Boyar Value Fund
[LOGO]
Prospectus
March 25, 1998
BOYAR VALUE FUND, INC.
Investment Adviser
Boyar Asset Management, Inc.
35 East 21st Street
New York, New York 10010
Distributor
Ladenburg Thalmann & Co. Inc.
590 Madison Avenue
New York, New York 10022
Administrator
Countrywide Fund Services, Inc.
312 Walnut Street
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Independent Auditors
Ernst & Young LLP
1330 Chiquita Center
Cincinnati, Ohio 45202
Board of Directors
Henry A. Alpert
Mark A. Boyar
Richard Finkelstein
A. F. Petrocelli
Jay R. Petschek
Jeffrey S. Silverman
Fund Manager
Ladenburg Thalmann Fund Management Inc.
590 Madison Avenue
New York, New York 10022
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, the Fund's
Statement of Additional Information or the Fund's official sales literature in
connection with the offering of shares of the Fund, and if given or made, such
other information or representations must not be relied upon as having been
authorized by the Fund. This Prospectus does not constitute an offer of the
shares of the Fund in any state in which or, to any person to whom, such offer
may not lawfully be made.
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PROSPECTUS
March 25, 1998
BOYAR VALUE FUND, INC.
590 Madison Avenue, New York, NY 10022
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Boyar Value Fund, Inc. (the "Fund") is a no-load mutual fund that seeks
long-term capital appreciation, which it pursues by investing primarily in
equity securities of companies that are believed by the Fund's investment
adviser to be intrinsically undervalued.
Investment advisory services for the Fund are provided by Boyar Asset
Management, Inc. (the "Adviser") and the Fund is managed by Ladenburg Thalmann
Fund Management Inc. (the "Manager").
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus carefully and retain it for future reference.
Additional information about the Fund, contained in a document entitled
"Statement of Additional Information", has been filed with the Securities and
Exchange Commission ("SEC") and is available for reference, along with other
related materials, on the SEC Internet Web site (http://www.sec.gov). The
Statement of Additional Information is also available upon request and without
charge by calling the Fund at 1-800-266-5566. Information regarding the status
of shareholder accounts may also be obtained by calling the Fund at the same
number. The Fund maintains a Web site at www.boyarvalue.com. The Statement of
Additional Information bears the same date as this Prospectus and is
incorporated by reference into this Prospectus.
Shares of the Fund are not deposits or obligations of or guaranteed or endorsed
by any bank, and shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.
Investments in shares of the Fund involve investment risks, including the
possible loss of the principal amount invested.
CONTENTS
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Prospectus Summary ....................................................... 2
The Fund's Expenses ...................................................... 4
Investment Objective and Policies ........................................ 5
Certain Securities and Investment Techniques ............................. 8
Risk Factors and Special Considerations .................................. 10
Management of the Fund ................................................... 11
How to Purchase Shares ................................................... 14
How to Redeem Shares ..................................................... 16
How Net Asset Value is Determined ........................................ 17
Dividends, Distributions and Taxes ....................................... 17
Additional Information ................................................... 19
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
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The Fund. Boyar Value Fund, Inc. (the "Fund"), a corporation organized and
existing under the laws of the State of Maryland, is a no-load, open-end
registered investment company commonly known as a "mutual fund" with its own
investment objective and policies. The Fund operates as a diversified investment
company. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this Prospectus.
Investment Objective and Policies. The Fund's investment objective is long-term
capital appreciation through investment in equity securities which are believed
by the Adviser to be intrinsically undervalued. Intrinsic value, as the Adviser
defines it, is the estimated current worth that would accrue to the stockholders
of a company, either through liquidation of corporate assets upon termination of
operations, or through the sale or merger of the entire enterprise as a
continuing business.
The Adviser believes that stock market prices often fail to accurately reflect
the underlying intrinsic values of companies. To find undervalued stocks, the
Adviser evaluates a corporation and its assets as any acquisition-minded
business executive would. The Adviser takes the company's balance sheet, tears
it apart, and reconstructs it in accordance with economic reality - as opposed
to generally accepted accounting principles. If the Adviser determines that he
could purchase the assets of a company at a significant discount to intrinsic
value, the Adviser believes that after a reasonable period of time, either the
stock market will accurately reflect those values, or the assets of the
corporation will be acquired by a third party.
The Adviser utilizes a "Buy and Hold" investment strategy which reflects the
determination to grow capital and maintain purchasing power by holding stocks
for the long term. A long-term orientation may seem stodgy, but this approach is
as important to investment success as picking the right stocks at the right
price and at the right time. Holding the equity of good companies purchased at
bargain prices allows compounding to work without the return-eroding effects of
commissions and capital gains taxes. The Adviser employs a variety of different
investment strategies and techniques to uncover opportunities for the Fund. See
"Investment Objective and Policies."
Risk Factors and Special Considerations. Because the Fund will invest primarily
in equity securities, it will be subject to general conditions prevailing in the
securities markets and the Fund's net asset value will fluctuate with changes in
the market prices of its portfolio securities. Further risks associated with
investment in the Fund may arise from the Fund's investment in the securities of
small and medium-sized companies and foreign securities and the Fund's ability
to write call options and purchase put options, although the Fund plans to write
and purchase options for hedging purposes only.
The Fund may purchase securities that have been researched by Asset Analysis
Focus (the research service published by Mark Boyar & Company, Inc., an entity
owned by Mr. Mark A. Boyar, the chief investment officer of the Fund) and it may
also purchase securities in combination with other accounts managed by the
Adviser. These practices may have an impact on the price and availability of the
securities to be purchased by the Fund. See "Risk Factors and Special
Considerations."
Management of the Fund. The business and affairs of the Fund are supervised
under the direction of the Board of Directors which is responsible for the
overall management of the Fund. Ladenburg Thalmann Fund Management Inc. is
responsible for managing the daily business operations of the Fund. Boyar Asset
Management, Inc. provides continuous advisory services to the Fund and Ladenburg
Thalmann & Co. Inc. acts as distributor of the Fund's shares. The Fund has
employed Countrywide Fund Services, Inc. to provide administration, accounting
and transfer agent services. See "Management of the Fund."
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Purchase of Shares. Shares are offered "no-load," which means they may be
purchased without the imposition of any front-end or contingent deferred sales
charges or redemption fees. The minimum initial investment in the Fund is
normally $5,000 ($2,500 for tax-deferred retirement plans). Subsequent
investment in the Fund must be $1,000 or more. Shares may be purchased by
individuals or organizations and may be appropriate for use in retirement plans
and automatic investment plans. See "How to Purchase Shares."
Redemption of Shares. There is currently no charge for the redemption of shares
of the Fund. Shares may be redeemed on each day that the Fund is open for
business. Redemption orders received by the Fund's administrator prior to the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time) will redeem shares at the net asset value per share determined as
of that business day's close of trading. Otherwise, redemption orders will
redeem shares on the next business day. See "How to Redeem Shares."
Dividends and Distributions. Net investment income of the Fund and net realized
long-term capital gains, if any, are distributed annually. Shareholders may
elect to receive dividends and capital gain distributions in cash or such
dividends and capital gain distributions may be reinvested in additional Fund
shares. See "Dividends, Distributions and Taxes."
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THE FUND'S EXPENSES
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The following table lists the costs that an investor will incur, either directly
or indirectly, as a shareholder of the Fund, based upon the Fund's projected
annual operating expenses:
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases of share
(as a percentage of offering price) .......................... None
Redemption Fee .................................................. None 1
Annual Operating Expenses (as percentage of average net assets)
Management and advisory fees ................................... 1.00%
12b-1 fees (distribution and service fees)2 ..................... 2.25%
Other expenses (after expense reimbursements)3 .................. 3.50%
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Total Fund Operating Expenses
(after expense waivers and reimbursements)3 ................... 1.75%
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1 A wire transfer fee is charged by the Fund's custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $9.
2 The Fund bears an annual Rule 12b-1 service fee of .25% of the value of the
average daily net assets. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
3 The Manager and the Adviser are voluntarily absorbing certain expenses
(excluding litigation, indemnification, taxes and other extraordinary
expenses) that would cause all "Other expenses" to exceed .50%. It is
currently anticipated that this arrangement will continue until further
notice to shareholders. Based on the Fund's projected annualized average net
assets, if these expenses are not absorbed, "Other expenses" would be 1.20%
and "Total Fund Operating Expenses" would be 2.45%.
The nature of the services for which the Fund pays management and advisory fees
is described below under "Management of the Fund." The percentage of "Other
expenses" in the table above is based on annualized estimates of expenses for
the Fund's initial fiscal year and includes fees for shareholder services,
custodial fees, legal and accounting fees and registration fees, net of expense
reimbursements.
Example:
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical $1,000 investment in the Fund assuming (1) a 5% annual return,
(2) payment of the shareholder transaction expenses and annual Fund operating
expenses set forth in the table above and (3) complete redemption at the end of
the period.
1 Year 3 Years
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$18.38 $56.90
The above example is intended to assist an investor in understanding various
costs and expenses that the investor would bear upon becoming a shareholder of
the Fund. The example should not be considered to be a representation of past or
future expenses. Actual expenses of the Fund may be greater or less than those
shown above. The assumed 5% annual return shown in the example is hypothetical
and should not be considered to be a representation of past or future annual
return; the actual return of the Fund may be greater or less than the assumed
return.
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INVESTMENT OBJECTIVE AND POLICIES
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In General
The investment objective of the Fund is long-term capital appreciation, which it
pursues by investing primarily in equity securities which are believed by the
Adviser to be intrinsically undervalued. The Fund seeks to achieve its
investment objective by investing substantially all, but under normal market
conditions no less than 65 percent, of its total assets in equity securities,
including common stock, preferred stock or securities convertible into or
exchangeable for common stock. It is anticipated that the equity securities in
which the Fund will invest will be traded on domestic and foreign securities
exchanges or on the over-the-counter markets. The Fund may also make temporary
investments in investment grade corporate debt obligations and U.S. Government
securities for defensive purposes when it believes market conditions warrant and
as a cash management technique. See "Temporary Investments." In addition, the
Fund may engage in securities lending transactions in order to generate income
to cover Fund expenses. See "Lending of Securities." The Fund's investment
objective may not be changed without shareholder approval. There is no assurance
that the Fund's investment objective will be achieved.
Because the Fund will invest primarily in equity securities, it will be subject
to general conditions prevailing in securities markets and the net asset value
of the Fund's shares will fluctuate with changes in the market prices of its
portfolio securities.
Investment Strategy
The Adviser seeks out intrinsically undervalued corporations and purchases their
shares at low prices relative to their perceived inherent worth. This can lead
to the potential for significant capital appreciation. The intrinsic value of a
corporation is the estimated current worth that would accrue to the stockholders
of a company, either through liquidation of corporate assets upon termination of
operations, or through the sale or merger of the entire enterprise as a
continuing business. In the Adviser's opinion, within an investment time horizon
of three to five years, typically either the stock market will accurately
reflect a corporation's intrinsic value or the assets of the corporation will be
acquired by a third party. From 1975 through December 31, 1997, approximately 43
percent of the corporations that the chief investment officer of the Adviser,
Mr. Mark A. Boyar, has extensively researched and written in-depth research
reports about in Asset Analysis Focus have been acquired or liquidated (i.e.,
the assets were sold to a third party and the proceeds of the sale were
distributed to the shareholders) at a premium to the price of the company's
shares at the time the initial research report appeared in Asset Analysis Focus.
Of the companies which were acquired or liquidated, the average time period from
the date the initial research report was issued until a transaction actually
occurred was 5.7 years.
This "buy and hold" investment strategy reflects the determination to grow
capital and maintain purchasing power by holding stocks for the long term. A
long-term orientation may sound stodgy, but this approach is as important to
investment success as picking the right stocks at the right price and at the
right time. Holding the equity of good companies purchased at bargain prices
allows compounding to work without the return-eroding effects of commissions and
capital gains taxes. Buying and holding stocks not only postpones the payment of
capital gains taxes but there are also added positive effects on the compounding
rate. The Adviser believes that by reducing the number of transactions generated
by profit taking, all the money invested is still working for a better return
until future tax liability is incurred.
There is an advantage to the "buy and hold" investment strategy assuming various
rates of return. Frequent securities trading may increase the tax liabilities of
investors and reduce investors' after tax return by not taking advantage of
lower capital gains rates and the advantage of deferring payment of Federal tax
liabilities. Under a "buy and hold" strategy, tax liabilities may be deferred to
the future and, when paid, may be paid at capital gains rates that may be lower
than ordinary tax rates. There is no guarantee that Federal capital gains rates
will remain lower than Federal ordinary tax rates.
To hasten the recognition factor of an intrinsically undervalued corporation's
shares in the marketplace, the Adviser also looks for companies that have some
type of catalyst or trigger, for example: a corporation that has undergone, or
is about to undergo, an asset redeployment program, resulting in potentially
greater return on assets; a company whose chief operating officer and major
stockholder is relatively old and has no heir to take over the company upon his
death or retirement; or a corporation that is engaged in more than one business,
with the possibility that the second business might be spun off to the
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existing shareholders. The Adviser generally will avoid investing in
corporations whose shares are widely held by institutions or closely followed by
investment analysts, because the likelihood of a great disparity between stock
market value and intrinsic value is remote.
At the time of the purchase of the corporation's shares, the Adviser determines
the value of all of the assets and liabilities of the corporation and thereby
establishes a potential selling price for the corporation's common stock. The
Adviser reviews the company's asset base from time to time (especially when the
common stock of a corporation nears its selling price target), to carefully
determine if something has changed to alter the Adviser's opinion -- if not, the
security is sold when it meets its fully valued price.
The Adviser may alternatively sell covered call options or buy put options with
exercise prices at a stock's sell target price, although it is not anticipated
that the value of the underlying securities on which covered call and put
options will be written or purchased, respectively, will exceed 5 percent of the
Fund's total assets in the foreseeable future. See "Stock Options and Currency
Exchange Transactions" in the Statement of Additional Information.
The Adviser employs a variety of different investment strategies to uncover
investment opportunities for the Fund, including the following:
1. Hidden Assets
"Hidden" assets are assets whose current values are undervalued on a
corporation's financial statements -- a situation which may lead to a
disparity between market value and intrinsic worth. Hidden assets include
real estate -- buildings and undeveloped acreage, reserves of natural
resources -- coal, gas, oil and timber, cellular or cable franchises and
inventory reserves resulting from the last-in-first-out method of inventory
accounting. The Adviser adjusts the value of these assets to their current
market value to calculate the intrinsic worth of the corporation, which may
be much higher than the value the stock market accords them.
2. Underpriced Businesses
Excessive pessimism about a particular industry or a specific company may
result in extreme disparities between the stock market value of a
corporation and the price that would be placed upon the company if the
entire enterprise were acquired by a knowledgeable private investor. When
employing this method of valuation, the Adviser considers the subject
corporation's historical earning power, present product mix and financial
strength as well as the prices at which similar corporations have been
acquired in the recent past. The Adviser's findings help place an
appropriate value on the shares of the subject company.
3. Undervalued Franchises
A number of corporations have, over time, created valuable consumer
franchises. Their products are recognized easily by consumers around the
world. Such franchises are virtually impossible for a potential competitor
to duplicate. These "franchise" corporations often can raise prices or even
charge a premium for their products or services without losing market share.
The value of this competitive advantage may not be adequately reflected in
the price of the company's shares.
4. Selling For Less Than Net Working Capital
The minimum liquidation value of a corporation is, in most instances, its
net working capital value. This amount is determined by subtracting from
current assets all liabilities senior to the common stock, including current
liabilities, long term debt, preferred stock, capitalized lease obligations
and certain pension liabilities. The stock market will, at pessimistic
extremes, value individual securities at a discount to their net working
capital on a per share basis. Investments made at these levels provide an
opportunity to purchase securities below their liquidating value and acquire
the pro-rata value of property, plant and equipment at zero cost.
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5. "Fallen Angels"
Well known corporations that were once the "darlings" of Wall Street, may
fall out of favor with the investment community, causing their stock prices
to plummet to unrealistically low levels. The Adviser may purchase shares of
such companies if it determines that the fundamentals of such a concern are
not permanently impaired.
6. Restructuring Plays, Breakups and Spin-offs
A company interested in enhancing shareholder value may spin off a portion
of its assets to current stockholders through the creation of a new public
entity. The common stock of the newly spun-off company often trades
temporarily at a substantial discount to its underlying net asset value.
This is in part because this new entity is not immediately followed by Wall
Street analysts. However, the newly focused "pure play" companies often
perform well and soon receive more coverage than they ever would have as one
ungainly and difficult to analyze conglomerate.
7. Bankruptcies
An over-leveraged company that declares bankruptcy can purge itself of
excess debt and then emerge as a more competitive enterprise. The stigma of
bankruptcy, however, can sometimes depress the stock prices of those
companies to bargain levels.
8. Under-Followed Companies
The Adviser normally invests in the equity of corporations not widely held
by institutions or closely followed by other investment analysts. The
Adviser believes that this is the area where the stock market is most
inefficient in providing investors the opportunity to find unrecognized
values. High-profile, popular companies are monitored carefully and
consistently by portfolio managers and investment analysts. The likelihood
of a profitable disparity developing between the stock market values and the
intrinsic values of these businesses is remote.
9. Low Price to Earnings Ratios
The Adviser believes that the risk inherent in the stock selection process
can be reduced by purchasing common equity at price to earnings ratios that
are low relative to those that prevail in the general stock market. Earnings
disappointments rarely hurt low price to earnings common stocks for long
periods of time. On the other hand, positive earnings surprises usually
result in an increase of the price to earnings ratio.
10. Large Free Cash Flows
The Adviser favors companies that generate significantly more cash than they
need to finance day-to-day operations. Such companies can use this excess
cash to repurchase their own shares, increase dividends or make
acquisitions.
11. Insider Ownership
The Adviser will take positions in the common equity of corporations whose
executives buy and hold large amounts of the company's stock. Significant
insider ownership of a corporation's shares indicates that the interests of
the executives and managers who own those shares are aligned with the
interests of other shareholders and they have a powerful incentive to work
for the company's long-term success. On the other hand, insignificant
insider ownership can depress the shares of an otherwise good company
because its managers own too little equity in the business to care much
about maximizing shareholder value. The Adviser evaluates investments in
companies with extreme positions of insider ownership -- significant or
insignificant -- to aid in determining a company's intrinsic value.
Excessive non-stock and non-performance related compensation for a company's
top officers can also depress the shares of an otherwise good company. The
Adviser will not hesitate to assert its weight as a shareholder of a
business that is poorly managed.
In making investment selections, the Fund also focuses on certain fundamental
financial characteristics of a company, including debt to capital ratios and the
market capitalization of small-, medium- and large-sized companies. The Fund has
no policy regarding the minimum or maximum market capitalization of companies in
which it may invest.
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CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
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Portfolio Transactions
All orders for transactions in securities and options on behalf of the Fund are
placed with broker-dealers selected by the Adviser. Affiliates of the Manager or
the Adviser may serve as the Fund's broker in effecting portfolio transactions
on national securities exchanges and retain commissions in accordance with
certain regulations of the SEC. In addition, the Adviser may select
broker-dealers that provide it with research services and may cause the Fund to
pay these broker-dealers commissions that exceed those that other broker-dealers
may have charged, if it views the commissions as reasonable in relation to the
value of the brokerage and/or research services received.
Foreign Securities
Although the Fund will invest primarily in domestic securities, and has no
present intention of investing any significant portion of its assets in foreign
securities, it reserves the right to invest in foreign securities if the
purchase thereof at the time of purchase would not cause more than 15 percent of
the value of the Fund's total assets to be invested in foreign securities. See
"Foreign Securities" below.
Temporary Investments
The Fund has adopted a temporary defensive investment policy, which permits the
Fund to deviate temporarily from fundamental and non-fundamental investment
policies, without a shareholder vote or without prior contemporaneous
notification to shareholders, when significant adverse market, economic,
political or other circumstances require immediate action to avoid loss. The
Fund may invest up to 35 percent of its total assets and, when the Adviser
believes market conditions warrant a temporary defensive position, up to 100
percent of its total assets in corporate bonds rated at least Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Services
("S&P"), commercial paper rated at least Prime-2 by Moody's or A-2 by S&P and
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities or in repurchase agreements for any of the foregoing.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association, are supported by the "full
faith and credit" of the U.S. Government; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Export-Import Bank of the U.S., are supported by the right of
the issuer to borrow from the U.S. Treasury; and still others, such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law. Bonds rated Baa by Moody's and BBB by S&P,
while considered "investment grade" obligations, may have speculative
characteristics.
Repurchase Agreements
The Fund may invest in repurchase agreement transactions with member banks of
the Federal Reserve System and certain non-bank dealers. Repurchase agreements
are contracts under which the buyer of a security simultaneously commits to
resell the security to the seller at an agreed-upon price and date. Under the
terms of a typical repurchase agreement, the Fund would acquire any underlying
security for a relatively short period (usually not more than one week) subject
to an obligation of the seller to repurchase, and the Fund to resell, the
obligation at an agreed-upon price and time, thereby determining the yield
during the Fund's holding period. This arrangement results in a fixed rate of
return that is not subject to market fluctuations during the Fund's holding
period. The value of the underlying securities will at all times be at least
equal to the total amount of the purchase obligation, including interest. The
Fund bears a risk of loss in the event that the other party to a repurchase
agreement defaults on its obligations or becomes bankrupt and the Fund is
delayed in or prevented from exercising its right to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert this
right. The Adviser, acting under the supervision of the Fund's Board of
Directors (the "Board"), monitors the creditworthiness of those bank and
non-bank dealers with which the Fund enters into repurchase agreements to
evaluate this risk. A repurchase agreement is considered to be a loan under the
Investment Company Act of 1940, as amended (the "1940 Act").
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Lending of Securities
The Fund may lend its portfolio securities to broker-dealers and other financial
institutions pursuant to agreements requiring that the loans be continuously
secured by cash, letters of credit or U.S. Government securities of a value
equal to at least the fair market value of the securities lent. These loans will
not be made if as a result the aggregate of all outstanding loans exceeds 33-1/3
percent of the value of the Fund's total assets taken at current value.
Stock Options
To hedge against adverse market shifts, the Fund may purchase put options on
securities held in its portfolio. The Fund may also seek to increase its income
or may hedge a portion of its portfolio investments through writing (that is,
selling) "covered" call options. As the holder of a put option, the Fund will
have the right to sell the securities underlying the option and as the writer
(seller) of a call option, the Fund will have the obligation to sell the
securities underlying the option, in each case at the option's exercise price at
any time prior to, or on, the option's expiration date. A covered call option
contemplates that, for so long as the Fund is obligated as the writer of the
option, it will own (1) the underlying securities subject to the option or (2)
securities convertible into, or exchangeable without the payment of any
consideration for, the securities subject to the option. The value of the
underlying securities on which covered call and put options will be written or
purchased, respectively, at any one time by the Fund is not anticipated to
exceed 5 percent of the Fund's total assets.
The Fund may choose to exercise the options it holds, permit them to expire or
terminate them prior to their expiration by entering into closing sale or
purchase transactions. In entering into a closing transaction, the Fund would
sell or purchase an option of the same series as the one it has written or
purchased, respectively. See "Stock Options and Currency Exchange Transactions"
in the Statement of Additional Information.
Investment Restrictions
In order to limit investment risk, the Fund has adopted certain investment
restrictions that are changeable only by shareholder vote. These restrictions,
among other things, prohibit the Fund from: purchasing securities of any issuer,
other than U.S. Government securities and repurchase agreements collateralized
by U.S. Government securities, if the purchase would cause more than 5 percent
of the Fund's total assets, taken at market value, to be invested in the
securities of that issuer, except that 25 percent of the Fund's assets may be
invested without regard to this limit; purchasing more than 10 percent of the
voting securities of any issuer, except that 25 percent of the Fund's assets may
be invested without regard to this limit; purchasing securities on margin;
borrowing money or mortgaging or hypothecating the Fund's assets, although the
prohibition against borrowing does not prohibit limited short-term borrowings to
meet redemption requests and the prohibition against mortgaging or hypothecating
assets does not prohibit escrow arrangements contemplated by writing covered
call options; and concentrating more than 25 percent of the Fund's total assets
in any one industry. In addition, it is anticipated that the Fund will not
invest more than 15 percent of the Fund's net assets in restricted or illiquid
securities, including securities that are not readily marketable. This last
restriction may be changed by the Fund's Board.
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RISK FACTORS AND SPECIAL CONSIDERATIONS
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Equity Fluctuation
Because the major portion of the Fund's portfolio consists of common stocks, it
may be expected that its net asset value will be subject to greater fluctuation
than a portfolio containing mostly fixed income securities.
Small- and Medium-Sized Companies
There is no minimum or maximum market capitalization of the companies in which
the Fund may invest. Investing in securities of small- and medium-sized
companies may involve greater risks since these securities may have limited
marketability and, thus, may be more volatile than securities of larger, more
established companies or the market in general. Because small- and medium-sized
companies normally have fewer shares outstanding than larger companies, it may
be more difficult for the Fund to buy or sell significant amounts of these
shares without an unfavorable impact on prevailing prices. Small-sized companies
may have limited product lines, markets or financial resources and may lack
management depth. In addition, small- and medium-sized companies are typically
subject to a greater degree of changes in earnings and business prospects than
are larger, more established companies. There is typically less publicly
available information concerning small- and medium-sized companies than for
larger, more established ones. Although investing in securities of small- and
medium-sized companies offers potential for above-average returns if the
companies are successful, the risk exists that such companies will not succeed
and the prices of their shares could significantly decline in value.
Related Transactions
The Fund may purchase securities that have been researched by Asset Analysis
Focus (the research service affiliated with the Adviser). However, the Fund will
acquire new recommendations made by Asset Analysis Focus no earlier than five
business days after publication of Asset Analysis Focus. The Fund may also
purchase shares in combination with other accounts managed by the Adviser. These
practices may have an impact on the price and availability of the securities to
be purchased by the Fund.
Foreign Securities
Foreign securities present special considerations not typically associated with
investments in domestic securities. Foreign taxes may reduce income. Currency
exchange rates and regulations may cause fluctuations in the value of foreign
securities. Foreign securities are subject to different regulatory environments
than in the United States and, compared to the United States, there may be a
lack of uniform accounting, auditing and financial reporting standards, less
volume and liquidity and more volatility, less public information and less
regulation of foreign issuers. Countries have been known to expropriate or
nationalize assets, and foreign investments may be subject to political,
financial or social instability or adverse diplomatic developments. There may be
difficulties in obtaining service of process on foreign issuers and difficulties
in enforcing judgments with respect to claims under the U.S. securities laws
against these issuers. Favorable or unfavorable differences between U.S. and
foreign economies could affect foreign securities values. The U.S. Government
has, in the past, discouraged certain foreign investments by U.S. investors
through taxation or other restrictions and it is possible that such restrictions
could be imposed again.
Stock Options
The Fund will receive a premium when it writes call options, which increases the
Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, the Fund will limit
its opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as writer of the option continues. Thus, in some periods, the Fund
will receive less total return and in other periods greater total return from
its hedged positions than it would have received from its underlying securities
if unhedged.
In purchasing a put option, the Fund will seek to benefit from a decline in the
market price of the underlying security. If a put option purchased is not sold
or exercised when it has remaining value, or if the market price of the
underlying security remains equal to or greater than the exercise price, during
the life of the option, the Fund will lose its investment in the option. For the
purchase of a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the premium
and transaction costs. Because option premiums paid by the Fund are small in
relation to the market value of the investments underlying the options, buying
options can result in large amounts of leverage. The leverage offered by trading
in options could cause the Fund's net asset value to be subject to more frequent
and wider fluctuations than would be the case if the Fund did not invest in
options.
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MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
Board of Directors
The overall management of the business and affairs of the Fund are managed under
the direction of its Board of Directors. The Directors, who are identified in
the Statement of Additional Information, approve all significant agreements
between the Fund and the persons that furnish services to the Fund, including
the agreements with the Manager, the Adviser, the Fund's distributor, custodian
and administrator and transfer agent. As the Fund's Manager, Ladenburg Thalmann
Fund Management Inc. is responsible for the day-to-day business operations of
the Fund.
Manager
The Manager is located at 590 Madison Avenue, New York, New York 10022.
Ladenburg Thalmann Asset Management Inc. ("LTAM") owns 50 percent of the
outstanding securities of the Manager. LTAM is a wholly owned subsidiary of
Ladenburg Thalmann & Co. Inc. ("LTCI"), a registered broker-dealer and a member
of all principal exchanges, including the New York Stock Exchange ("NYSE"),
since 1876 . LTCI is a wholly owned subsidiary of Ladenburg Thalmann Group Inc.
("Ladenburg Thalmann Group"). Ladenburg Thalmann Group is indirectly controlled
by Brooke Group Ltd. ("Brooke Group"). Bennett S. Lebow, the Chairman, President
and Chief Executive Officer of Brooke Group, may be deemed to control Brooke
Group. Ebbets Field Association LLC, an entity controlled by Mark A. Boyar,
holds the other 50 percent of the outstanding voting securities of the Manager.
Pursuant to a Management Agreement with the Fund, the Manager, under the
supervision of the Board of Directors, oversees the daily operations of the
Fund, supervises the performance of administrative and professional services
provided by others, including the Adviser. As compensation for its services and
the related expenses borne by the Manager, the Fund pays the Manager a fee,
computed daily and payable monthly, at the annual rate of .50 percent of the
Fund's average daily net assets. The Manager may voluntarily waive all or a
portion of its fees from time to time and in its discretion reimburse expenses
to be paid by the Fund.
Investment Adviser
The Adviser is an investment adviser and an affiliate of Mark Boyar & Company,
Inc. ("Mark Boyar & Co."), a broker-dealer registered with the SEC. The
Adviser's principal business address is 35 East 21st Street, New York, New York
10010.
Pursuant to the Investment Advisory Agreement among the Manager, the Adviser and
the Fund, the Adviser has agreed to furnish continuous investment advisory
services to the Fund. Subject to the supervision and direction of the Fund's
Board of Directors, the Adviser manages the Fund's portfolio in accordance with
the stated policies of the Fund. The Adviser makes investment decisions for the
Fund and places the purchase and sale orders for portfolio transactions. For the
services provided pursuant to the Investment Advisory Agreement, the Fund pays
the Adviser a fee, computed daily and payable monthly, at the annual rate of .50
percent of the Fund's average daily net assets. The Adviser may voluntarily
waive all or a portion of its fees from time to time and in its discretion
reimburse expenses to be paid by the Fund.
Mark A. Boyar is the chief investment officer of the Fund, and will be primarily
responsible for the day-to-day management of the Fund's portfolio. Mr. Boyar,
the President of Mark Boyar & Co., has also been the President of the Adviser
since 1983. Mark Boyar & Co. publishes Asset Analysis Focus, an institutionally
oriented research service that focuses on uncovering intrinsically undervalued
corporations for investment and merger and acquisition activity.
Administrator
Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354,
serves as the Fund's administrator and accounting, transfer, dividend
disbursing, shareholder service and plan agent (the "Administrator"). The
Administrator is a wholly-owned indirect subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange ("NYSE") listed company principally
engaged in the business of residential mortgage lending.
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<PAGE>
Pursuant to the Administration Agreement, the Accounting Services Agreement and
the Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement, the Administrator furnishes the Fund's accounting, data processing,
internal auditing and other services required by the Fund; prepares reports to
shareholders of the Fund and reports to, and filings with, the SEC and state
Blue Sky authorities; and calculates the net asset value of shares of the Fund.
For administrative services provided pursuant to the Administration Agreement,
the Fund pays the Administrator a monthly fee, calculated at an annual rate as a
percentage of the Fund's average daily net assets, of .150 percent for the first
$50 million, .125 percent for the next $50 million and .100 percent for over
$100 million of average daily net assets. The monthly fee for administrative
services is subject to a $1,000 minimum charge. For accounting services provided
pursuant to the Accounting Services Agreement, the Fund pays the Administrator a
monthly fee of $2,000 for up to $50 million, $2,500 for $50 million to $100
million, $3,000 for $100 million to $200 million, $4,000 for $200 million to
$300 million and $5,000 for over $300 million of average net assets of the Fund
during the month. For the performance of transfer agent services by the
Administrator (including transfer, dividend disbursing, shareholder service and
plan agent services provided pursuant to the Transfer, Dividend Disbursing,
Shareholder Service, and Plan Agency Agreement) the Fund pays the Administrator
an annual per account charge of $18. This fee is paid monthly and is subject to
a $1,200 monthly minimum charge.
Distributor
LTCI acts as distributor of the Fund's shares. LTCI's principal address is 590
Madison Avenue, New York, New York 10022.
LTCI is a member of the NASD, the NYSE, the American Stock Exchange and other
principal national securities exchanges. LTCI is paid monthly fees by the Fund
in connection with the servicing of shareholder accounts. A monthly service fee,
authorized pursuant to a Shareholder Servicing and Distribution Plan (the
"Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act, is
calculated at the annual rate of .25 percent of the value of the average daily
net assets of the Fund and is used by LTCI to provide compensation for ongoing
servicing and/or maintenance of shareholder accounts with the Fund. Compensation
is paid by LTCI to persons, including employees of LTCI, who respond to
inquiries of shareholders of the Fund regarding their ownership of shares or
their accounts with the Fund or who provide other similar services not otherwise
required to be provided by the Fund's Adviser, Administrator or other agent of
the Fund.
Payments under the Plan are not tied exclusively to the service expenses
actually incurred by LTCI, and the payments may exceed expenses actually
incurred by LTCI. The Board of Directors evaluates the appropriateness of the
Plan and its payment terms on a continuing basis and in doing so considers all
relevant factors, including expenses borne by LTCI and amounts it receives under
the Plan.
Under its terms, the Plan continues from year to year, so long as its
continuance is approved annually by vote of the Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan (the
"Independent Directors"). The Plan may not be amended to increase materially the
amount to be spent for the services provided by LTCI without shareholder
approval, and all material amendments of the Plan also must be approved by the
Directors in the manner described above. The Plan may be terminated at any time,
without penalty, by vote of a majority of the Independent Directors or by a vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
on not more than 30 days' written notice to LTCI.
Pursuant to the Plan, LTCI will provide the Board with periodic reports of
amounts expended under the Plan and the purpose for which the expenditures were
made. The Directors believe that the Fund's expenditures under the Plan will
benefit the Fund and its shareholders by providing better shareholder services.
12
<PAGE>
Directors and Officers
The officers of the Fund manage its day-to-day operations and are directly
responsible to its Board. The Board sets broad policies for the Fund and chooses
the Fund's officers. A list of the Directors and officers of the Fund and a
brief statement of their present positions and principal occupations during the
past five years is set forth in the Statement of Additional Information.
Custodian
Star Bank, N.A. (the "Custodian") acts as custodian of the Fund's investments.
The Custodian's principal address is 425 Walnut Street, Cincinnati, Ohio 45202.
Pursuant to the Custody Agreement, the Custodian acts as the Fund's depository,
safekeeps its portfolio securities, collects all income and other payments with
respect thereto, disburses funds as instructed and maintains records in
connection with its duties.
Expenses of the Fund
In addition to the fees paid to the Adviser and the Manager, operating expenses
for the Fund generally consist of fees of the Administrator and other Fund
expenses, which include, among others, the fees and expenses, if any, of the
Directors and officers for attending meetings of the Board, fees of the Fund's
Custodian, interest expense, taxes, brokerage fees and commissions, fees and
expenses of the Fund's shareholder servicing operations, fees and expenses of
qualifying and registering the Fund's shares under Federal and state securities
laws, expenses of preparing, printing and distributing prospectuses and reports
to existing shareholders, auditing and legal expenses, insurance expenses,
association dues, and the expense of shareholders' meetings and proxy
solicitations. The Fund is also liable for any non-recurring expenses that may
arise such as litigation to which the Fund may be a party. The Fund may be
obligated to indemnify the Board and officers with respect to such litigation.
All expenses of the Fund are accrued daily on the books of the Fund at a rate
which is equal to the actual expenses expected to be incurred by the Fund in
accordance with generally accepted accounting principles. Currently, the Manager
and the Adviser are voluntarily absorbing certain expenses and they may, in
their discretion and as they deem appropriate, continue to waive a portion or
all of the fees payable to them by the Fund.
13
<PAGE>
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
There are no sales commissions charged to investors. Assistance in opening
accounts may be obtained from the Administrator by calling 1-800-266-5566, or by
writing to the Fund at the address shown below for regular mail orders.
Assistance is also available through any broker-dealer authorized to sell shares
of the Fund. Such broker-dealer may charge you a fee for its services. Payment
for shares purchased may be made through your account at the broker-dealer
processing your application and order to purchase. Your investment will purchase
shares at the Fund's net asset value next determined after your order is
received by the Fund in proper order as indicated herein. The minimum initial
investment in the Fund, unless stated otherwise herein, is $5,000. For
retirement plans, the minimum initial investment is $2,500. The Fund may, in the
Adviser's sole discretion, accept certain accounts with less than the stated
minimum initial investment.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. All orders received by the Administrator, whether by mail, bank
wire or facsimile order from a qualified broker-dealer, prior to the close of
regular trading on the NYSE, normally 4:00 p.m., Eastern time, will purchase
shares at the net asset value next determined on that business day. If your
order is not received by the close of regular trading on the NYSE, your order
will purchase shares at the net asset value determined on the next business day.
See "How Net Asset Value is Determined".
Due to Internal Revenue Service ("IRS") regulations, applications without social
security or tax identification numbers will not be accepted. If, however, you
have already applied for a social security or tax identification number at the
time of completing your account application, the application should so indicate.
The Fund is required to, and will, withhold taxes on all distributions and
redemption proceeds if the number is not delivered to the Fund within 60 days.
Investors should be aware that the Fund's account application contains
provisions in favor of the Fund, the Administrator and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Fund or the Administrator in the transaction.
Regular Mail Orders. Please complete and sign the Account Application form
accompanying this Prospectus and send it with your check, made payable to Boyar
Value Fund, Inc. and mail it to:
Boyar Value Fund, Inc.
c/o Shareholder Services
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or add to an existing account by wire, please call the Fund, at
1-800-266-5566 for instructions. Your bank may impose a charge for sending your
wire. There is presently no fee for receipt of wired Funds, but the
Administrator reserves the right to charge shareholders for this service upon
thirty days' notice to shareholders.
It is important that the wire contain all the information and that the Fund
receives prior telephone notification to ensure proper credit. Once your wire is
sent, you should as soon as possible thereafter, complete and mail your Account
Application to the Fund as described under "Regular Mail Orders," above.
Additional Investments. You may add to your account by mail or wire (minimum
additional investment of $1,000) at any time by purchasing shares at the then
current net asset value as aforementioned. Before making additional investments
by bank wire, please call the Fund at 1-800-266-5566. Follow the wire
instructions given to send your wire. When calling for any reason, please have
your account number ready, if known. Mail orders should include, when possible,
the "Invest by Mail" stub which is attached to your Fund confirmation statement.
Otherwise, be sure to identify your account number in your letter.
14
<PAGE>
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Administrator will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
net asset value on or about the last business day of the month or quarter. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.
Employees and Affiliates of the Fund. The minimum purchase requirement is not
applicable to accounts of Directors, officers or employees of the Fund or
certain parties related thereto. The minimum initial investment for such
accounts is $1,000.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
which will show the number of shares owned.
Tax-Deferred Retirement Plans. Shares of the Fund are available for purchase in
connection with the following tax-deferred retirement plans:
- -- Keogh Plans for self-employed individuals;
- -- Individual retirement account (IRA) plans for individuals and their
non-employed spouses;
- -- Qualified pension and profit-sharing plans for employees, including those
profit-sharing plans with a 401(k) provision; and
- -- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other nonprofit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
Direct Deposit Plans. Shares of the Fund may be purchased through direct deposit
plans offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
15
<PAGE>
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares of the Fund may be redeemed on each day that the Fund is open for
business by sending a written request to the Fund. The Fund is open for business
on each day the NYSE is open for business. Any redemption may be for more or
less than the purchase price of your shares depending on the market value of the
Fund's portfolio securities. All redemption orders received in proper form, as
indicated herein, by the Administrator prior to the close of regular trading on
the NYSE (normally 4:00 p.m., Eastern time) will redeem shares at the net asset
value per share determined as of that business day's close of trading.
Otherwise, your order will redeem shares on the next business day. You may also
redeem your shares through a broker-dealer who may charge you a fee for its
services.
The Board of Directors reserves the right to involuntarily redeem any account
having an account value of less than $5,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 60 days' written notice. If the
shareholder brings his account value up to $5,000 or more during the notice
period, the account will not be redeemed. Redemptions from retirement plans may
be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-266-5566, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to Boyar Value Fund,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Your request for redemption
must include:
1) your letter of instruction or a stock assignment specifying the account
number, and the number of shares or dollar amount to be redeemed. This
request must be signed by all registered shareholders in the exact names
in which they are registered;
2) any required signature guarantees (see "Signature Guarantees"); and
3) other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be mailed to you within three business days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days) may
be reduced or avoided if the purchase is made by certified check, government
check or wire transfer. In such cases, the net asset value next determined after
receipt of the request for redemption will be used in processing the redemption
and your redemption proceeds will be mailed to you upon clearance of your check
to purchase shares. The Fund may suspend redemption privileges or postpone the
date of payment (1) during any period that the NYSE is closed, or trading on the
NYSE is restricted as determined by the SEC, (2) during any period when an
emergency exists as defined by the rules of the SEC as a result of which it is
not reasonably practicable for the Fund to dispose of securities owned by it, or
to fairly determine the value of its assets, and (3) for such other periods as
the SEC may permit.
You can choose to have redemption proceeds mailed to you at your address of
record, your bank, or to any other authorized person, or you can have the
proceeds sent by bank wire to your bank ($5,000 minimum). Shares of the Fund may
not be redeemed by wire on days in which your bank is not open for business.
Redemption proceeds will only be sent to the bank account or person named in
your Account Application currently on file with the Fund. You can change your
redemption instructions anytime you wish by filing a letter including your new
redemption instructions with the Fund. See "Signature Guarantees."
There is currently no charge by the Administrator for wire redemptions, however,
the Fund's Custodian charges an $9 wire transfer fee for redemptions made by
wire. This fee is subject to change. The Administrator reserves the right, upon
thirty days written notice, to make reasonable charges for wire redemptions. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
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<PAGE>
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration, or standing instructions, for your account. Signature
guarantees are required for (1) requests to redeem shares having a value greater
than $25,000, (2) change of registration requests, and (3) requests to establish
or change redemption services other than through your initial account
application. Signature guarantees are acceptable from a member bank of the
Federal Reserve System, a savings and loan institution, credit union, registered
broker-dealer or a member firm of a U.S. stock exchange, and must appear on the
written request for redemption, or change of registration.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$25,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested or paid in cash. Systematic withdrawals may be
deposited directly to the shareholder's bank account by completing the
applicable section on the Account Application form accompanying this Prospectus,
or by calling or writing the Fund.
Redemptions In Kind. If the Board determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, the Fund
may make payment wholly or partly in securities or other investment instruments
which may not constitute securities as such term is defined in the applicable
securities laws. If a redemption is paid wholly or partly in securities or other
property, you would incur transaction costs in disposing of the redemption
proceeds.
HOW NET ASSET VALUE IS DETERMINED
- --------------------------------------------------------------------------------
The net asset value of the Fund is determined on each business day that the NYSE
is open for trading, as of the close of the NYSE (normally 4:00 p.m., Eastern
time). Securities held by the Fund may be primarily listed on foreign exchanges
or traded in foreign markets which are open on days (such as Saturdays and U.S.
holidays) when the NYSE is not open for business. As a result, the net asset
value per share of the Fund may be significantly affected by trading on days
when the Fund is not open for business. Net asset value per share is determined
by dividing the total value of all Fund securities (valued at market value) and
other assets, less liabilities, by the total number of shares then outstanding.
Net asset value includes interest on fixed income securities, which is accrued
daily. See the Statement of Additional Information for further details.
Securities which are traded over-the-counter are priced at the last sale price,
if available, otherwise, at the last quoted bid price. Securities traded on a
national stock exchange will be valued based upon the closing price on the
valuation date on the principal exchange where the security is traded.
Fixed-income securities will ordinarily be traded in the over-the-counter market
and common stocks will ordinarily be traded on a national securities exchange,
but may also be traded in the over-the-counter market. Foreign securities are
valued on the basis of quotations from the primary market in which they are
traded and are translated from the local currency into U.S. dollars using
currency exchange rates. Securities and other assets for which no quotations are
readily available will be valued in good faith at fair value using methods
determined by the Board.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions. The Fund expects to distribute substantially all of
its net investment income, if any, on an annual basis. The Fund also expects to
distribute any net realized long-term capital gains at least once each year.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital gains distributions
reinvested in additional shares.
Income Option -- income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option -- income distributions and capital gains distributions
paid in cash.
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<PAGE>
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then current net asset
value and your account will be converted to the Share Option.
Taxes. The Fund intends to qualify each year as a regulated investment company
("RIC") within the meaning of the Code. As a RIC, the Fund will be subject to a
4 percent non-deductible excise tax measured with respect to certain
undistributed amounts of ordinary income and capital gain. The Fund expects to
pay such dividends and make such distributions as are necessary to avoid the
application of this tax.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of how long the
shareholder has held Fund shares and whether received in cash or reinvested in
additional Fund shares. As a general rule, an investor's gain or loss on a sale
or redemption of his Fund shares will be long-term capital gain or loss if he
has held his shares for more than one year and will be short-term capital gain
or loss if he has held his shares for one year or less. However, any loss
realized upon the sale or redemption of shares within six months from the date
of their purchase will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain during such
six-month period with respect to such shares.
The Taxpayer Relief Act of 1997 made certain changes to the Code with respect to
taxation of long-term capital gains earned by taxpayers other than a
corporation. In general, for sales made after May 6, 1997, the maximum tax rate
for individual taxpayers on net long-term capital gains is lowered to 20% for
most assets (including long-term capital gains recognized by shareholders on the
sale or redemption of Fund shares that were held as capital assets). This 20%
rate applies to sales on or after July 29, 1997 only if the asset was held for
more than 18 months at the time of disposition. Capital gains on the disposition
of assets on or after July 29, 1997 held for more than one year and up to 18
months at the time of disposition will be taxed as "mid-term gain" at a maximum
rate of 28%. A rate of 18% instead of 20% will apply after December 31, 2000 for
assets held for more than 5 years. However, the 18% rate applies only to assets
acquired after December 31, 2000 unless the taxpayer elects to treat an asset
held prior to such date as sold for fair market value on January 1, 2001. In the
case of individuals whose ordinary income is taxed at a 15% rate, the 20% rate
is reduced to 10% and the 18% rate for assets held for more than 5 years is
reduced to 8%. The Fund will provide information relating to that portion of a
"capital gain dividend" that may be treated by investors as eligible for the
reduced capital gains tax rate for capital assets held for more than 18 months.
Investors may be proportionately liable for taxes on income and gains of the
Fund, but investors not subject to tax on their income will not be required to
pay tax on amounts distributed to them. The Fund's investment activities,
including short sales of securities, will not result in unrelated business
taxable income to a tax-exempt investor. The Fund will designate that portion of
the Fund's dividends that will qualify for the federal dividends received
deduction for corporations. The Fund's investments in foreign securities may
subject it to certain withholding and other taxes imposed by foreign countries
with respect to dividends, interest, capital gains and other income. It is not
expected that the payment of such taxes by the Fund will give rise to a direct
credit or deduction available to the Fund's shareholders.
The Fund may be required to withhold federal income tax at a rate of 31 percent
("backup withholding") from dividends paid to non-corporate shareholders. This
tax may be withheld from dividends if (1) the shareholder fails to furnish the
Fund with the shareholder's correct taxpayer identification number, (2) the IRS
notifies the Fund that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to certify that he
or she is not subject to backup withholding. Redemption proceeds may be subject
to withholding under the circumstances described in (1) above. Any amounts
withheld under the backup withholding rules may be credited against a
shareholder's federal income tax liability.
Each shareholder will receive an annual statement setting forth the dollar
amounts of dividends and any distributions for the prior calendar year and the
tax status of such dividends and distributions for federal income tax purposes.
Shareholders should consult their own tax advisers as to the state and local tax
consequences of investing in the Fund.
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Organization
The Fund is registered under the 1940 Act as an open-end, diversified,
management investment company and was incorporated on February 28, 1997 under
the laws of the State of Maryland. The Fund has an authorized capitalization of
1,000,000,000 shares with a par value of $.001 per share and transferable
without restriction. All shares of the Fund have equal rights and privileges as
to participation in dividends and distributions and in the net distributable
assets of the Fund on liquidation.
When issued, shares are fully paid and nonassessable, and have no preemptive,
conversion or exchange rights. Certain aspects of the shares may be changed,
upon notice to Fund shareholders, to satisfy certain tax regulatory
requirements, if the change is deemed necessary by the Directors.
From time to time, advertisements or reports to shareholders may compare the
performance of the shares to that of other mutual funds (or classes thereof)
with a similar investment objective. The performance of the shares also might be
compared to rankings prepared by Lipper Analytical Services, Inc. and
Morningstar, Inc., which are widely recognized, independent services that
monitor the performance of mutual funds, as well as to various unmanaged
indices, such as the Standard & Poor's 500 Composite Stock Price Index.
Performance information may be useful in reviewing the performance of the shares
and in providing a basis for comparison with other investment alternatives.
Investors should be aware that, because the performance of the Fund changes in
response to fluctuation in interest rates, price fluctuations in securities
markets, the Fund's expenses and other factors, a performance quotation should
not be considered representative of the Fund's performance for any future
period. Shareholders may make inquiries regarding the Fund, including current
performance quotations, by calling their account representative.
Voting Rights
Investors in the Fund are entitled to one vote for each full share held and
proportional, fractional votes for fractional shares held. There will normally
be no meeting of investors for the purpose of electing members of the Board
unless and until such time as less than a majority of the members holding office
have been elected by investors. Any Director of the Fund may be removed from
office upon the vote of shareholders holding at least a majority of the Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of 10% of the outstanding shares of the Fund.
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STATEMENT OF ADDITIONAL INFORMATION
March 25, 1998
BOYAR VALUE FUND, INC.
590 Madison Avenue, New York, New York 10022
For information, call 800-266-5566
Contents
--------
Page
----
Investment Objective ..................................................... 2
Investment Policies ...................................................... 2
Investment Limitations ................................................... 8
Portfolio Valuation ...................................................... 10
Portfolio Transactions ................................................... 11
Management Of The Fund ................................................... 14
Distribution And Shareholder Servicing ................................... 20
Additional Purchase And Redemption Information ........................... 21
Additional Information Concerning Taxes .................................. 2
Determination Of Performance ............................................. 27
Independent Accountants And Counsel ...................................... 28
Financial Statement ...................................................... 28
This Statement of Additional Information is meant to be read in conjunction
with the Prospectus for Boyar Value Fund, Inc. (the "Fund"), dated March 25,
1998, as amended or supplemented from time to time, and is incorporated by
reference in its entirety into that Prospectus. Because this Statement of
Additional Information is not itself a prospectus, no investment in shares of
the Fund should be made solely upon the information contained herein. Copies of
the Fund's Prospectus may be obtained by calling the Fund at 800-266-5566.
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
INVESTMENT POLICIES
The following policies supplement the descriptions of the Fund's investment
objective and policies in the Prospectus.
Stock Options and Currency Exchange Transactions
- ------------------------------------------------
Stock Options. When Boyar Asset Management, Inc. (the "Adviser") believes
that individual portfolio securities are approaching the top of the Adviser's
growth and price expectations, the Fund may write covered call options against
such securities. The Fund may also purchase put options. The value of the
underlying securities on which covered call and put options will be written or
purchased, respectively, at any one time by the Fund is not anticipated to
exceed 5% of the Fund's total assets. The Fund writes and purchases options only
for hedging purposes and not for speculation.
The Fund realizes fees (referred to as "premiums") for granting the rights
evidenced by the options it has written. A call option embodies the right of its
purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time. A put option embodies the right of its purchaser to compel the
writer of the option to purchase from the option holder an underlying security
at a specified price for a specified period or at a specified time.
The principal reason for writing covered call options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, the Fund as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the Fund as a call writer retains the risk of a decline in the price of the
underlying security. The size of the premiums that the Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.
In the case of options written by the Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace
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the borrowed securities, but the Fund may incur additional transaction costs or
interest expenses in connection with any such purchase or borrowing.
Options written by the Fund will normally have expiration dates between one
and nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. The Fund may write (i) in-the-money call options when the Adviser
expects that the price of the underlying security will remain flat or decline
moderately during the option period, (ii) at-the-money call options when the
Adviser expects that the price of the underlying security will remain flat or
advance moderately during the option period and (iii) out-of-the-money call
options when the Adviser expects that the premiums received from writing the
call option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of the
underlying security alone. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received. To secure its obligation to deliver the underlying security
when it writes a call option, the Fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the securities exchange
on which the option is written.
Prior to their expirations, call options may be sold in closing sale or
purchase transactions (sales or purchases by the Fund prior to the exercise of
options that it has purchased or written, respectively, of options of the same
series) in which the Fund may realize a profit or loss from the sale. An option
position may be closed out only where there exists a secondary market for an
option of the same series on a recognized securities exchange or in the
over-the-counter market. When the Fund has purchased a put option and engages in
a closing sale transaction, whether the Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale transaction is more
or less than the premium the Fund initially paid for the original option plus
the related transaction costs. Similarly, in cases where the Fund has written a
call option, it will realize a profit if the cost of the closing purchase
transaction is less than the premium received upon writing the original option
and will incur a loss if the cost of the closing purchase transaction exceeds
the premium received upon writing the original option. The Fund may engage in a
closing purchase transaction to realize a profit, to prevent an underlying
security with respect to which it has written an option from being called or, in
the case of a call option, to unfreeze an underlying security (thereby
permitting its sale or the writing of a new option on the security prior to the
outstanding option's expiration). The obligation of the Fund under an option it
has written would be terminated by a closing purchase transaction, but the Fund
would not be deemed to own an option as a result of the transaction. So long as
the obligation of the Fund as the writer of an option continues, the Fund may be
assigned an exercise notice by the broker-dealer through which the option was
sold, requiring the Fund to deliver the underlying security against
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<PAGE>
payment of the exercise price. This obligation terminates when the option
expires or the Fund effects a closing purchase transaction. The Fund can no
longer effect a closing purchase transaction with respect to an option once it
has been assigned an exercise notice.
There is no assurance that sufficient trading interest will exist to create
a liquid secondary market on a securities exchange for any particular option or
at any particular time, and for some options no such secondary market may exist.
A liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow or other unforeseen events have at times rendered certain of the
facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, the Fund's ability
to terminate options positions established in the over-the-counter market may be
more limited than for exchange-traded options and may also involve the risk that
securities dealers participating in over-the-counter transactions would fail to
meet their obligations to the Fund. The Fund, however, intends to purchase
over-the-counter options only from dealers whose debt securities, as determined
by the Adviser, are considered to be investment grade. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. In either
case, the Fund would continue to be at market risk on the security and could
face higher transaction costs, including brokerage commissions.
Securities exchanges generally have established limitations governing the
maximum number of calls of each class which may be held or written, or exercised
within certain time periods by an investor or group of investors acting in
concert (regardless of whether the options are written on the same or different
securities exchanges or are held, written or exercised in one or more accounts
or through one or more brokers). It is possible that the Fund and other clients
of the Adviser may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits and
it may impose certain other sanctions. These limits may restrict the number of
options the Fund will be able to purchase on a particular security.
Currency Exchange Transactions. The value in U.S. dollars of the assets of
the Fund that are invested in foreign securities may be affected favorably or
unfavorably by changes in exchange control regulations, and the Fund may incur
costs in connection with conversion between various currencies. Currency
exchange transactions may be from any non-U.S. currency into U.S. dollars or
into other appropriate currencies. The Fund will conduct its currency exchange
transactions (i) on a spot (i.e., cash) basis at the rate prevailing
4
<PAGE>
in the currency exchange market, (ii) through entering into forward contracts to
purchase or sell currency or (iii) by purchasing exchange-traded currency
options.
Foreign Investments. Investors should recognize that investing in foreign
companies involves certain risks, including those discussed below, which are not
typically associated with investing in U.S. issuers. Since the Fund may invest
in securities denominated in currencies other than the U.S. dollar, and since
the Fund may temporarily hold funds in bank deposits or other money market
investments denominated in foreign currencies, the Fund may be affected
favorably or unfavorably by exchange control regulations or changes in the
exchange rate between such currencies and the dollar. A change in the value of a
foreign currency relative to the U.S. dollar will result in a corresponding
change in the dollar value of the Fund's assets denominated in that foreign
currency. Changes in foreign currency exchange rates may also affect the value
of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by the forces of supply and demand in the foreign
exchange markets. Changes in the exchange rate may result over time from the
interaction of many factors directly or indirectly affecting economic and
political conditions in the United States and a particular foreign country,
including economic and political developments in other countries. Of particular
importance are rates of inflation, interest rate levels, the balance of payments
and the extent of government surpluses or deficits in the United States and the
particular foreign country, all of which are in turn sensitive to the monetary,
fiscal and trade policies pursued by the governments of the United States and
foreign countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies.
Individual foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency, and balance of
payments positions. The Fund may invest in securities of foreign governments (or
agencies or instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.
Securities of some foreign companies are less liquid and their prices are
more volatile than securities of comparable U.S. companies. Certain foreign
countries are known to experience long delays between the trade and settlement
dates of securities purchased or sold. Due to the increased exposure of the Fund
to market and foreign exchange fluctuations brought about by such delays, and
due to the corresponding negative impact on Fund liquidity, the Fund will avoid
investing in countries which are known to experience settlement delays which may
expose the Fund to unreasonable risk of loss.
5
<PAGE>
U.S. Government Securities. The Fund may invest in debt obligations of
varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. government securities"). Direct obligations
of the U.S. Treasury include a variety of securities that differ in their
interest rates, maturities and dates of issuance. U.S. government securities
also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board and Student Loan Marketing
Association. The Fund may also invest in instruments that are supported by the
right of the issuer to borrow from the U.S. Treasury and instruments that are
supported by the credit of the instrumentality. Because the U.S. government is
not obligated by law to provide support to an instrumentality it sponsors, the
Fund will invest in obligations issued by such an instrumentality only if the
Adviser determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Fund.
Lending of Portfolio Securities. The Fund may lend portfolio securities to
brokers, dealers and other financial organizations that meet capital and other
credit requirements or other criteria established by the Fund's Board of
Directors (the "Board"). These loans, if and when made, may not exceed 33 1/3%
of the Fund's total assets taken at current value. The Fund will not lend
portfolio securities to affiliates of the Adviser unless it has applied for and
received specific authority to do so from the SEC. Loans of portfolio securities
will be collateralized by cash, letters of credit or U.S. government securities,
which are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Any gain or loss in the market
price of the securities loaned that might occur during the term of the loan
would be for the account of the Fund. From time to time, the Fund may return a
part of the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party that is unaffiliated with
the Fund and that is acting as a "finder."
By lending its securities, the Fund can increase its income by continuing
to receive interest and any dividends on the loaned securities as well as by
either investing the collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid by the borrower when
U.S. government securities are used as collateral. Although the generation of
income is not an investment objective of the Fund, income received could be used
to pay the Fund's expenses and would increase an investor's total return. The
Fund will adhere to the following conditions whenever its portfolio securities
are loaned: (i) the Fund must receive at least 100% cash collateral or
equivalent securities of the type discussed in the preceding paragraph from the
borrower; (ii) the borrower must increase such collateral whenever the market
value of the securities rises above the level of such collateral;
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<PAGE>
(iii) the Fund must be able to terminate the loan at any time; (iv) the Fund
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities and any increase in market
value; (v) the Fund may pay only reasonable custodian fees in connection with
the loan; and (vi) voting rights on the loaned securities may pass to the
borrower, provided, however, that if a material event adversely affecting the
investment occurs, the Board must terminate the loan and regain the right to
vote the securities. Loan agreements involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon the Fund's ability to recover the loaned securities or dispose
of the collateral for the loan.
American, European and Continental Depositary Receipts. The assets of the
Fund may be invested in the securities of foreign issuers in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs").
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-U.S. banks and trust companies that evidence ownership of
either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in U.S. securities markets and EDRs and CDRs in bearer form are
designed for use in European securities markets.
Convertible Securities. Convertible securities are fixed income securities
that may be converted at either a stated price or stated rate into underlying
shares of common stock. Because of this conversion feature, convertible
securities enable an investor to benefit from increases in the market price of
the underlying common stock while permitting the investor to obtain a yield that
is generally greater than that obtainable from the underlying common stock. In
addition, convertible securities generally offer greater stability of price than
the underlying common stock during declining market periods. The value of
convertible securities fluctuates in relation to changes in interest rates and,
in addition, also fluctuates in relation to the underlying common stock. The
Adviser may make modifications of its investment strategy for the Fund as it
deems advisable in light of its experience in managing the Fund or in response
to changing market or economic conditions.
Warrants. The Fund may purchase warrants issued by domestic and foreign
companies to purchase newly created equity securities consisting of common and
preferred stock. The equity security underlying a warrant is outstanding at the
time the warrant is issued or is issued together with the warrant.
Investing in warrants can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and, thus, can be a
speculative investment. The value of a warrant may decline because of a decline
in the value of the underlying security, the passage of time, changes in
interest rates or in the dividend or other policies of the company whose equity
underlies the warrant or a change in the perception as to the future price of
the
7
<PAGE>
underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.
Illiquid Securities. The Fund may not invest more than 15% of its net
assets in illiquid securities, including securities that are illiquid by virtue
of the absence of a readily available market, time deposits maturing in more
than seven days and repurchase agreements which have a maturity of longer than
seven days. Securities that have legal or contractual restrictions on resale but
have a readily available market are not considered illiquid for purposes of this
limitation. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.
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. The Fund's investment in illiquid
securities is subject to the risk that, should the Fund desire to sell any of
these securities when a ready buyer is not available at a price that is deemed
to be representative of their value, the value of the Fund's net assets could be
adversely affected.
Borrowing. The Fund may borrow, temporarily, up to 33 1/3% of its total
assets for extraordinary purposes or to meet redemption requests which might
otherwise require untimely disposition of portfolio holdings. To the extent the
Fund borrows for these purposes, the effects of market price fluctuations on
portfolio net asset value will be exaggerated. If, while such borrowing is in
effect, the value of the Fund's assets declines, the Fund could be forced to
liquidate portfolio securities when it is disadvantageous to do so. The Fund
would incur interest and other transaction costs in connection with borrowing.
The Fund will borrow only from a bank.
INVESTMENT LIMITATIONS
The investment limitations numbered 1 through 10 may not be changed without
the affirmative vote of the holders of a majority of the Fund's outstanding
shares. Such majority is defined as the lesser of (i) 67% or more of the shares
present at the meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the outstanding shares. Investment limitations 11 through 13 may be changed by a
vote of the Board at any time.
The Fund may not:
8
<PAGE>
1. Borrow money except that the Fund may borrow from banks for temporary or
emergency purposes in an amount that may not exceed 33 1/3% of the value of the
Fund's total assets at the time of such borrowing. For purposes of this
restriction, short sales, the entry into currency transactions, options, and
forward commitment transactions that are not accounted for as financings (and
the segregation of assets in connection with any of the foregoing) shall not
constitute borrowing.
2. Make loans, except that the Fund may purchase or hold fixed-income
securities, lend portfolio securities up to 33 1/3% of the Fund's total assets
and enter into repurchase agreements in accordance with its investment
objective, policies and limitations.
3. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of issuers conducting their principal business activities in the same industry;
provided that there shall be no limit on the purchase of U.S. Government
Securities.
4. Purchase the securities of any issuer if as a result (a) more than 5% of
the value of the Fund's total assets would be invested in the securities of such
issuer or (b) the Fund would acquire 10% or more of the voting securities of
such issuer, except that these limitations do not apply to U.S. Government
Securities and repurchase agreements collateralized by U.S. Government
Securities and except that up to 25% of the value of the Fund's total assets may
be invested without regard to these limitations.
5. Underwrite any securities issued by others except to the extent that the
investment in restricted securities and the sale of securities or the purchase
of securities directly from the issuer in accordance with the Fund's investment
objective, policies and limitations may be deemed to be underwriting.
6. Purchase or sell real estate, except that the Fund may invest in
securities (a) secured by real estate, mortgages or interests therein, (b)
issued by companies which invest in real estate or interests therein or (c) hold
and sell real estate acquired by the Fund as the result of the ownership of
securities.
7. Make short sales of securities or maintain a short position, except that
the Fund may maintain short positions in currencies, securities and stock
indexes, futures contracts and options on futures contracts and enter into short
sales or short sales "against the box" in accordance with the Fund's investment
objective, policies and limitations.
8. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.
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<PAGE>
9. Invest in commodities, except that the Fund may (a) purchase and sell
futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
(b) purchase and sell currencies on a forward commitment or delayed-delivery
basis and (c) enter into stand-by commitments.
10. Pledge, mortgage or hypothecate its assets, or otherwise issue senior
securities, except (a) to the extent necessary to secure permitted borrowings
and (b) to the extent related to the deposit of assets in escrow in connection
with the purchase of securities on a forward commitment or delayed-delivery
basis and collateral and initial or variation margin arrangements with respect
to currency transactions, options, futures contracts, and options on futures
contracts.
11. Invest more than 15% of the Fund's net assets in securities which may
be illiquid because of legal or contractual restrictions on resale or securities
for which there are no readily available market quotations. For purposes of this
limitation, repurchase agreements with maturities greater than seven days shall
be considered illiquid securities.
12. Make additional investments if the Fund's borrowings exceed 5% of its
total assets.
13. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or offer of exchange,
or as otherwise permitted under the 1940 Act.
Notwithstanding paragraphs numbered 1, 7, 8, 9 and 10, the Fund has no
present intention of engaging in transactions involving futures contracts and
options on futures contracts or of entering into short sales and short sales
"against the box," and will not do so until approved by the Fund's Board and
upon appropriate notice to investors.
If a percentage restriction (other than the percentage limitation set forth
in No. 1 above) is adhered to at the time of an investment, a later increase or
decrease in the percentage of assets resulting from a change in the values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
PORTFOLIO VALUATION
The share net price (net asset value) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange ("NYSE") (normally 4:00 p.m., Eastern time) on each business day,
except on days when the NYSE is closed. The NYSE is currently scheduled to be
closed on New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas,
and on the preceding Friday or subsequent Monday when one of these holidays
falls on a Saturday or Sunday, respectively. The Fund may also be open for
business on other days in which there is sufficient trading in its portfolio
securities
10
<PAGE>
such that its net asset value might be materially affected. For a description of
the methods used to determine the share price, see "Net Asset Value" in the
Prospectus.
Trading in securities in certain foreign countries is completed at various
times prior to the close of business on each business day in New York (i.e., a
day on which the NYSE is open for trading). In addition, securities trading in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in various foreign markets on days which
are not business days in New York and days on which the Fund's net asset value
is not calculated. As a result, calculation of the Fund's net asset value may
not take place contemporaneously with the determination of the prices of certain
portfolio securities used in such calculation. Events affecting the values of
portfolio securities that occur between the time their prices are determined and
the close of regular trading on the NYSE will not be reflected in the Fund's
calculation of net asset value unless the Board or its delegates deems that the
particular event would materially affect net asset value, in which case an
adjustment may be made. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the
prevailing rate as quoted by a pricing service. If such quotations are not
available, the rate of exchange will be determined in good faith pursuant to
consistently applied procedures established by the Board.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Other purchases and sales may
be effected on a securities exchange or over-the-counter, depending on where it
appears that the best price or execution will be obtained. The purchase price
paid by the Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the price
of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. government securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. government
securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality.
The Adviser will select specific portfolio investments and effect
transactions for the Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions, the
Adviser will consider the factors it deems relevant,
11
<PAGE>
which may include the breadth of the market in the security, the price of the
security, the financial condition and execution capability of a broker or dealer
and the reasonableness of the commission, if any, for the specific transaction
and on a continuing basis. All orders for transactions in securities and options
on behalf of the Fund are placed with broker-dealers selected by the Adviser.
Affiliates of Ladenburg Thalmann Fund Management Inc. ("the Manager") or the
Adviser may serve as the Fund's broker in effecting portfolio transactions on
national securities exchanges and retain commissions in accordance with certain
regulations of the SEC.
The Adviser may, in its discretion, effect transactions in portfolio
securities with dealers (other than the Adviser, the Manager and their
affiliates) who provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the Fund
and/or other accounts over which the Adviser exercises investment discretion.
The Adviser may place portfolio transactions with a broker or dealer with whom
it has negotiated a commission that is in excess of the commission another
broker or dealer would have charged for effecting the transaction if the Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of such brokerage and research services provided by such
broker or dealer viewed in terms of either that particular transaction or of the
overall responsibilities of the Adviser. Research and other services received
may be useful to the Adviser in serving both the Fund and its other clients and,
conversely, research or other services obtained by the placement of business of
other clients may be useful to the Adviser in carrying out its obligations to
the Fund. Research may include furnishing advice, either directly or through
publications or writings, as to the value of securities, the advisability of
purchasing or selling specific securities and the availability of securities or
purchasers or sellers of securities; furnishing seminars, information, analyses
and reports concerning issuers, industries, securities, trading markets and
methods, legislative developments, changes in accounting practices, economic
factors and trends and portfolio strategy; access to research analysts,
corporate management personnel, industry experts and economists; comparative
performance evaluation and technical measurement services and quotation
services; and products and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment, software,
information and accessories that deliver, process or otherwise utilize
information, including the research described above) that assist the Adviser in
carrying out its responsibilities. Research received from brokers or dealers is
supplemental to the Adviser's own research program. The fees to the Adviser
under its advisory agreement with the Fund are not reduced by reason of its
receiving any brokerage and research services. Since the Adviser and the Manager
are obligated to provide management, which includes elements of research and
related skills, such research and related skills will not be used by the Adviser
or the Manager (or their affiliates) for negotiating commissions at a rate
higher than that determined in accordance with the above criteria.
Investment decisions for the Fund concerning specific portfolio securities
are made independently from those for other clients advised by the Adviser. Such
other
12
<PAGE>
investment clients may invest in the same securities as the Fund. When purchases
or sales of the same security are made at substantially the same time on behalf
of such other clients, transactions are averaged as to price and available
investments allocated as to amount, in a manner which the Adviser believes to be
equitable to each client, including the Fund. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or sold for the Fund. To the extent permitted by
law, securities to be sold or purchased for the Fund may be aggregated with
those to be sold or purchased for such other investment clients in order to
obtain best execution.
Any portfolio transaction for the Fund on a securities exchange may be
executed through Ladenburg Thalmann & Co. Inc., a broker-dealer and an affiliate
of the Manager (the "Distributor"), or Mark Boyar & Company, Inc. ("Mark Boyar &
Co."), an affiliate of the Adviser, if, in the Adviser's judgment, the use of
the Distributor or an affiliate of the Adviser is likely to result in price and
execution at least as favorable as those of other qualified brokers, and if, in
the transaction, the Distributor or an affiliate of the Adviser charges the Fund
a commission rate consistent with those charged by the Distributor or an
affiliate of the Adviser to comparable unaffiliated customers in similar
transactions. All transactions with affiliated brokers will comply with Rule
17e-1 under the 1940 Act.
In no instance will portfolio securities be purchased from or sold to the
Manager, the Adviser or the Distributor or any affiliated person of such
companies. In addition, the Fund will not give preference to any institutions
with whom the Fund enters into distribution or shareholder servicing agreements
concerning the provision of distribution services or support services.
Transactions for the Fund may be effected on foreign securities exchanges.
In transactions for securities not actively traded on a foreign securities
exchange, the Fund will deal directly with the dealers who make a market in the
securities involved, except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Such portfolio securities are generally traded on a net basis and do
not normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options.
The Fund may participate, if and when practicable, in bidding for the
purchase of securities for the Fund's portfolio directly from an issuer in order
to take advantage of the lower purchase price available to members of such a
group. The Fund will engage in this practice, however, only when the Adviser, in
its sole discretion, believes such practice to be otherwise in the Fund's
interest.
Portfolio Turnover
- ------------------
13
<PAGE>
The Fund anticipates that the rate of Portfolio turnover will, generally,
not exceed 50% in the current fiscal year. The Fund does not intend to seek
profits through short-term trading, but the rate of turnover will not be a
limiting factor when the Fund deems it desirable to sell or purchase securities.
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of its portfolio securities for the year by the monthly
average value of the portfolio securities. Securities with remaining maturities
of one year or less at the date of acquisition are excluded from the
calculation.
MANAGEMENT OF THE FUND
Officers and Board of Directors
- -------------------------------
The names (and ages) of the Fund's Directors and officers, their addresses,
present positions and principal occupations during the past five years and other
affiliations are set forth below.
<TABLE>
<CAPTION>
Name, Address, Age Position(s) Held Occupations During the Past Five Years
- ------------------ ---------------- --------------------------------------
<S> <C> <C>
Mark A. Boyar (54)* Chairman and Chief President and Director of Boyar Asset Management,
35 East 21 Street Executive Officer Inc. since June 1983; President of Mark Boyar &
New York, New York 10010 Company, Inc. since 1979; Manager and Member of
Ebbets Field Association LLC since 1998; Chairman
and General Partner of Boyar Partners L.P. since
1990; Chairman of N.R.M.B. Management, Inc. since
1988.
Jay R. Petschek (39)* President, Treasurer, President of LTFM since 1997; President and
590 Madison Avenue Chief Financial Officer Director of Ladenburg Thalmann Asset Management
New York, New York 10022 and Director Inc. since 1996; Senior Managing Director,
Director of Investment Policy and Director of
Ladenburg Thalmann & Co., Inc. since 1996 and
Managing Director Corporate Finance from
1984-1995; President of Corsair Management Company
Inc. since 1993; General Partner of Corsair
Capital Partners L.P. since 1991.
- -------------------
* Indicates an "interested person" under Section 2(a)(19) of the 1940 Act.
14
<PAGE>
Henry A. Alpert (50) Director President of Spartan Petroleum Corp. since 1974;
1158 Broadway Director of Griffon Corp. since 1995.
Hewlett, New York 10010
A.F. Petrocelli (54) Director Chairman, President, CEO and Director of United
United Capital Corp. Capital Corp. since 1981; Director of Philips
9 Park Place, 4th Floor International Realty Corp. since 1997; Director of
Great Neck, New York 11021 Nathan's Famous, Inc. since 1993; Director of
Prime Hospitality Corp. since 1992; Director of
Metex Corporation since 1981; Director of Dorne &
Margolin, Inc. since 1981.
Jeffrey S. Silverman (52) Director Chairman of LTS Capital Partners; Chairman and CEO
777 Third Avenue of Ply Gem Industries, Inc. 1986-1997; Director of
New York, New York 10017 Catalina Lighting since June 1997; Director of
Realco since 1995.
Richard Finkelstein (48) Director Vice President of Kenco Management, Inc. &
1000 Clint Moore Road, Affiliates since 1992.
Suite 110
Boca Raton, Florida 33487
Robert G. Dorsey (40) Vice President President and Treasurer of Countrywide Fund
312 Walnut Street Services, Inc.; President of CW Fund Distributors,
Cincinnati, Ohio 45202 Inc.; Vice President and Treasurer of Countrywide
Financial Services, Inc.; President of CW Fund
Distributors, Inc.; Treasurer of Countrywide
Investments, Inc.; Vice President of Countrywide
Investment Trust, Countrywide Tax-Free Trust
Countrywide Strategic Trust, Brundage, Story and
Rose Investment Trust, Markman MultiFund Trust,
Maplewood Investment Trust, a
15
<PAGE>
series company, the Thermo Opportunity Fund, Inc.,
Lake Shore Family of Funds, the Dean Family of
Funds, Well Family of Real Estate Funds, Profit
Funds Investment Trust and the New York State
Opportunity Funds; Assistant Vice President of
Williamsburg Investment Trust, Schwartz Investment
Trust, The Tuscarora Investment Trust, The Gannett
Welsh & Kotler Funds, Interactive Investments and
The Westport Funds.
John F. Splain (41) Secretary Vice President, Secretary and General Counsel of
312 Walnut Street Countrywide Fund Services, Inc. and CW Fund
Cincinnati, Ohio 45202 Distributors, Inc.; Secretary and General Counsel
of Countrywide Investments, Inc. and Countrywide
Financial Services, Inc.; Secretary of Countrywide
Investment Trust, Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Brundage, Story and
Rose Investment Trust, Williamsburg Investment
Trust, Markman MultiFund Trust, The Tuscarora
Investment Trust, Maplewood Investment Trust, a
series company, Wells Family of Real Estate Funds,
Profit Funds Investment Trust and The Thermo
Opportunity Fund, Inc.; Assistant Secretary of
Schwartz Investment Trust, The Gannett Welsh &
Kotler Funds, Interactive Investments, the New
York State Opportunity Funds, Lake Shore Family of
Funds, The Westport Funds and Dean Family of
Funds.
16
<PAGE>
Mark J. Seger (36) Assistant Treasurer Vice President and Chief Operating Officer of
312 Walnut Street Countrywide Fund Services, Inc. and Vice President
Cincinnati, Ohio 45202 of its parent company, Countrywide Financial
Services, Inc. and CW Fund Distributors, Inc.;
Treasurer of Countrywide Investment Trust,
Countrywide Tax-Free Trust, Countrywide Strategic
Trust, Brundage, Story and Rose Investment Trust,
Williamsburg Investment Trust, Markman MultiFund
Trust, Maplewood Investment Trust, a series
company, The Thermo Opportunity Fund, Inc., Lake
Shore Family of Funds, the New York State
Opportunity Funds, Wells Family of Real Estate
Funds, Profit Funds Investment Trust and Dean
Family of Funds; Assistant Treasurer of Schwartz
Investment Trust, The Tuscarora Investment Trust,
The Gannett Welsh & Kotler Funds, The Westport
Funds and Interactive Investments, all of which
are registered investment companies.
Tina D. Hosking (29) Assistant Secretary Assistant Vice President and Associate General
312 Walnut Street Counsel of Countrywide Fund Services, Inc.;
Cincinnati, Ohio 45202 Assistant Vice President - Legal of CW Fund
Distributors, Inc.; Secretary of Dean Family of
Funds, and The New York State Opportunity Funds;
Assistant Secretary of The Gannett Welsh & Kotler
Funds, Lake Shore Family of Funds, The Westport
Funds and Wells Family of Real Estate Funds.
</TABLE>
17
<PAGE>
No employee of the Manager, the Adviser or any of their respective
affiliates will receive any compensation from the Fund for acting as an officer
or director of the Fund. Each other Director will receive an annual fee of
$3,000, and $500 for each meeting of the Board attended by him for his services
as Director and will be reimbursed for expenses incurred in connection with his
attendance at Board meetings.
Directors' Compensation
- -----------------------
Name of Director Total Compensation from Fund
---------------- ----------------------------
Mark A. Boyar None
Jay R. Petschek None
Jeffrey S. Silverman $5,000
Henry A. Alpert $5,000
A.F. Petrocelli $5,000
Richard Finkelstein $5,000
+ Amounts shown are estimates of future payments to be made in the fiscal
year ending December 31, 1998, which the directors have elected to take in
shares of the Fund.
As of February 27, 1998, the officers and directors of the Fund as a group owned
less than 1% of the Fund's outstanding shares.
Manager
- -------
The Manager serves as manager of the Fund pursuant to a management
agreement (the "Management Agreement"). The services provided by, and the fees
payable by the Fund to, the Manager under the Management Agreement are described
in the Prospectus. The fees are calculated at an annual rate based on a
percentage of the Fund's average daily net assets. See in the Prospectus,
"Management of the Fund."
The Fund is responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Fund, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Fund may be a party. The Fund may have an obligation
to indemnify the Fund's officers and Directors with respect to such litigation,
except in instances of willful misfeasance, bad faith, gross negligence or
reckless disregard by such officers and Directors in the performance of their
duties. The Manager bears promotional expenses in connection with the
distribution of the Fund's shares to the extent that such expenses are not
assumed by the Fund under its 12b-1 Plan (see below). The compensation and
expenses of any officer, Director or employee of the Fund who is an officer,
director or employee of the Manager are paid by the Manager.
18
<PAGE>
By its terms, the Fund's Management Agreement will remain in force for an
initial two-year term and from year to year thereafter, subject to annual
approval by (a) the Board of Directors or (b) a vote of the majority of the
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Directors who are not interested persons
of the Fund, by a vote cast in person at a meeting called for the purpose of
voting on such approval. The Fund's Management Agreement may be terminated at
any time, on sixty days' written notice, without the payment of any penalty, by
the Board of Directors, by a vote of the majority of a Fund's outstanding voting
securities, or by the Manager. The Management Agreement automatically terminates
in the event of its assignment, as defined by the 1940 Act and the rules
thereunder.
Ladenburg Thalmann Asset Management, Inc. ("LTAM") owns 50% of the
outstanding securities of the Manager. LTAM is a wholly owned subsidiary of
Ladenburg Thalmann & Co. Inc. ("LTCI"), a registered broker-dealer which is a
member of all principal exchanges, including the NYSE since 1876. LTCI is a
wholly owned subsidiary of Ladenburg Thalmann Group Inc. An entity controlled by
Mark A. Boyar, Ebbets Field Association LLC, holds the other 50% of the
outstanding voting securities of the Manager. The principal business address of
the Manager is 590 Madison Avenue, New York, New York 10022.
Investment Adviser
- ------------------
The Adviser serves as investment adviser to the Fund pursuant to a written
agreement (the "Investment Advisory Agreement"). The services provided by, and
the fees payable by the Fund to, the Adviser under the Investment Advisory
Agreement are described in the Prospectus. These fees are calculated at an
annual rate based on a percentage of the Fund's average daily net assets. See in
the Prospectus, "Management of the Fund."
By its terms, the Fund's Advisory Agreement will remain in force for an
initial two-year term and from year to year thereafter, subject to annual
approval by (a) the Board of Directors or (b) a vote of the majority of the
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Directors who are not interested persons
of the Fund, by a vote cast in person at a meeting called for the purpose of
voting on such approval. The Fund's Advisory Agreement may be terminated at any
time, on sixty days' written notice, without the payment of any penalty, by the
Board of Directors, by a vote of the majority of a Fund's outstanding voting
securities, or by the Adviser. The Advisory Agreement automatically terminates
in the event of its assignment, as defined by the 1940 Act and the rules
thereunder.
The name "Boyar" is a property right of the Adviser. The Adviser may use
the name "Boyar" in other connections and for other purposes, including in the
name of other investment companies. The Fund has agreed to discontinue any use
of the name "Boyar" if the Adviser ceases to be employed as the Fund's
investment adviser.
19
<PAGE>
The Adviser is an affiliate of Mark Boyar & Co., a broker-dealer registered
with the SEC. The Adviser's principal business address is 35 East 21st Street,
New York, New York 10010. Mark A. Boyar, Chairman and Chief Executive Officer of
the Fund, is a controlling person of the Adviser and Mark Boyar & Co.
Administrator
- -------------
Countrywide Fund Services, Inc. (the "Administrator") serves as the Fund's
administrator and accounting, transfer, dividend disbursing, shareholder service
and plan agent pursuant to three written agreements (the "Agreements"). The
services provided by, and the fees payable by the Fund to, the Administrator
under the Agreements are described in the Prospectus. See in the Prospectus,
"Management of the Fund."
Custodian
- ---------
Star Bank, N.A. (the "Custodian") serves as custodian of the Fund's U.S.
and foreign assets, pursuant to a custodian agreement (the "Custody Agreement").
The services provided by the Custodian are described in the Prospectus. Under
the Custody Agreement, the Custodian will receive fixed fees, based on portfolio
transactions, in addition to fees based on the market value of the Fund's
portfolio calculated at .03% on the first $20 million, .02% on the next $20
million and .015% on any balance over $40 million. The Custodian's fees are
payable monthly and subject of a monthly minimum of $300. See in the Prospectus,
"Management of the Fund."
By its terms, the Custody Agreement will remain in force until terminated.
The Custody Agreement may be terminated at any time, on sixty days' written
notice, without the payment of any penalty, by the Board of Directors or by the
Custodian.
Organization of the Fund
- ------------------------
The Fund was incorporated on February 28, 1997 under the laws of the State
of Maryland under the name "Boyar Value Fund, Inc." The Fund's charter
authorizes the Board to issue one billion (1,000,000,000) shares of common
stock, $.001 par value per share (the "Shares").
All shareholders of the Fund, upon liquidation, will participate ratably in
the Fund's net assets. Shares do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of Directors
can elect all Directors. Shares are transferable but have no preemptive,
conversion or subscription rights.
DISTRIBUTION AND SHAREHOLDER SERVICING
The Fund has entered into a Shareholder Servicing and Distribution Plan
(the "12b-1 Plan"), pursuant to Rule 12b-1 under the 1940 Act, pursuant to which
the Fund will pay the Distributor, in consideration for Services (as defined
below), a fee calculated at an
20
<PAGE>
annual rate of .25% of the average daily net assets of the Fund. Services
performed by the Distributor include (i) ongoing servicing and/or maintenance of
the accounts of shareholders of the Fund, as set forth in the 12b-1 Plan
("Shareholder Services"), and (ii) sub-transfer agency services, subaccounting
services or administrative services related to the sale of Shares, as set forth
in the 12b-1 Plan ("Administrative Services" and collectively with Shareholder
Services, "Services") including, without limitation, (a) payments reflecting an
allocation of overhead and other office expenses of the Distributor related to
providing Services; (b) payments made to, and reimbursement of expenses of,
persons who provide support services in connection with the distribution of
Shares including, but not limited to, office space and equipment, telephone
facilities, answering routine inquiries regarding the Fund, and providing any
other Shareholder Services; (c) payments made to compensate selected dealers or
other authorized persons for providing any Services; (d) costs of printing and
distributing prospectuses, statements of additional information and reports of
the Fund to prospective shareholders of the Fund; and (e) costs involved in
obtaining whatever information, analyses and reports with respect to service
activities that the Fund may, from time to time, deem advisable.
Pursuant to the 12b-1 Plan, the Distributor provides the Board, at least
quarterly, with reports of amounts expended under the 12b-1 Plan and the purpose
for which the expenditures were made.
The 12b-1 Plan will continue in effect for so long as their continuance is
specifically approved at least annually by the Board, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the 12b-1 Plan, as the case
may be ("Independent Directors"). Any material amendment of the 12b-1 Plan would
require the approval of the Board in the manner described above. The 12b-1 Plan
may not be amended to increase materially the amount to be spent thereunder
without shareholder approval. The 12b-1 Plan may be terminated at any time,
without penalty, by vote of a majority of the Independent Directors or by a vote
of a majority of the outstanding voting securities of the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of the Fund's shares is equal to the per share net asset
value of the shares of the Fund. Information on how to purchase and redeem Fund
shares and how such shares are priced is included in the Prospectus under "How
Net Asset Value is Determined."
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit.
21
<PAGE>
If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is a summary of the material United States federal income tax
considerations regarding the purchase, ownership and disposition of shares in
the Fund. Each prospective shareholder is urged to consult his own tax adviser
with respect to the specific federal, state, local and foreign tax consequences
of investing in the Fund. The summary is based on the laws in effect on the date
of this Statement of Additional Information, which are subject to change.
The Fund and Its Investments
- ----------------------------
The Fund and Its Investments. The Fund intends to qualify to be treated as
a regulated investment company each taxable year under the Internal Revenue Code
of 1986, as amended (the "Code"). To so qualify, the Fund must, among other
things: (a) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to securities, loans and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies and (b) diversify its holdings so that, at the
end of each quarter of the Fund's taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, securities of other regulated
investment companies, United States government securities and other securities,
with such other securities limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and not greater than 10% of the
outstanding voting securities of such issuer and (ii) not more than 25% of the
value of its assets is invested in the securities (other than United States
government securities or securities of other regulated investment companies) of
any one issuer or any two or more issuers that the Fund controls and are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses. The Fund expects that all of its foreign currency gains
will be directly related to its principal business of investing in stocks and
securities.
As a regulated investment company, the Fund will not be subject to United
States federal income tax on its net investment income (i.e., income other than
its net realized long- and short-term capital gains) and its net realized long-
and short-term capital gains, if any, that it distributes to its shareholders,
provided that an amount equal to at least 90% of the sum of its investment
company taxable income (i.e., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its net realized
short-term capital losses (including any capital loss carryovers), plus or minus
certain other adjustments
22
<PAGE>
as specified in the Code) and its net tax-exempt income for the taxable year is
distributed, but will be subject to tax at regular corporate rates on any
taxable income or gains that it does not distribute. Furthermore, the Fund will
be subject to a United States corporate income tax with respect to such
distributed amounts in any year that it fails to qualify as a regulated
investment company or fails to meet this distribution requirement. Any dividend
declared by the Fund in October, November or December of any calendar year and
payable to shareholders of record on a specified date in such a month shall be
deemed to have been received by each shareholder on December 31 of such calendar
year and to have been paid by the Fund not later than such December 31, provided
that such dividend is actually paid by the Fund during January of the following
calendar year.
The Fund intends to distribute annually to its shareholders substantially
all of its investment company taxable income. The Board of Directors of the Fund
will determine annually whether to distribute any net realized long-term capital
gains in excess of net realized short-term capital losses (including any capital
loss carryovers). The Fund currently expects to distribute any excess annually
to its shareholders. However, if the Fund retains for investment an amount equal
to all or a portion of its net long-term capital gains in excess of its net
short-term capital losses and capital loss carryovers, it will be subject to a
corporate tax (currently at a rate of 35%) on the amount retained. In that
event, the Fund will designate such retained amounts as undistributed capital
gains in a notice to its shareholders who (a) will be required to include in
income for United Stares federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, (b) will be
entitled to credit their proportionate shares of the 35% tax paid by the Fund on
the undistributed amount against their United States federal income tax
liabilities, if any, and to claim refunds to the extent their credits exceed
their liabilities, if any, and (c) will be entitled to increase their tax basis,
for United States federal income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income. Organizations or persons not subject to federal income tax
on such capital gains will be entitled to a refund of their pro rata share of
such taxes paid by the Fund upon filing appropriate returns or claims for refund
with the Internal Revenue Service (the "IRS").
The Code imposes a 4% nondeductible excise tax on the Fund to the extent
the Fund does not distribute by the end of any calendar year at least 98% of its
net investment income for that year and 98% of the net amount of its capital
gains (both long-and short-term) for the one-year period ending, as a general
rule, on October 31 of that year. For this purpose, however, any income or gain
retained by the Fund that is subject to corporate income tax will be considered
to have been distributed by year-end. In addition, the minimum amounts that must
be distributed in any year to avoid the excise tax will be increased or
decreased to reflect any underdistribution or overdistribution, as the case may
be, from the previous year. The Fund anticipates that it will pay such dividends
and will make such distributions as are necessary in order to avoid the
application of this tax.
With regard to the Fund's investments in foreign securities, exchange
control regulations may restrict repatriations of investment income and capital
or the proceeds of
23
<PAGE>
securities sales by foreign investors such as the Fund and may limit the Fund's
ability to pay sufficient dividends and to make sufficient distributions to
satisfy the 90% and excise tax distribution requirements.
If, in any taxable year, the Fund fails to qualify as a regulated
investment company under the Code, it would be taxed in the same manner as an
ordinary corporation and distributions to its shareholders would not be
deductible by the Fund in computing its taxable income. In addition, in the
event of a failure to qualify, the Fund's distributions, to the extent derived
from the Fund's current or accumulated earnings and profits would constitute
dividends (eligible for the corporate dividends-received deduction) which are
taxable to shareholders as ordinary income, even though those distributions
might otherwise (at least in part) have been treated in the shareholders' hands
as long-term capital gains. If the Fund fails to qualify as a regulated
investment company in any year, it must pay out its earnings and profits
accumulated in that year in order to qualify again as a regulated investment
company. In addition, if the Fund failed to qualify as a regulated investment
company for a period greater than one taxable year, the Fund may be required to
recognize any net built-in gains (the excess of the aggregate gains, including
items of income, over aggregate losses that would have been realized if it had
been liquidated) in order to qualify as a regulated investment company in a
subsequent year.
The Fund's short sales against the box, if any, and transactions in foreign
currencies, forward contracts, options and futures contracts (including options
and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Fund (i.e., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the Fund and defer
Fund losses. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (a) will require the
Fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were closed out) and (b) may cause the Funds to recognize
income without receiving cash with which to pay dividends or make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes. The Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of the Fund as a regulated investment company.
Passive Foreign Investment Companies. If the Fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income tax on
a portion of any "excess distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable dividend by the Fund to
its shareholders. Additional charges in the nature of interest may be imposed on
the Fund in respect of deferred taxes arising from such distributions or gains.
Any tax paid by the Fund as a result of its ownership of shares in a PFIC will
not give rise to any deduction or
24
<PAGE>
credit to the Fund or any shareholder. If the Fund were to invest in a PFIC and
elected to treat the PFIC as a "qualified electing fund" under the Code, in lieu
of the foregoing requirements, the Fund might be required to include in income
each year a portion of the ordinary earnings and net capital gains of the
qualified election fund, even if not distributed to the Fund, and such amounts
would be subject to the 90% and excise tax distribution requirements described
above. In order to make this election, the Fund would be required to obtain
certain annual information from the passive foreign investment companies in
which it invests, which may be difficult or not possible to obtain.
Recently, legislation was enacted that provides a mark-to-market election
for regulated investment companies effective for taxable years beginning after
December 31, 1997. This election would result in the Fund being treated as if it
had sold and repurchased all of the PFIC stock at the end of each year. In this
case, the Fund would report gains as ordinary income and would deduct losses as
ordinary losses to the extent of previously recognized gains. The election, once
made, would be effective for all subsequent taxable years of the Fund, unless
revoked with the consent of the IRS. By making the election, the Fund could
potentially ameliorate the adverse tax consequences with respect to its
ownership of shares in a PFIC, but in any particular year may be required to
recognize income in excess of the distributions it receives from PFICs and its
proceeds from dispositions of PFIC company stock. The Fund may have to
distribute this "phantom" income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise tax. The Fund will make the
appropriate tax elections, if possible, and take any additional steps that are
necessary to mitigate the effect of these rules.
Dividends and Distributions. Dividends of net investment income and
distributions of net realized short-term capital gains are taxable to a United
States shareholder as ordinary income, whether paid in cash or in shares.
Distributions of net-long-term capital gains, if any, that the Fund designates
as capital gains dividends are taxable as long-term capital gains, whether paid
in cash or in shares and regardless of how long a shareholder has held shares of
the Fund. Dividends and distributions paid by the Fund (except for the portion
thereof, if any, attributable to dividends on stock of U.S. corporations
received by the Fund) will not qualify for the deduction for dividends received
by corporations. Distributions in excess of the Fund's current and accumulated
earnings and profits will, as to each shareholder, be treated as a tax-free
return of capital, to the extent of a shareholder's basis in his shares of the
Fund, and as a capital gain thereafter (if the shareholder holds his shares of
the Fund as capital assets).
Shareholders receiving dividends or distributions in the form of additional
shares should be treated for United States federal income tax purposes as
receiving a distribution in the amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount.
25
<PAGE>
Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to them.
If the Fund is the holder of record of any stock on the record date for any
dividends payable with respect to such stock, such dividends are included in the
Fund's gross income not as of the date received but as of the later of (a) the
date such stock became ex-dividend with respect to such dividends (i.e., the
date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date the Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, the Fund
may be required to pay dividends based on anticipated earnings, and shareholders
may receive dividends in an earlier year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his shares, a shareholder
will realize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. Such gain or loss will be treated as
capital gain or loss, if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be disallowed
to the extent the shares disposed of are replaced, including replacement through
the reinvesting of dividends and capital gains distributions in the Fund, within
a 61-day period beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired will
be increased to reflect the disallowed loss. Any loss realized by a shareholder
on the sale of a Fund share held by the shareholder for six months or less will
be treated for United States federal income tax purposes as a long-term capital
loss to the extent of any distributions or deemed distributions of long-term
capital gains received by the shareholder with respect to such share.
Foreign Taxes. Income received by the Fund from non-U.S. sources may be
subject to withholding and other taxes imposed by other countries. Because it is
not expected that more than 50 percent of the value of the Fund's total assets
at the close of its taxable year will consist of stock and securities of
non-U.S. corporations, it is not expected that the Fund will be eligible to
elect to "pass through" to the Fund's shareholders the amount of foreign income
and similar taxes paid by the Fund. In the absence of such an election, the
foreign taxes paid by the Fund will reduce its investment company taxable
income, and distributions of investment company taxable income received by the
Fund from non-U.S. sources will be treated as United States source income.
Backup Withholding. The Fund may be required to withhold, for United States
federal income tax purposes, 31% of the dividends and distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding
26
<PAGE>
is not an additional tax and any amount withheld may be credited against a
shareholder's United States federal income tax liabilities.
Notices. Shareholders will be notified annually by the Fund as to the
United States federal income tax status of the dividends, distributions and
deemed distributions attributable to undistributed capital gains (discussed
above in "The Fund and Its Investments") made by the Fund to its shareholders.
Furthermore, shareholders will also receive, if appropriate, various written
notices after the close of the Fund's taxable year regarding the United States
federal income tax status of certain dividends, distributions and deemed
distributions that were paid (or that are treated as having been paid) by the
Fund to its shareholders during the preceding taxable year.
Other Taxation
- --------------
Distributions also may be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES
AFFECTING THE FUND AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM
OF AN INVESTMENT IN THE FUND.
DETERMINATION OF PERFORMANCE
From time to time, the Fund may quote its total returns in advertisements
or in reports and other communications to shareholders. These figures are
calculated by finding the average annual compounded rates of return for the
one-, five- and ten- (or such shorter period as the shares have been offered)
year periods that would equate the initial amount invested to the ending
n
redeemable value, according to the following formula: P (1 + T) = ERV. For
purposes of this formula, "P" is a hypothetical investment of $1,000; "T" is
average annual total return; "n" is number of years; and "ERV" is the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
one-, five- or ten-year periods (or fractional portion thereof). Total return or
"T" is computed by finding the average annual change in the value of an initial
$1,000 investment over the period and assumes that all dividends and
distributions are reinvested during the period.
The Fund may advertise, from time to time, comparisons of the performance
of its Shares with that of one or more other mutual funds with similar
investment objectives. The Fund may advertise average annual calendar
year-to-date and calendar quarter returns, which are calculated according to the
formula set forth in the preceding paragraph, except that the relevant measuring
period would be the number of months that have elapsed in the current calendar
year or most recent three months, as the case may be.
27
<PAGE>
The Fund may also advertise its yield. Yield is calculated by annualizing
the net investment income generated by the Fund over a specified thirty-day
period according to the following formula:
6
YIELD = 2[(a-b + 1) -1]
---
cd
For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period.
The performance of Fund shares will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses allocable to it. As described above, total return and yield are based
on historical earnings and are not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, the Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by institutional investors directly to their
customers in connection with investments in Fund shares are not reflected in the
Fund's total return, and such fees, if charged, will reduce the actual return
received by customers on their investments.
INDEPENDENT ACCOUNTANTS AND COUNSEL
Ernst & Young LLP, with principal offices at 1300 Chiquita Center,
Cincinnati, Ohio, serves as independent accountants for the Fund. The statement
of assets and liabilities of the Fund, as of November 20, 1997, that appears in
this Statement of Additional Information has been audited by Ernst & Young LLP,
whose report thereon appears elsewhere herein.
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York, 10022-4677, serves as counsel for the Fund as well as counsel to
the Manager and the Distributor.
FINANCIAL STATEMENT
The Fund's financial statement follows this Statement of Additional
Information.
28
<PAGE>
Report of Independent Auditors
To the Board of Directors and Shareholders
Boyar Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of the
Boyar Value Fund, Inc. as of November 20, 1997. This statement of assets and
liabilities is the responsibility of the Fund's management. Our responsibility
is to express an opinion on this statement of assets and liabilities based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Boyar
Value Fund, Inc. at November 20, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
------------------------
Ernst & Young LLP
Cincinnati, Ohio
February 26, 1998
<PAGE>
BOYAR VALUE FUND, INC.
----------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
AS OF NOVEMBER 20, 1997
-----------------------
ASSETS:
Cash $100,000
Organization costs (Note 2) 91,000
--------
Total assets 191,000
--------
LIABILITIES:
Accrued expenses (Note 2) 91,000
--------
Total liabilities 91,000
--------
Net assets for shares of
beneficial interest
outstanding (Note 1) $100,000
========
Shares outstanding (Note 1) 10,000
========
Net asset value per share $ 10.00
========
2
<PAGE>
BOYAR VALUE FUND, INC.
----------------------
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------
AS OF NOVEMBER 20, 1997
-----------------------
(1) Boyar Value Fund, Inc. (the Fund) is an open-end management investment
company established as a Maryland corporation on February 28, 1997.
The Fund has had no operations except for the initial issuance of shares.
On November 20, 1997, 10,000 shares were issued for cash at $10.00 per
share.
(2) Expenses incurred in connection with the organization of the Fund and the
initial offering of shares are estimated to be $91,000. These expenses have
been paid by Ladenburg Thalmann Fund Management Inc. (The "Manager"). Upon
commencement of the public offering of shares of the Fund, the Fund will
reimburse the Manager for such expenses, with that amount being capitalized
and amortized on a straight-line basis over five years. As of November 20,
1997, all outstanding shares of the Fund were held by the Manager, who
purchased these initial shares in order to provide the Fund with its
required capital. In the event the initial shares of the Fund are redeemed
by any holder thereof at any time prior to the complete amortization of
organizational expenses, the redemption proceeds payable with respect to
such shares will be reduced by the pro rata share (based upon the portion
of the shares redeemed in relation to the required capitalization) of the
unamortized deferred organizational expenses as of the date of such
redemption.
(3) Reference is made to the Prospectus and this Statement of Additional
Information for a description of the Management Agreement, the Underwriting
Agreement, the Shareholder Servicing and Distribution Plan, the
Administration Agreement, tax aspects of the Fund and the calculation of
the net asset value of shares of the Fund.
3
