing
exclusive right shall not apply:
(a) to shares issued or sold in connection with the merger or
consolidation of any other investment company with the Fund or the acquisition
by purchase or otherwise of all or substantially all of the assets of any
investment company or substantially all of the outstanding shares of any
such company by the Fund;
(b) to shares which may be offered by the Fund to its stockholders for
reinvestment of cash distributed from capital gains or net investment income
of the Fund; or
(c) shares that may be purchased from the Fund's transfer agent in the
manner set forth in the Registration Statement;
(d) to shares which may be issued to shareholders of other funds who
exercise any exchangeprivilege set forth in the Fund's
Prospectus. Notwithstanding any other provision hereof, the Fund may
terminate, suspend, or withdraw the offering of the Shares whenever in
its sole discretion, it deems such action to be desirable.
2. Sale and Repurchase of Shares.
(a) SSH is hereby granted the right as agent for the Fund, to
sell Shares to the public against orders therefor at the public offering
price (as defined in sub-paragraph 2.(c) below).
(b) SSH will also have the right to take, as agent for the
Fund, all actions which, in SSH's judgment, are necessary to carry into
effect the distribution of the Shares.
(c) The public offering price shall be the net asset value of
the Shares then in effect plus any applicable sales charge.
(d) The net asset value of the Shares shall be determined in
the manner provided in the then current prospectus and statement of
additional information relating to the Shares and when determined
shall be applicable to all transactions as provided in the prospectus.
The netasset value of the Shares shall be calculated by the Fund or by
another entity on behalf of the Fund. SSH shall have no duty to inquire
into or liability for the accuracy of the net asset value per Share as
calculated.
(e) On every sale, the Fund shall receive the applicable net
asset value of the Shares promptly.
(f) Upon receipt of purchase instructions, SSH will transmit
such instructions to the Fund or its transfer agent for registration of the
Shares purchased.
(g) Nothing in this Agreement shall prevent SSH or any
affiliated person (as defined in the Act) of SSH from acting as underwriter
or distributor for any other person, firm or corporation (including other
investment companies) or in any way limit or restrict SSH or such affiliated
person from buying, selling or trading any securities for its or their own
account or for the accounts of others for whom it or they may be acting;
provided, however, that SSH expressly agrees that it
will not for its own account purchase any shares of the
Fund except for investment purposes and that it will not for its own
account sell any such shares except by redemption of such shares by the Fund,
and that it will not undertake in any activities which, in its judgment, will
adversely affect the performance of its obligations to the Fund under this
Agreement.
(h) SSH may, but is not required to, repurchase Shares at such
prices and upon such terms and conditions as shall be specified in the
Prospectus.
3. Rules of Sale of Shares.
SSH does not agree to sell any specific number of Shares. SSH,
as Underwriter for the Fund,undertakes to sell Shares on a best efforts
basis and only against orders received therefor.
The Fund reserves the right to terminate, suspend or withdraw
the sale of its Shares for any reason deemed adequate by it and the Fund
reserves the right to refuse at any time or times to sell any of its Shares
to any person for any reason deemed adequate by it.
4. Rules of NASD.
(a) SSH will conform to the Conduct Rules of the NASD and the
securities laws of any jurisdiction in which it directly or indirectly
sells any Shares.
(b) SSH will require each dealer with whom SSH has a selling
agreement to conform to the applicable provisions of the Prospectus,
with respect to the public offering price of the Shares, and SSH shall not
cause the Fund to withhold the placing of purchase orders so as to make a
profit thereby.
(c) The Fund agrees to furnish to SSH sufficient copies of any
and all:
agreements, plans, communications with the public or other
materials which the Fund or SSH intends to use in connection with any sales
of Shares in adequate time for SSH to file and clear such materials with
the proper authorities before they are put in use. SSH and the Fund
may agree that any such material does not need to be filed subsequent to
distribution. In addition, the Fund agrees not to use any such materials
until so filed and cleared for use by appropriate authorities as well as by
SSH.
(d) SSH, at its own expense, will qualify as a dealer or
broker, or otherwise,under all applicable state or federal laws required in
order that the Shares may be sold in such states as may be mutually agreed
upon by the Parties.
(e) SSH shall remain registered with the U.S. Securities and Exchange
Commission and a member of the National Association of Securities
Dealers for the term of this Agreement.
(f) SSH shall not, in connection with any sale or solicitation of a
sale of the Shares, make or authorize any representative, Service
Organization, broker or dealer to make, any representations
concerning the Shares except those contained in the Prospectus
covering the Shares and in communications with the public or
sales materials approved by SSH as information supplemental
to such Prospectus. Copies of the Prospectus will be
supplied by the Fund to SSH in reasonable quantities upon request.
5. Records to be Supplied by the Fund.
The Fund shall furnish to SSH copies of all information, financial
statements and other papers which SSH may reasonably request for use in
connection with the distribution of the Shares including, but not limited
to, one certified copy of all financial statements prepared for the Fund by
its independent public accountants.
6. Expenses.
(a) The Fund will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient
copies of the prospectuses and statements of additional information
for distribution to shareholders, and the distribution of same to the
shareholders;
(ii) preparation, printing and distribution of reports and
other communications to shareholders;
(iii) registration of the Shares under the federal
securities laws;
(iv) fees and disbursements of its counsel and independent
public accountants
(v) qualification of the Shares for sale in the
jurisdictions as directed by the Fund;
(vi) maintaining facilities for the issue and transfer of the
Shares;
(vii) supplying information, prices and other data to be
furnished by the Fund under this Agreement; and
(viii) any original issue taxes or transfer taxes
applicable to the sale or delivery of the Shares or certificates therefor.
(b) SSH will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
7. Term.
(a) The term of this Agreement shall commence on the date on
which the Fund's registration statement is declared effective by the U.S.
Securities and Exchange Commission ("Effective Date") provided that this
Agreement shall not take effect unless such action has first been approved
by vote of a majority of the Board of Directors and by vote of a majority
of those Directors of the Fund who are not interested persons of the Fund,
and have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("Independent Directors"), cast
in person at a meeting called for the purpose of voting on such action.
(b) This Agreement shall remain in effect for two (2) years from
the Effective Date.
This Agreement shall continue thereafter for periods not
exceeding one (1) year if approved at least annually (i) by a vote of a
majority of the outstanding voting securities of the Fund or by a vote of
the Board of Directors of the Fund, and (ii) by a vote of a majority of the
Independent Directors cast in person at a meeting called for the purpose of
voting on such approval.
(c) This Agreement (i) may at any time be terminated without the
payment of any penalty, either by a vote of the Directors of the Fund or by
a vote of a majority of the outstanding voting securities of the Fund, on
sixty (60) days' written notice to SSH; and (ii) may be terminated by SSH
on sixty (60) days' written notice to the Fund.
(d) This Agreement shall automatically terminate in the event of
its assignment.
8. Liability of Underwriter.
(a) SSH, its directors, officers, employees, shareholders and
agents shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from a breach of SSH's obligation
pursuant to Section 4 of this Agreement, a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of SSH
in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this Agreement.
(b) The Fund agrees to indemnify and hold harmless SSH against
any and all liability, loss, damages, costs or expenses (including
reasonable counsel fees) which SSH may incur or be required to pay
hereafter, in connection with any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body,
in which SSH may be involved as a party or otherwise or with which SSH may
be threatened, by reason of the offer or sale of the Fund shares by
persons other than SSH or its representatives, prior to the execution of
this Agreement.
(c) Any person, even though also a director, officer, employee,
shareholder or agent of SSH, who may be or become an officer, director,
trustee, employee or agent of the Fund, shall be deemed, when rendering
services to the Fund or acting on any business of the Fund (other than
services or business in connection with SSH's duties hereunder), to be
rendering such services to or acting solely for the Fund and not as
a director, officer, employee, shareholder or agent, or one under the
control or direction of SSH even though receiving a salary from SSH.
(d) The Fund agrees to indemnify and hold harmless SSH, and each
person, who controls SSH within the meaning of Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section 20
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against any and all losses, claims, damages and liabilities, joint or
several (including any reasonable investigative, legal and other expenses
incurred in connection therewith) to which they, or any of them, may
become subject under the Act, the Securities Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise
insofar as such losses, claims, damages or liabilities (or actions, suits or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
prospectus, statement of additional information, supplement thereto, sales
literature or other written information prepared by the Fund and furnished
by the Fund to SSH for SSH's use hereunder, disseminated by the Fund or
arise out of or are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading.
Such indemnity shall not, however, inure to the benefit of
SSH (or any person controlling SSH) on account of any losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof) arising
from the sale of the shares of the Fund to any person by SSH (i) if such
untrue statement or omission or alleged untrue statement or omission was
made in the prospectus, statement of additional information, or supplement,
sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by SSH specifically for
use therein or (ii) if such losses, claims, damages or liabilities arise
out of or are based upon an untrue statement or omission or alleged untrue
statement or omission found in any prospectus, statement of additional
information,supplement, sales or other literature, subsequently corrected,
but, negligently distributed by SSH and a copy of the corrected prospectus
was not delivered to such person at or before the confirmation of the sale
to such person.
9. Amendments.
No provision of this Agreement may be amended or modified, in any
manner whatsoever except by a written agreement properly authorized and
executed by the Parties.
10. Section Headings.
Section and Paragraph headings are for convenience only and shall
not be construed as part of this Agreement.
11. Reports.
SSH shall prepare reports for the Board of Directors of the Fund
on a quarterly basis showing such information as from time to time shall
be reasonably requested by such Board.
12. Severability.
If any part, term or provision of this Agreement is held by any
court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not
affected, and the rights and obligations of the parties shall be construed
and enforced as if the Agreement did not contain the particular part,
term or provision held to be illegal or invalid provided that the basic
agreement is not thereby substantially impaired.
13. Governing Law.
This Agreement shall be governed by the laws of New York, without
giving effect to the conflicts of law principles thereof, and in
accordance with the 1940 Act. To the extent that the applicable laws of
the State of New York conflict with the applicable provisions of the
1940 Act, the latter shall control.
14. Authority to Execute
The Parties represent and warrant that the execution and delivery
of this Agreement by the undersigned officers of the Parties has been
duly and validly authorized by resolution of the respective Boards of
Directors of each of the Parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of nine type written pages, together with Schedule "A" to be
signed by their duly authorized officers, as of the day and year first
above written.
Spirit of America Investment Fund, Inc.
/s/ David Lerner
David Lerner, President
SSH Securities, Inc.
/s/ David Lerner
David Lerner, President
Schedule "A"
Identification of Series
Below are listed the "Series" to which services under this Agreement
are to be performed as of the
execution date of the Agreement:
"Spirit of America Investment Fund, Inc."
This Schedule "A" may be amended from time to time by agreement of
the Parties.
CUSTODY AGREEMENT
Agreement made as of this day of ,
1997, between SPIRIT OF AMERICA INVESTMENT FUND, INC.,
a Maryland corporation organized and existing under the laws of
the State of Maryland, having its principal office and place
of business at 477 Jericho Turnpike, Syosset, New York 11791
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a
New York corporation authorized to do a banking business, hav-
ing its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Cus-
todian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to the
Administration Agreement (as hereinafter defined) between FPS
Services, Inc. ("FPS") and the Fund, FPS (a) has agreed to
perform certain administrative functions which may include the
functions of administrator, transfer agent and accounting ser-
vices agent and (b) has been appointed by the Fund to act as
its agent in respect of certain transactions contemplated in
this Agreement; and
WHEREAS, the Fund represents that (a) FPS has agreed to
act as Fund's agent in respect of certain transactions
contemplated in this Agreement and (b) the Custodian is au-
thorized and directed to rely upon and follow Certificates and
Instructions given by FPS, the Fund's agent, in respect of
transactions contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Administrator" shall mean FPS and such successors
or permitted assigns as may succeed and perform its duties
under the Administration Agreement.
2. "Administration Agreement" shall mean that certain
separate agreement entitled "Custody Administration and Agency
Agreement" dated as of _______________, 199 between the Fund
and the FPS.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and fed-
eral agency securities, its successor or successors and its
nominee or nominees.
4. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer
thereof the specified underlying Securities.
5. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually re-
ceived by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include
Instructions communicated to the Custodian by the
Administrator.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange quali-
fied to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such
a clearing member.
7. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII
herein.
8. "Composite Currency Unit" shall mean the European
Currency Unit or any other composite unit consisting of the
aggregate of specified amounts of specified Currencies as such
unit may be constituted from time to time.
9. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
the writer thereof the specified underlying Securities (ex-
cluding Futures Contracts) which are owned by the writer
thereof and subject to appropriate restrictions.
10. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
11. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nomi-
nee or nominees. The term "Depository" shall further mean and
include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
12. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified
month at an agreed upon price.
13. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
14. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
15. "FX Transaction" shall mean any transaction for the
purchase by one party of an agreed amount in one Currency
against the sale by it to the other party of an agreed amount
in another Currency.
16. "Instructions" shall mean instructions
communications transmitted by electronic or telecommunications
media including S.W.I.F.T., computer-to-computer interface,
dedicated transmission line, facsimile transmission (which may
be signed by an Officer or unsigned) and tested telex.
17. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time deter-
mine. Securities held in the Book-Entry System or the Deposi-
tory shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an ap-
propriate entry in its books and records.
18. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements,
debt obligations issued or guaranteed as to interest and prin-
cipal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipa-
tion note issued by any state or municipal government or pub-
lic authority, commercial paper, certificates of deposit and
bankers' acceptances, repurchase agreements with respect to
the same and bank time deposits, where the purchase and sale
of such securities normally requires settlement in federal
funds on the same day as such purchase or sale.
19. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
20. "Officers" shall be deemed to include the President,
any Vice President, the Secretary, the Clerk, the Treasurer,
the Controller, any Assistant Secretary, any Assistant Clerk,
any Assistant Treasurer, and any other person or persons, in-
cluding officers or employees of the Administrator, whether or
not any such other person is an officer of the Fund, duly au-
thorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf
of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the
Custodian from time to time.
21. "Option" shall mean a Call Option, Covered Call Op-
tion, Stock Index Option and/or a Put Option.
22. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.
23. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and tender of the specified un-
derlying Securities, to sell such Securities to the writer
thereof for the exercise price.
24. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
25. "Security" shall be deemed to include, without limi-
tation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock In-
dex Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agree-
ments, common stocks and other securities having characteris-
tics similar to common stocks, preferred stocks, debt obliga-
tions issued by state or municipal governments and by public
authorities, (including, without limitation, general obliga-
tion bonds, revenue bonds, industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase,
sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or as-
sets.
26. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
27. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund and listed on Appendix B
hereto as amended from time to time.
28. "Shares" shall mean the shares of beneficial inter-
est of the Fund, each of which is, in the case of a Fund hav-
ing Series, allocated to a particular Series.
29. "Stock Index Futures Contract" shall mean a bilat-
eral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the con-
tract and the price at which the futures contract is origi-
nally struck.
30. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive
an amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custo-
dian as custodian of the Securities and money at any time
owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as herein-
after set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all money
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the
Series separate and apart. The Custodian will not be respon-
sible for any Securities and money not actually received by
it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previ-
ously made and money is not finally collected. The Fund shall
deliver to the Custodian a certified resolution of the Board
of Trustees of the Fund, substantially in the form of Exhibit
A hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, includ-
ing, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a
deposit of Securities specifically allocated to a Series in
the Depository, the Fund shall deliver to the Custodian a cer-
tified resolution of the Board of Trustees of the Fund, sub-
stantially in the form of Exhibit B hereto, approving, autho-
rizing and instructing the Custodian on a continuous and ongo-
ing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Deposi-
tory all Securities specifically allocated to such Series eli-
gible for deposit therein, and to utilize the Depository to
the extent possible with respect to such Securities in connec-
tion with its performance hereunder, including, without limi-
tation, in connection with settlements of purchases and sales
of Securities, loans of Securities, and deliveries and returns
of Securities collateral. Securities and money deposited in
either the Book-Entry System or the Depository will be repre-
sented in accounts which include only assets held by the Cus-
todian for customers, including, but not limited to, accounts
in which the Custodian acts in a fiduciary or representative
capacity and will be specifically allocated on the Custodian's
books to the separate account for the applicable Series.
Prior to the Custodian's accepting, utilizing and acting with
respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this
Agreement, the Custodian shall have received a certified reso-
lution of the Fund's Board of Trustees, substantially in the
form of Exhibit C hereto, approving, authorizing and instruct-
ing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received
by the Custodian, to accept, utilize and act in accordance
with such confirmations as provided in this Agreement with
respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all money received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed
by the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name
and address of the person to whom the payment is to be made,
the Series account from which payment is to be made and the
purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Administrator with confirma-
tions and a summary, on a per Series basis, of all transfers
to or from the account of the Fund for a Series, either here-
under or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securi-
ties are transferred to the account of the Fund for a Series,
the Custodian shall also by book-entry or otherwise identify
as belonging to such Series a quantity of Securities in a fun-
gible bulk of Securities registered in the name of the Custo-
dian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At
least monthly and from time to time, the Custodian shall fur-
nish the Administrator with a detailed statement, on a per
Series basis, of the Securities and money held by the Custo-
dian for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the Custo-
dian hereunder, which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry
System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the
Fund, in the name of any duly appointed registered nominee of
the Custodian as the Custodian may from time to time deter-
mine, or in the name of the Book-Entry System or the Deposi-
tory or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish or cause to be furnished
to the Custodian appropriate instruments to enable the Custo-
dian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name
of the Book-Entry System or the Depository any Securities
which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold
all such Securities specifically allocated to a Series which
are not held in the Book-Entry System or in the Depository in
a separate account in the name of such Series physically seg-
regated at all times from those of any other person or per-
sons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or the Depository with respect to Securities held here-
under and therein deposited, shall with respect to all Securi-
ties held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) collect all income due or payable;
(b) present for payment and collect the amount pay-
able upon such Securities which are called, but only if either
(i) the Custodian receives a written notice of such call, or
(ii) notice of such call appears in one or more of the publi-
cations listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian without the prior notifi-
cation or consent of the Fund;
(c) present for payment and collect the amount pay-
able upon all Securities which mature;
(d) surrender Securities in temporary form for de-
finitive Securities;
(e) execute, as custodian, any necessary declara-
tions or certificates of ownership under the Federal Income
Tax Laws or the laws or regulations of any other taxing au-
thority now or hereafter in effect; and
(f) hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein depos-
ited, for the account of a Series, all rights and similar se-
curities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry Sys-
tem or the Depository, shall:
(a) execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authoriza-
tions, and any other instruments whereby the authority of the
Fund as owner of any Securities held by the Custodian hereun-
der for the Series specified in such Certificate may be exer-
cised;
(b) deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in ex-
change for other Securities or cash issued or paid in con-
nection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege and receive and
hold hereunder specifically allocated to such Series any cash
or other Securities received in exchange;
(c) deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any cor-
poration, and receive and hold hereunder specifically al-
located to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) make such transfers or exchanges of the assets
of the Series specified in such Certificate, and take such
other steps as shall be stated in such Certificate to be for
the purpose of effectuating any duly authorized plan of liqui-
dation, reorganization, merger, consolidation or recapitaliza-
tion of the Fund; and
(e) present for payment and collect the amount pay-
able upon Securities not described in preceding paragraph 5(b)
of this Article which may be called as specified in the Cer-
tificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a Cer-
tificate from the Fund stating, that any such instruments or
certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or certifi-
cate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as
amended, in connection with the purchase, sale, settlement,
closing out or writing of Futures Contracts, Options, or Fu-
tures Contract Options by making payments or deliveries speci-
fied in Certificates received by the Custodian in connection
with any such purchase, sale, writing, settlement or closing
out upon its receipt from a broker, dealer, or futures commis-
sion merchant of a statement or confirmation reasonably be-
lieved by the Custodian to be in the form customarily used by
brokers, dealers, or future commission merchants with respect
to such Futures Contracts, Options, or Futures Contract Op-
tions, as the case may be, confirming that such Security is
held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or
any nominee of the Custodian) as custodian for the Fund, pro-
vided, however, that notwithstanding the foregoing, payments
to or deliveries from the Margin Account and payments with
respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the
Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstand-
ing any provision in this Agreement to the contrary, make pay-
ment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are
available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Con-
tract, Option or Futures Contract Option for which such in-
struments or such certificates are available only against re-
ceipt by the Custodian of payment therefor. Any such instru-
ment or certificate delivered to the Custodian shall be held
by the Custodian hereunder in accordance with, and subject to,
the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract,
or a Futures Contract Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian (i) with respect
to each purchase of Securities which are not Money Market Se-
curities, a Certificate, and (ii) with respect to each pur-
chase of Money Market Securities, a Certificate or Oral In-
structions, specifying with respect to each such purchase:
(a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of pur-
chase and settlement; (e) the purchase price per unit; (f) the
total amount payable upon such purchase; (g) the name of the
person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custo-
dian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of
the money held for the account of such Series the total amount
payable upon such purchase, provided that the same conforms to
the total amount payable as set forth in such Certificate or
Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Certificate, and (ii) with
respect to each sale of Money Market Securities, a Certificate
or Oral Instructions, specifying with respect to each such
sale: (a) the Series to which such Securities were specifi-
cally allocated; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e)
the sale price per unit; (f) the total amount payable to the
Fund upon such sale; (g) the name of the broker through whom
or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to
whom the Securities are to be delivered. The Custodian shall
deliver the Securities specifically allocated to such Series
to the broker specified in the Certificate against payment
upon receipt of the total amount payable to the Fund upon such
sale, provided that the same conforms to the total amount pay-
able as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each Option purchased: (a) the Series to which such Option
is specifically allocated; (b) the type of Option (put or
call); (c) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the
number of Stock Index Options purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in con-
nection with such purchase; (h) the name of the Clearing Mem-
ber through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian
shall pay, upon receipt of a Clearing Member's statement con-
firming the purchase of such Option held by such Clearing Mem-
ber for the account of the Custodian (or any duly appointed
and registered nominee of the Custodian) as custodian for the
Fund, out of money held for the account of the Series to which
such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom
the purchase was made, provided that the same conforms to the
total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall de-
liver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such sale: (a)
the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the name of the
issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock
Index Options sold; (d) the date of sale; (e) the sale price;
(f) the date of settlement; (g) the total amount payable to
the Fund upon such sale; and (h) the name of the Clearing
Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing
Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such
Option against payment to the Custodian of the total amount
payable to the Fund, provided that the same conforms to the
total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Call Option: (a) the Series to which such Call Option was
specifically allocated; (b) the name of the issuer and the
title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e)
the exercise price per share; (f) the total amount to be paid
by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying
the Call Option which was exercised, pay out of the money held
for the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clear-
ing Member through whom the Call Option was exercised, pro-
vided that the same conforms to the total amount payable as
set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Put Option: (a) the Series to which such Put Option was spe-
cifically allocated; (b) the name of the issuer and the title
and number of shares subject to the Put Option; (c) the expi-
ration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Put Option was exercised. The Custo-
dian shall, upon receipt of the amount payable upon the exer-
cise of the Put Option, deliver or direct the Depository to
deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund
as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series to which such
Stock Index Option was specifically allocated; (b) the type of
Stock Index Option (put or call); (c) the number of Options
being exercised; (d) the stock index to which such Option
relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with
such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the
title and number of shares for which the Covered Call Option
was written and which underlie the same; (c) the expiration
date; (d) the exercise price; (e) the premium to be received
by the Fund; (f) the date such Covered Call Option was writ-
ten; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the
customs prevailing among Clearing Members dealing in Covered
Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Cer-
tificate specifically allocated to such Series such restric-
tions as may be required by such receipts. Notwithstanding
the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and
not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate instructing the Cus-
todian to deliver, or to direct the Depository to deliver, the
Securities subject to such Covered Call Option and specifying:
(a) the Series for which such Covered Call Option was written;
(b) the name of the issuer and the title and number of shares
subject to the Covered Call Option; (c) the Clearing Member to
whom the underlying Securities are to be delivered; and (d)
the total amount payable to the Fund upon such delivery. Upon
the return and/or cancellation of any receipts delivered pur-
suant to paragraph 6 of this Article, the Custodian shall de-
liver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate against payment of
the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written;
(b) the name of the issuer and the title and number of shares
for which the Put Option is written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Op-
tion is written; (g) the name of the Clearing Member through
whom the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash,
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Secu-
rity Account for such Series; and (i) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the Cer-
tificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Cer-
tificate against receipt of the premium specified in said Cer-
tificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee let-
ter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and de-
scribed in the preceding paragraph is exercised, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Series to which
such Put Option was written; (b) the name of the issuer and
title and number of shares subject to the Put Option; (c) the
Clearing Member from whom the underlying Securities are to be
received; (d) the total amount payable by the Fund upon such
delivery; (e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be with-
drawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, spe-
cifically allocated to such Series, if any, to be withdrawn
from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the money held for the
account of the Series to which such Put Option was specifi-
cally allocated the total amount payable to the Clearing Mem-
ber specified in the Certificate as set forth in such Certifi-
cate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index
Option was written; (b) whether such Stock Index Option is a
put or a call; (c) the number of options written; (d) the
stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such Se-
ries; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be de-
posited in a Margin Account, and the name in which such ac-
count is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account speci-
fied in the Certificate, and either (1) deliver such receipts,
if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying with re-
spect to such Stock Index Option: (a) the Series for which
such Stock Index Option was written; (b) such information as
may be necessary to identify the Stock Index Option being ex-
ercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to
the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securi-
ties, if any, to be withdrawn from the Senior Security Account
for such Series; and the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Col-
lateral Account for such Series. Upon the return and/or can-
cellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay
out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the
Clearing Member specified in the Certificate the total amount
payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a
"Closing Purchase Transaction" in order to liquidate its posi-
tion as a writer of an Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying with respect to the Option being purchased: (a)
that the transaction is a Closing Purchase Transaction; (b)
the Series for which the Option was written; (c) the name of
the issuer and the title and number of shares subject to the
Option, or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Options
held; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the type of Option (put
or call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Se-
ries. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Op-
tion being liquidated through the Closing Purchase Transac-
tion, the Custodian shall remove, or direct the Depository to
remove, the previously imposed restrictions on the Securities
underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option pur-
chased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund pursuant to paragraph 3 Article III
herein, and upon the return and/or cancellation of any re-
ceipts issued by the Custodian, shall make such withdrawals
from the Collateral Account, and the Margin Account and/or the
Senior Security Account as may be specified in a Certificate
received in connection with such expiration, exercise, or con-
summation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Con-
tract, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to such Futures Contract, (or with respect to any number of
identical Futures Contract(s)): (a) the Series for which the
Futures Contract is being entered; (b) the category of Futures
Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts
entered into; (d) the delivery or settlement date of the Fu-
tures Contract(s); (e) the date the Futures Contract(s) was
(were) entered into and the maturity date; (f) whether the
Fund is buying (going long) or selling (going short) on such
Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Fu-
tures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is
to be paid. The Custodian shall make the deposits, if any, to
the Margin Account in accordance with the terms and conditions
of the Margin Account Agreement. The Custodian shall make
payment out of the money specifically allocated to such Series
of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or fu-
tures commission merchant with respect to an outstanding Fu-
tures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certifi-
cate specifying: (a) the Futures Contract and the Series to
which the same relates; (b) with respect to a Stock Index Fu-
tures Contract, the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or re-
ceived; (c) the broker, dealer, or futures commission merchant
to or from whom payment or delivery is to be made or received;
and (d) the amount of cash and/or Securities to be withdrawn
from the Senior Security Account for such Series. The Custo-
dian shall make the payment or delivery specified in the Cer-
tificate, and delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein.
4. Whenever the Fund shall enter into a Futures Con-
tract to offset a Futures Contract held by the Custodian here-
under, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in
paragraph 1 of this Article, and (b) the Futures Contract be-
ing offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commis-
sion, if any, specified in the Certificate and delete the Fu-
tures Contract being offset from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Senior Security Account for
such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and con-
ditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this
Agreement to the contrary, the Custodian shall deliver cash
and Securities to a future commission merchant upon receipt of
a Certificate from the Fund or the Administrator specifying:
(a) the name of the future commission merchant; (b) the
specific cash and Securities to be delivered; (c) the date of
such delivery; and (d) the date of the agreement between the
Fund and such future commission merchant entered pursuant to
Rule 17f-6 under the Investment Company Act 1940, as amended.
Each delivery of such a Certificate by the Fund shall
constitute (x) a representation and warranty by the Fund that
the Rule 17f-6 agreement has been duly authorized, executed
and delivered by the Fund and the future commission merchant
and complies with Rule 17f-6, and (y) an agreement by the Fund
that the Custodian shall not be liable for the acts or
omissions of any such future commission merchant.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall deliver or cause the Admin-
istrator to deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series
to which such Option is specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Fu-
tures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Con-
tract Option purchased; (d) the expiration date; (e) the exer-
cise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase;
(h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of
the broker, or futures commission merchant, to whom payment is
to be made. The Custodian shall pay out of the money spe-
cifically allocated to such Series, the total amount to be
paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the
same conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Op-
tion purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to each
such sale: (a) Series to which such Futures Contract Option
was specifically allocated; (b) the type of Future Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d)
the date of sale; (e) the sale price; (f) the date of settle-
ment; (g) the total amount payable to the Fund upon such sale;
and (h) the name of the broker of futures commission merchant
through whom the sale was made. The Custodian shall consent
to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying: (a) the Series to
which such Futures Contract Option was specifically allocated;
(b) the particular Futures Contract Option (put or call) being
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the
name of the broker or futures commission merchant through whom
the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any,
to be received by the Fund; and (h) the amount of cash and/or
the amount and kind of Securities to be deposited in the Se-
nior Security Account for such Series. The Custodian shall
make, out of the money and Securities specifically allocated
to such Series, the payments, if any, and the deposits, if
any, into the Senior Security Account as specified in the Cer-
tificate. The deposits, if any, to be made to the Margin Ac-
count shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such
Futures Contract Option was written; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (d) the expiration date; (e) the exercise price; (f)
the premium to be received by the Fund; (g) the name of the
broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any,
as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certifi-
cate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular
Futures Contract Option exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the name
of the broker or futures commission merchant through whom such
Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f)
the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount of cash and/or the amount and
kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and
the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made
to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying: (a) the Series to which such Option
was specifically allocated; (b) the particular Futures Con-
tract Option exercised; (c) the type of Futures Contract un-
derlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Fu-
tures Contract Option is exercised; (e) the net total amount,
if any, payable to the Fund upon such exercise; (f) the net
total amount, if any, payable by the Fund upon such exercise;
and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account
for such Series, if any. The Custodian shall, upon its re-
ceipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the money and Secu-
rities specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Ac-
count as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Op-
tion described in this Article in order to liquidate its posi-
tion as a writer of such Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is
a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d)
the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h)
the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from
the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and con-
ditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a Certifi-
cate. The deposits to and/or withdrawals from the Margin Ac-
count, if any, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Ar-
ticle shall be subject to Article VI hereof.
10. Notwithstanding any other provision in this
Agreement to the contrary, the Custodian shall deliver cash
and Securities to a future commission merchant upon receipt of
a Certificate from the Fund or the Administrator specifying:
(a) the name of the future commission merchant; (b) the
specific cash and Securities to be delivered; (c) the date of
such delivery; and (d) the date of the agreement between the
Fund and such future commission merchant entered pursuant to
Rule 17f-6 under the Investment Company Act 1940, as amended.
Each delivery of such a Certificate by the Fund shall
constitute (x) a representation and warranty by the Fund that
the Rule 17f-6 agreement has been duly authorized, executed
and delivered by the Fund and the future commission merchant
and complies with Rule 17f-6, and (y) an agreement by the Fund
that the Custodian shall not be liable for the acts or
omissions of any such future commission merchant.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the
issuer and the title of the Security; (c) the number of shares
or principal amount sold, and accrued interest or dividends,
if any; (d) the dates of the sale and settlement; (e) the sale
price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has
been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker
through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee
of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior Secu-
rity Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or the princi-
pal amount, and accrued interest or dividends, if any, re-
quired to effect such closing-out to be delivered to the bro-
ker; (d) the dates of closing-out and settlement; (e) the pur-
chase price per unit; (f) the net total amount payable to the
Fund upon such closing-out; (g) the net total amount payable
to the broker upon such closing-out; (h) the amount of cash
and the amount and kind of Securities to be withdrawn, if any,
from the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Cus-
todian shall, upon receipt of the net total amount payable to
the Fund upon such closing-out, and the return and/or cancel-
lation of the receipts, if any, issued by the Custodian with
respect to the short sale being closed-out, pay out of the
money held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals
from the Margin Account and the Senior Security Account, as
the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver or cause the Ad-
ministrator to deliver to the Custodian a Certificate, or in
the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions specifying: (a)
the Series for which the Reverse Repurchase Agreement is en-
tered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically al-
located to such Series; (c) the broker or dealer through or
with whom the Reverse Repurchase Agreement is entered; (d) the
amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such
Series to be deposited in a Senior Security Account for such
Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable
to the Fund specified in the Certificate or Oral Instructions
make the delivery to the broker or dealer, and the deposits,
if any, to the Senior Security Account, specified in such Cer-
tificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall deliver or cause the Administrator to deliver a
Certificate or, in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate or Oral Instructions
to the Custodian specifying: (a) the Reverse Repurchase
Agreement being terminated and the Series for which same was
entered; (b) the total amount payable by the Fund in
connection with such termination; (c) the amount and kind of
Securities to be received by the Fund and specifically
allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or
dealer with or through whom the Reverse Repurchase Agreement
is to be terminated; and (f) the amount of cash and/or the
amount and kind of Securities to be withdrawn from the Senior
Securities Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate or Oral Instructions,
make the payment to the broker or dealer, and the withdrawals,
if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian here-
under, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each such loan: (a) the Series to which the loaned Securi-
ties are specifically allocated; (b) the name of the issuer
and the title of the Securities, (c) the number of shares or
the principal amount loaned, (d) the date of loan and deliv-
ery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of
cash collateral and the premium, if any, separately identi-
fied, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer
or financial institution to which the loan was made upon re-
ceipt of the total amount designated as to be delivered
against the loan of Securities. The Custodian may accept pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certi-
fied or bank cashier's check payable to the order of the Fund
or the Custodian drawn on New York Clearing House funds and
may deliver Securities in accordance with the customs prevail-
ing among dealers in securities.
2. Promptly after each termination of the loan of Secu-
rities by the Fund, the Fund shall deliver or cause the Admin-
istrator to deliver to the Custodian a Certificate specifying
with respect to each such loan termination and return of Secu-
rities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Cus-
todian (including the cash collateral for such Securities mi-
nus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institu-
tion from which the Securities will be returned. The Custo-
dian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the money
held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certifi-
cate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Se-
curity Account for such Series. In the event the Certificate
fails to specify the Series, the name of the issuer, the title
and the number of shares or the principal amount of any par-
ticular Securities to be deposited by the Custodian into, or
withdrawn from, a Senior Securities Account, the Custodian
shall be under no obligation to make any such deposit or with-
drawal and shall so notify the Administrator.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose ben-
efit, the account was established as specified in the Margin
Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Mar-
gin Account shall be dealt with in accordance with the terms
and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and secu-
rity interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In ac-
cordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option guar-
antee letter or similar document or any receipt issued hereun-
der by the Custodian. In the event the Custodian should real-
ize on any such property net proceeds which are less than the
Custodian's obligations under any Put Option guarantee letter
or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Ar-
ticle XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custo-
dian shall make available upon request to any broker, dealer,
or futures commission merchant specified in the name of a Mar-
gin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. Promptly after the close of business on each busi-
ness day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Administrator with a statement with respect to such Col-
lateral Account specifying the amount of cash and/or the
amount and kind of Securities held therein. No later than the
close of business next succeeding the delivery to the Fund of
such statement, the Fund shall deliver or cause the Adminis-
trator to deliver to the Custodian a Certificate specifying
the then market value of the Securities described in such
statement. In the event such then market value is indicated
to be less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document,
the Fund shall promptly specify or cause the Administrator to
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to
deliver to the Custodian a copy of the resolution of the Board
of Trustees of the Fund, certified by the Secretary, the
Clerk, any Assistant Secretary or any Assistant Clerk, either
(i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which share-
holders entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders of record
as of that date and the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund on the payment date, or (ii) authorizing with respect to
the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian
to rely on Oral Instructions or a Certificate setting forth
the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the
amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions or Certificate, as the case may be, the Cus-
todian shall pay out of the money held for the account of each
Series the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver or cause the Administrator to deliver to the Custodian
a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Cus-
todian for the sale of such Shares and specifically allocated
to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described
in the foregoing provisions of this Article, the Custodian
shall pay, out of the money held for the account of such Se-
ries, all original issue or other taxes required to be paid by
the Fund in connection with such issuance upon the receipt of
a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the money held in the separate account
in the name of the Series the total amount specified in the
Certificate delivered pursuant to the foregoing paragraph 4 of
this Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time
to time be offered by the Fund, the Custodian, unless other-
wise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the re-
demption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part
of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being re-
deemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion ad-
vance funds on behalf of any Series which results in an over-
draft because the money held by the Custodian in the separate
account for such Series shall be insufficient to pay the total
amount payable upon a purchase of Securities specifically al-
located to such Series, as set forth in a Certificate or Oral
Instructions, or which results in an overdraft in the separate
account of such Series for some other reason, or if the Fund
is for any other reason indebted to the Custodian with respect
to a Series, including any indebtedness to The Bank of New
York under the Fund's Cash Management and Related Services
Agreement, (except a borrowing for investment or for temporary
or emergency purposes using Securities as collateral pursuant
to a separate agreement and subject to the provisions of para-
graph 2 of this Article), such overdraft or indebtedness shall
be deemed to be a loan made by the Custodian to the Fund for
such Series payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time
to time, such rate to be adjusted on the effective date of any
change in such prime commercial lending rate but in no event
to be less than 6% per annum, or at such other rate per annum,
if any, as the Fund and the Custodian may agree upon in
writing from time to time. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien and
security interest in and to any property specifically al-
located to such Series at any time held by it for the benefit
of such Series or in which the Fund may have an interest which
is then in the Custodian's possession or control or in posses-
sion or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole dis-
cretion, at any time to charge any such overdraft or indebted-
ness together with interest due thereon against any balance of
account standing to such Series' credit on the Custodian's
books. In addition, the Fund hereby covenants that on each
Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third
party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repur-
chase Agreement or such a borrowing, it shall prior to 9 a.m.,
New York City time, advise the Custodian, in writing, of each
such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified
other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Custo-
dian a Certificate specifying with respect to each such bor-
rowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment pur-
poses or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against de-
livery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such Se-
curities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities re-
leased from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in a Certificate the Se-
ries, the name of the issuer, the title and number of shares
or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the
Custodian to the Administrator in order for the Administrator
to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to the Administrator a personal,
nontransferable and nonexclusive license to use the Software
solely for the purpose of transmitting Instructions on behalf
of the Fund to, and receiving communications from, the
Custodian in connection with its account(s). The
Administrator agrees not to sell, reproduce, lease or
otherwise provide, directly or indirectly, the Software or any
portion thereof to any third party without the prior written
consent of the Custodian.
2. The Administrator shall obtain and maintain at its
own cost and expense all equipment and services, including but
not limited to communications services, necessary for it to
utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the
reliability, compatibility with the Software or availability
of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Administrator acknowledges for itself and the
Fund that the Software, all data bases made available to the
Administrator by utilizing the Software (other than data bases
relating solely to the assets of the Fund and transactions
with respect thereto), and any proprietary data, processes,
information and documentation (other than which are or become
part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"),
are the exclusive and confidential property of the Custodian.
The Administrator shall keep the Information confidential by
using the same care and discretion that the Administrator uses
with respect to its own confidential property and trade
secrets and shall neither make nor permit any disclosure
without the prior written consent of the Custodian. Upon
termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the
Custodian all copies of the Information which are in its
possession or under its control or which the Fund distributed
to third parties.
4. The Custodian reserves the right to modify the
Software from time to time upon reasonable prior notice and
the Administrator shall install new releases of the Software
as the Custodian may direct. The Administrator agrees not to
modify or attempt to modify the Software without the
Custodian's prior written consent. The Administrator
acknowledges that any modifications to the Software, whether
by the Administrator or the Custodian and whether with or
without the Custodian's consent, shall become the property of
the Custodian.
5. The Custodian makes no warranties or representations
of any kind with regard to the Software or the method(s) by
which the Administrator may transmit Instructions to the
Custodian, express or implied, including but not limited to
any implied warranties or merchantability or fitness for a
particular purpose.
6. Where the method for transmitting Instructions by
the Administrator on behalf of the Fund involves an automatic
systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the
Custodian shall not be liable for any failure to act pursuant
to such Instructions, neither the Administrator nor the Fund
may claim that such Instructions were received by the
Custodian, and the Administrator or the Fund shall deliver a
Certificate by some other means.
7. (a) The Administrator and the Fund agree that where
the Administrator delivers to the Custodian Instructions
hereunder, it shall be the Administrator's sole responsibility
to ensure that only persons duly authorized by the
Administrator transmit such Instructions to the Custodian.
The Administrator will cause all persons transmitting
Instructions to the Custodian to treat applicable user and
authorization codes, passwords and authentication keys with
extreme care, and irrevocably authorizes the Custodian to act
in accordance with and rely upon Instructions received by it
pursuant hereto.
(b) The Administrator hereby represents,
acknowledges and agrees that it is fully informed of the
protections and risks associated with the various methods of
transmitting Instructions to the Custodian and that there may
be more secure methods of transmitting instructions to the
Custodian than the method(s) selected by the Administrator on
behalf of the Fund. The Fund hereby agree that the security
procedures (if any) to be followed in connection with the
Fund's transmission of Instructions provide a commercially
reasonable degree of protection in light of its particular
needs and circumstances.
8. The Administrator and the Fund hereby represent,
warrant and covenant to the Custodian that this Agreement has
been duly approved by a resolution of the Fund's Board of
Directors Trustees, and that its transmission of Instructions
pursuant hereto shall at all times comply with the Investment
Company Act of 1940, as amended.
9. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
its ability to send Instructions as promptly as practicable,
and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care
and (iii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being
agreed that discovery and receipt of notice may only occur on
a business day. The Custodian shall promptly advise the
Administrator whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of,
the Fund's ability to send Instructions.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to
employ, as sub-custodian for each Series' Foreign Securities
(as such term is defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, as amended) and
other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on
Schedule I hereto ("Foreign Sub-Custodians") to carry out
their respective responsibilities in accordance with the terms
of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been
previously delivered to the Fund and receipt of which is
hereby acknowledged (each such agreement, a "Foreign Sub-
Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution substantially in the form
attached as Exhibit E of the Fund's Board of Trustees, the
Fund may designate any additional foreign sub-custodian with
which the Custodian has an agreement for such entity to act as
the Custodian's agent, as its sub-custodian and any such
additional foreign sub-custodian shall be deemed added to
Schedule I. Upon receipt of a Certificate from the Fund, the
Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's
assets and such Foreign Sub-Custodian shall be deemed deleted
from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as
belonging to each Series of the Fund the Foreign Securities of
such Series held by each Foreign Sub-Custodian. At the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims by the
Fund or any Series against a Foreign Sub-Custodian as a
consequence of any loss, damage, cost, expense, liability or
claim sustained or incurred by the Fund or any Series if and
to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or
claim.
4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-
Custodian Agreement, use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as
such books and records relate to the performance of such
Foreign Sub-Custodian under its agreement with the Custodian
on behalf of the Fund.
5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign
Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or
notifications of any transfers of Foreign Securities to or
from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall
be similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial
services required, and (ii) whether the Foreign Sub-Custodians
would provide a level of safeguards for safekeeping and
custody of securities not materially different form those
prevailing in the United States. The Custodian shall monitor
the general operating performance of each Foreign Sub-
Custodian. The Custodian agrees that it will use reasonable
care in monitoring compliance by each Foreign Sub-Custodian
with the terms of the relevant Foreign Sub-Custodian Agreement
and that if it learns of any breach of such Foreign Sub-
Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will
promptly notify the Fund of such breach. The Custodian also
agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund
all notices, reports or other written information received
pertaining to the Fund's Foreign Securities, including without
limitation, notices of corporate action, proxies and proxy
solicitation materials.
8. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for securities received
for the account of any Series and delivery of securities
maintained for the account of such Series may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities
from such purchaser or dealer.
9. Notwithstanding any other provision in this
Agreement to the contrary, with respect to any losses or
damages arising out of or relating to any actions or omissions
of any Foreign Sub-Custodian the sole responsibility and
liability of the Custodian shall be to take appropriate action
at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed
that the Custodian's sole responsibility and liability shall
be limited to amounts so recovered from the Foreign Sub-
Custodian.
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX
Transaction, the Fund shall promptly deliver or cause the
Administrator to deliver to the Custodian a Certificate or
Oral Instructions specifying with respect to such FX
Transaction: (c) the Series to which such FX Transaction is
specifically allocated; (b) the type and amount of Currency to
be purchased by the Fund; (c) the type and amount of Currency
to be sold by the Fund; (d) the date on which the Currency to
be purchased is to be delivered; (e) the date on which the
Currency to be sold is to be delivered; and (f) the name of
the person from whom or through whom such currencies are to be
purchased and sold. Unless otherwise instructed by a
Certificate or Oral Instructions, the Custodian shall deliver,
or shall instruct a Foreign Sub-Custodian to deliver, the
Currency to be sold on the date on which such delivery is to
be made, as set forth in the Certificate, and shall receive,
or instruct a Foreign Sub-Custodian to receive, the Currency
to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on
the same day as the Currency to be purchased, as specified in
the Certificate or Oral Instructions, the Custodian or a
Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and
such receipt and delivery may not be completed simultaneously.
The Fund assumes all responsibility and liability for all
credit risks involved in connection with such receipts and
deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been
received in full.
3. Any FX Transaction effected by the Custodian in
connection with this Agreement may be entered with the
Custodian, any office, branch or subsidiary of The Bank of New
York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels.
The Fund may issue a standing Certificate with respect to FX
Transaction but the Custodian may establish rules or
limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of
investing in Securities or holding Currency. Without limiting
the foregoing, the Fund shall bear the risks that rules or
procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws,
rules, regulations or orders shall prohibit or impose burdens
or costs on the transfer to, by or for the account of the Fund
of Securities or any cash held outside the Fund's jurisdiction
or denominated in Currency other than its home jurisdiction or
the conversion of cash from one Currency into another
currency. The Custodian shall not be obligated to substitute
another Currency for a Currency (including a Currency that is
a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been
affected by such law, regulation, rule or procedure. Neither
the Custodian nor any Foreign Sub-Custodian shall be liable to
the Fund for any loss resulting from any of the foregoing
events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI neither the Custodian nor its nominee shall be
liable for any loss or damage, including reasonable counsel
fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of
its own negligence or willful misconduct. The Custodian
agrees to indemnify and hold harmless the Trust and Trust's
Trustees and officers to the extent described below against
any loss as a result of any breach or violation of this
Agreement by the Custodian or its officers, employees and
agents or its nominees, resulting from their negligence or
willful misconduct. The Custodian may, with respect to ques-
tions of law arising hereunder or under any Margin Account
Agreement, apply for and obtain the advice and opinion of
counsel to the Fund or of its own counsel, at the expense of
the Fund, and shall be fully protected with respect to any-
thing done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any
negligence or willful misconduct on the part of the Custodian
or any of its employees or agents. Notwithstanding the
foregoing, or any other provision contained in this Agreement,
in no event shall the Custodian be liable to the Trust, its
Trustees or officers, or any third party, for special,
indirect or consequential damages, or lost profits or loss of
business, arising under or in connection with this Agreement,
even if previously informed of the possibility of such damages
and regardless of the form of action.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into,
and shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality
of the purchase, sale or writing thereof, or the propriety of
the amount paid or received therefor;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;
(c) The legality of the declaration or payment of
any dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that any cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan. The Custodian spe-
cifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
Article XIV of this Agreement makes payment to it of any divi-
dends or interest which are payable to or for the account of
the Fund during the period of such loan or at the termination
of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment
to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see
that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the
amount the Fund is entitled to receive, or to notify the Fund
of the Custodian's receipt or non-receipt of any such pay-
ment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the Custo-
dian actually receives and collects such money directly or by
the final crediting of the account representing the Fund's
interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls, con-
versions, exchange offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely no-
tice from the Depository. In no event shall the Custodian
have any responsibility or liability for the failure of the
Depository to collect, or for the late collection or late
crediting by the Depository of any amount payable upon Securi-
ties deposited in the Depository which may mature or be re-
deemed, retired, called or otherwise become payable. However,
upon receipt of a Certificate from the Fund of an overdue
amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the
Fund, except that the Custodian shall not be under any obliga-
tion to appear in, prosecute or defend any action suit or pro-
ceeding in respect to any Securities held by the Depository
which in its opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the Trans-
fer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action
by a Certificate and (ii) it shall be assured to its satisfac-
tion of reimbursement of its costs and expenses in connection
with any such action.
7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking institu-
tions located in foreign countries, of Securities and money at
any time owned by the Fund, upon such terms and conditions as
may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed
institution.
8. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time de-
livered to, or held by it or by any Foreign Sub-Custodian, for
the account of the Fund and specifically allocated to a Series
are such as properly may be held by the Fund or such Series
under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly
be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all out-of-pocket expenses
and such compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Fund represents that
the Administrator has agreed to pay such compensation and ex-
penses promptly upon receipt of statements therefor, and
hereby directs the Custodian to (i) send all statements for
compensation to its attention care of FPS at the following
address: FPS Services, Inc., 3200 Horizon Drive, King of
Prussia, PA 19406-0903, Attention: Mr. Elmer Gardner, Senior
Vice President, and (ii) accept all payments made by Fund/Plan
in the Fund's name as if such payments were made directly by
the Fund. The Fund shall pay to FPS fees for services
(including custodian services provided by the Custodian) in
accordance with the Administration Agreement. The Custodian's
compensation for services rendered hereunder is set forth in a
separate agreement between the Custodian and Fund/Plan.
Should Fund/Plan fail to pay or remit such compensation to the
Custodian within 20 days of the date the same is due and pay-
able, Custodian shall notify the Fund. If such payment or
remittance is not received from FPS within 15 days of such
notice, then the Custodian will be entitled to debit the
Custody Account directly for such compensation. The Custodian
may charge compensation with respect to which it has properly
sent a notice to the Fund, as provided in the preceding sen-
tence, and any expenses with respect to a Series incurred by
the Custodian in the performance of its duties pursuant to
such agreement against any money specifically allocated to
such Series. Unless and until the Fund or the Administrator
instructs the Custodian by a Certificate to apportion any
loss, damage, liability or expense among the Series in a
specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Se-
ries such Series' pro rata share (based on such Series net
asset value at the time of the charge to the aggregate net
asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the pro-
visions of this Agreement. The expenses for which the Custo-
dian shall be entitled to reimbursement hereunder shall in-
clude, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase
and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian. The
Fund agrees to forward or cause the Administrator to forward
to the Custodian a Certificate or facsimile thereof confirming
such Oral Instructions in such manner so that such Certificate
or facsimile thereof is received by the Custodian, whether by
hand delivery, telecopier or other similar device, or other-
wise, by the close of business of the same day that such Oral
Instructions are given to the Custodian. The Fund agrees that
the fact that such confirming instructions are not received by
the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby au-
thorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral In-
structions given to the Custodian hereunder concerning such
transactions provided such instructions reasonably appear to
have been received from an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other no-
tice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission mer-
chant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property
of the Fund. Such books and records shall be prepared and
maintained as required by the Investment Company Act of 1940,
as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representa-
tives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable re-
quest of the Fund, copies of any such books and records shall
be provided by the Custodian to the Fund or the Fund's autho-
rized representative, and the Fund shall reimburse the Custo-
dian its expenses of providing such copies. Upon reasonable
request of the Fund, the Custodian shall provide in hard copy
or on micro-film, whichever the Custodian elects, any records
included in any such delivery which are maintained by the Cus-
todian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees, how-
soever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII
as part of any check redemption privilege program of the Fund,
except for any such liability, claim, loss and demand arising
out of the Custodian's own negligence or willful misconduct.
For any legal proceeding giving rise to the indemnification
set forth above in this paragraph, the Fund shall be entitled
to defend or prosecute any claim in the name of the Custodian
at its own expense and through counsel of its own choosing
reasonably acceptable to the Custodian if it gives written
notice to the Custodian within ten (10) Business days of re-
ceiving notice of such claim. Notwithstanding the foregoing,
the Custodian may participate in the litigation at its own
expense and with counsel of its own choosing.
15. Subject to the foregoing provisions of this Agree-
ment, including, without limitation, those contained in Ar-
ticle XVI the Custodian may deliver and receive Securities,
and receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in ac-
cordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is
instructed to deliver Securities against payment, delivery of
such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility
and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to Certifi-
cates or instructions of the Fund or the Administrator which
responsibility and liability shall continue until final pay-
ment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Fund
that the Fund is no longer utilizing the services of the Ad-
ministrator, then the Custodian shall furnish or give to the
Fund the statements or notices described above as to be fur-
nished or given to the Administrator.
17. The Custodian shall have no duties or responsibili-
ties whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Cus-
todian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason
of any terms or provisions in the Administration Agreement,
and if such Administration Agreement shall cease to be in ef-
fect the Custodian shall have no additional duties hereunder.
ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not
less than ninety (90) days after the date of giving of such
notice, provided, however, that if such notice is sent by the
Fund and recites that it is being given contemporaneously with
a termination of the Custody Administration any Agency
Agreement with FPS, such notice may specify any date of
termination selected by the Fund. In the event such notice is
given by the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Fund, certified by
the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which
shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits.
In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Cus-
todian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor cus-
todian or custodians. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian
which shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits.
Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and money
then owned by the Fund and held by it as Custodian, after de-
ducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding para-
graph, the Fund shall upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
money then owned by the Fund be deemed to be its own custodian
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the
duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present Of-
ficers. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present
Officer ceases to be an Officer or in the event that other or
additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Officers
as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, autho-
rized or required by this Agreement to be given to the Custo-
dian, shall be sufficiently given if addressed to the Custo-
dian and mailed or delivered to it at its offices at 90 Wash-
ington Street, New York, New York 10286, or at such other
place as the Custodian may from time to time designate in
writing.
3. Any notice or other instrument in writing, autho-
rized or required by this Agreement to be given to the Fund
shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing, and any notice or
other instrument in writing authorized or required to be given
to the Administrator shall be sufficiently given if addressed
to the Administrator at such address as the Administrator may
from time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the Cus-
todian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Board of Trustees.
6. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby con-
sents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute
arising hereunder and hereby waives its right to trial by
jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
SPIRIT OF AMERICA
INVESTMENT FUND, INC.
[SEAL] By:/s/ David Lerner
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________<PAGE>
APPENDIX A
I, David Lerner, President and I, of SPIRIT OF
AMERICA INVESTMENT FUND, INC., a Maryland corporation (the
"Fund"), do hereby certify that:
The following individuals including officers and employ-
ees of the Administrator have been duly authorized by the
Board of Trustees of the Fund in conformity with the Fund's
Declaration of Trust and By-Laws to give Certificates or Oral
Instructions on behalf of the Fund, and the signatures set
forth opposite their respective names are their true and cor-
rect signatures:
Name Signature
_David Lerner /s/ David Lerner
<PAGE>
APPENDIX B
PORTFOLIO
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF
NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, David Lerner , hereby certifies
that he or she is the duly elected and acting
President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a
Maryland corporation (the "Fund"), and further certifies that
the following resolution was adopted by the Board of Trustees
of the Fund at a meeting duly held on July 9,
1997, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1997,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to deposit in the Book-
Entry System, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated,
and to utilize the Book-Entry System to the extent pos-
sible in connection with its performance thereunder, in-
cluding, without limitation, in connection with settle-
ments of purchases and sales of securities, loans of se-
curities, and deliveries and returns of securities col-
lateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the
day of , 1997.
[SEAL]<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, David Lerner , hereby certifies
that he or she is the duly elected and acting
President of SPIRIT OF AMERICA INVESTMENT FUND, INC.,
a Maryland corporation (the "Fund"), and further certifies
that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on
July 9, 1997, at which a quorum was at all times
present and that such resolution has not been modified or re-
scinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 199 ,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Depository, as
defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and re-
turns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the
day of , 1997.
[SEAL]<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, David Lerner , hereby certifies
that he or she is the duly elected and acting
President of SPIRIT OF AMERICA INVESTMENT FUND,
INC., a Maryland corporation (the "Fund"), and further
certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on
July 9, 1997, at which a quorum was at all times
present and that such resolution has not been modified or re-
scinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 199 ,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Participants
Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifi-
cally allocated, and to utilize the Participants Trust
Company to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and re-
turns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the
day of , 199 .
[SEAL]<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, David Lerner , hereby
certifies that he or she is the duly elected and acting
President of SPIRIT OF AMERICA INVESTMENT FUND, INC.,
a Maryland corporation (the "Fund"), and further certifies
that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on
July 9, 1997, at which a quorum was at all
times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 199 ,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which
the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Cus-
tody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the
day of , 1997.
[SEAL]<PAGE>
EXHIBIT D
The undersigned, David Lerner , hereby
certifies that he or she is the duly elected and acting
President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a
Maryland corporation (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of
the Fund at a meeting duly held on July 9, 1997, at
which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to the Custody Agreement between The Bank of New
York and the Fund dated as of , 1997 (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with,
and to rely on Instructions (as defined in the Custody
Agreement).
RESOLVED, that the Fund shall establish access codes
and grant use of such access codes only to Officers of
the Fund as defined in the Custody Agreement, shall
establish internal safekeeping procedures to safeguard
and protect the confidentiality and availability of user
and access codes, passwords and authentication keys, and
shall use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as
amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the
day of , 1997.
[SEAL]<PAGE>
EXHIBIT E
The undersigned, David Lerner , hereby cer-
tifies that he or she is the duly elected and acting
President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a
Maryland corporation (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of
the Fund at a meeting duly held on July 9, 1997
at which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in
each country listed in Schedule I hereto be, and hereby is,
approved by the Board of Trustees as consistent with the best
interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with
the foreign branches of The Bank of New York (the "Bank")
listed in Schedule I located in the countries specified
therein, and with the foreign sub-custodians and depositories
listed in Schedule I located in the countries specified
therein be, and hereby is, approved by the Board of Directors
as consistent with the best interest of the Fund and its
shareholders; and further
RESOLVED, that the Sub-custodian Agreements presented to
this meeting between the Bank and each of the foreign
sub-custodians and depositories listed in Schedule I providing
for the maintenance of the Fund's assets with the applicable
entity, be and hereby are, approved by the Board of Trustees
as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the appropriate officers of the Fund are
hereby authorized to place assets of the Fund with the afore-
mentioned foreign branches and foreign sub-custodians and de-
positories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or
any of them, are authorized to do any and all other acts, in
the name of the Fund and on its behalf, as they, or any of
them, may determine to be necessary or desirable and proper in
connection with or in furtherance of the foregoing resolu-
tions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal
of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day
of , 1997.
[SEAL]
Investment Company Services Agreement
This Agreement, dated as of the 16th day of December, 1997, made by
and between Spirit of America Investment Fund, Inc. (the "Fund"), a
corporation operating as an open-end, management investment company
registered under the Investment Company Act of 1940, as amended
(the "Act"),duly organized and existing under the laws of the State of
Maryland and FPS Services, Inc. ("FPS"), a corporation duly organized
and existing under the laws of the State of Delaware (collectively, the
"Parties").
Witnesseth That:
Whereas, the Fund is authorized by its Articles of Incorporation
to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by
mutual agreement of the Fund and FPS; and
Whereas, the Parties desire to enter into an agreement whereby
FPS will provide the services to the Fund as specified herein and set
forth in particular in Schedule "A" which is attached hereto and made
a part hereof.
Now Therefore, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
General Provisions
Section 1. Appointment. The Fund hereby appoints FPS as its
servicing agent and FPS hereby accepts such appointment. In order
that FPS may perform its duties under the terms of this Agreement,
the Board of Directors of the Fund shall direct the officers,
investment adviser, legal counsel, independent accountants and
custodian of the Fund to cooperate fully with FPS and, upon request
of FPS, to provide such information, documents and advice relating to
the Fund which FPS requires to execute its responsibilities
hereunder. In connection with its duties, FPS shall be entitled to
rely, and will be held harmless by the Fund when acting in reasonable
reliance, upon any instruction, advice or document relating to the
Fund as provided to FPS by any of the aforementioned persons on
behalf of the Fund. All fees charged by any such persons acting on
behalf of the Fund will be deemed an expense of the Fund.
Any services performed by FPS under this Agreement will conform
to the requirements of:
(1) the provisions of the Act and the Securities Act of
1933, as amended, and any rules or regulations in
force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Fund's Articles of
Incorporation and the By-Laws as amended from time
to time and delivered to FPS;
(4) any policies and determinations of the Board of Directors
of the Fund which are communicated to FPS; and
(5) the policies of the Fund as reflected in the Fund's
registration statement as filed with the U.S.
Securities and Exchange Commission.
Nothing in this Agreement will prevent FPS or any officer
thereof from providing the same or comparable services for or with
any other person, firm or corporation. While the services supplied
to the Fund may be different than those supplied to other persons,
firms or corporations, FPS will provide the Fund equitable treatment
in supplying services. The Fund recognizes that it will not receive
preferential treatment from FPS as compared with the treatment
provided to other FPS clients.
Section 2. Duties and Obligations of FPS.
Subject to the provisions of this Agreement, FPS will
provide to the Fund the specific services as set forth in Schedule
"A" attached hereto.
Section 3. Definitions. For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement or
the custody agreement executed by the Fund ("Custody Agreement"). To
be effective, such Certificate shall be given to and received by the
custodian and shall be signed on behalf of the Fund by any two of its
designated officers. The term Certificate shall also include
instructions communicated to the custodian by FPS.
"Custodian" will refer to that agent which provides safekeeping
of the assets of the Fund.
"Instructions" will mean communications containing instructions
transmitted by electronic or telecommunications media including, but
not limited to, Industry Standardization for Institutional Trade
Communications ("I.S.I.T.C."), computer-to-computer interface,
dedicated transmission line, facsimile transmission (which may be
signed by an officer or unsigned) and tested telex.
"Oral Instruction" will mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted
to FPS in person or by telephone, telegram, telecopy or other
mechanical or documentary means lacking original signature, by a
person or persons reasonably identified to FPS to be a person or
persons so authorized by a resolution of the Board of Directors of
the Fund to give Oral Instructions to FPS on behalf of the Fund.
"Shareholders" will mean the registered owners of the shares of
the Fund in accordance with the share registry records maintained by
FPS for the Fund.
"Shares" will mean the issued and outstanding shares of the
Fund.
"Signature Guarantee" will mean the guarantee of signatures by
an "eligible guarantor institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be members of a clearing
corporation or maintain net capital of at least $100,000. Signature
guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
"Written Instruction" will mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted
to FPS in an original writing containing an original signature or a
copy of such document transmitted by telecopy including transmission
of such signature reasonably identified to FPS to be the signature of
a person or persons so authorized by a resolution of the Board of
Directors of the Fund, or so identified by the Fund to give Written
Instructions to FPS on behalf of the Fund.
Concerning Oral and Written Instructions For all
purposes under this Agreement, FPS is authorized to act
upon receipt of the first of any Written or Oral
Instruction it receives from the Fund or its agents. In
cases where the first instruction is an Oral Instruction
that is not in the form of a document or written record,
a confirmatory Written Instruction or Oral Instruction in
the form of a document or written record shall be
delivered. In cases where FPS receives an Instruction,
whether Written or Oral, to enter a portfolio transaction
onto the Fund's records, the Fund shall cause the
broker/dealer executing such transaction to send a
written confirmation to the Custodian.
FPS shall be entitled to rely on the first Instruction
received. For any act or omission undertaken by FPS in
compliance therewith, it shall be free of liability and
fully indemnified and held harmless by the Fund, provided
however, that in the event a Written or Oral Instruction
received by FPS is countermanded by a subsequent Written
or Oral Instruction received prior to acting upon such
countermanded Instruction, FPS shall act upon such
subsequent Written or Oral Instruction. The sole
obligation of FPS with respect to any follow-up or
confirmatory Written Instruction, Oral Instruction in
documentary or written form shall be to make reasonable
efforts to detect any such discrepancy between the
original Instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be
responsible and bear the expense of its taking any
action, including any reprocessing, necessary to correct
any discrepancy or error. To the extent such action
requires FPS to act, the Fund shall give FPS specific
Written Instruction as to the action required.
The Fund will file with FPS a certified copy of each resolution
of its Board of Directors authorizing execution of Written
Instructions or the transmittal of Oral Instructions as provided
above.
Section 4. Indemnification.
(a) FPS, its directors, officers, employees, shareholders, and
agents will be liable for any loss suffered by the Fund resulting
from the willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of FPS in the performance of its obligations
and duties under this Agreement.
(b) Any director, officer, employee, shareholder or agent of
FPS, who may be or become an officer, director, employee or agent of
the Fund, will be deemed, when rendering services to the Fund, or
acting on any business of the Fund (other than services or business
in connection with FPS' duties hereunder), to be rendering such
services to or acting solely for the Fund and not as a director,
officer, employee, shareholder or agent of, or under the control or
direction of FPS even though such person may be receiving
compensation from FPS.
(c) The Fund agrees to indemnify and hold FPS harmless,
together with its directors, officers, employees, shareholders and
agents from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of any and
every nature which FPS may sustain or incur or which may be asserted
against FPS by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by FPS except
claims, demands, expenses and liabilities arising from willful
misfeasance, bad faith, gross negligence or reckless disregard on the
part of FPS in the performance of its obligations and duties under
this Agreement; or
(ii) any action taken or omitted to be taken by FPS in
reliance upon any Certificate, instrument, order or stock certificate
or other document reasonably believed by FPS to be genuine and
signed, countersigned or executed by any duly authorized person, upon
the
Oral Instructions or Written Instructions of an authorized person of
the Fund, or upon the written opinion of legal counsel for the Fund
or FPS; or
(iii) the offer or sale of shares of the Fund to any
person, natural or otherwise, which is in violation of any state or
federal law.
If a claim is made against FPS as to which FPS may seek
indemnity under this Section, FPS will notify the Fund promptly after
receipt of any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and will
notify the Fund promptly of any action commenced against FPS within
ten (10) days after FPS has been served with a summons or other legal
process. Failure to notify the Fund will not, however, relieve the
Fund from any liability which it may have on account of the indemnity
under this Section so long as the Fund has not been prejudiced in any
material respect by such failure.
The Fund and FPS will cooperate in the control of the defense
of any action, suit or proceeding in which FPS is involved and for
which indemnity is being provided by the Fund to FPS. The Fund may
negotiate the settlement of any action, suit or proceeding subject to
FPS' approval, which will not be unreasonably withheld. FPS reserves
the right, but not the obligation, to participate in the defense or
settlement of a claim, action or proceeding with its own counsel.
Costs or expenses incurred by FPS in connection with, or as a result
of, such participation will be borne solely by the Fund if:
(i) FPS has received an opinion of counsel from counsel
to the Fund stating that the use of counsel to the Fund by FPS would
present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both FPS and the Fund, and legal counsel to FPS
has reasonably concluded that there are legal defenses available to
it which are different from or additional to those available to the
Fund or which may be adverse to or inconsistent with defenses
available to the Fund (in which case the Fund will not have the right
to direct the defense of such action on behalf of FPS); or
(iii) the Fund authorizes FPS to employ separate counsel
at the expense of the Fund.
(d) The terms of this Section will survive the termination of
this Agreement.
Section 5. Representations and Warranties.
(a) FPS represents and warrants that:
(i) it is a corporation duly organized and existing and
in good standing under the laws of Delaware;
(ii) it is empowered under applicable laws and by its
Certificate of Incorporation and By-Laws to enter into and perform
this Agreement;
(iii) all requisite corporate proceedings have been taken
to authorize FPS to enter into and perform this Agreement;
(iv) it has and will continue to have, access to the
facilities, personnel and equipment required to fully perform its
duties and obligations hereunder;
(v) no legal or administrative proceeding have been
instituted or threatened which would impair FPS's ability to perform
its duties and obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement
or obligation of FPS or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section
17A(c)(2) of the Exchange Act;
(viii) this Agreement has been duly authorized by FPS,
and when executed and delivered, will constitute valid, legal and
binding obligation of FPS, enforceable in accordance with its terms.
(b) The Fund represent and warrant that:
(i) it is a corporation duly organized and existing and
in good standing under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its
Certificate of Incorporation and By-Laws to enter into and perform
this Agreement;
(iii) all requisite proceedings have been taken to
authorize the Fund to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been
instituted or threatened which would impair the Fund's ability to
perform its duties and obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not
cause a material breach or be in material conflict with any other
agreement or obligations of the Fund, or any law or regulation
applicable to either;
(vi) the Shares are properly registered or otherwise
authorized for issuance and sale;
(vii) this Agreement has been duly authorized by the Fund
and, when executed and delivered, will constitute valid, legal and
binding obligation of the Fund, enforceable in accordance with its
terms.
(c) Delivery of Documents
The Fund will furnish or cause to be furnished to FPS the
following documents;
(i) current Prospectus and Statement of Additional
Information;
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered
investment companies on Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board
of Directors authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and those persons authorized to give
those Instructions.
(d) Record Keeping and Other Information
FPS will create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule "A" in
accordance with all applicable laws, rules and regulations, including
records required by Section 31(a) of the Act. All such records will
be the property of the Fund and will be available during regular
business hours for inspection, copying and use by the Fund. Where
applicable, such records will be maintained by FPS for the periods
and in the places required by Rule 31a-2 under the Act. Upon
termination of this Agreement, FPS will deliver all such records to
the Fund or such person as the Fund may designate.
In case of any request or demand for the inspection of
the Share records of the Fund, FPS shall notify the Fund and secure
instructions as to permitting or refusing such inspection. FPS may,
however, exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do
so.
Section 6. Compensation. The Fund agrees to pay FPS
compensation for its services, and to reimburse it for expenses, at
the rates, times, manner and amounts as set forth in Schedule "B"
attached hereto and incorporated herein by reference, and as will be
set forth in any amendments to such Schedule "B" agreed upon in
writing by the Parties. Upon receipt of an invoice therefor, FPS is
authorized to collect such fees by debiting the Fund's custody
account. In addition, the Fund agrees to reimburse FPS for any out-of-pocket
expenses paid by FPS on behalf of the Fund within ten (10)
calendar days of the Fund's receipt of an invoice therefor.
For the purpose of determining fees payable to FPS, the value
of the Fund's net assets will be computed at the times and in the
manner specified in the Fund's Prospectus and Statement of Additional
Information then in effect.
During the term of this Agreement, should the Fund seek
services or functions in addition to those outlined below or in
Schedule "A" attached hereto, a written amendment to this Agreement
specifying the additional services and corresponding compensation
will be executed by the Parties.
Section 7. Days of Operation. Nothing contained in this
Agreement is intended to or will require FPS, in any capacity
hereunder, to perform any functions or duties on any holiday, day of
special observance or any other day on which the New York Stock
Exchange ("NYSE") is closed. Functions or duties normally scheduled
to be performed on such days will be performed on, and as of, the
next succeeding business day on which the NYSE is open.
Notwithstanding the foregoing, FPS will compute the net asset value
of the Fund on each day required pursuant to Rule 22c-1 promulgated
under the Act.
Section 8. Acts of God, etc. FPS will not be liable or
responsible for delays or errors caused by acts of God or by reason
of circumstances beyond its control, including acts of civil or
military authority, national emergencies, labor difficulties,
mechanical breakdown, insurrection, war, riots, or failure or
unavailability of transportation, communication or power supply,
fire, flood or other catastrophe.
In the event of equipment failures beyond FPS' control, FPS
will, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but will have no liability with
respect thereto. The foregoing obligation will not extend to computer
terminals located outside of premises maintained by FPS. FPS has
entered into and maintains in effect agreements making reasonable
provision for emergency use of electronic data processing equipment
to the extent appropriate equipment is available.
Section 9. Inspection and Ownership of Records. In the event
that any request or demand for the inspection of the records of the
Fund, FPS will use its best efforts to notify the Fund and to secure
instructions as to permitting or refusing such inspection. FPS may,
however, make such records available for inspection to any person in
any case where it is advised in writing by its counsel that it may be
held liable for failure to do so after notice to the Fund.
FPS recognizes that the records it maintains for the Fund are
the property of the Fund and will be surrendered to the Fund upon
written notice to FPS as outlined under Section 10(c) below and the
payment in advance of any fees owed to FPS. FPS agrees to maintain
the records and all other information of the Fund in a confidential
manner and will not use such information for any purpose other than
the performance of FPS' duties under this Agreement.
Section 10. Duration and Termination.
(a) The initial term of this Agreement will be for the period
of three (3) years, commencing on the date hereinabove first written
(the "Effective Date") and will continue thereafter subject to
termination by either Party as set forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached
hereto will be fixed for two (2) years commencing on the Effective
Date of this Agreement and will continue thereafter subject to their
review and any adjustment.
(c) After the initial term of this Agreement, a Party may give
written notice to the other (the day on which the notice is received
by the Party against which the notice is made shall be the "Notice
Date") of a date on which this Agreement shall be terminated
("Termination Date"). The Termination Date shall be set on a day not
less than one hundred eighty (180) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is
hereby identified as the "Notice Period". Any time up to, but not
later than ninety (90) days prior to the Termination Date, the Fund
will pay to FPS such compensation as may be due as of the Termination
Date and will likewise reimburse FPS for any out-of-pocket expenses
and disbursements reasonably incurred or expected to by incurred by
FPS up to and including the Termination Date.
(d) In connection with the termination of this Agreement, if a
successor to any of FPS' duties or responsibilities under this
Agreement is designated by the Fund by written notice to FPS, FPS
will promptly, on the Termination Date and upon receipt by FPS of any
payments owed to it as set forth in Section 10(c) above, shall
transfer to the successor, at the Fund's expense, all records which
belong to the Fund and will provide appropriate, reasonable and
professional cooperation in transferring such records to the named
successor.
(e) Should the Fund desire to move any of the services
outlined in this Agreement to a successor service provider prior to
the Termination Date, FPS shall make a good faith effort to
facilitate the conversion on such prior date; however, there can be
no guarantee that FPS will be able to facilitate a conversion of
services prior to the end of the Notice Period. Should services be
converted to a successor service provider prior to the end of the
Notice Period, or if the Fund is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to FPS
shall be accelerated to a date prior to the conversion or termination
of services and calculated as if the services had remained at FPS
until the expiration of the Notice Period and calculated at the asset
levels on the Notice Date.
(f) Notwithstanding the foregoing, this Agreement may be
terminated at any time by either Party in the event of a material
breach by the other Party involving gross negligence, willful
misfeasance, bad faith or a reckless disregard of its obligations and
duties under this Agreement provided that such breach shall have
remained unremedied for sixty (60) days or more after receipt of
written specification thereof.
Section 11. Rights of Ownership. All computer programs and
procedures developed to perform services required to be provided by
FPS under this Agreement are the property of FPS. All records and
other data except such computer programs and procedures are the
exclusive property of the Fund and all such other records and data
will be furnished to the Fund in appropriate form as soon as
practicable after termination of this Agreement for any reason.
Section 12. Amendments to Documents. The Fund will furnish
FPS written copies of any amendments to, or changes in, the Fund's
Articles of Incorporation or By-Laws, and each Prospectus or
Statement of Additional Information in a reasonable time prior to
such amendments or changes becoming effective. In addition, the Fund
agrees that no amendments will be made to the Prospectus or Statement
of Additional Information of the Fund which might have the effect of
changing the procedures employed by FPS in providing the services
agreed to hereunder or which amendment might affect the duties of FPS
hereunder unless the Fund first obtains FPS' approval of such
amendments or changes.
Section 13. Confidentiality. Both Parties hereto agree that
any non-public information obtained hereunder concerning the other
Party is confidential and may not be disclosed to any other person
without the consent of the other Party, except as may be required by
applicable law or at the request of the U.S. Securities and Exchange
Commission or other governmental agency. FPS agrees that it will not
use any non-public information for any purpose other than performance
of its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this
Agreement. The Parties further agree that a breach of this Section
would irreparably damage the other Party and accordingly agree that
each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
Section 14. Notices. Except as otherwise provided in this
Agreement, any notice or other communication required by or permitted
to be given in connection with this Agreement will be in writing, and
will be delivered in person or sent by first class mail, postage
prepaid or by prepaid overnight delivery service to the respective
parties as follows:
If to the Fund: If to FPS:
Spirit of America Investment Fund, Inc. FPS Services, Inc.
477 Jericho Turnpike 3200 Horizon Drive
Syosset, NY 11791 King of Prussia, PA 19406
Attention: David Lerner Attention: Kenneth J. Kempf
President President
Section 15. Amendment. No provision of this Agreement may
be amended or modified in any manner except by a written agreement
properly authorized and executed by FPS and the Fund. This Agreement
may be amended from time to time by supplemental agreement executed
by the Fund and FPS and the compensation stated in Schedule "B"
attached hereto may be adjusted accordingly as mutually agreed upon.
Section 16. Authorization. The Parties represent and warrant
to each other that the execution and delivery of this Agreement by
the undersigned officer of each Party has been duly and validly
authorized; and when duly executed, this Agreement will constitute a
valid and legally binding enforceable obligation of each Party.
Section 17. Counterparts. This Agreement may be executed in
two or more counterparts, each of which when so executed will be
deemed to be an original, but such counterparts will together
constitute but one and the same instrument.
Section 18. Assignment. This Agreement will extend to and be
binding upon the Parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be
assignable by the Fund without the written consent of FPS or by FPS
without the written consent of the Fund which consent will be
authorized or approved by a resolution of its respective Boards of
Directors.
Section 19. Governing Law. This Agreement will be governed by
the laws of the State of Pennsylvania and the exclusive venue of any
action arising under this Agreement will be Montgomery County,
Commonwealth of Pennsylvania.
Section 20. Severability. If any part, term or provision of
this Agreement is held by any court to be illegal, in conflict with
any law or otherwise invalid, the remaining portion or portions will
be considered severable and not be affected and the rights and
obligations of the parties will be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid, provided that the basic Agreement is not
thereby materially impaired.
In Witness Whereof, the Parties hereto have caused this Agreement
consisting of twelve (12) typewritten pages, together with Schedules
"A," "B" and "C" to be signed by their duly authorized officers as of
the day and year first above written.
Spirit of America Investment Fund, Inc.
By: /s/ David Lerner
David Lerner, President<PAGE>
FPS Services, Inc.
By: /s/ Kenneth J. Kempf
Kenneth J. Kempf, President<PAGE>
<PAGE>
Schedule "A"
Services To Be Provided by FPS Services, Inc.
FPS Services, Inc. ("FPS") will (i) provide its own office space,
facilities, equipment and personnel for the performance of its duties
under this Agreement; and (ii) take all actions it deems necessary to
properly execute its responsibilities hereunder.
I. Services Related to Administration (Compliance and Financial Reporting)
Regulatory Compliance
A. Compliance - Investment Company Act of 1940, as
amended
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and shareholder services
contracts
2. Filings
a N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective
amendments and supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under 30(b)2-1
3. Annual up-dates of biographical and financial
information through questionnaires for Directors
and Officers
B. Compliance - Other
1. applicable stock exchange rules
2. applicable state tax laws
Corporate Business and Shareholder/Public Information
A. Directors/Management
1. Preparation of Directors' meetings
a. agendas - all necessary items of
compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information (as directed by
management)
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital
gains)
b. tax information
c. changes to prospectus
d. letters from management
e. fund performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
E. Communications to Shareholders
1. Coordinate printing and distribution of annual,
semi-annual reports,
and prospectus
Financial and Management Reporting
A. Income and Expenses
1. Monitoring of expense accruals, expense payments
and expense caps
2. Approve and coordinate payment of expenses
3. Establish Fund's operating expense checking
account and perform monthly reconciliation of
checking account
4. Calculation of advisory fee, 12b-1 fee and
reimbursements to Fund (if applicable)
6. Authorize the recording and amortization of
organizational costs and pre-paid expenses
(supplied by Adviser) for start-up funds and
reorganizations
7. Calculation of average net assets
8. Calculation of expense ratios
B. Distributions to Shareholders
1. Calculations of dividends and capital gain
distributions (in conjunction with the Fund and
its auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of
1940, as amended
3. Book/Tax identification and adjustments at
required distribution periods (in conjunction
with the Fund and its auditors)
C. Financial Reporting
1. Liaison between Fund management, independent
auditors and printers for semi-annual and annual
shareholder reports
2. Preparation of semi-annual and annual reports to
shareholders
3. Preparation of semi-annual and annual N-SAR's
(Financial Data)
4. Preparation of Financial Statements for required
SEC Post-Effective
Amendments (if applicable)
5. Preparation of required performance graph
(annually)(based on . . . Adviser supplied indicies)
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analyses
1. Upon request from Fund management, other
budgeting and analyses can be constructed to
meet the Fund's specific needs (additional fees
may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on return
of capital presentation and excise tax
calculation
4. Monthly performance calculation (total return)
5. 1099 Miscellaneous - prepared and filed for
Directors (annual)
6. Annual analysis of interest derived from various
Government obligations and prepare detail
schedule showing same
7. Review and characterize 1099-DIV forms
8. Prepare and coordinate with printer the printing
and mailing of 1099-Dividend insert cards.
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to
ensure proper update
2. Perform various reviews to ensure accuracy of
Accounting (the monthly expense analysis) and
Custody (review of daily bank statements to
ensure accurate expense money movements for
expense payments)
3. Review accruals and expenditures (where
applicable)
G. Preparation and distribution of monthly operational
reports to management by 10th business day
1. Management Statistics (Recap)
a.portfolio summary
b.book gains/losses/per share
c.net income, book income/per share
d.capital stock activity
e. .distributions
2. Performance Analysis
a.total return
b.monthly, quarterly, year to date, average annual returns
3. Expense Analysis
a. . .schedule
b. summary of due to/from Adviser
c. .expenses paid
d. expense cap
e.accrual monitoring
f.advisory fee
4. Short-Short Analysis
a.short-short income
b. . . . . .gross income (components)
5. Portfolio Turnover
a.market value
b.cost of purchases
c.net proceeds of sales
d. average market value
6. Asset Diversification Test
a.gross assets
b.non-qualifying assets
7. Activity Summary
a.shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
I. Standard schedules for Board Package (Quarterly)
1. Activity Summary (III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided (additional fees
may apply)
Blue Sky Administration
A. Sales Data
1. Receive daily sales figures through SUNGARD
interface with Price Waterhouse Blue 2 System
2. Receive daily sales figures broken down by state
from Charles Schwab (if applicable)
3. Produce daily warning report for sales in excess
of pre-determined percentage
4. Analysis of all sales data to determine trends
within certain states
B. Filings
1. Produce and mail the following required filings:
a. Initial filings - produce all required forms and
follow-up on any comments, including
notification of SEC effectiveness
b. Renewals - produce all renewal documents and
mail to states, including follow-up to ensure
all is in order to continue selling in states
c. Sales Reports - produce all relevant sales
reports for the states and complete necessary
documents to properly file sales reports with
states
d. Annual Report Filings - file copies of all
annual reports with states
e. Prospectus filings - file all copies of
definitive Prospectus and Statement of
Additional Information with the states
f. Post-Effective Amendment filing - file all Post-Effective
Amendments with the states as well as
with other required documents
2. On demand additional states - complete filing for any
additional states requested for filing. This
includes all of the items in 1(A).
3. Amendments to current permits - file in a timely
manner any amendment to registered share amounts
4. Update and file hard copy of all data pertaining to
individual permits
C. Consulting and Analysis - We will supply you with the
most current fee structure for each state and ascertain
procedures to minimize Blue Sky State Registration
expenditures
II. Services Related to Portfolio Valuation and Mutual Fund Accounting
All financial data provided to, processed and reported by FPS
under this Agreement shall be stated in U. S. dollars. FPS'
obligation to convert, equate or deal in foreign currencies or
values extends only to the accurate transposition of
information received from the various pricing and information
services.
A. Daily Accounting Services
1. Calculate Net Asset Value ("NAV") and Offering Price Per
Share ("POP"):
Fund Level
Update the daily market value of securities held by
the Fund using FPS' standard agents for pricing U.S.
equity and bond securities. The U.S. equity pricing
services are Reuters, Inc., Muller Data Corporation,
J.J. Kenny Co., Inc. and Interactive Data Corporation
(IDC). Muller Data, Dow Jones Markets (formerly
Telerate Systems, Inc.), J.J. Kenny Co., Inc.,
Municipal Market Data and IDC are also used for bond
and money market prices/yields. Bloomberg is
available and used for price research.
Enter limited number of manual prices supplied by
Spirit of America Management Corp. (the "Adviser")
and/or broker.
Review variance reporting on-line and in hard copy
for price changes in individual securities using
variance levels established by the Adviser. Verify
U.S. dollar security prices exceeding variance levels
by notifying the Adviser and pricing sources of noted
variances.
Review for ex-dividend items indicated by pricing
sources; trace to Fund's general ledger for
agreement.
Fund and Each Class
Allocate daily unrealized Fund
appreciation/depreciation to classes based upon value
of outstanding class shares.
Prepare NAV proof sheets. Review components of
change in NAV for reasonableness. Complete Fund and
class control proofs.
Communicate pricing information (NAV/Offering Price)
to Adviser, the Fund's transfer agent ("Transfer
Agent") and, electronically, to NASDAQ.
2. Determine and Report Cash Availability to Adviser by
approximately 9:30 a.m. Eastern Time:
Fund Level
Receive daily cash and transaction statements from
the agent responsible for the safekeeping of the
Fund's assets (the "Custodian") by 8:30 a.m. Eastern
time.
Receive previous day shareholder activity reports
from the Transfer Agent 8:30 a.m. Eastern time.
Class level shareholder activity will be accumulated
into the Fund's available cash balances.
Fax hard copy of Cash Availability calculations with
all details to Adviser.
Supply Adviser with 3-day cash projection report.
For the Fund, prepare daily bank cash
reconciliations. Notify the Custodian and Adviser of
any reconciling items.
3. Reconcile and Record All Daily Expense Accruals:
Fund Level
Accrue expenses based on budget supplied by the
Adviser either as percentage of net assets or
specific dollar amounts.
If applicable, monitor expense limitations
established by the Adviser.
If applicable, accrue daily amortization of
organizational expense.
If applicable, complete daily accrual of 12b-1
expenses.
Fund and Each Class
Class specific accruals completed such as daily
accrual of 12b-1 expenses.
Allocate Fund expenses to classes based upon value of
outstanding class shares.
4. Verify and Record All Daily Income Accruals for Debt
Issues:
Fund Level
Review and verify all system generated interest and
amortization reports. . . . . . . . . . . .
Establish unique security codes for bond issues to
permit segregated trial balance income reporting.
Fund and Each Class
Allocate Fund income to classes based upon value of
outstanding class shares.
5. Monitor Securities held for cash dividends, corporate
actions and capital changes such as splits, mergers,
spinoffs, etc. and process appropriately.
Fund Level
Monitor electronically received information from
Muller Data Corporation for all domestic securities.
Review current daily security trades for dividend
activity.
Monitor collection and postings of corporate actions,
dividends and interest.
Fund and Each Class
Allocate Fund dividend income to classes based upon
value of outstanding class shares.
6. Enter All Security Trades on Investment Accounting System
(IAS) based on written instructions from the Adviser.
Fund Level
Review system verification of trade and interest
calculations.
Verify settlement through statements supplied by the
Custodian.
Maintain security ledger transaction reporting.
Maintain tax lot holdings.
Determine realized gains or losses on security
trades.
Provide broker commission reporting.
Fund and Each Class
Allocate all Fund level realized and unrealized
capital gains/losses to classes based upon value of
class outstanding shares.
7. Enter All Fund Share Transactions on IAS:
Each Class
Process activity identified on reports supplied by
the Transfer Agent.
Verify settlement through statements supplied by the
Custodian.
Reconcile report balances to the Transfer Agent.
Roll each classes' capital share values into Fund and
determine allocation percentages based upon the value
of each classes' outstanding shares to the Fund
total.
8. Prepare and Reconcile/Prove Accuracy of the Daily Trial
Balance (listing all asset, liability, equity, income and
expense accounts)
Fund Level
Post manual entries to the general ledger.
Post Custodian activity.
Post security transactions.
Post and verify system generated activity, i.e.,
income and expense accruals.
Fund and Each Class
Prepare Fund's general ledger net cash proof used in
NAV calculation.
Post class specific shareholder activity and roll
values into Fund.
Allocate all Fund level net cash accounts on the Fund
trial balance to each specific class based upon value
of class outstanding shares.
Maintain allocated Trial Balance accounts on class
specific Allocation Reports.
Maintain class-specific expense accounts.
Prepare class-specific proof/control reports to
ensure accuracy of allocations.
9. Review and Reconcile with Custodian Statements:
Fund Level
Verify all posted interest, dividends, expenses, and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to and resolved by
the Custodian.)
Post all cash settlement activity to the trial
balance.
Reconcile to ending cash balance accounts.
Clear IAS subsidiary reports with settled amounts.
Track status of past due items and failed trades as
reported by the Custodian.
10. Submission of Daily Accounting Reports to Adviser:
(Additional reports readily available.)
Fund Level
Portfolio valuation (listing inclusive of holdings,
costs, market values, unrealized
appreciation/depreciation and percentage of portfolio
comprised of each security.)
Cash availability.
3-day Cash Projection Report
Fund and Each Class
Fund Trial Balance and Class Allocation Report
NAV Calculation
B. Monthly Accounting Services
1. For each Fund, full Financial Statement Preparation
(automated Statements of Assets and Liabilities, of
Operations and of Changes in Net Assets) and submission
to Adviser by 10th business day.
Class specific capital share activity and expenses
will be disclosed also.
2. Submission of Monthly Automated IAS Reports to Adviser:
Fund Level
Security Purchase/Sales Journal
Interest and Maturity Report
Brokers Ledger (Commission Report)
Security Ledger Transaction Report with Realized
Gains/Losses
Security Ledger Tax Lot Holdings Report
Additional reports available upon request
3. Reconcile Accounting Asset Listing to Custodian Asset
Listing:
Fund Level
Report any security balance discrepancies to the
Custodian and the Adviser.
4. Provide Monthly Analysis and Reconciliation of Additional
Trial Balance Accounts, such as:
Fund Level
Security cost and realized gains/losses
Interest/dividend receivable and income
Payable/receivable for securities purchased and sold
Fund and Each Class
Payable/receivable for Fund's shares; issued and
redeemed
Expense payments and accruals analysis
C. Annual (and Semi-Annual) Accounting Services
1. Annually assist and supply Fund's auditors with schedules
supporting securities and shareholder transactions,
income and expense accruals, etc. for each Fund and each
Class during the year in accordance with standard audit
assistance requirements.
2. Provide N-SAR Reporting (Accounting Questions) on a Semi-Annual
Basis:
If applicable for Fund and Classes, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43,
53, 55, 62, 63, 64B, 71, 72, 73, 74, 75 and 76.
D. Accounts and Records
On each day the NYSE is open for regular trading and subject
to the proper receipt (via Oral or Written Instructions) by
FPS of all information required to fulfill its duties under
this Agreement, FPS will maintain and keep current the
following Accounts and Records and any other records
required to be kept pursuant to Rule 31a-1 of the Act
relating to the business of the Fund in such form as may be
mutually agreed upon between the Fund and FPS:
(1) Net Asset Value Calculation Reports;
(2) Cash Receipts Report;
(3) Cash Disbursements Report;
(4) Dividends Paid and Payable Schedule;
(5) Purchase and Sales Journals - Portfolio Securities;
(6) Subscription and Redemption Reports;
(7) Security Ledgers - Transaction Report and Tax Lot Holdings Report;
(8) Broker Ledger - Commission Report;
(9) Daily Expense Accruals;
(10) Daily Interest Accruals;
(11) Daily Trial Balance;
(12) Portfolio Interest Receivable and Income Reports;
(13) Portfolio Dividend Receivable and Income Reports;
(14) Listing of Portfolio Holdings - showing cost, market
value and percentage of portfolio comprised of each
security; and
(15) Average Daily Net assets provided on monthly basis.
E. Protocol concerning accuracy of Pricing Portfolio
Securities
FPS shall perform the ministerial calculations necessary to
calculate the net asset value each day that the New York
Stock Exchange is open for business, in accordance with; (i)
the current Prospectus and Statement of Additional
Information for the Fund, and (ii) procedures with respect
thereto approved by the Board of Directors of the Fund and
supplied in writing to FPS. Portfolio items for which
market quotations are available by FPS' use of an automated
financial information service (the "Service") shall be based
on the closing prices of such Service except where the Fund
or the Adviser has given or caused to be given specific
Written or Oral Instructions to utilize a different value
subject to the appropriate provisions in the Fund's
Prospectus and Statement of Additional Information then in
effect. All of the portfolio securities shall be given such
values as the Fund or the Adviser provides by Written or
Oral Instructions including all restricted securities and
other securities requiring valuation not readily
ascertainable solely by such Service subject to the
appropriate provisions in the Fund's Prospectus and
Statement of Additional Information then in effect.
FPS will have no responsibility or liability for (i) the
accuracy of prices quoted by such Service; (ii) the accuracy
of the information supplied by the Fund; or (iii) any loss,
liability, damage, or cost arising out of any inaccuracy of
such data. FPS will have no responsibility or duty to
include information or valuations which are to be provided
by the Fund in any computation unless and until it is
supplied to FPS in usable form by 4:45 p.m. on the day which
such calculation is made. FPS will record corporate action
information as received from the Custodians, the Service or
the Fund. FPS will not have any duty to gather or record
corporate action information not supplied by these sources.
FPS will assume no liability for price changes caused by the
Adviser or any subadvisor, Custodian, suppliers of security
prices, corporate action and dividend information, or any
party other than FPS itself.
Assumptions Regarding Portfolio Valuation and Mutual Fund Accounting
The fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or
require change, fee revisions may be necessary.
Basic Assumptions:
1. It is assumed that the portfolio asset composition will be
primarily real estate securities such as REITS and
securities of publicly traded real estate companies. Trading
activity is expected to be 20 trades per month with an
annual turnover rate not to exceed 100%.
2. The Fund has a tax year-end which coincides with its fiscal
year-end. No additional accounting requirements are
necessary to identify or maintain book-tax differences. FPS
does not provide security tax accounting which differs from
its book accounting under this fee schedule
3. The Fund agrees to the use of FPS' standard current pricing
services for domestic equity and debt securities.
It is assumed that FPS will work closely with the Fund to
ensure the accuracy of the Fund's NAV and to obtain the most
satisfactory pricing sources and specific methodologies
prior to the actual start-up date. The Fund will establish
security variance procedures to minimize NAV
miscalculations.
4. To the extent the Fund requires a limited number of daily
security prices from specific brokers for domestic
securities (as opposed to pricing information received
electronically), these manual prices will be obtained by the
Fund's Adviser and faxed to FPS by 4:00 p.m. Eastern time
for inclusion in the NAV calculations. The Adviser will
supply FPS with the appropriate pricing contacts for these
manual quotes.
5. Procedural discussions between FPS and the Fund are required
to clarify the appropriate pricing and dividend rate sources
if the Fund invests in open-end regulated investment
companies (RIC's). Depending on the methodologies selected
by the Fund, additional fees may apply.
6. FPS will supply daily Portfolio Valuation Reports to the
Fund's Adviser identifying current security positions,
original/amortized cost, security market values and changes
in unrealized appreciation/depreciation. It will be the
responsibility of the Adviser to review these reports and to
promptly notify FPS of any possible problems, trade
discrepancies, incorrect security prices or corporate
action/capital change information that could result in a
misstated Fund NAV.
7. The Fund does not currently expect to invest in swaps,
futures, hedges, derivatives or foreign (non-U.S. dollar
denominated) securities and currency. To the extent these
investment strategies should change, additional fees may
apply after the appropriate procedural discussions have
taken place between FPS and Fund management. (Two weeks
advance notice is required should the Fund commence trading
in these investments.)
8. The Fund will supply FPS with income information such as
accrual methods, interest payment frequency details, coupon
payment dates, floating rate reset dates, and complete
security descriptions with issue types and CUSIP numbers for
all debt issues. The Fund's Adviser shall supply the yield
to maturity and related cash flow schedules for any
mortgage/asset-backed securities held in the Fund.
Depending on the level of support required for the mortgage-backed
securities and asset-backed securities held in the
Fund, additional fees may apply.
9. With respect to mortgage/asset-backed securities including
GNMA's, FHLMC's, FNMA's, CMO's and ARM's, the Fund shall
direct the Custodian or an Adviser supplied source, to
provide FPS with current principal repayment factors on a
timely basis in accordance with the appropriate securities
schedule. Income accrual adjustments (to the extent
necessary) based upon initial estimates will be completed by
FPS when actual principal/income payments are collected by
the Custodian and reported to FPS.
10. FPS will use the ICI\NAREIT Tracking System along with
Bloomberg to obtain receipt of complete and accurate
information on REITs. The Adviser will supply/support
FPS in timely receipt of dividend information and return
of capital characterization for the REITs held in the
Fund, if not available from the ICI or Bloomberg systems.
To the extent applicable, FPS will maintain on a daily basis
U.S. dollar denominated qualified covered call options and
index options reporting on the daily Trial Balance and value
the respective options and underlying positions. This
Agreement does not provide for tax classifications if they
are required.
11. The Fund is responsible for the establishment and
monitoring of any segregated accounts pertaining to any
line of credit for temporary administrative purposes,
and/or leveraging/hedging the portfolio. FPS will
reflect appropriate trial balance account entries and
interest expense accrual charges on the daily trial
balance adjusting as necessary at month-end.
12. If the Fund commences participation in security lending
or short sales within its portfolio securities,
additional fees may apply. Should the Fund require these
additional services, procedural discussions must take
place between FPS and the Fund's Adviser to clarify
responsibilities. (Two weeks advance notice to FPS is
required should the Fund desire to participate in the
above.)
13. The following specific deadlines will be met and complete
information will be supplied by the Fund in order to
minimize any settlement problems, NAV miscalculations or
income accrual adjustments.
The Fund will direct the Adviser to provide Trade
Authorization Forms to FPS with the appropriate officer's
signature on all security trades placed by the Fund no later
than 12:30 p.m. Eastern time on settlement/value date for
short term money market securities issues (assuming that
trade date equals settlement date); and by 11:00 a.m.
Eastern time on trade date plus one for non-money market
securities. Receipt by FPS of trade information within
these identified deadlines may be made via telex, fax or on-line
system access. The Adviser will supply FPS with the
trade details in accordance with the above stated deadlines.
The Adviser will provide all information required by FPS,
including CUSIP numbers and/or ticker symbols for all U.S.
dollar denominated trades on the Trade Authorization, telex
or on-line support. FPS will supply the Adviser with
recommended trade ticket documents to minimize receipt of
incomplete information. FPS will not be responsible for NAV
changes or distribution rate adjustments that result from
incomplete trade information.
14. To the extent the Fund utilizes purchases in-kind (U.S.
dollar denominated securities only) as a method for
shareholder subscriptions, FPS will provide the Fund with
procedures to properly handle and process such
transactions. Should the Fund prefer procedures other
than those provided by FPS, additional fees may apply.
Discussions shall take place at least two weeks in
advance between FPS and the Fund to clarify the
appropriate in-kind operational procedures to be
followed.
15. The Parties will establish mutually agreed upon
amortization procedures and accretion requirements for
debt issues held by the Fund prior to commencement of
operations. Adjustments for financial statements
regarding any issues with original issue discount (OID)
are not included under this Agreement. The Fund will
direct its independent auditors to complete the necessary
OID adjustments for financial statements and/or tax
reporting.
III. Services Related to Shareholder and Share Transactions
The following services related to Shareholder and Share
Transactions shall be performed under this Agreement.
A. Shareholder File
1. Establish new accounts and enter demographic data into
shareholder base. Includes . . . . . . . . . . . in-house
processing and National Securities Clearing Corporation
(NSCC) - Fund/SERV - Networking transmissions.
2. Create Customer Information File (CIF) to link accounts
within the Fund. Facilitates account maintenance, lead
tracking, quality control, household mailings and combined
statements.
3. 100% quality control of new account information including
verification of initial investment.
4. Maintain account and customer file records based on
shareholder request and routine quality review.
5. Maintain tax ID certification and Non Resident Agent (NRA)
records for each account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity,
dividends, on-request, interested party and periodic
mailings.
8. Establish and maintain dealer file by fund group, including
dealer, branch, representative number and name.
9. Automated processing of dividends and capital gains with
daily, monthly, quarterly or annual distributions. Payment
options include reinvestment, directed payment to another
fund, cash via mail, Fed wire or ACH.
10. Image all applications, account documents, data changes,
correspondence, monetary transactions and other pertinent
shareholder documents.
B. Shareholder Services
1. Provide quality service through a staff of highly trained
NASD licensed customer service personnel, including phone,
research and correspondence representatives.
2. Answer shareholder calls: provide routine account
information, transaction details including direct and wire
purchases, redemptions, exchanges, systematic withdrawals,
pre-authorized drafts, FundSERV and wire order trades,
problem solving and process telephone transactions.
3. Silent monitoring of shareholder calls by the phone
supervisor to ensure exceptional customer service.
4. Record and maintain tape recordings of all shareholder calls
for a six month period.
5. Phone Supervisor produces daily management reports of
shareholder calls which track volumes, length of calls,
average wait time and abandoned call rates to ensure quality
service.
6. Customer inquiries received by letter or telephone are
thoroughly researched by a correspondence team member.
These inquires include such items as account/customer file
information, complete historical account information, stop
payments on checks, transaction details and lost
certificates.
7. Provide written correspondence in response to shareholder
inquiries and request through the CORRO Letter Writer System.
Whenever possible, unclear shareholder instructional letters are
handled by a phone call to the shareholder from our phone
representatives to avoid delay in processing of the request.
C. Investment Processing
1. Establish and maintain Rights of Accumulation and Letter of
Intent files.
2. Initial investment (checks or Fed wires).
3. Subsequent investments processed through lock box.
4. Pre-authorized investments (PAD) through ACH system.
5. Government allotments through ACH system.
6. NSCC-Fund/SERV trades.
7. Prepare and process daily bank deposit of shareholder
investments.
D. Redemption Processing
1. Process mail redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal File and process automated
transactions on monthly basis.
4. Distribute redemption proceeds distributed to shareholder by
check, wire or ACH processing.
5. Provide NSCC-Fund/SERV trade processing.
E. Exchange & Transfer Processing
1. Process legal transfers.
2. Issue and cancel certificates.
3. Replace certificates through surety bonds (separate charge
to shareholder).
4. Process exchange transactions (letter and telephone
request).
5. Process Automated Customer Account Transfer Service (ACATS)
transfers.
F. Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as
"custodian." Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 one-half requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust
Company as "custodian." Services include those listed under
IRA's and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
G. Commission Processing
1. Settlement and payment of dealer commissions on the 10th and
25th of each month for front-end load funds.
2. Settlement and payment of CDSC fees on the 1st of each month
for back-end load funds.
H. Settlement & Control
1. Daily review of processed shareholder transactions to assure
input was processed correctly. Accurate trade activity
figures passed to the Fund's accounting agent by 10:00 a.m.
Eastern Time.
2. Preparation of daily cash movement information to be passed
to the Fund's accounting agent and Custodian by 10:00 a.m.
Eastern Time for use in determining the Fund's daily cash
availability.
3. Prepare a daily share reconcilement which balances the
shares on the Transfer Agent system to those on the books of
the Fund.
4. Resolve any outstanding share or cash issues that are not
cleared by trade date + 2.
5. Process shareholder adjustments to also include the proper
notification of any booking entries needed, as well as any
necessary cash movement.
6. Settlement and review of the Fund's declared dividends and
capital gains to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend
is posted. Verify the posting date shares, the rate used
and the NAV price of reinvest date to ensure dividend was
posted properly.
c. Distribute copies to the Fund's accounting agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement information for the cash
portion of the dividend payout on payable date.
7. Placement of stop payments on dividend and liquidation
checks as well as the issuance of their replacements.
8. Maintain inventory control for stock certificates and
dividend check form.
9. Aggregate tax filings for all FPS clients. All types of
monthly deposits to the IRS of all taxes withheld from
shareholder disbursements, distributions and foreign account
distributions. Correspond with the IRS concerning any of
the above issues.
10. Timely settlement and cash movement for all NSCC -
Fund/SERV activity.
I. Year-End Processing
1. Maintain shareholder records in accordance with IRS notices
for under-reporting and invalid Tax IDs. This includes
initiating 31% backup withholding and notifying shareholders
of their tax status and the corrective action which is
needed.
2. Conduct annual W-9 solicitation of all uncertified accounts.
Update account tax status to reflect backup withholding or
certified status depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with
updated shareholder information and treaty rates for NRA
tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production
of forms to ensure compliance.
5. Coordinate year-end activity with client. Activities
include producing year-end statements, scheduling record
dates for year-end dividends and capital gains, production
of combined statements and printing of inserts to be mailed
with tax forms.
6. Distribute Dividend Letter to Fund for sign off on all
distributions paid year-to-date. Dates and rates must be
authorized so that they can be used for reporting to the
IRS.
7. Coordinate the ordering of forms and envelopes from vendor
in preparation of tax reporting. Review against IRS
requirements to ensure accuracy.
8. Prepare form flashes for the microfiche vendor. Test and
oversee the production of fiche for year end statements and
tax forms.
9. Match and settle tax reporting totals to fund records and
on-line data from INVESTAR.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year
end valuations. Quality assure forms before mailing to
shareholders.
11. Monitor IRS deadlines and special events such as cross
over dividends and prior year IRA contributions.
12. Prepare magnetic tapes and appropriate forms for the
filing of all reportable activity to the IRS.
J. Client Services
1. An Account Manager shall be assigned to the Fund. The
Account Manager is the liaison between the Fund and FPS.
Responsibilities include scheduling of events, system
enhancement implementation, special promotion/event
implementation and follow-up, and constant interaction with
the Fund on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailing and
special mailings.
b. Coordinate with the Fund the shipment of materials for
scheduled mailings.
c. Liaison between the Fund and support services for
preparation of proofs and eventual printing of statement
forms, certificates, proxy cards, envelopes, etc.
d. Handle all notification to the client regarding proxy
tabulation through the meeting. Coordinate scheduling of
materials, including voted cards, tabulation letters, and
shareholder list, to be available for the meeting.
e. Order special reports, tapes, discs for special systems
requests received.
f. Implement any new operational procedures, i.e., check
writing feature, load discounts, minimum waivers, sweeps,
telephone options, PAD promotions, etc.
g. Coordinate with other operating departments any special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings,
additional mail files, etc.
h. Prepare standard operating procedures and review
prospectuses. Coordinate implementation of suggested
changes with the Fund.
i. Liaison between the Fund and FPS staff regarding all
service and operational issues.
2. Blue Sky Processing
a. Maintain file with additions, deletions, changes and
updates at the Fund's direction.
K. Other Related Services
Although not included under the terms hereunder, the following
services are available by amendment to this Agreement.
1. Systematic linkage of shareholder accounts with exact
matches of social security numbers (SSN) and address for the
purpose of consolidated account history reporting. Periodic
production of laser printed combined statements.
2. Production of household mailing labels which enable the Fund
to do special mailings to each address as opposed to each
account.
3. Produce shareholder lists, labels and ad hoc reports as
requested.
Daily Reports
Report Number Report Description
-- Daily Activity
Register
024 Tax Reporting Proof
051 Cash Receipts and
Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate
Register
056 Blue Sky Warning Report
Monthly Reports
Report Description:
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
iv. Services Related to Custody Administration
The following services related to Administration of the custody
of the assets of the Fund shall be performed under this
Agreement.
Assign a Custody Administrator to accept, control and
process daily portfolio transactions through direct
computer link with the Custodian.
Match and review DTC eligible ID's and trade information
with the Fund's instructions for accuracy and
coordinating with the Custodian and the Fund's accounting
agent for recording and affirmation processing with the
depository.
Systematically settle all depository eligible issues.
Transactions requiring physical delivery will be settled
through the Custodian's New York Office.
Assist the Fund in placing cash management trades through
the Custodian, such as commercial paper, CD's and
repurchase agreement.
Provide the Fund's accounting agent and investment
adviser with daily custodian statements reflecting all
prior cash activity on behalf of each portfolio by 8:30
a.m. Eastern time. Complete description of any posting,
inclusive of Sedol/CUSIP numbers, interest/dividend
payment date, capital stock details, expense
authorizations, beginning/ending cash balances, etc.,
will be provided by the Custodian's reports or system.
Provide monthly activity statements combining both cash
changes and security trades and a full portfolio listing.
Communicate to the Fund and the Fund's accounting agent
on any corporate actions, capital changes and interest
rate changes supported by appropriate supplemental
reports received from the Custodian. Follow-up will be
made with the Custodian to ensure all necessary actions
and/or paperwork is completed.
Work with fund accounting and the Custodian on monthly
asset reconciliations.
Coordinate and resolve unsettled dividends, interest,
paydowns and capital changes. Assist in resolution of
failed transactions and any settlement problems.
Arrange for securities lending, lines of credit, and/or
letters of credit through the Custodian.
Provide automated mortgage-backed processing through the
Custodian.
Provide broker interface ensuring trade settlement with
fail trade follow-up.
Provide the Fund's auditors with trade documentation to
help expedite the Fund's audit.
Schedule "B"
FEE SCHEDULE
FOR
SPIRIT OF AMERICA INVESTMENT FUND, INC.
INVESTMENT COMPANY SERVICES FEE SCHEDULE
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date as that term is
defined in the Agreement. A third year term will be offered at fees
that shall be increased at a rate that is less than or equal to 10%.
I. Fees related to Administration (Compliance and Financial Reporting)
A. Subject to a minimum annual fee of $55,000 for the initial
Series' first class of shares and $12,000 for each additional
domestic portfolio or class thereof, the Fund agrees to pay FPS
each month an asset-based fee calculated at the annual rate of:
.0015 On the First $ 50 Million of Average Net
Assets
.0010 On the Next $ 50 Million of Average Net
Assets
.0005 Over $100 Million of Average Net
Assets
II. Fees related to Portfolio Valuation and Mutual Fund Accounting
A. Annual Fee Schedule Per Domestic Portfolio U.S. Dollar
Denominated Securities only (1/12th payable monthly )
$24,000 Minimum to $ 10 Million of Average Net Assets*
.0004 On the Next $ 40 Million of Average Net Assets*
.0003 On the Next $ 50 Million of Average Net Assets*
.0001 Over $100 Million of Average Net Assets*
Each additional class is $12,000 minimum per year.
*For multiple class portfolios, fees are based on combined
classes' average net assets.
B. Pricing Services Quotation Fee
Specific costs will be identified based upon options
selected by the Adviser and will be billed monthly.
FPS does not currently pass along charges for U.S. equity
prices supplied by Muller Data. Should the Fund invest in
security types other than domestic equities supplied by
Muller Data, the following fees would apply.
Security Types: Muller Data Corp.* Interactive Data Corp.*
J.J. Kenney Co., Inc.
Government Bonds
Muller Data Corp.* $.50
Interactive Data Corp.* $.50
J.J. Kenney Co., Inc. $.25 (a)
Mortgage-Backed (evaluated, seasoned, closing)
Muller Data Corp.* $.50
Interactive Data Corp.* $.50
J.J. Kenney Co., Inc. $.25 (a)
Corporate Bonds (short and long term)
Muller Data Corp.* $.50
Interactive Data Corp.* $.50
J.J. Kenney Co., Inc. $.25 (a)
U.S. Municipal Bonds (short and long term)
Muller Data Corp.* .55
Interactive Data Corp.* .80
J.J. Kenney Co., Inc. .50 (b)
CMO's/ARM's/ABS
Muller Data Corp. 1.00
Interactive Data Corp.* .80
J.J. Kenney Co., Inc. 1.00 (a)
Convertible Bonds
Muller Data Corp. .50
Interactive Data Corp.* .50
J.J. Kenney Co., Inc. 1.00 (a)
High Yield Bonds
Muller Data Corp. .50
Interactive Data Corp.* .50
J.J. Kenney Co., Inc. 1.00 (a)
Mortgage-Backed Factors (per Issue per Month)
Muller Data Corp. 1.00
Interactive Data Corp.* n/a
J.J. Kenney Co., Inc. n/a
U.S. Equities
Muller Data Corp. (d)
Interactive Data Corp.* .15
J.J. Kenney Co., Inc. n/a
Domestic Options
Muller Data Corp. n/a
Interactive Data Corp.* .15
J.J. Kenney Co., Inc. n/a
Domestic Dividends & Capital Changes(per Issue per month)
Muller Data Corp. (d)
Interactive Data Corp.* 3.50
J.J. Kenney Co., Inc. n/a
Foreign Securities
Muller Data Corp. .50
Interactive Data Corp.* .50
J.J. Kenney Co., Inc. n/a
Foreign Securities Dividends & Capital Changes(per Issue per Month)
Muller Data Corp. 2.00
Interactive Data Corp.* 4.00
J.J. Kenney Co., Inc. n/a
Set-up Fees
Muller Data Corp. n/a
Interactive Data Corp.* n/a(e)
J.J. Kenney Co., Inc. .25 (c)
All Added Items
Muller Data Corp. n/a
Interactive Data Corp.* n/a
J.J. Kenney Co., Inc. .25 (c)
* Based on current Vendor costs, subject to change.
Costs are quoted based on individual security CUSIP/identifiers
and are per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no cusip
(d) At no additional cost to FPS clients(e) Interactive Data also
charges monthly transmission costs and disk storage charges.
1) Futures and Currency Forward Contracts -
$ 2. 00 per Issue per Day
2) Dow Jones Markets (formerly Telerate
Systems, Inc.)* (if applicable)
*Based on current vendor costs, subject
to change.
Specific costs will be identified based
upon options selected by the Adviser and
will be billed monthly.
3) Reuters, Inc.*
*Based on current vendor costs, subject
to change.
FPS does not currently pass along the
charges for the domestic security prices
supplied by Reuters, Inc.
4) Municipal Market Data* (if applicable)
*Based on current vendor costs, subject
to change.
Specific costs will be identified based
upon options selected by the Adviser and
will be billed monthly.
C. SEC Yield Calculation: (if applicable)
Provide up to 12 reports per year to reflect the
yield calculations for non-money market funds
required by the SEC, $1,000 per year per Fund. For
multiple class Funds, $1,000 per year per class.
(U.S. dollar denominated securities only).
III. Fees related to Transfer Agency and Shareholder Servicing
A. Transfer Agent and Shareholder Services:
$20.00 per account per year per portfolio
Minimum monthly fee - $2,250 per portfolio. This
fee is reduced to $24,000/year for the first two
years of a 3-year contract.
Each additional class has a $1,250 minimum monthly
fee.
B. IRA's, 403(b) Plans, Defined Contribution/Benefit
Plans:
Annual Maintenance Fee - $12.00 per account per year
(normally charged to participants)
C. FUND/SERV Processing (if applicable)
$1,000 One time start-up fee
$50.00 Per month/per Fund monthly maintenance fee
D. Networking Processing (if applicable)
$1,000 One time start-up fee
$75.00 Per month/per Fund monthly maintenance fee
IV. Fees related to Custody Administration
A. Domestic Securities and ADRs: (1/12th payable
monthly)
.0002 On the First $ 50 Million of Combined Average Net Assets
.00015 On the Next $150 Million of Combined Average Net Assets
.000125 Over $200 Million of Combined Average Net Assets
Minimum is $6,000 per portfolio per year ($500 monthly).
B. Custody Domestic Securities Transactions Charge:
(billed monthly)
Book Entry DTC, Federal Book Entry, PTC. . . . . . . . . $12.00
Physical Securities, Options/Futures . . . . . . . $20.00
RIC's. . . . . . . . . . . . . . . . . . . . . . . $24.50
P & I Paydowns . . . . . . . . . . . . . . . . . . $7.00
Wires. . . . . . . . . . . . . . . . . . . . . . . $7.00
Check Request. . . . . . . . . . . . . . . . . . . $6.00
Euro CD's. . . . . . . . . . . . . . . . . . . . . $45.00
Eurotime Deposit . . . . . . . . . . . . . . . . . $15.00
A transaction includes buys, sells, maturities or free security
movements.
Cedel/Euroclear
4 BPS safekeeping charge, $20 transaction charge.
Fee expressed in basis points per annum based upon
month end market value.
Global Network Fee
$500 per portfolio per month
C. When Issued, Securities Lending, Index Futures, etc.
Should any investment vehicle require a separate
segregated custody account, a fee of $250 per account
per month will apply.
D. Custody Miscellaneous Fees
Administrative fees incurred in certain local markets
will be passed onto the customer with a detailed
description of the fees. Fees include income
collection, corporate action handling, overdraft
charges, funds transfer, special local taxes, stamp
duties, registration fees, messenger and courier
services and other out-of-pocket expenses.
V. Out-of-Pocket Expenses
The Fund will reimburse FPS monthly for all reasonable
out-of-pocket expenses which including telephone,
postage, EDGAR filings, Fund/SERV and Networking
expenses, telecommunications, special reports, record
retention, special transportation costs, copying and
sending materials to auditors and/or regulatory agencies
as incurred and approved.
VI. Additional Services
To the extent the Fund commences investment techniques
such as futures, security lending, swaps, leveraging,
short sales, derivatives, precious metals, or foreign
(non-U.S.) securities and currency, additional fees will
apply. Activities of a non-recurring nature such as
shareholder in-kinds, fund consolidations, mergers or
reorganizations will be subject to negotiation. To the
extent that the Fund should decide to issue
multiple/separate classes of shares in excess of those
listed on Schedule "C", additional fees will apply. Any
additional/enhanced services, programming requests or
reports will be quoted upon request.<PAGE>
Schedule "C"
Identification of Separate Series of Shares to which this Agreement
applies:
1. Spirit of America Investment Fund, Inc.
DISTRIBUTION AND SERVICES PLAN
PURSUANT TO RULE 12b-1
This Plan constitutes the DISTRIBUTION AND SERVICES PLAN (the
"Plan") of Spirit of America Investment Fund, Inc.(the "Fund"), a
Maryland corporation, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"). The
Plan relates to the shares of stock ("Shares") of the Fund.
Section 1. The Fund shall pay SSH Securities, Inc. (the
"Distributor") a fee in an amount not to exceed on an annual basis
0.30% of the average daily net assets of the Fund (the "Fee") to
compensate the Distributor for the following: (i) payments the
Distributor makes to other institutions and industry professionals,
broker-dealers, including the investment adviser, Distributor and
their affiliates or subsidiaries (collectively referred to as
"Participating Organizations"), pursuant to an agreement in
connection with providing administrative support services to the
holders of the Fund's shares; (ii) payments to financial institutions
and industry professionals (such as insurance companies, investment
counselors, accountants and estate planning firms, but not including
banks and savings and loan associations), broker-dealers, the
Distributor and the Distributor's affiliates and subsidiaries in
consideration for distribution services provided and expenses assumed
in connection with distribution assistance, including but not limited
to printing and distributing Prospectuses to persons other than
current shareholders of the Fund, printing and distributing
advertising and sales literature and reports to shareholders used in
connection with the sale of the Fund's shares, and personnel and
communication equipment used in servicing shareholder accounts and
prospective shareholder inquiries; or (iii) services rendered by the
Distributor pursuant to the Distribution Services Agreement between
the Fund and the Distributor.
Section 2. The Fee shall be accrued daily and payable
monthly, and shall be paid by the Fund to the Distributor to
compensate the Distributor for payments made and services rendered
pursuant to Section 1.
Section 3. The Plan shall not take effect until it has been
approved, together with any related agreements, by votes of a
majority of both (a) the Board of Directors of the Fund and (b) the
"Disinterested Directors" (as defined below) cast in person at a
meeting called for the purpose of voting on the Plan or such related
agreements.
Section 4. This Plan shall continue automatically for
successive annual periods, provided such continuance is specifically
approved at least annually in the manner provided for approval of the
Plan in Section 3, unless earlier terminated in accordance with the
terms hereof.
Section 5. The Distributor shall provide to the Directors of
the Fund, and the Directors shall review, at least quarterly, a
written report of the amounts expended pursuant to Section 1 and the
purposes for which such expenditures were made.
Section 6. The Plan may be terminated with respect to the Fund
at any time by vote of a majority of the Disinterested Directors (as
defined below), or by vote of a majority of the outstanding voting
securities of the Fund.
Section 7. Payments by the Distributor to a Participating
Organization shall be subject to compliance by the Participating
Organization with the terms of an agreement with the Distributor.
All agreements with any person relating to implementation of the Plan
shall be in writing, and any agreement related to the Plan shall
provide:
A. That such agreement may be terminated with respect to the
Fund at any time, without payment of any penalty, by vote
of a majority of the Disinterested Directors, or by vote
of a majority of the outstanding voting securities of the
Fund, on not more than 60-days' written notice; and
B. That such agreement shall terminate automatically in the
event of its assignment.
Section 8. The Plan may not be amended to increase materially
the amount of distribution expenses permitted pursuant to Section 1
hereof with respect to the Fund without approval in the manner
provided in Section 3 hereof, and all material amendments to the Plan
shall be approved in the manner provided for approval of the Plan in
Section 3.
Section 9. Any person authorized to direct the disposition of
monies paid or payable by the Fund pursuant to this Agreement shall
provide to the Distributor and the Board of Directors of the Fund or
its designees, and the Board will review, at least quarterly, a
written report of the amounts so expended and the purposes for which
such expenditures were made. In addition, each Participating
Organization shall furnish the Fund or its designees with such
information as may be reasonably requested (including, without
limitation, periodic certifications confirming the provision to
Customers of the services described herein) and will otherwise
cooperate with the Fund or its designees (including, without
limitation, any auditors designated by the Fund or the Distributor),
in connection with the preparation of reports to the Board of
Directors concerning this Agreement and the monies paid or payable by
the Fund pursuant hereto, as well as any other reports or filing that
may be required by law.
Section 10.
(a) The monthly payments to the Distributor under this Plan
shall be made in accordance with, and subject to, the following
conditions:
(i) that payments made out of or charged against the
assets of the Fund must be in payment for services rendered on
behalf of the Fund; and
(ii) that payments of the Fee by the Fund pursuant to
this Plan will be reduced to the extent necessary to ensure
that the amount of the Fee and any other operating expenses
that are accrued on any day with respect to the Fund will not
exceed the gross income accrued on that day (with written
notice at the time of payment to a Participating Organization).
(b) Joint distribution financing by the Fund on behalf of
shares (which financing may also involve other investment portfolios
or companies that are affiliated persons of the Fund, affiliated
persons of such a person, or affiliated persons of the Distributor)
shall be permitted in accordance with applicable regulations of the
Securities and Exchange Commission as in effect from time to time,
and nothing in subparagraph (a) above or any other provision herein
shall be construed to the contrary.
(c) For the purposes of determining the amounts payable under
this Plan, the value of the Fund's net assets shall be computed in
the manner specified in the Fund's current Prospectus as then in
effect.
Section 11. As used herein, (a) the term "Disinterested
Directors" shall mean those Directors of the Fund who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or any agreements
related to it and (b) the terms "affiliated person," "assignment,"
"interested person," and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940
Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the Securities and Exchange
Commission.
Spirit of America Investment Fund,
Inc.
/s/ David Lerner
By: David Lerner, President
/s/ Constance Ferreira
Attest: Constance Ferreira,Secretary
<PAGE>
SSH Securities, Inc.
/s/ David Lerner
By: David Lerner, President
/s/
Attest: , Secretary
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams,
William J. Baltrus and Carolyn Mead, Esq. and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any
appropriate action to execute and file with the U.S. Securities
Exchange Commission, any amendment to the registration statement of
Spirit of America Investment Fund, Inc. (the "Fund"), file any
request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale
of shares of the Fund, to perform on behalf of the Fund any and all
such acts as such attorneys-in-fact may deem necessary or advisable
in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as each might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 15th day of December, 1997.
/s/ David Lerner
David Lerner
Chairman of the Board,
President, Director & Treasurer
ACKNOWLEDGMENT
State of New York )
) ss:
County of Nassau )
The foregoing instrument was acknowledged before me this 15th day of
December, 1997, by David Lerner, Chairman of the Board, President,
Director & Treasurer of Spirit of America Investment Fund, Inc.
/s/ Daniel Rensch
Notary Public<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams,
William J. Baltrus and Carolyn Mead, Esq. and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any
appropriate action to execute and file with the U.S. Securities
Exchange Commission, any amendment to the registration statement of
Spirit of America Investment Fund, Inc. (the "Fund"), file any
request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale
of shares of the Fund, to perform on behalf of the Fund any and all
such acts as such attorneys-in-fact may deem necessary or advisable
in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as each might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 2nd day of September, 1997.
/s/ Herbert Grant
Herbert Grant
Director
ACKNOWLEDGEMENT
State of New York )
) ss:
County of Rockland )
The foregoing instrument was acknowledged before me this 2nd day of
September, 1997, by Herbert Grant, Director of Spirit of America
Investment Fund, Inc.
/s/ Edythe L. DeGroat
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams,
William J. Baltrus and Carolyn Mead, Esq. and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any
appropriate action to execute and file with the U.S. Securities
Exchange Commission, any amendment to the registration statement of
Spirit of America Investment Fund, Inc. (the "Fund"), file any
request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale
of shares of the Fund, to perform on behalf of the Fund any and all
such acts as such attorneys-in-fact may deem necessary or advisable
in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as each might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 2nd day of September, 1997.
/s/ Allen Kaufman
Allen Kaufman
Director
ACKNOWLEDGEMENT
State of New York )
) ss:
County of Nassau )
The foregoing instrument was acknowledged before me this 2nd day of
September, 1997, by Allen Kaufman, Director of Spirit of America
Investment Fund, Inc.
/s/ Bernice Cherry
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams,
William J. Baltrus and Carolyn Mead, Esq. and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any
appropriate action to execute and file with the U.S. Securities
Exchange Commission, any amendment to the registration statement of
Spirit of America Investment Fund, Inc. (the "Fund"), file any
request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale
of shares of the Fund, to perform on behalf of the Fund any and all
such acts as such attorneys-in-fact may deem necessary or advisable
in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as each might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the the day of December, 1997.
/s/ Daniel Lerner
Daniel Lerner
Director
ACKNOWLEDGEMENT
State of New York )
) ss:
County of Nassau )
The foregoing instrument was acknowledged before me this 15th day of
December, 1997, by Daniel Lerner, Director of Spirit of America
Investment Fund, Inc.
/s/ Daniel Rensch
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams,
William J. Baltrus and Carolyn Mead, Esq. and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any
appropriate action to execute and file with the U.S. Securities
Exchange Commission, any amendment to the registration statement of
Spirit of America Investment Fund, Inc. (the "Fund"), file any
request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale
of shares of the Fund, to perform on behalf of the Fund any and all
such acts as such attorneys-in-fact may deem necessary or advisable
in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to,
applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as each might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the the 15th day of December, 1997.
/s/ Constance Ferreira
Constance Ferreira
Director
ACKNOWLEDGEMENT
State of New York )
) ss:
County of Nassau )
The foregoing instrument was acknowledged before me this 15th day of
December, 1997, by Daniel Lerner, Director of Spirit of America
Investment Fund, Inc.
/s/ Daniel Rensch
Notary Public
