UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post- Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. [ ]
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:
Joseph M. O'Donnell, Esq.
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 elects to register under this Registration Statement an
indefinite number of shares of its securities under this Registration
Statement pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended. Registrant will file a Notice pursuant to Rule
24f-2 within two months 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 May 28,
1997.
<PAGE>
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 General 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 May 28, 1997
SPIRIT OF AMERICA INVESTMENT FUND, INC.
477 Jericho Turnpike
Syosset, New York 11791
(800) ___________
Prospectus July , 1997
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 July __, 1997 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, as it may be supplemented from time to
time, 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 OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY 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 and
to a lesser extent in mortgage-backed securities and taxable
municipal obligations. 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 4.25%. 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."
<PAGE>
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). . . . . . . . . . . . 4.25%
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 purchase. See "How to Purchase Shares -
Sales Charge."
(3) If you want to redeem shares by wire transfer, the Fund's
transfer agent charges a fee (currently $9.00) for each wire
redemption. 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 . . . . . . . . . . . . . . . . . 0.97%
12b-1 fees. . . . . . . . . . . . . . . . . . . . 0.30%
Other Expenses (4). . . . . . . . . . . . . . . . 0.70%
Total Fund operating expenses (after fee waivers)(1) 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. "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 of the Fund may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (the "NASD"). See "Management of the Fund -
Distribution Services Agreement."
<PAGE>
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 through investing in a portfolio of equity securities
of issuers that are primarily engaged in or related to 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 and selling
short against-the-box. 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. Spirit
Management will attempt to purchase Real Estate Equity Securities of
companies whose underlying portfolios are diversified geographically
and by property type.
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 by 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 make short sales against-the-box, in which it sells
securities short only if it owns or has the right to obtain without
payment of additional consideration an equal amount of the same type
of securities sold. Short selling against-the-box may defer
recognition of gains or losses into a later tax period. This strategy
is employed to protect the asset base in volatile markets.
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 resuming 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 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
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 4.25% of the offering price (4.44% of the net amount invested)
reduced on investments of $100,000 or more. See "Sales Charge."
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.
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 a sales charge. Orders for Fund
shares received after 4:00 p.m. Eastern time will be purchased at the
net asset value, plus a sales charge, determined on the following
business day.
The Fund reserves the right to reject any purchase order or 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
Before shares of the Fund may be purchased for the first time, please
complete the application accompanying this Prospectus and mail 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)_________ 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/FPS "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.
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. 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. The
Fund and the Transfer Agent each reserves the right to reject any
purchase order in whole or in part. The Fund and the Transfer Agent
will not accept checks which have been endorsed by a third party.
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 4.25% 4.44% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.50%
$250,000 but less
than $500,000 2.75% 2.83% 2.50%
$500,000 but
less than
$1,000,000 2.25% 2.30% 2.00%
$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
A shareholder may qualify for a reduced sales charge by aggregating
the net asset values of shares requiring the payment of an initial
sales charge, previously purchased and currently owned, with the
dollar amount of shares to be purchased.
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 Internal Revenue Code of 1986, as
amended, 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 Spirit Management 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)
Spirit Management, the Distributor, and their affiliates; and certain
employee benefit plans for employees of Spirit Management 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 without charge 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)______________.
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) _____________ 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. Under such
circumstances, it may take as long as 15 business days for a
shareholder to receive the proceeds of a redemption. You may avoid
such delays by purchasing shares with a certified or cashier's check,
or 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 $9.00 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 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 $25.
The Fund may alter, modify or terminate this plan at any time. For
information about participating in the Automatic Investment Plan,
call the Transfer Agent at (800)_______________.
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) __________________.
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) plans through which an investor may purchase Fund shares.
For details concerning any of these retirement plans, please call the
Transfer Agent at (800)_____________ or (610) 239-4700.
Net Asset Value
The 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,
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 will be 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 when it
was formed 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 (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") Pursuant to the Plan, the Fund pays to SSH
a Rule 12b-1 distribution services 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, at the election of each
shareholder, be paid in cash or 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. Election to receive income dividends and
distributions in cash or shares is made at the time shares are
initially purchased and 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 Internal Revenue Code of 1986, as amended (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 long-term capital gains over the net short-term
capital losses realized and distributed by the Fund to its
shareholders as capital gains distributions is taxable to the
shareholders as long-term capital gains, irrespective of the length
of time a shareholder may have held his or her stock. Long-term
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.
It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal or
state law. Shareholders have available certain procedures for the
removal of Directors.
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.
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, or 0.15% of the average daily net assets of the Fund.
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.
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)___________.
<PAGE>
[OUTSIDE BACK COVER]
INVESTMENT ADVISER
Spirit of America Management, Inc.
477 Jericho Turnpike
Syosset, NY 11791
(800) _________________
DISTRIBUTOR
SSH Securities, Inc.
477 Jericho Turnpike
Syosset, NY 11791
(800) _________________
SHAREHOLDER SERVICES
FPS Services, Inc.
3200 Horizon Drive, P. O. Box 61503
King of Prussia, PA 19406-0903
(800) ____________
(610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
AUDITORS
Tait Weller & Baker
Two Penn Center, Suite 700
Philadelphia, PA 19102-1707
<PAGE>
Subject to Completion -- May 28, 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
_________________, 1997
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 ______________, 1997. 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 Management 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
Generally, the Fund's policy with respect to portfolio turnover is
to purchase securities with a view to holding them for periods of
time sufficient to assure that the Fund will realize less than 30%
of its gross income from the sale or other disposition of securities
held for less than three months (see "Dividends, Distributions and
Taxes") and to hold its securities for six months or longer. However,
it is also 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. The turnover rate
has a direct effect on the transaction costs to be borne by the Fund,
and as portfolio turnover increases it is more likely that the Fund
will realize short-term capital gains. In order to continue to
qualify as a regulated investment company for Federal tax purposes,
less than 30% of the annual gross income of the Fund must be derived
from the sale of securities held by the Fund for less than three
months. See "Dividends, Distributions and Taxes."
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
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 Investment Company Act of 1940, as
amended (the "1940 Act"), is indicated by an asterisk.
Directors
DAVID LERNER*, 60, Chairman of the Board of Directors and President
of the Fund; President and a Director of newly formed Spirit of
America Management Corp., the Fund's investment adviser, and
Director, President, Treasurer and Secretary of SSH Securities, Inc.,
the Fund 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, 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. He is currently a Ph.D. Candidate, Doctor of
Professional Studies in Management, Pace College Graduate School.
HERBERT GRANT, 73, Director; For the past 42 years, Mr. Grant has
been an Automobile Dealer. 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; 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*, [age], Director; 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.
RUTHANN G. NIOSI, ESQ., 42; Director; Attorney, private practice of
law specializing in Securities Arbitrations Law, Customer Complaints
Law, SEC Law, NYSE Law, NASD Regulatory Investigations Law and
Disciplinary Actions from ___ to present. Former Assistant United
States Attorney, District of New Hampshire from 19__ to 19__. Former
SEC Enforcement Attorney NYRO from 19__ to 19__. By-line writer for
Financial Planning on Wall Street from 19__ to present. President,
American Institute of Registered Representatives, 1991 to 1994.
Graduate of Union College (B.A.) And New England School of Law
(J.D.).
Officers
DAVID LERNER, President and Treasurer (see biography above).
CONSTANCE FERREIRA, 46, Vice President and Secretary; 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 Aggregate Estimated total
Compensation from Compensation From Fund
for fiscal Fiscal Year Complex Paid
Name of Director/Officer Ended ______/97 to Directors
David Lerner* $ 0 $ 0
Stanley Thune $ 2,000 $ 2,000
Herbert Grant $ 2,000 $ 2,000
Allen Kaufman $ 2,000 $ 2,000
Daniel Lerner* $ 0 $ 0
Ruthann G. Niosi, Esq. $ 0 $ 0
Constance 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 ___________, 1997. The
Advisory Agreement will continue in effect until _______, 1999 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
_________, 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 Services Agreement
The Fund has entered into a Distribution Services Agreement (the
"Agreement") with SSH Securities, Inc., the Fund's principal
distributor (the "Principal Distributor"), to permit the Principal
Distributor to distribute the Fund's shares and to permit the Fund
to pay distribution services fees to defray expenses associated with
the distribution of the Fund's shares in accordance with a plan of
distribution which is included in the Agreement and has been duly
adopted and approved in accordance with Rule 12b-1 adopted by the
Securities and Exchange Commission (the "SEC") under the 1940 Act
(the "Rule 12b-1 Plan").
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 Agreement, 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 Agreement
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 Agreement became effective on ____________, 1997. The Agreement
will continue in effect for successive twelve-month periods provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders of
a majority of the outstanding voting securities (as defined in the
1940 Act) and in either case, by a majority of the Directors of the
Fund who are not parties to the Agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as directors
of the Fund) and who have no direct or indirect financial interest
in the operation of the Plan or any agreement related thereto.
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 Principal 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 Agreement 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 Principal Distributor,
and (ii) the Fund would not be obligated to pay the Principal
Distributor for any amounts expended under the Agreement not
previously recovered by the Principal Distributor from distribution
services fees in respect of shares or through deferred sales charges.
All material amendments to the Rule 12b-1 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 Rule 12b-1 Plan may not
be amended in order to increase materially the costs that
shareholders may bear pursuant to the Rule 12b-1 Plan without the
approval of a majority of the holders of the outstanding voting
shares of the Fund. The Agreement 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 Principal Distributor. To terminate the Agreement,
any party must give the other parties 60 days' written notice; to
terminate the Rule 12b-1 Plan only, the Fund need give no notice to
the Principal Distributor. The Agreement 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 $25) 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
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.
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; (ii) derive
less than 30% of its gross income in each taxable year from the sale
or other disposition within three months or their acquisition by the
Fund of stocks, securities, options, futures or forward contracts and
foreign currencies (or options, futures or forward contracts on
foreign currencies) that are not directly related to the Fund's
principal business of investing in stock or securities (or options
and futures with respect to stocks or securities); and (iii)
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 (calculated
without regard to its net capital gain, i.e., the excess of its net
long-term capital gain over its net short-term capital loss), 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. 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.
The excess of net long-term capital gains over the net short-term
capital losses realized and distributed by the Fund to its
shareholders will be taxable to the shareholders as long-term capital
gains, irrespective of the length of time a shareholder may have held
his Fund shares. 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 in the manner discussed regardless of whether they are paid
to the shareholder in cash or are reinvested in additional shares of
the Fund.
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 advertises its total return. 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
Distribution Services Agreement, the Fund has agreed to indemnify the
Principal 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
In November 1986, the State of New York filed a complaint in the
Supreme Court of the State of New York against David Lerner
Associates, Inc., a broker-dealer owned by David Lerner, and nine
account executives employed by David Lerner Associates, Inc. The
complaint alleged that the account executives misrepresented and
failed to disclose to certain of their customers information about
certain municipal securities and that David Lerner Associates,
Inc. and David Lerner failed to supervise properly the account
executive with respect to transactions involving such municipal
securities. Solely for purposes of settling the case, David Lerner
Associates, Inc. and the individuals charged entered into a
consent judgment without admitting any of the allegations in the
complaint and specifically denying them for purposes of any other
forum. Pursuant to the settlement, the parties agreed to make
certain disclosures concerning municipal securities. In addition,
the David Lerner Associates, Inc. agreed to maintain certain
supervisory policies and procedures with respect to municipal
securities transactions and reimbursed the State of New York for
costs it incurred in the proceeding.
On ___________, 1997, the Securities and Exchange Commission
issued an order, requested under Section 9(c) of the 1940 Act,
exempting David Lerner Associates, Inc., the Adviser, and David
Lerner from the prohibition of Section 9(a) of the 1940 Act
relating to the consent judgment.
[UPDATE LEGAL PROCEEDINGS]
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 filed herewith.
(2) By-Laws are filed herewith.
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders
-- None
(5) Investment Advisory Contracts -- (To be filed
by Amendment.)
(6) (a) Distribution Services Agreement -- (To
be filed by Amendment.)
(b) Selected Dealer Agreement -- (To be
filed by Amendment.)
(7) Bonus, Profit Sharing, Pension or Other
Similar Contracts -- None
(8) Custodian Agreements -- (To be filed by
Amendment.)
(9) Multiple Services Agreement -- (To be filed
by Amendment.)
(10) Opinion and Consent of [LAW FIRM] 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 --
(To be filed by Amendment.)
(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 -- None.
(19) Director's Powers of Attorney -- (To be filed
by Amendment.)
Item 25. Persons Controlled by or Under Common Control with
Registrant.
The Registrant is a recently organized corporation and
___________ 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-____) 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, Director,
477 Jericho Turnpike President, President
Syosset, NY 11791 Treasurer and and Treasurer
Secretary
(c) Not Applicable.
tem 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, Spririt 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 28th day of May, 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* Sole Director 5/28/97
David Lerner
/s/ David Lerner* President and Principal 5/28/97
David Lerner Executive Officer
/s/ Constance Ferreira* Principal Financial and 5/28/97
Constance Ferreira Accounting Officer
/s/ Joseph M. O'Donnell
* By Joseph M. O'Donnell, as
Attorney-in-Fact and Agent
pursuant to Power of Attorney
<PAGE>
The Spirit of America Investment Fund, Inc.
Index to Exhibits to Form N-1A
Exhibit Page
(1) Articles of Incorporation. . . . . . . . . .64
(2) By-Laws. . . . . . . . . . . . . . . . . . .73
ARTICLES OF INCORPORATION
OF
SPIRIT OF AMERICA INVESTMENT FUND, INC.
FIRST: (1) The name of the incorporator is Lee
A Pickard.
(2) The incorporator's post office
address is Pickard and Djinis, 1990 M Street, Suite 660,
Washington, DC 20036.
(3) The incorporator is over eighteen
years of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation
under the general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter
called the Corporation) is Spirit of America Investment
Fund, Inc.
THIRD: (1) The purposes for which the
Corporation is formed is to conduct, operate and carry on
the business of an investment company.
(2) The Corporation may engage in any
other business and shall have all powers conferred upon
or permitted to corporations by the Maryland General
Corporation Law.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland is
32 South Street, Baltimore, Maryland 21202 in care of The
Corporation Trust Incorporated. The resident agent of
the Corporation in the State of Maryland is The
Corporation Trust Incorporated.
FIFTH: (1) The total number of shares of capital
stock which the Corporation shall have authority to issue
is one billion (1,000,000,000), all of which shall be
Common Stock having a par value of one-tenth of one cent
($.001) per share and an aggregate par value of one
million dollars ($1,000,000).
(2) On each matter submitted to a vote of
the stockholders, each holder of stock shall be entitled
to one vote for each share standing in his or her name on
the books of the Corporation.
(3) (a) Each holder of stock may require
the Corporation to redeem all of any part of the stock
owned by that holder, upon request to the Corporation or
its designated agent, at the net asset value of the
shares of stock next determined following receipt of the
request in a form approved by the Corporation and
accompanied by surrender of the certificate or
certificates for the shares, if any, less the amount of
any applicable redemption charge or deferred sales charge
or other amount imposed by the Board of Directors (to the
extend consistent with applicable law). The Board of
Directors may establish procedures for redemption of
stock.
(b) the proceeds of the redemption
of a share (including a fractional share) of any class of
capital stock of the Corporation shall be reduced by the
amount of any contingent deferred sales charge,
redemption fee or other amount payable on such redemption
pursuant to the terms of issuance of such share.
(c) (i) The term "Minimum Amount"
when used herein shall mean two hundred dollars ($200)
unless otherwise fixed by the Board of Directors from
time to time, provided that the Minimum Amount may not in
any event exceed twenty-five thousand dollars ($25,000).
The Board of Directors may establish differing Minimum
Amounts for categories of holders of stock based on such
criteria as the Board of Directors may deem appropriate.
(ii) If the net asset value of
the shares of stock held by a stockholder shall be less
than the Minimum Amount then in effect with respect to
the category of holders in which the stockholder is
included, the Corporation may redeem all of those shares,
upon notice given to the holder in accordance with
paragraph (iii) of this subsection (c), to the extent
that the Corporation may lawfully effect such redemption
under the laws of the State of Maryland.
(iii) The notice referred to
in paragraph (ii) of this subsection (c) shall be in
writing personally delivered or deposited in the mail, at
least thirty days (or such other number of days as may be
specified from time to time by the Board of Directors)
prior to such redemption. If mailed, the notice shall be
addressed to the stockholder at his post office address
as shown on the books of the Corporation, and sent by
first class mail, postage prepaid. The price for shares
acquired by the Corporation pursuant to this subsection
(c) shall be an amount equal to the net asset value of
such shares.
(d) Payment by the Corporation for shares
of stock of the Corporation surrendered to it for
redemption shall be made by the Corporation within seven
days of such surrender out of the funds legally available
therefor, provided that the Corporation may suspend the
right of the stockholders to redeem shares of stock and
may postpone the right of these holders to receive
payment for any shares when permitted or required to do
so by applicable statutes or regulations. Payment of the
aggregate price of shares surrendered for redemption may
be made in cash or,, at the option of the Corporation,
wholly or partly in such portfolio securities of the
Corporation as the Corporation shall select.
(4) The Corporation may issue shares of
stock in fractional denominations to the same extent as
its whole shares, and shares in fractional denominations
shall be shares of stock having proportionately to the
respective fractions represented thereby all the rights
of whole shares, including without limitation, the right
to vote, the right to receive dividends and
distributions, and the right to participate upon
liquidation of the Corporation, but excluding the right
to receive a stock certificate representing fractional
shares.
(5) No stockholder shall be entitled to
any preemptive right other than as the Board of Directors
may establish.
SIXTH: The number of directors of the Corporation
shall be one. The number of directors of the Corporation
may be changed pursuant to the By-Laws of the
Corporation. The name of the person who shall act as
director of the Corporation until the first annual
meeting or until his successor is chosen and qualified is
David Lerner.
SEVENTH: The following provisions are inserted for
the purpose of defining, limiting and regulating the
powers of the Corporation and the Board of Directors and
Stockholders.
(1) In addition to its other powers
explicitly or implicitly granted under these Articles of
Incorporation, by law or otherwise, the Board of
Directors of the Corporation:
(a) is expressly authorized to make,
alter, amend or repeal the By-Laws of the Corporation;
(b) may from time to time determine
whether, to what extent, at what times and places, and
under what conditions and regulations the accounts and
books of the Corporation, or any of them, shall be open
to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or
document of the Corporation except as conferred by
statute or as authorized by the Board of Directors of the
Corporation;
(c) is empowered to authorize,
without stockholder approval, the issuance and sale from
time to time of shares of stock of the Corporation of any
class or classes, whether now or hereafter authorized,
and securities convertible into shares of stock of the
Corporation of any class or classes, whether now or
hereafter authorized, for such consideration as the Board
may deem advisable.
(d) is authorized to classify or to
reclassify, from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter
authorized, by setting, changing or eliminating the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications
or terms and conditions of or rights to require
redemption of the stock. The provisions of these
Articles of Incorporation (including those in Article
FIFTH hereof) shall apply to each class or stock whether
now or hereafter authorized, unless otherwise provided by
the Board of Directors prior to issuance of any shares of
that class; and
(e) is authorized to adopt
procedures for determination of and to maintain constant
the net asset value of shares of any class of the
Corporation's stock.
(2) Notwithstanding any provision of the
Maryland General Corporation Law requiring a greater
proportion than a majority of the votes of all classes or
of any class of the Corporation's stock entitled to be
cast in order to take or authorize any action, any such
action may be taken or authorized upon the concurrence of
a majority of the aggregate number of votes entitled to
be cast thereon subject to any applicable requirements of
the Investment Company Act of 1940, as from time to time
in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto.
(3) The presence in person or by proxy of
the holders of shares entitled to cast one-third of the
votes entitled to be cast (without regard to class) shall
constitute a quorum at any meeting of the stockholders.
(4) Any determination made in good faith
by or pursuant to the direction of the Board of
Directors, as to the amount of the assets, debts,
obligations, or liabilities of the Corporation, as to the
amount of any reserves or charges set up and the
propriety thereof, as to the time or purpose for creating
such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not
any debt, obligation, or liability for which such
reserves or charges shall have been created shall be then
or thereafter required to be paid or discharged), as to
the value of or the method of valuing any investment
owned or held by the Corporation, as to market value or
fair value of any investment or fair value of any other
asset of the Corporation, as to the allocation of any
asset of the Corporation to a particular class or classes
of the Corporation's stock, as to the charging of any
liability of the Corporation to a particular class or
classes of the Corporation's stock, as to the number of
shares of the Corporation outstanding, as to the
estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate
investments in orderly fashion, or as to any other
matters relating to the issue, sale, redemption or other
acquisition or disposition of investments or shares of
the Corporation and all holders of its shares, past,
present and future, and shares of the Corporation are
issued and sold on the condition and understanding that
any and all such determinations shall be binding as
aforesaid.
EIGHTH: (1) To the full extent that limitations
on the liability of directors and officers are permitted
by the Maryland General Corporation law, no director or
officer of the Corporation shall have any liability to
the Corporation or its stockholders for money damages.
This limitation on liability applies to events occurring
at the time a person serves as a director or officer of
the Corporation whether or not that person is a director
or officer at the time of any proceeding in which
liability is asserted.
(2) The Corporation shall indemnify and
advance expenses to its currently acting and its former
directors to the full extent that indemnification of
directors is permitted by the Maryland General
Corporation law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as
its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law,
resolution or agreement make further provision for
indemnification of directors, officers, employees and
agents to the full extent permitted by the Maryland
General Corporation law.
(3) No provision of this Article shall be
effective to protect or purport to protect any director
or officer of the Corporation against any liability to
the Corporation or its stockholders to which he or she
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or
her office.
(4) References to the Maryland General
Corporation Law in this Article are to that law as from
time to time amended. No amendment to the Charter of the
Corporation shall affect any right of any person under
this Article based on any event, omission or proceeding
prior to the amendment.
NINTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in
its Charter in the manner now or hereafter prescribed by
the laws of the State of Maryland, including any
amendment which alters the contract rights, as expressly
set forth in the Charter, of any outstanding stock, and
all rights conferred upon stockholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed
these Articles of Incorporation and does hereby
acknowledge that the adoption and signing are his act.
/s/ Lee A. Pickard
Dated: 4/18/97
BY-LAWS
OF
SPIRIT OF AMERICA INVESTMENT FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The Corporation
shall have a principal office in the City of Baltimore, State of
Maryland.
Section 2. Other Offices. The Corporation may have offices
also at such other places within and without the State of Maryland
as the Board of Directors may from time to time determine or as
the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall
be held at such place, either within the State of Maryland or at
such other place within the United States, as shall be fixed from
time to time by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of stockholders
shall be held on a date fixed from time to time by the Board of
Directors not less than ninety nor more than one hundred twenty
days following the end of each fiscal year of the Corporation, for
the election of directors and the transaction of any other
business within the powers of the Corporation; provided, however,
that the Corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not
required to be acted on by stockholders under the Investment
Company Act of 1940.
Section 3. Notice of Annual Meeting. Written or printed
notice of the annual meeting, stating the place, date and hour
thereof, shall be given to each stockholder entitled to vote
thereat and each other stockholder entitled to notice thereof not
less than ten nor more than ninety days before the date of the
meeting.
Section 4. Special Meetings. Special meetings of
stockholders may be called by the chairman, the president or by
the Board of Directors and shall be called by the secretary upon
the written request of holders of shares entitled to cast not less
than twenty-five percent of all the votes entitled to be cast at
such meeting. Such request shall state the purpose or purposes of
such meeting and the matters proposed to be acted on thereat. In
the case of such request for a special meeting, upon payment by
such stockholders to the Corporation of the estimated reasonable
cost of preparing and mailing a notice of such meeting, the
secretary shall give the notice of such meeting. The secretary
shall not be required to call a special meeting to consider any
matter which is substantially the same as a matter acted upon at
any special meeting of stockholders held within the preceding
twelve months unless requested to do so by holders of shares
entitled to cast not less than a majority of all votes entitled to
be cast at such meeting. Notwithstanding the foregoing, special
meetings of stockholders for the purpose of voting upon the
question of removal of any director or directors of the
Corporation shall be called by the secretary upon the written
request of holders of shares entitled to cast not less than ten
percent of all the votes entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or printed
notice of a special meeting of stockholders, stating the place,
date, hour and purpose thereof, shall be given by the secretary to
each stockholder entitled to vote thereat and each other
stockholder entitled to notice thereof not less than ten nor more
than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings. Business transacted
at any special meeting of stockholders shall be limited to the
purposes stated in the notice thereof.
Section 7. Quorum. The holders of shares entitled to cast
one-third of the votes entitled to be cast thereat, present in
person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business,
except with respect to any matter which, under applicable statutes
or regulatory requirements, requires approval by a separate vote
of one or more classes of stock, in which case the presence in
person or by proxy of the holders of one-third of the shares of
stock of each class required to vote as a class on the matter
shall constitute a quorum.
Section 8. Voting. When a quorum is present at any meeting,
the affirmative vote of a majority of the votes cast, or, with
respect to any matter requiring a class vote, the affirmative vote
of a majority of the votes cast of each class entitled to vote as
a class on the matter, shall decide any question brought before
such meeting (except that directors may be elected by the
affirmative vote of a plurality of the votes cast), unless the
question is one upon which by express provision of the Investment
Company Act of 1940, as from time to time in effect, or other
statutes or rules or orders of the Securities and Exchange
Commission or any successor thereto or of the Articles of
Incorporation a different vote is required, in which case such
express provision shall govern and control the decision of such
question.
Section 9. Proxies. Each stockholder shall at every meeting
of stockholders be entitled to one vote in person or by proxy for
each share of the stock having voting power held by such
stockholder, but no proxy shall be voted after eleven months from
its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, to express
consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in
advance, a record date which shall be not more than ninety days
and, in the case of a meeting of stockholders, not less than ten
days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. In lieu of
fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period, but not
to exceed, in any case, twenty days. If the stock transfer books
are closed for the purpose of determining stockholders entitled to
notice of or to vote at a meeting of stockholders, such books
shall be closed for at least ten days immediately preceding such
meeting. If no record date is fixed and the stock transfer books
are not closed for the determination of stockholders: (1) The
record date for the determination of stockholders entitled to
notice of, or to vote at, a meeting of stockholders shall be at
the close of business on the day on which notice of the meeting of
stockholders is mailed or the day thirty days before the meeting,
whichever is the closer date to the meeting; and (2) The record
date for the determination of stockholders entitled to receive
payment of a dividend or an allotment of any rights shall be at
the close of business on the day on which the resolution of the
Board of Directors, declaring the dividend or allotment of rights,
is adopted, provided that the payment or allotment date shall not
be more than sixty days after the date of the adoption of such
resolution.
Section 11. Inspectors of Election. The directors, in
advance of any meeting, may, but need not, appoint one or more
inspectors to act at the meeting or any adjournment thereof. If an
inspector or inspectors are not appointed, the person presiding at
the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by
the directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before entering
upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented
at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with
the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting or any stockholder,
the inspector or inspectors, if any, shall make a report in
writing of any challenge, question or matter determined by him or
them and execute a certificate of any fact found by him or them.
Section 12. Informal Action by Stockholders. Except to the
extent prohibited by the Investment Company Act of 1940, as from
time to time in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto, any action required
or permitted to be taken at any meeting of stockholders may be
taken without a meeting if a consent in writing, setting forth
such action, is signed by all the stockholders entitled to vote on
the subject matter thereof and any other stockholders entitled to
notice of a meeting of stockholders (but not to vote thereat) have
waived in writing any rights which they may have to dissent from
such action, and such consent and waiver are filed with the
records of the Corporation.
Section 13. Adjournment. Any meeting of the stockholders may
be adjourned from time to time, without notice other than by
announcement at the meeting at which the adjournment was taken. In
the absence of a quorum, the stockholders present in person or by
proxy, by majority vote of those present and without notice other
than by announcement at the meeting, may adjourn the meeting from
time to time as provided for in this Section 13 of Article II. At
any adjourned meeting at which a quorum shall be present, any
action may be taken that could have been taken at the meeting
originally called. A meeting of the stockholders may not be
adjourned without further notice to a date more than 120 (one
hundred and twenty) days after the original record date determined
pursuant to Section 10 of this Article II.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of directors
constituting the entire Board of Directors (which initially was
fixed at one in the Corporation's Articles of Incorporation) may
be increased or decreased from time to time by the vote of a
majority of the entire Board of Directors within the limits
permitted by law but at no time may be more than twenty, but the
tenure of office of a director in office at the time of any
decrease in the number of directors shall not be affected as a
result thereof. The directors shall be elected to hold offices at
the annual meeting of stockholders, except as provided in Section
2 of this Article, and each director shall hold office until the
next annual meeting of stockholders or until his successor is
elected and qualified. Any director may resign at any time upon
written notice to the Corporation. Any director may be removed,
either with or without cause, at any meeting of stockholders duly
called and at which a quorum is present by the affirmative vote of
the majority of the votes entitled to be cast thereon, and the
vacancy in the Board of Directors caused by such removal may be
filled by the stockholders at the time of such removal. Directors
need not be stockholders.
Section 2. Vacancies and Newly-Created Directorships. Any
vacancy occurring in the Board of Directors for any cause other
than by reason of an increase in the number of directors may be
filled by a majority of the remaining members of the Board of
Directors although such majority is less than a quorum. Any
vacancy occurring by reason of an increase in the number of
directors may be filled by a majority of the entire Board of
Directors then in office. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until
the next annual meeting of stockholders or until his successor is
elected and qualifies.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the
Corporation or any committee thereof may hold meetings, both
regular and special, either within or without the State of
Maryland. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time
to time be determined by the Board of Directors. Special meetings
of the Board of Directors may be called by the chairman, the
president or by two or more directors. Notice of special meetings
of the Board of Directors shall be given by the secretary to each
director at least three days before the meeting if by mail or at
least 24 hours before the meeting if given in person or by
telephone or by telegraph. The notice need not specify the
business to be transacted.
Section 5. Quorum and Voting. During such times when the
Board of Directors shall consist of more than one director, a
quorum for the transaction of business at meetings of the Board of
Directors shall consist of two of the directors in office at the
time but in no event shall a quorum consist of less than one-third
of the entire Board of Directors. The action of a majority of the
directors present at a meeting at which a quorum is present shall
be the action of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum
shall be present.
Section 6. Committees. The Board of Directors may appoint
from among its members an executive committee and other committees
of the Board of Directors, each committee to be composed of two or
more of the directors of the Corporation. The Board of Directors
may delegate to such committees any of the
powers of the Board of Directors except those which may not by law
be delegated to a committee. Such committee or committees shall
have the name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Unless the Board of
Directors designates one or more directors as alternate members of
any committee, who may replace an absent or disqualified member at
any meeting of the committee, the members of any such committee
present at any meeting and not disqualified from voting may,
whether or not they constitute a quorum, appoint another member of
the Board of Directors to act at the meeting in the place of any
absent or disqualified member of such committee. At meetings of
any such committee, a majority of the members or alternate members
of such committee shall constitute a quorum for the transaction of
business and the act of a majority of the members or alternate
members present at any meeting at which a quorum is present shall
be the act of the committee.
Section 7. Minutes of Committee Meetings. The committees
shall keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as
the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee,
provided, however, that such written consent shall not constitute
approval of any matter which pursuant to the-Investment Company
Act of 1940 and the rules thereunder requires the approval of
directors by vote cast in person at a meeting.
Section 9. Meetings by Conference Telephone. The members of
the Board of Directors or any committee thereof may participate in
a meeting of the Board of Directors or committee by means of a
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and such participation shall constitute
presence in person at such meeting, provided, however, that such
participation shall not constitute presence in person with respect
to matters which pursuant to the Investment Company Act of 1940
and the rules thereunder require the approval of directors by vote
cast in person at a meeting.
Section 10. Fees and Expenses. The directors may be paid
their expenses of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, a stated salary as director or
such other compensation as the Board of Directors may approve. No
such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed
like reimbursement and compensation for attending committee
meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and stockholders
mailed to them at their post office addresses appearing on the
books of the Corporation shall be deemed to be given at the time
when deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is required
to be given under the provisions of the statutes, of the Articles
of Incorporation or of these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed the
equivalent of notice and such waiver shall be filed with the
records of the meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the
person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors at its first meeting after each
annual meeting of stockholders and shall be a chairman of the
Board of Directors, a president, a secretary and a treasurer. The
Board of Directors may choose also such vice presidents and
additional officers or assistant officers as it may deem
advisable. Any number of offices, except the offices of president
and vice president and chairman and vice president, may be held by
the same person. No officer shall execute, acknowledge or verify
any instrument in more than one capacity if such instrument is
required by law to be executed, acknowledged or verified by two or
more officers.
Section 2. Other Officers and Agents. The Board of Directors
may appoint such other officers and agents as it desires who shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time
by the Board of Directors.
Section 3. Tenure of Officers. The officers of the
Corporation shall hold office at the pleasure of the Board of
Directors. Each officer shall hold his office until his successor
is elected and qualifies or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to
the Corporation. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors
when, in its judgment, the best interests of the Corporation will
be served thereby. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be
filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman
of the Board of Directors shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be the chief
executive officer and shall have general and active management of
the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He
shall be ex officio a member of all committees designated by the
Board of Directors except as otherwise determined by the Board of
Directors. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
Section 5. President. The president shall act under the
direction of the chairman and in the absence or disability of the
chairman shall perform the duties and exercise the powers of the
chairman. He shall perform such other duties and have such other
powers as the chairman or the Board of Directors may from time to
time prescribe. He shall execute on behalf of the Corporation, and
may affix the seal or cause the seal to be affixed to, all
instruments requiring such execution except to the extent that
signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the
Corporation.
Section 6. Vice Presidents. The vice presidents shall act
under the direction of the chairman and in the absence or
disability of the president shall perform the duties and exercise
the powers of the president. They shall perform such other duties
and have such other powers as the chairman or the Board of
Directors may from time to time prescribe. The Board of Directors
may designate one or more executive vice presidents or may
otherwise specify the order of seniority of the vice presidents
and, in that event, the duties and powers of the president shall
descend to the vice presidents in the specified order of
seniority.
Section 7. Secretary. The secretary shall act under the
direction of the chairman. Subject to the direction of the
chairman he shall attend all meetings of the Board of Directors
and all meetings of stockholders and record the proceedings in a
book to be kept for that purpose and shall perform like duties for
the committees designated by the Board of Directors when required.
He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the
chairman or the Board of Directors. He shall keep in safe custody
the seal of the Corporation and shall affix the seal or cause it
to be affixed to any instrument requiring it.
Section 8. Assistant Secretaries. The assistant secretaries
in the order of their seniority, unless otherwise determined by
the chairman or the Board of Directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the
powers of the secretary. They shall perform such other duties and
have such other powers as the chairman or the Board of Directors
may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the
direction of the chairman. Subject to the direction of the
chairman he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the funds
of the Corporation as may be ordered by the chairman or the Board
of Directors, taking proper vouchers for such disbursements, and
shall render to the chairman and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an
account of all his transactions as treasurer and of the financial
condition of the Corporation.
Section 10. Assistant Treasurers. The assistant treasurers
in the order of their seniority, unless otherwise determined by
the chairman or the Board of Directors, shall, in the absence or
disability of the treasurer, perform the duties and exercise the
powers of the treasurer. They shall perform such other duties and
have such other powers~as the chairman or the Board of Directors
may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation
who has made full payment of the consideration for such stock
shall be entitled upon request to have a certificate, signed by,
or in the name of the Corporation by, the chairman, the president
or a vice president and countersigned by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of
the Corporation, certifying the number and, if additional shares
of stock should be authorized, the class of whole shares of stock
owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation may
issue fractions of a share of stock. Fractional shares of stock
shall have proportionately to the respective fractions represented
thereby all the rights of whole shares, including the right to
vote, the right to receive dividends and distributions and the
right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or all the
signatures on a certificate may be a facsimile. In case any
officer who has signed or whose facsimile signature has been
placed upon a certificate shall cease to be such officer before
such certificate is issued, it may be issued with the same effect
as if he were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed
to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The Board
of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of any affidavit of that fact by the
person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner
of such lost, stolen or destroyed certificate or certificates, or
his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the
registered owner of shares, and if a certificate has been issued
to represent such shares upon surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares of
stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the
duty of the Corporation, if it is satisfied that all provisions of
the Articles of Incorporation, of the By-Laws and of the law
regarding the transfer of shares have been duly complied with, to
record the transaction upon its books, issue a new certificate to
the person entitled thereto upon request for such certificate, and
cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the
owner of shares to be the exclusive owner for all purposes
including voting and dividends, and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for such other purpose as the Board of Directors
shall think conducive to the interest of the Corporation, and the
Board of Directors may modify or abolish any such reserve.
Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Articles of
Incorporation and of applicable law, be declared by the Board of
Directors at any time. Dividends may be paid in cash, in property
or in shares of the Corporation's stock, subject to the provisions
of the Articles of Incorporation and of applicable law.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders
during each fiscal year shall be determined by the Board of
Directors. Each such payment shall be accompanied by a statement
as to the source of such payment, to the extent required by law.
Section 4. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from
time to time designate.
Section 5. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 6. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Maryland." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in
another manner reproduced.
Section 7. Insurance Against Certain Liabilities. The
Corporation shall not bear the cost of insurance that protects or
purports to protect directors and officers of the Corporation
against any liabilities to the Corporation or its security holders
to which any such director or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers. The
Corporation shall indemnify its directors to the full extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify its officers to
the same extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify its directors
and officers who while serving as directors or officers also serve
at the request of the Corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee
benefit plan to the full extent consistent with law. The
indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect
any such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
Section 2. Advances. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him
in connection with the matter as to which he is seeking
indemnification in the manner and to the full extent permissible
under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and
a written undertaking to repay any such advance if it should
ultimately be determined that the standard of conduct has not been
met. In addition, at least one of the following additional
conditions shall be met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured
against losses arising by reason of the advance; or (c) a majority
of a quorum of directors of the Corporation who are neither
"interested persons" 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 independent
legal counsel, in a written opinion, shall have determined, based
on a review of facts readily available to the Corporation at the
time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall
determine, or cause to be determined, in a manner consistent with
the Maryland General Corporation Law, whether the standards
required by this Article have been met. Indemnification shall be
made only following: (a) a final decision on the merits by a court
or other body before whom the proceeding was brought that the
person to be indemnified was not liable by reason of disabling
conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person
to be indemnified was not liable by reason of disabling conduct by
(i) the vote of a majority of a quorum of disinterested non-party
directors or (ii) an independent legal counsel in a written
opinion.
Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
advanced to such employees or agents, as may be provided by action
of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors may make
further provision consistent with law for indemnification and
advance of expenses to directors, officers, employees and agents
by resolution, agreement or otherwise. The indemnification
provided by this Article shall not be deemed exclusive of any
other right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled under any
insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise. The rights provided to any
person by this Article shall be enforceable against the
Corporation by such person who shall be presumed to have relied
upon it in serving continuing to serve as a director, officer,
employee, or agent as provided above.
Section 6. Amendment s. References in this Article are to
the Maryland General Corporation Law and to the Investment Company
Act of 1940 as from time to time amended. No amendment of these
By-laws shall affect any right of any person under this Article
based on any event, omission or proceeding prior to the amendment.
ARTICLE IX
Amendments
The Board of Directors shall have the power to make, alter
and repeal By-laws of the Corporation.
