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As Filed With the Securities and Exchange Commission on July 11, 1997
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
ISI STRATEGY FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
717 Fifth Avenue
New York, New York 10022
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 446-5600
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R. Alan Medaugh
717 Fifth Avenue
New York, NY 10022
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(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered Amount Being Registered
- ------------------------------------ -----------------------
Share of Common Stock Indefinite*
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*Registrant elects to register an indefinite number of shares of its Common
Stock, par value $.001 per share, under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
ISI STRATEGY FUND, INC.
July 11, 1997
Cross Reference Sheet
(ISI Strategy Fund Shares)
Items Required by Form N-1A
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Part A Information Required in Prospectus Registration Statement Heading
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Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Financial Highlights*
Item 4. General Description of Registrant Investment Program
Investment Restrictions;
General Information
Item 5. Management of the Fund Management of the Fund;
Investment Advisor and Sub-Advisor;
Distributor; Custodian, Transfer
Agent and Accounting Services
Item 5A. Management's Discussion of Fund **
Performance
Item 6. Capital Stock and Other Securities Cover Page
Dividends and Taxes;
General Information
Item 7. Purchase of Securities Being Offered How to Invest in
the Fund
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Pending Legal Proceedings *
Part B Information Required in a Statement
- ------ of Additional Information
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
and History
Item 13. Investment Objectives and Policies Investment Objective,
Policies and Risk
Considerations
</TABLE>
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* Omitted since the answer is negative or the item is not applicable.
** Required information will be contained in the Registrant's first Annual
Report to Shareholders containing results of operations, when available.
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<TABLE>
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Part A Information Required in Prospectus Registration Statement Heading
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Item 14. Management of the Fund Management of
the Fund
Item 15. Control Persons and Principal Holders Control Persons and
of Securities Principal Holders of
Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Custodian, Transfer Agent
and Accounting Services
Item 17. Brokerage Allocation Brokerage
Item 18. Capital Stock and Other Securities Capital Stock;
Semi-Annual Reports
Item 19. Purchase, Redemption and Pricing of Valuation of Shares
Securities Being Offered and Redemption
Item 20. Tax Status Federal Tax Treatment of
Dividends and
Distributions
Item 21. Underwriters Distribution of Fund
Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C Other Information
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Part C contains the information required by the items
contained therein under the items set forth in the form.
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<PAGE>
Supplement dated _____, 1997
to
Prospectus dated ____, 1997
of
ISI Strategy Fund Shares
(A Class of ISI Strategy Fund, Inc.)
The Prospectus dated _______, 1997 of ISI Strategy Fund Shares ( a class of
shares of ISI Strategy Fund, Inc.) is hereby amended and supplemented by the
following:
The sections entitled "Fee Table" and "How to Invest in the Fund" are modified
to reflect the terms of the following offer:
Until such time as the assets of the Fund reach $100 million, or a minimum of
______ days from the date hereof (the "Special Offering Period"), whichever
occurs first, investments of $100,000 or more in Shares will be made at net
asset value (without a sales charge) as set forth below:
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Dealer
Sales Charge as Sales Charge as Compensation as
Percentage of Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price*
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Less than $50,000 4.45% 4.66% 4.00%
$50,000 - $99,999 3.50% 3.63% 3.00%
$100,000 and over...** None None 1.00%
</TABLE>
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* The Distributor may from time to time reallow to Participating Dealers
up to 100% of the sales charge included in the Offering Price of
Shares. Dealers that receive a reallowance of 100% of the sales charge
may be considered underwriters for purposes of the federal securities
laws.
** Purchases of $100,000 or more by persons who would not be eligible for
sales load waivers except for the limited offer described herein are
not subject to an initial sales charge, however, a contingent deferred
sales charge of 1.00% will be imposed on such purchases in the event of
redemption within 36 months following such purchase.
During the Special Offering Period, the following features described under "How
to Invest in the Fund" will not be available: Purchases by Exchange and Letters
of Intent. In addition, Rights of Accumulation will not be available on separate
purchases aggregating more than $50,000 and will only be available on purchases
aggregating more than $100,000 with respect to the amount in excess of $100,000.
The following features will remain in effect during this period: Purchases
Through Automatic Investing and Purchases Through Dividend Reinvestment.
THE FUND RESERVES THE RIGHT TO TERMINATE THIS SPECIAL OFFER AT ANY TIME.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
<PAGE>
FOR USE DURING SPECIAL OFFERING PERIOD
ISI STRATEGY FUND SHARES
NEW ACCOUNT APPLICATION
Make check payable to "ISI Strategy Fund Shares" and mail with this Application
to:
ISI Mutual Funds
P.O. Box 419426
Kansas City, MO 64141-6426
For assistance in completing this form, please call the Transfer Agent at (800)
882-8585. To open an IRA account, call ISI at (800) 955-7175 to request an
application.
The minimum initial purchase is $5,000, except that the minimum initial purchase
for qualified retirement plans or IRA's is $1,000 and the minimum initial
purchase for participants in the Fund's Automatic Investing Plan is $250. Each
subsequent purchase requires a $250 minimum, except that the minimum subsequent
purchase under the Fund's Automatic Investing Plan is $100 for monthly purchases
and $250 for quarterly purchases. The Fund reserves the right not to accept
checks for more than $50,000 that are not certified or bank checks.
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Your Account Registration (Please print) ---------------------------------------------------------
Existing Account No., if any
Individual or Joint Tenant Gifts to Minors
_______________________________________________________ ____________________________________________________________________
First Name Initial Last Name Custodian's Name (only one allowed by law)
_______________________________________________________ ____________________________________________________________________
Social Security Number Minor's Name (only one)
_______________________________________________________ ____________________________________________________________________
Joint Tenant Initial Last Name Social Security Number of Minor
under the ____________________ Uniform Gifts to Minors Act
Social Security Number State of Residence
Corporations, Trusts, Partnerships, etc. Mailing Address
_______________________________________________________ ____________________________________________________________________
Name of Corporation, Trust or Partnership Street
_______________________________________________________ ____________________________________________________________________
Tax ID Number City State Zip
_______________________________________________________ ____________________________________________________________________
Name of Trustees (If to be included in the Registration) Daytime Phone
</TABLE>
Distribution Options
Please check appropriate boxes. There is no sales charge for reinvested
dividends. If none of the options are selected, all distributions will be
reinvested.
<PAGE>
Income Dividends Capital Gains
|_| Reinvested in additional shares |_| Reinvested in additional shares
|_| Paid in Cash |_| Paid in cash
Call (800) 882-8585 for information about reinvesting your dividends in other
funds in the ISI Family of Funds.
Automatic Investing Plan (Optional)
|_| I authorize you as Agent for the Automatic Investing Plan to automatically
invest $__________ for me, on a monthly or quarterly basis, on or about the 20th
of each month or if quarterly, the 20th of January, April, July and October, and
to draw a bank draft in payment of the investment against my checking account.
(Bank drafts may be drawn on commercial banks only.)
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Minimum Initial Investment: $250
Subsequent Investments (check one): |_| Monthly ($100 minimum) |_| Quarterly ($250 minimum)
Please attach a voided check.
__________________________________________________ ____________________________________________________________
Bank Name Depositor's Signature Date
__________________________________________________ ____________________________________________________________
Existing ISI Strategy Fund Account No., if any Depositor's Signature Date
(if joint acct., both must sign)
</TABLE>
Systematic Withdrawal Plan (Optional)
|_| Beginning the month of __________________________, 19___, please send me
checks on a monthly or quarterly basis, as indicated below, in the amount of
$ ________, from shares that I own, payable to the account registration address
as shown above. (Participation requires minimum account value of $10,000.)
Frequency (check one): |_| Monthly |_| Quarterly (January, April, July
Telephone Transactions and October)
Telephone Transactions
I understand that I will automatically have telephone redemption privileges (for
amounts up to $50,000) unless I mark the box below.
No, I/We do not want: |_| Telephone redemption privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a pre-designated bank account, please
provide the following information:
Bank: ___________________ Bank Account No.:___________________
Address: ___________________ Bank Account Name ___________________
<PAGE>
Signature and Taxpayer Certification
The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding is
not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as required
by federal law: (Please check applicable boxes)
|_| U.S. Citizen/Taxpayer:
|_| I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and
(2) I am not subject to any backup withholding either because (a) I
am exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
|_| If no Tax ID Number or Social Security Number has been provided above,
I have applied, or intend to apply, to the
IRS or the Social Security Administration for a Tax ID Number or a
Social Security Number, and I understand that if I do not provide either
number to the Transfer Agent within 60 days of the date of this
Application or if I fail to
furnish my correct Social Security Number or Tax ID Number, I may be subject
to a penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request such
form by calling the Transfer Agent at 800-882-8585.)
|_| Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes:
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal Revenue
Service.
I have received a copy of the Fund's prospectus dated, _______ 1997. I
acknowledge that the telephone redemption privileges are automatic and will be
effected as described in the Fund's current prospectus (see "Telephone
Transactions"). I also acknowledge that I may bear the risk of loss in the event
of fraudulent use of such privileges. If I do not want telephone redemption
privileges, I have so indicated on this Application.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
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________________________________________ _______________________________________________________
Signature Date Signature (if a joint account, both must sign) Date
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For Dealer Use Only
Dealer's Name: ________________________________________ Dealer Code: _________________
Dealers Address: ________________________________________ Branch Code: ________________
________________________________________
Representative: ________________________________________ Rep. No. ________________
</TABLE>
<PAGE>
ISI STRATEGY FUND SHARES
(A Class of ISI Strategy Fund, Inc.)
717 Fifth Avenue
New York, New York 10022
For information call (800) 955-7175
ISI Strategy Fund, Inc. (the "Fund") is designed to maximize total return
through a combination of long-term growth of capital and current income by
actively apportioning investments between U.S. Treasury Securities and
diversified investments in U.S. equity securities.
Shares of the ISI class of the Fund ("Shares") are available through
International Strategy & Investment Group Inc. (the "Distributor"), as well as
Participating Dealers and Shareholder Servicing Agents. (See "How to Invest in
the Fund.")
This Prospectus sets forth basic information that investors should know
about the Fund prior to investing, and should be retained for future reference.
A Statement of Additional Information dated , 1997, has been filed with the
Securities and Exchange Commission (the "SEC") and is hereby incorporated by
reference. It is available upon request and without charge by contacting the
Fund at the above address or telephone number.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
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.
The date of this Prospectus is , 1997.
<PAGE>
1. FEE TABLE
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Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) ............ 4.45%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower) .......................................................... None
Annual Fund Operating Expenses:
(as a percentage of average daily net assets)
Management Fees (net of fee waivers) ................................................... 0.00%*
12b-1 Fees .............................................................................. 0.25%
Other Expenses (net of fee waivers) ...................................................... 0.75%*
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Total Fund Operating Expenses (net of fee waivers) .................................... 1.00%*
======
</TABLE>
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* The Advisor has voluntarily agreed to waive its fees and to reimburse
expenses to the extent required so that the Fund's Total Operating Expenses do
not exceed 1.00% of the Fund's average daily net assets. In addition, the
Fund's administrator has voluntarily agreed to waive its fee until the earlier
of such time as the Fund's net assets reach $50 million or the Fund has been in
operation for one year. Absent fee waivers, Management Fees would be .40%,
Other Expenses (including administration fees) would be 1.15% and Total Fund
Operating Expenses would be 1.80% of the Fund's average daily net assets.
Example:
1 year 3 years
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You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period:* $ $
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* Net of fee waivers
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Fund will bear directly or indirectly. A
person who purchases Shares through a financial institution may be charged
separate fees by the financial institution. (For more complete descriptions of
the various costs and expenses, see "How to Invest in the Fund -- Offering
Price", "Investment Advisor", "Administrator" and "Distributor.") The rules of
the SEC require that the maximum sales charge (in the Shares' case, 4.45% of
the offering price) be reflected in the above table. However, certain investors
may qualify for reduced sales charges. (See "How to Invest in the Fund --
Offering Price.") The Expenses and Example appearing in the table above are
based on the Fund's estimated amounts for the current fiscal year ending May
31, 1998. Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders of the Fund may pay more than the equivalent of the maximum
front-end sales charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. The foregoing table has not been
audited by ______________________, the Fund's independent auditors.
2. INVESTMENT PROGRAM
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize total return through a
combination of long-term growth of capital and current income. The Fund seeks
to achieve this objective through an active asset allocation strategy that
involves apportioning the Fund's assets between U.S. Treasury Securities and
diversified investments in U.S. equity securities. There can be no assurance
that the Fund's investment objective will be met.
2
<PAGE>
ALLOCATION OF INVESTMENTS
International Strategy & Investment Inc. ("ISI" or "Advisor"), the Fund's
advisor, and Wilshire Associates Incorporated ("Wilshire"), the Fund's
sub-advisor (collectively, the "Advisors"), are responsible for selecting the
Fund's investments. (See "Investment Advisor and Sub-Advisor.") The Fund will
invest primarily in U.S. equity securities (including common stocks, preferred
stocks, convertible debt, warrants, other securities convertible into or
exchangeable for common stocks, and Standard & Poor's ("S&P") depository
receipts ("SPDRs")), securities index futures contracts, and U.S. Treasury
Securities.
Edward S. Hyman, Chairman of ISI and the Fund and R. Alan Medaugh, President of
ISI and President and Director of the Fund, will allocate the Fund's assets
between U.S. equity securities and U.S. Treasury Securities based on ISI's
analysis of the pace of the economy and its forecasts for the direction of
interest rates and corporate earnings. Under normal market conditions, the Fund
will invest its assets in a ratio of (1) approximately 80% equity securities to
20% U.S. Treasury Securities when an aggressive strategy is deemed warranted,
(2) approximately 60% equity securities to 40% U.S. Treasury Securities when a
neutral strategy is deemed warranted, and (3) approximately 40% equity
securities to 60% U.S. Treasury Securities when a defensive strategy is deemed
warranted. As discussed below, the Fund may, especially during its early
stages, use securities index futures contracts as a means of obtaining exposure
to the U.S. equity markets. The allocation of the Fund's assets will be
reviewed periodically in light of ISI's forecasts and may be reallocated when
ISI determines it appropriate. The Fund's assets will be rebalanced on a
quarterly basis if at that time the market value of the equity portion of the
portfolio is below 40% or above 80% of the Fund's total assets. There can be no
assurance that the Advisor's forecasts will accurately predict economic trends
or that portfolio strategies based on these forecasts will be effective.
U. S. EQUITY SECURITIES
Wilshire and its affiliates have, since 1983, focused on building and
maintaining portfolios based on the Wilshire 5000 Index and other
custom-structured U.S. equity applications, and currently have $-- billion
under management in these portfolios. In managing the U.S. equity securities in
the Fund's portfolio Wilshire will attempt to capture the return of the broad
U.S. equity market. Ultimately, Wilshire expects that the performance and
volatility of the Fund's equity portfolio will approximately resemble that of
the Wilshire 5000 Index ("Wilshire 5000" or "Index"). The Wilshire 5000 consists
of all U.S. common stocks that trade on a regular basis on the New York and
American Stock Exchanges and in the NASDQ over-the-counter market. Approximately
7,300 stocks, including large-, medium-, and small-capitalization stocks are
included in the Index. In constructing the Fund's portfolio, Wilshire will, as
the Fund grows, conduct a stratified sampling of the Wilshire 5000 resulting
optimally in the purchase of 1,500 to 2,000 common stocks of issuers included in
the Index based on sector allocation and other investment techniques in an
attempt to achieve performance and volatility comparable to the Index.
Initially, Wilshire may use securities index futures contracts and SPDRs to
gain market exposure without purchasing individual stocks. For example, the
Fund may invest in security index futures contracts on the Standard & Poor's
500 Index ("S&P 500") and the Russell 2000 Index as well as S&P 500 SPDRs and
S&P MidCap 400 Index SPDRs for market exposure.
For more information on securities index futures contracts, see "Futures
Contracts" under "Other Investment Policies and Risk Considerations" below.
A SPDR is a share of common stock in a unit investment trust ("UIT") that is
currently traded on the American Stock Exchange. SPDRs represent a
proportionate undivided interest in a basket of securities owned by the UIT
which consists of substantially all of the common stocks, in substantially the
same weighting, as the component stocks of a specified S&P index. The
performance of a SPDR is intended to track the performance of the component
stocks of the relevant S&P index. The composition and weighting of the
securities owned by the UIT will be adjusted from time to time to conform to
periodic changes in the volatility and relative weightings of such S&P index.
See "Risk Considerations" below for more information about SPDRs.
U.S. TREASURY SECURITIES
ISI will manage the U.S. Treasury Securities in the Fund's portfolio with a view
toward, first, a high level of total return with relative stability of principal
and, second, high current income. Therefore, in addition to yield, the potential
for capital gains and appreciation resulting from possible changes in interest
rates will be a consideration in
3
<PAGE>
selecting investments. ISI will be free to take advantage of the entire range
of maturities offered by U.S. Treasury Securities and may adjust the average
maturity of such securities held in the Fund's portfolio from time to time,
depending on its assessment of the relative yields available on securities of
different maturities and its expectations of future changes in interest rates.
Thus, at certain times the average maturity of the U.S. Treasury Securities
held by the Fund may be relatively short (from under one year to five years,
for example) and at other times may be relatively long (over 10 years, for
example). In determining which direction interest rates are likely to move, the
Advisor relies on the economic analysis made by Mr. Hyman. There can be no
assurance that such economic analysis will accurately predict interest rate
trends or that portfolio strategies based on Mr. Hyman's economic analysis will
be effective.
RISK CONSIDERATIONS
The investment policies of the Fund entail certain risks and considerations of
which an investor should be aware.
U.S. Equity Securities. The Fund will invest in U.S. equity securities which
are subject to market risks that may cause their prices to fluctuate over time
and the price fluctuations may differ from changes in the value of the Wilshire
5000. Fluctuations in the value of the U.S. equity securities held by the Fund
will cause the value of the Shares to fluctuate. An investment in SPDRs is
subject to the same risk of fluctuation in value as the basket of common stocks
underlying the SPDR. In particular, the price at which the underlying SPDR
securities may be sold and the value of the SPDR may be adversely affected if
the secondary trading markets for the SPDRs are limited or absent.
Additionally, the basket of common stocks underlying the SPDR may not exactly
replicate the performance of the specified index because of transaction costs
and other expenses. The basket of common stocks underlying the SPDR may also be
unable to fully replicate the performance of the specified S&P index due to the
temporary unavailability of certain underlying securities or due to other
extraordinary circumstances.
U.S. Treasury Securities. U.S. Treasury Securities are considered among the
safest of fixed-income investments. Because of this added safety, the yields
available from U.S. Treasury Securities are generally lower than the yields
available from corporate debt securities. As with other debt securities, the
value of U.S. Treasury Securities changes as interest rates fluctuate. This is
especially true for securities with longer maturities and for STRIPS
(securities that do not pay interest currently but which are purchased at a
discount and are payable in full at maturity). Changes in the value of
portfolio securities will not affect interest income from those securities but
will be reflected in the Fund's net asset value. Thus, a decrease in interest
rates will generally result in an increase in the value of the Shares.
Conversely, during periods of rising interest rates, the value of the Shares
will generally decline. The magnitude of these fluctuations will generally be
greater at times when the average maturity of the U.S. Treasury Securities held
by the Fund is longer.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
Futures Contracts. The Fund may engage in securities index futures contracts in
order to obtain exposure to certain market segments, facilitate allocation of
investments among asset classes and for the purposes of hedging the portfolio's
investments. A securities index futures contract obligates the seller to
deliver (and the purchaser to take), effectively, an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the trade is made. No physical delivery of the underlying stocks in
the index is made. Futures contracts will be entered on domestic exchanges and
boards of trade, subject to applicable Commodities and Futures Trading
Commission ("CFTC") Rules. These transactions may be entered into for bona fide
hedging and other permissible risk management purposes.
In connection with transactions in futures contracts, the Fund will be required
to deposit as "initial margin" a specified amount of cash or short-term U.S.
Government securities. The initial margin required for a securities index
futures contract is set by the exchange on which the contract is traded with
review and oversight by the CFTC. Thereafter, subsequent payments (referred to
as "variation margin") are made to and from the broker to reflect changes in
the value of the futures contract. The Fund will not enter into futures
contracts, if immediately thereafter, the sum of the amounts of initial margin
deposits on the Fund's open futures contracts entered into for other than "bona
fide hedging" would exceed 5% of the value of the Fund's total assets.
Participation in the futures markets involves investment risks and transaction
costs to which the Fund would not be
4
<PAGE>
subject absent the use of these strategies. Gains and losses on futures
contracts, such as securities index futures contracts, depend on the Advisor's
ability to predict correctly the direction of securities prices, interest rates
and other economic factors. Other risks associated with the use of futures
contracts are (i) imperfect correlation between the price of futures contracts
and movements in the prices of the securities underlying the index or of the
securities being hedged in the case of bona fide hedging strategies; (ii) the
fact that skills needed to use these investment strategies are different from
those needed to select portfolio securities; (iii) the possible absence of a
liquid secondary market for any particular instrument at any particular time;
and (iv) the possible need to defer closing out certain positions to avoid
adverse tax consequences. The risk that the Fund will be unable to close out a
futures position will be minimized by only entering into futures contracts for
which there appears to be a liquid exchange or secondary market. In addition,
the possible risk of loss of trading futures contracts in certain strategies
can be substantial, due to both the low margin deposits required and the high
degree of leverage involved in futures pricing.
Other Investments. For temporary, defensive purposes, the Fund may invest up to
100% of its assets in high quality, short-term money market instruments, and in
notes or bonds issued by the U.S. Treasury Department or by other agencies of
the U.S. Government.
Repurchase Agreements. The Fund may agree to purchase U.S. Treasury securities
from creditworthy financial institutions, such as banks and broker-dealers,
subject to the seller's agreement to repurchase the securities at an
established time and price. Default by, or bankruptcy proceedings with respect
to, the seller may, however, expose the Fund to possible loss because of
adverse market action or delay in connection with the disposition of the
underlying obligations.
Purchase of When Issued Securities. From time to time, in the ordinary course
of business, the Fund may make purchases of U.S. Treasury securities, at the
current market value of the securities, on a when-issued basis. A segregated
account of the Fund, consisting of cash or liquid securities equal at all times
to the amount of the when-issued commitments will be established and maintained
by the Fund at the Fund's custodian. While the Fund will purchase securities on
a when-issued basis only with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date if it is deemed
advisable to limit the effects of adverse market action. The value of U.S.
Treasury securities so purchased or sold is subject to market fluctuation and no
interest accrues to the purchaser during this period. The Fund will ordinarily
invest no more than [40]% of its net assets at any time in securities purchased
on a when-issued basis.
[Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are at all times
secured by cash or money market instruments, which are maintained in a
segregated account pursuant to applicable regulations and that are at least
equal to market value, determined daily, of the loaned securities. As with any
extensions of credit, there are risk of delay in recovery, and in some cases,
even loss of rights in the collateral should the borrower of the securities
fail financially. In determining whether to lend securities to a particular
borrower, the Advisors (subject to review by the Fund's Board of Directors)
will consider all relevant facts and circumstances including the
creditworthiness of the borrower. The Fund will not lend portfolio securities
in excess of [20]% of the value of its total assets. The Board of Directors
will monitor the Fund's lending of portfolio securities.]
3. INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of restrictions which
reflect both self-imposed standards and federal regulatory limitations. The
Fund's investment objective and investment restrictions numbered 1 and 2 are
matters of fundamental policy and may not be changed without shareholder
approval. Investment restriction number 3 may be changed by a majority vote of
the Board of Directors. The Fund will not:
1) Concentrate 25% or more of its total assets in securities of issuers in any
one industry (for these purposes the U.S. Government, its agencies and
instrumentalities are not considered an industry);
2) With respect to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any single issuer or purchase more
than 10% of the outstanding voting securities of any one issuer, except
the U.S. Government, its agencies and instrumentalities; and
3) Invest more than 15% of the value of its net assets in illiquid securities.
5
<PAGE>
The Fund is subject to further investment restrictions that are set forth in
the Statement of Additional Information.
4. HOW TO INVEST IN THE FUND
Shares may be purchased from the Distributor, through any securities dealer
which has entered into a dealer agreement with the Distributor ("Participating
Dealers") or through any financial institution which has entered into a
shareholder servicing agreement with the Fund ("Shareholder Servicing Agents").
Shares may also be purchased by completing the Application Form attached to
this Prospectus and returning it, together with payment of the purchase price,
to the address shown on the Application Form. As used herein, the "Fund" refers
to The Strategy Fund, Inc., whereas references to the "Shares" shall mean
shares of the Fund's ISI Strategy Fund Shares class, which is a class of shares
of the Fund.
The minimum initial investment is $5,000, except that the minimum initial
investment for qualified retirement plans and IRA's is $1,000 and the minimum
initial investment for participants in the Fund's Automatic Investing Plan is
$250. Each subsequent investment must be at least $250, except that the minimum
subsequent investment for participants in the Fund's Automatic Investing Plan
is $100 for monthly investments and $250 for quarterly investments. (See
"Purchases Through Automatic Investing Plan" below.) The Fund reserves the
right to suspend the sale of Shares at any time at the discretion of the
Distributor. Orders for purchases of Shares are accepted on any day on which
the New York Stock Exchange is open for business (a "Business Day"). Purchase
orders for Shares will be executed at a per Share purchase price equal to the
net asset value next determined after receipt of the purchase order plus any
applicable front-end sales charge (the "Offering Price") on the date such net
asset value is determined (the "Purchase Date"). Purchases made by mail must be
accompanied by payment of the Offering Price. Purchases made through the
Distributor or a Participating Dealer or Shareholder Servicing Agent must be in
accordance with such entity's payment procedures. The Distributor may, in its
sole discretion, refuse to accept any purchase order.
The net asset value per Share is determined daily as of the close of the New
York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on each
Business Day. Net asset value per share of a class is calculated by valuing its
share of the Fund's assets, deducting all liabilities attributable to that
class, and dividing the resulting amount by the number of then outstanding
shares of the class. For this purpose, portfolio securities will be given their
market value where feasible. If a portfolio security is traded on a national
exchange, on the valuation date, the last quoted sale price (or in the absence
of recorded sales, the average of readily available closing bid and asked
prices) will generally be used. Securities or other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established from time to time and
monitored by the Fund's Board of Directors. Debt obligations with maturities of
60 days or less are valued at amortized cost, which constitutes fair value as
determined by the Directors.
OFFERING PRICE
Shares may be purchased at the Offering Price, which includes a sales charge
which is calculated as a percentage of the Offering Price and decreases as the
amount of purchase increases as shown below.
<TABLE>
<CAPTION>
Sales Sales
Charge as Charge as Dealer
Percentage Percentage Compensation
of of Net as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price*
------------------ ----- -------- ------
<S> <C> <C> <C>
Less than - $ 50,000 4.45% 4.66% 4.00%
$ 50,000 - $ 99,999 3.50% 3.63% 3.00%
$ 100,000 - $ 249,999 2.50% 2.56% 2.00%
$ 250,000 - $ 499,999 2.00% 2.04% 1.50%
$ 500,000 - $ 999,999 1.50% 1.52% 1.25%
$1,000,000 - $1,999,999 0.75% 0.76% 0.75%
$2,000,000 - $2,999,999 0.50% 0.50% 0.50%
$3,000,000 and over ...... None None None
</TABLE>
- -----------
* The Distributor may from time to time reallow to Participating Dealers up to
100% of the sales charge included in the Offering Price of Shares. Dealers
that receive a reallowance of 100% of the sales charge may be considered
underwriters for purposes of the federal securities laws.
A shareholder who purchases additional Shares may obtain reduced sales charges
as set forth in the table above through a right of accumulation. In addition,
an investor may obtain reduced sales charges as set forth above through a right
of accumulation of purchases of Shares and purchases of shares of other mutual
funds in the ISI family of funds. The applicable sales charge will be
determined based on the total of (a) the investor's current purchase plus (b)
an amount equal to the then current net asset value
6
<PAGE>
or cost, whichever is higher, of all Shares and of all shares of such other
mutual funds in the ISI family of funds held by the shareholder. To obtain the
reduced sales charge through a right of accumulation, the shareholder must
provide the Distributor, either directly or through a Participating Dealer or
Shareholder Servicing Agent, as applicable, with sufficient information to
verify that the shareholder has such a right. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases. The term
"purchase" refers to an individual purchase by a single purchaser, or to
concurrent purchases, which will be aggregated, by a purchaser, the purchaser's
spouse and their children under the age of 21 years purchasing Shares for their
own account.
An investor may also obtain the reduced sales charges shown above by executing
a written Letter of Intent which states the investor's intention to invest at
least $50,000 within a 13-month period in Shares. Each purchase of Shares under
a Letter of Intent will be made at the Offering Price applicable at the time of
such purchase to the full amount indicated on the Letter of Intent. A Letter of
Intent is not a binding obligation upon the investor to purchase the full
amount indicated. The minimum initial investment under a Letter of Intent is 5%
of the full amount. Shares purchased with the first 5% of the full amount will
be held in escrow (while remaining registered in the name of the investor) to
secure payment of the higher sales charge applicable to the Shares actually
purchased if the full amount indicated is not invested. Such escrowed Shares
will be involuntarily redeemed to pay the additional sales charge, if
necessary. When the full amount indicated has been purchased, the escrowed
Shares will be released. An investor who wishes to enter into a Letter of
Intent in conjunction with an investment in Shares may do so by completing the
appropriate section of the Application Form attached to this Prospectus.
The Fund may sell Shares at net asset value (without sales charge) to the
following: (i) banks, bank trust departments, registered investment advisory
companies, financial planners and broker-dealers purchasing Shares on behalf of
their fiduciary and advisory clients, provided such clients have paid an
account management fee for these services; (ii) investors who have redeemed
Shares, or shares of any other mutual fund in the ISI family of funds that have
similar sales charges, in an amount that is not more than the total redemption
proceeds, provided that the purchase is within six months after the redemption
and the amount of the purchase is at least $5,000; and (iii) current or retired
Directors of the Fund, directors and employees (and their immediate families)
of the Advisor, the Fund's administrator, and their respective affiliates, and
employees of Participating Dealers. In addition, investors who have redeemed
shares of funds in the ISI family of funds that have lower sales charges may
purchase Shares at net asset value in an amount that is not more than the total
redemption proceeds, provided that they held the shares of such funds for more
than 24 months prior to the redemption, the purchase is within six months after
the redemption and the amount of the purchase is at least $5,000.
PURCHASES BY EXCHANGE
As permitted pursuant to any rule, regulation or order promulgated by the SEC,
shareholders of other mutual funds in the ISI family of funds that have similar
sales charges may exchange their shares of those funds for an equal dollar
amount of Shares. Shares issued pursuant to this offer will not be subject to
the sales charges described above or any other charge. In addition,
shareholders of funds in the ISI family of funds that have lower sales charges
may exchange into other funds in the family upon payment of the difference in
sales charges, except that the exchange will be made at net asset value if the
shares have been held for at least 24 months. Investors who purchased Shares at
no load through a Special Offer may exchange into other funds in the ISI family
of funds upon payment of the applicable sales charge, except that the exchange
will be made at net asset value if such Shares have been held for at least 36
months. The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day, provided
that the exchange request is received prior to 4:00 p.m. (Eastern Time), or the
close of the New York Stock Exchange, whichever is earlier. Exchange requests
received after 4:00 p.m. (Eastern Time) will be effected on the next Business
Day.
[Until February 28, 1998, shareholders of any other mutual fund who have paid a
sales charge on their shares of such fund, and shareholders of any closed-end
fund, may exchange shares of such funds for an equal dollar amount of Shares by
submitting to the Distributor or a Participating Dealer, the proceeds of the
redemption or sale of shares of such funds, together with evidence of the
payment of a sales charge (for mutual funds only) and the source of such
7
<PAGE>
proceeds. Shares issued pursuant to this offer will not be subject to the sales
charges described above or any other charge.]
The Fund may modify or terminate these offers of exchange at any time and will
provide shareholders with 60 days' written notice prior to any such
modification or termination. The exchange privilege with respect to other ISI
funds may also be exercised by telephone. (See "Telephone Transactions" below.)
Investors should receive and read the applicable prospectus prior to tendering
shares for exchange.
PURCHASES THROUGH AUTOMATIC INVESTING PLAN
Shareholders may purchase Shares regularly by means of an Automatic Investing
Plan with a pre-authorized check drawn on their checking accounts. Under this
plan, the shareholder may elect to have a specified amount invested monthly or
quarterly in Shares. The minimum initial investment is $250. Each subsequent
investment must be at least $100 for monthly investments and $250 for quarterly
investments. The amount specified by the shareholder will be withdrawn from the
shareholder's checking account using the pre-authorized check. This amount will
be invested in Shares at the applicable Offering Price determined on the date
the amount is available for investment. Participation in the Automatic
Investing Plan may be discontinued by either the Fund or the shareholder upon
30 days' prior written notice to the other party. A shareholder who wishes to
enroll in the Automatic Investing Plan or who wishes to obtain additional
purchase information may do so by completing the appropriate section of the
Application Form attached to this Prospectus.
PURCHASES THROUGH DIVIDEND REINVESTMENT
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Shares. Unless the
shareholder elects otherwise, all income dividends and capital gains
distributions will be reinvested in additional Shares at net asset value,
without a sales charge. Shareholders may elect to terminate automatic
reinvestment by giving written notice to the Fund's transfer agent (the
"Transfer Agent") (see "Custodian, Transfer Agent and Accounting Services")
either directly or through their Participating Dealer or Shareholder Servicing
Agent, at least five days before the next date on which dividends or
distributions will be paid. Alternately, shareholders may have their
distributions invested in shares of other funds in the ISI family of funds.
Shareholders who are interested in this option should call the Transfer Agent
for additional information.
5. HOW TO REDEEM SHARES
Shareholders may redeem all or part of their investment on any Business Day by
transmitting a redemption order through the Distributor, a Participating
Dealer, a Shareholder Servicing Agent or by regular or express mail to the
Transfer Agent. Shareholders may also redeem Shares by telephone (in amounts up
to $50,000). (See "Telephone Transactions" below.) A redemption order is
effected at the net asset value per Share next determined after receipt of the
order (or, if stock certificates have been issued for the Shares to be
redeemed, after the tender of the stock certificates for redemption).
Redemption orders received after 4:00 p.m. (Eastern Time) or the close of the
New York Stock Exchange, whichever is earlier, will be effected at the net
asset value next determined on the following Business Day. Payment for redeemed
Shares will be made by check and will ordinarily be mailed within seven days
after receipt of a duly authorized telephone redemption request or of a
redemption order fully completed and, as applicable, accompanied by the
documents described below:
1) A letter of instructions, specifying the shareholder's account number with
the Distributor or a Participating Dealer, if applicable, and the number
of Shares or dollar amount to be redeemed, signed by all owners of the
Shares in the exact names in which their account is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of each
registered owner by a member of the Federal Deposit Insurance Corporation,
a trust company, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency, or savings
association;
3) If Shares are held in certificate form, stock certificates either properly
endorsed or accompanied by a duly executed stock power for Shares to be
redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of Shares will be paid on the
next dividend payable date. If all of the Shares in a shareholder's account
have been redeemed on a dividend payable date, the dividend will be remitted by
check to the shareholder.
8
<PAGE>
The Fund has the power under its Articles of Incorporation to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who hold Shares having a value of $10,000 or more may arrange to
have a portion of their Shares redeemed monthly or quarterly under the Fund's
Systematic Withdrawal Plan. Such payments are drawn from income dividends, and,
to the extent necessary, from Share redemptions (which would be a return of
principal and, if reflecting a gain, would be taxable). If redemptions
continue, a shareholder's account may eventually be exhausted. Because Share
purchases include a sales charge that will not be recovered at the time of
redemption, a shareholder should not have a withdrawal plan in effect at the
same time he is making recurring purchases of Shares. A shareholder who wishes
to participate in the Systematic Withdrawal Plan may do so by completing the
appropriate section of the Application Form attached to this Prospectus.
6. TELEPHONE TRANSACTIONS
Shareholders may exercise the exchange privilege with respect to other ISI
funds, or redeem Shares, in amounts up to $50,000, by notifying the Transfer
Agent by telephone on any Business Day between the hours of 8:30 a.m. and 5:30
p.m. (Eastern Time) or by regular or express mail at its address listed under
"Custodian, Transfer Agent and Accounting Services." Telephone transaction
privileges are automatic. Shareholders may specifically request that no
telephone redemptions or exchanges be accepted for their accounts. This
election may be made on the Application Form or at any time thereafter by
completing and returning appropriate documentation supplied by the Transfer
Agent.
A telephone exchange or redemption placed by 4:00 p.m. (Eastern Time) or the
close of the New York Stock Exchange, whichever is earlier, is effective that
day. Telephone orders placed after 4:00 p.m. (Eastern Time) will be effected at
the net asset value as determined on the next Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include requiring the investor to provide certain personal identification
information at the time an account is opened and prior to effecting each
transaction requested by telephone. In addition, all telephone transaction
requests will be recorded and investors may be required to provide additional
telecopied written instructions of such transaction requests. If these
procedures are employed, neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for following instructions
received by telephone that either of them reasonably believes to be genuine.
During periods of extreme economic or market changes, shareholders may
experience difficulty in effecting telephone transactions. In such event,
requests should be made by regular or express mail. Shares held in certificate
form may not be exchanged or redeemed by telephone. (See "How to Invest in the
Fund -- Purchases by Exchange" and "How to Redeem Shares.")
7. DIVIDENDS AND TAXES
Dividends and Distributions
The Fund's policy is to distribute to shareholders substantially all of its
taxable net investment income (including net short-term capital gains) in the
form of quarterly dividends. The Fund may distribute to shareholders any
taxable net capital gains on an annual basis or, alternatively, may elect to
retain net capital gains and pay tax thereon.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
the shareholders, and the discussion here is not intended as a substitute for
careful tax planning.The Statement of Additional Information sets forth further
information concerning taxes.
The Fund expects to be taxed as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended. As long as the Fund
qualifies for this tax treatment, it will be relieved of federal income tax on
amounts distributed to shareholders, but shareholders, unless otherwise exempt,
will generally pay federal income or capital gains taxes on the amounts so
distributed. Reinvested dividends will be taxed as if they had been distributed
on the reinvestment date.
Distributions from the Fund out of net capital gains (the excess of net
long-term capital gains over net short-term
9
<PAGE>
capital losses), if any, will be taxed to shareholders as long-term capital
gains regardless of the length of time the shareholder has held the Shares. All
other income distributions will be taxed to shareholders as ordinary income.
Corporate shareholders may be eligible for the corporate dividends received
deduction on a portion of dividends received from the Fund. Shareholders will
be advised annually as to the tax status of all distributions.
Ordinarily, shareholders will include all dividends declared by the Fund as
income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
The sale, exchange or redemption of Shares is a taxable event for the
shareholder.
The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
Shareholders are urged to consult with their tax advisors concerning the
application of state and local taxes to investments in the Fund, which may
differ from the federal income tax consequences described above. For example,
under certain specified circumstances, state income tax laws may exempt from
taxation distributions of a regulated investment company to the extent that
such distributions are derived from interest on federal obligations.
Shareholders are urged to consult with their tax advisors regarding whether,
and under what conditions such exemption is available.
8. MANAGEMENT OF THE FUND
The overall business affairs of the Fund are managed by its Board of Directors.
The Board approves all significant agreements between the Fund and persons or
companies furnishing services to the Fund, including the Fund's agreements with
its investment advisor, sub-advisor, distributor, administrator, custodian and
transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to the Distributor, to the Advisors and to the
Fund's administrator. A majority of the Directors of the Fund have no
affiliation with the Distributor, the Advisors or the Fund's administrator.
The Fund's Directors and officers are as follows:
Edward S. Hyman Chairman
Truman T. Semans Vice Chairman
James J. Cunnane Director
John F. Kroeger Director
Louis E. Levy Director
Eugene J. McDonald Director
Michael J. Napoli, Jr. Director
Rebecca W. Rimel Director
Carl W. Vogt, Esq. Director
R. Alan Medaugh Director and President
David R. Borger Vice President
Carie L. Butler Vice President
Nancy Lazar Vice President
Scott J. Liotta Vice President and Secretary
Thomas D. Stevens Vice President
Edward J. Veilleux Vice President
Margaret M. Beeler Assistant Vice President
Keith C. Reilly Assistant Vice President
Joseph A. Finelli Treasurer
Laurie D. Collidge Assistant Secretary
9. INVESTMENT ADVISOR AND SUB-ADVISOR
International Strategy & Investment Inc. is the Fund's investment advisor and
Wilshire Associates Incorporated is the Fund's sub-advisor. ISI employs Messrs.
Edward S. Hyman and R. Alan Medaugh. Due to their stock ownership, Messrs. Hyman
and Medaugh may be deemed to be controlling persons of ISI. As of July 31, 1997,
the Advisor had approximately $ __ million under management. The Advisor also
acts as investment advisor to Total Return U. S. Treasury Fund, Inc., Managed
Municipal Fund, Inc. and North American Government Bond Fund, Inc., open-end
investment companies with approximately $_____ million in net assets as of
July 31, 1997. Wilshire is a registered investment advisor with approximately
$______ of net assets under management as of July 31, 1997. Wilshire currently
provides advisory or sub-advisory services to ______ [open-end investment
companies] with approximately $_____ of combined net assets as of July 31, 1997.
Wilshire is a [describe ownership of Wilshire] and is controlled by its
[President and Chairman], Mr. Dennis Tito who, as of July 31, 1997 owned __% of
Wilshire's outstanding voting securities.
Pursuant to the terms of the Investment Advisory Agreement, ISI supervises and
manages all of the Fund's operations. Under the Investment Advisory and
Sub-Advisory
10
<PAGE>
Agreements, ISI delegates to Wilshire certain of its duties, provided that ISI
continues to supervise the performance of Wilshire and report thereon to the
Board of Directors (see "Investment Program").
As compensation for providing investment advisory services, ISI is entitled to
receive an annual fee, calculated daily and payable monthly, equal to .40% of
the Fund's average daily net assets. As compensation for providing sub-advisory
services, Wilshire is entitled to receive an annual fee from ISI, payable from
its advisory fee, calculated daily and payable monthly, equal to .16% of the
Fund's average daily net assets. ISI and Wilshire have voluntarily agreed to
waive their annual fees proportionately, to the extent necessary, and ISI has
voluntarily agreed to reimburse expenses to the extent necessary, so that total
operating expenses do not exceed 1.00% of the Fund's average daily net assets.
The address of the Advisor is 717 Fifth Avenue, New York, New York 10022,
telephone (800) 955-7175. The address of Wilshire is 1299 Ocean Avenue, Suite
700, Santa Monica, California 90401.
PORTFOLIO MANAGERS
The Fund's portfolio managers are Edward S. Hyman and R. Alan Medaugh of ISI,
and Thomas D. Stevens, David R. Borger, and Michael J. Napoli, Jr. of Wilshire.
Mr. Hyman, Chairman of the Fund and ISI, is responsible for developing the
forecasts and economic analysis on which the allocation strategy and the
selection of investments in the Fund's portfolio of U.S. Treasury Securities
are based (see "Investment Program"). Before joining ISI, Mr. Hyman was a vice
chairman and member of the Board of C.J. Lawrence Inc. and prior thereto, an
economic consultant at Data Resources. He writes a variety of international and
domestic economic research reports which follow trends that may determine the
direction of interest rates. These international and domestic reports are sent
to ISI's private institutional clients in the United States and overseas. The
periodical Institutional Investor, which rates analysts and economists on an
annual basis, has rated Mr. Hyman as its "first team" economist, which is its
highest rating, in each of the last [seventeen] years.
Mr. Medaugh, President and Director of the Fund and President of ISI, is
responsible for executing the allocation strategy as well as the day-to-day
management of the Fund's portfolio of U.S. Treasury Securities. Prior to
joining ISI, Mr. Medaugh was Managing Director of C.J. Lawrence Fixed Income
Management and prior thereto Senior Vice President and bond portfolio manager
at Fiduciary Trust International. While at Fiduciary Trust International, Mr.
Medaugh led their Fixed-Income Department which managed $5 billion of
international fixed income portfolios for institutional clients. Mr. Medaugh
also had prior experience as a bond portfolio manager at both Putnam Management
Company and Fidelity Management and Research.
Mr. Stevens, Mr. Borger and Mr. Napoli have shared responsibility for managing
the Fund's portfolio of U.S. equity securities since the Fund's inception. Mr.
Stevens is a Senior Vice President and Principal of Wilshire, Chief Investment
Officer of Wilshire Asset Management ("WAM"), a division of Wilshire and a Vice
President of the Fund. He has been employed with Wilshire since 1980. Prior to
joining Wilshire, Mr. Stevens was a portfolio manager and analyst at the
National Bank of Detroit. Mr. Borger is a Vice President and Principal at
Wilshire, Director of Research at WAM and a Vice President of the Fund. Mr.
Borger has been employed with Wilshire since 1986. Before joining Wilshire, he
was a Vice President and Chief of Quantitative Investment Methods at the
National Bank of Detroit where he managed an equity index fund. Mr. Napoli is a
Vice President and Principal of Wilshire, Director of Marketing for WAM, and a
Director of the Fund. Mr. Napoli has been employed with Wilshire from 1991 to
the present. Prior to joining Wilshire, he was employed with Drexel Burnham
Lambert, Bankers Trust Co. and Ameri-trust Company.
10. ADMINISTRATOR
Investment Company Capital Corp. ("ICC"), One South Street, Baltimore, Maryland
21202, provides administration services to the Fund. ICC is an indirect
subsidiary of Alex. Brown Incorporated [language re Bankers Trust to come].
ICC supervises the day-to-day operations of the Fund, including the preparation
of registration statements, proxy materials, shareholder reports, compliance
with all requirements of securities laws in the states in which the Shares are
distributed and oversight of the relationship between the Fund and its other
service providers. As compensation for these services ICC is entitled to
receive an annual fee, calculated daily and payable monthly equal to .12% of
the
11
<PAGE>
Fund's average daily net assets. ICC has voluntarily agreed to waive its fee
until the earlier of such time as the Fund has $50 million in net assets or has
been in operation for one year.
ICC is also the Fund's transfer and dividend disbursing agent and provides
accounting services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
11. DISTRIBUTOR
International Strategy & Investment Group Inc. ("ISI Group" or the
"Distributor"), 717 Fifth Avenue, New York, New York 10022, acts as distributor
of the Shares pursuant to a Distribution Agreement and related Plan of
Distribution (the "Plan") adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended. ISI Group is a broker-dealer that was formed
in 1991 and is an affiliate of the Advisor. ISI Group employs Mr. Edward S.
Hyman and Ms. Nancy Lazar. Due to their stock ownership, Mr. Hyman and Ms.
Lazar may be deemed to be controlling persons of ISI Group. As compensation for
its services, the Distributor receives a fee equal to .25% of the Shares'
average daily net assets. The Distributor expects to allocate on a proportional
basis up to all of its fee to Participating Dealers as compensation for their
ongoing shareholder services, including processing purchase and redemption
requests and responding to shareholder inquiries.
In addition, the Fund may enter into Shareholder Servicing Agreements with
certain financial institutions, such as banks, to act as Shareholder Servicing
Agents, pursuant to which the Distributor may allocate a portion of its
distribution fee as compensation for such financial institutions' ongoing
shareholder services. Such financial institutions may impose separate fees in
connection with these services and investors should review this Prospectus in
conjunction with any such institution's fee schedule. Amounts allocated to
Participating Dealers and Shareholder Servicing Agents may not exceed amounts
payable to the Distributor under the Plan. Payments under the Plan are made as
described above regardless of the Distributor's actual cost of providing
distribution services and may be used to pay the Distributor's overhead
expenses. If the cost of providing distribution services to the Fund in
connection with the sale of the Shares is less than .25% of the average daily
net assets invested in Shares for any period, the Distributor may retain the
unexpended portion of the distribution fee. The Distributor or its associated
persons will from time to time and from its own resources pay or allow
additional discounts or promotional incentives in the form of cash or other
compensation (including merchandise or travel) to Participating Dealers.
12. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
Investment Company Capital Corp., One South Street, Baltimore, Maryland 21202
(telephone: (800) 882-8585), is the Fund's transfer and dividend disbursing
agent and provides accounting services to the Fund.
[---------------------- , acts as custodian of the Fund's assets.]
13. PERFORMANCE INFORMATION
From time to time, the Fund may advertise its performance, including
comparisons with other mutual funds with similar investment objectives and to
stock or other relevant indices.
All such advertisements will show the average annual total return, net of the
Fund's maximum sales charge, over one-, five- and ten-year periods or, if such
periods have not yet elapsed, shorter periods corresponding to the life of the
Fund. Such return quotations will be computed by finding average annual
compounded rates of return over such periods that would equate an assumed
initial investment of $1,000 to the ending redeemable value, net of the maximum
sales charge and other fees, according to the required standardized
calculation. During its first year of operation, the Fund may, in lieu of
annualizing its total return, use an aggregate total return calculated in the
same manner. The standardized calculation is required by the SEC to provide
consistency and comparability in investment company advertising and is not
equivalent to a yield calculation. If the Fund compares its performance to
other funds or to relevant indices, the Fund's performance will be stated in
the same terms in which such comparative data and indices are stated, which is
normally total return rather than yield. For these purposes, the performance of
the Fund, as well as the performance of such investment companies or indices,
may not reflect sales charges, which, if reflected, would reduce performance
results.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services which monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Wilshire 5000 Index, the
CDA/Wiesenberger Domestic Asset Allocation Average Mutual Fund, [the Consumer
12
<PAGE>
Price Index, the Standard & Poor's 500 Stock Index and other market indices
such as NASDAQ.] The Fund may also use total return performance data as
reported in the following national financial and industry publications that
monitor the performance of mutual funds: Money Magazine, Forbes, Business Week,
Barron's, Investor's Daily, IBC/Donoghue's Money Fund Report and The Wall
Street Journal.
Performance will fluctuate and any statement of performance should not be
considered as respresentative of the future performance of the Fund.
Performance is generally a function of the type and quality of instruments held
by the Fund, operating expenses and market conditions. Any fees charged by
banks with respect to customer accounts through which Shares may be purchased,
although not included in calculations of performance, will reduce performance
results.
The Fund's annual portfolio turnover rate (the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the portfolio during the year, excluding securities with maturities of one year
or less) may vary from year to year, as well as within a year, depending on
market conditions. In accordance with its investment objectives, the Fund may
shift its investments between U.S. Treasury Securities and U.S. equity
securities from time to time which may result in relatively high portfolio
turnover. A high level of portfolio turnover may generate relatively high
transaction costs and may increase the amount of taxes payable by the Fund's
shareholders. The Fund estimates its portfolio turnover rate will not exceed
100% in the fiscal year ending, May 31, 1998. (See "Dividends and Taxes.")
14. GENERAL INFORMATION
CAPITAL SHARES
The Fund is an open-end diversified management investment company organized
under the laws of the State of Maryland on June 12, 1997, and is authorized to
issue 25 million shares of capital stock with a par value of $.001 per share.
Shares of the Fund have equal rights with respect to voting. Voting rights are
not cumulative, so the holders of more than 50% of the outstanding shares of
capital stock voting together for election of Directors may elect all the
members of the Board of Directors of the Fund. In the event of liquidation or
dissolution of the Fund, each share is entitled to its portion of the Fund's
assets after all debts and expenses have been paid. The fiscal year end of the
Fund is May 31.
The Board of Directors of the Fund is authorized to establish additional
"series" of shares of capital stock, each of which would evidence interests in
a separate portfolio of securities, and separate classes of each series of the
Fund. The shares offered by this Prospectus have been designated "ISI Strategy
Fund Shares." The Board has no present intention of establishing any additional
series of the Fund but the Fund does have one other class of shares in addition
to the shares offered hereby, "Wilshire Institutional Strategy Fund Shares."
Information about that class may be obtained by calling the Distributor at
(800) ___ ____. Different classes of the Fund may be offered to certain
investors and holders of such shares may be entitled to certain exchange
privileges not offered to Shares. All classes of the Fund share a common
investment objective, portfolio and advisory fee, but the classes may have
different distribution expenses and sales charges and, accordingly, performance
may differ.
ANNUAL MEETINGS
The Fund does not expect to hold annual meetings of shareholders but special
meetings of shareholders will be held under certain circumstances. Shareholders
of the Fund reserve the right, under certain circumstances, to request that a
meeting of shareholders be held for the purpose of considering the removal of a
Director from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent auditors, _____________________.
FUND COUNSEL
Morgan Lewis & Bockius LLP serves as counsel to the Fund.
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their Shares should contact the Transfer
Agent at (800) 882-8585, the Fund at (800) 955-7175, the Advisors, a
Participating Dealer or Shareholder Servicing Agent, as appropriate.
13
<PAGE>
ISI STRATEGY FUND SHARES
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "ISI Strategy Fund Shares" and mail with this Application
to:
ISI Mutual Funds
P.O. Box 419426
Kansas City, MO 64141-6426
For assistance in completing this form, please call the Transfer Agent at (800)
882-8585.
To open an IRA account, call ISI at (800) 955-7175 to request an application.
The minimum initial purchase is $5,000, except that the minimum initial
purchase for qualified retirement plans or IRA's is $1,000 and the minimum
initial purchase for participants in the Fund's Automatic Investing Plan is
$250. Each subsequent purchase requires a $250 minimum, except that the minimum
subsequent purchase under the Fund's Automatic Investing Plan is $100 for
monthly purchases and $250 for quarterly purchases. The Fund reserves the right
not to accept checks for more than $50,000 that are not certified or bank
checks.
Your Account Registration (Please Print)
Individual or Joint Tenant
- --------------------------------------
First Name Initial Last Name
- --------------------------------------
Social Security Number
- --------------------------------------
Joint Tenant Initial Last Name
- --------------------------------------
Social Security Number
Corporations, Trusts, Partnerships, etc.
- --------------------------------------
Name of Corporation, Trust or Partnership
- --------------------------------------
Tax ID Number
- --------------------------------------
Name of Trustees (If to be included in the Registration)
Gifts to Minors
================================================================================
- -------------------------------------
Existing Account No., if any
================================================================================
- --------------------------------------
Custodian's Name (only one allowed by law)
- --------------------------------------
Minor's Name (only one)
- --------------------------------------
Social Security Number of Minor
under the ------------ Uniform Gifts to Minors Act
State of Residence
Mailing Address
- --------------------------------------
Street
- --------------------------------------
City State Zip
( )
- --------------------------------------
Daytime Phone
Statement of Intention (Optional)
[ ] I agree to the Letter of Intent and Escrow Agreement set forth in the
accompanying prospectus. I intend to invest over a 13-month period in shares of
ISI Strategy Fund Shares in an aggregate amount at least equal to:
- --- $50,000 --- $100,000 --- $250,000 --- $500,000 --- $1,000,000 ---
$2,000,000 --- $3,000,000
Right of Accumulation (Optional)
List the Account numbers of other ISI Funds that you or your immediate family
already own that qualify for this purchase.
Fund Name Account No. Owner's Name Relationship
--------- ----------- ------------ ------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
DISTRIBUTION OPTIONS
Please check appropriate boxes. There is no sales charge for reinvested
dividends. If none of the options are selected, all distributions will be
reinvested.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in
additional shares
[ ] Paid in Cash [ ] Paid in Cash
Call (800) 882-8585 for information about reinvesting your dividends in other
funds in the ISI Family of Funds.
<PAGE>
Automatic Investing Plan (Optional)
|B) I authorize you as Agent for the Automatic Investing Plan to automatically
invest $------------ for me, on a monthly or quarterly basis, on or about the
20th of each month or if quarterly, the 20th of January, April, July and
October, and to draw a bank draft in payment of the investment against my
checking account. (Bank drafts may be drawn on commercial banks only.)
Minimum Initial Investment: $250
Subsequent Investments (check one): [ ] Monthly ($100 minimum)
[ ] Quarterly ($250
minimum)
Please attach a voided check.
- ------------------------------------- -------------------------------------
Bank Name
Depositor's Signature Date
- ------------------------------------- --------------------------------------
Existing ISI Strategy Fund Account No., Depositor's Signature Date
if any (if joint acct., both must sign)
Systematic Withdrawal Plan (Optional)
/ / Beginning the month of --------------------- , 19-- , please send me checks
on a monthly or quarterly basis, as indicated below, in the amount of
$--------------------- , from shares that I own, payable to the account
registration address as shown above. (Participation requires minimum account
value of $10,000.)
Frequency (check one): [ ] Monthly [ ] Quarterly (January, April, July and
October)
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect to
other ISI Funds) unless I mark one or both of the boxes below.
No, I/We do not want: [ ] Telephone redemption privileges [ ] Telephone
exchange privileges
Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a pre-designated bank account, please
provide the following information:
Bank: ------------------------- Bank Account
No.: -------------------------
Address: ----------------------- Bank Account
Name: -------------------------
-----------------------
SIGNATURE AND TAXPAYER CERTIFICATION
The Fund may be required to withhold and remit to the U.S. Treasury 31% of
any taxable dividends, capital gains distributions and redemption proceeds
paid to any individual or certain other non-corporate shareholders who fail
to provide the information and/or certifications required below. This backup
withholding is not an additional tax, and any amounts withheld may be
credited against the shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury
that the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above,
I have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a
penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-882-8585.)
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes: ---------------------
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal Revenue
Service.
I have received a copy of the Fund's prospectus dated , 1997. I
acknowledge that the telephone redemption and exchange privileges are automatic
and will be effected as described in the Fund's current prospectus (see
"Telephone Transactions"). I also acknowledge that I may bear the risk of loss
in the event of fraudulent use of such privileges. If I do not want telephone
redemption or exchange privileges, I have so indicated on this Application.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding.
- ------------------------------------- -------------------------------------
Signature Date Signature (if a joint account, both
must sign) Date
- --------------------------------------------------------------------------------
For Dealer Use Only
Dealer's Name: ______________________________________ Dealer Code: ___________
Dealer's Address: ____________________________________ Branch Code: ___________
____________________________________
Representative: ____________________________________ Rep. No. _______________
<PAGE>
[GRAPHIC OMITTED]
ISI
STRATEGY FUND
SHARES
(A Class of ISI Strategy Fund, Inc.)
No person has been authorized to give any information or to make
representations not contained in this Prospectus in connection with any
offering made by this Prospectus and, if given or made, such information must
not be relied upon as having been authorized by the Fund or the Distributor.
TABLE OF CONTENTS
Page
1. Fee Table ....................................................2
2. Investment Program ...........................................2
3. Investment Restrictions ........................................5
4. How to Invest in the Fund .....................................6
5. How to Redeem Shares ...........................................8
6. Telephone Transactions ........................................9
7. Dividends and Taxes ...........................................9
8. Management of the Fund .......................................10
9. Investment Advisor and
Sub-Advisor ................................................10
10. Administrator ................................................11
11. Distributor ...................................................12
12. Custodian, Transfer Agent and
Accounting Services ..........................................12
13. Performance Information .......................................12
14. General Information ..........................................13
ISI
STRATEGY FUND
SHARES
(A Class of ISI Strategy Fund, Inc.)
An open-end mutual fund seeking to maximize total return through a
combination of long-term growth of capital and current income by actively
apportioning investments between securities issued by the United States Treasury
("U.S. Treasury Securities") and diversified investments in U.S. equity
securities.
, 1997
<PAGE>
ISI STRATEGY FUND, INC.
July ___, 1997
Cross Reference Sheet
(Wilshire Institutional Strategy Fund Shares)
Items Required by Form N-1A
<TABLE>
<CAPTION>
Part A Information Required in Prospectus Registration Statement Heading
- ------ ---------------------------------- ------------------------------
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Financial Highlights*
Item 4. General Description of Registrant Investment Program
Investment Restrictions;
General Information
Item 5. Management of the Fund Management of the Fund;
Investment Advisor and Sub-Advisor
Distributor; Custodian, Transfer
Agent and Accounting Services
Item 5A. Management's Discussion of Fund **
Performance
Item 6. Capital Stock and Other Securities Cover Page
Dividends and Taxes;
General Information
Item 7. Purchase of Securities Being Offered How to Invest in
the Fund
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Pending Legal Proceedings *
Part B Information Required in a Statement
- ------ of Additional Information
-----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
and History
Item 13. Investment Objectives and Policies Investment Objective,
Policies and Risk
</TABLE>
* Omitted since the answer is negative or the item is not applicable.
** Required information will be contained in the Registrant's first Annual
Report to Shareholders containing results of operations, when available.
C-1
<PAGE>
<TABLE>
<CAPTION>
Part A Information Required in Prospectus Registration Statement Heading
- ------ ---------------------------------- ------------------------------
<S> <C> <C>
Item 14. Management of the Fund Management of
the Fund
Item 15. Control Persons and Principal Holders Control Persons and
of Securities Principal Holders of
Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Custodian, Transfer Agent
and Accounting Services
Item 17. Brokerage Allocation Brokerage
Item 18. Capital Stock and Other Securities Capital Stock;
Semi-Annual Reports
Item 19. Purchase, Redemption and Pricing of Valuation of Shares
Securities Being Offered and Redemption
Item 20. Tax Status Federal Tax Treatment of
Dividends and
Distributions
Item 21. Underwriters Distribution of Fund
Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
C-2
<PAGE>
WILSHIRE INSTITUTIONAL STRATEGY FUND SHARES
(A Class of ISI Strategy Fund, Inc.)
717 Fifth Avenue
New York, New York 10022
For information call (800) 955-7175
ISI Strategy Fund, Inc. (the "Fund") is designed to maximize total return
through a combination of long-term growth of capital and current income by
actively apportioning investments between U.S. Treasury Securities and
diversified investments in U.S. equity securities.
Shares of the Wilshire Institutional class of the Fund ("Institutional
Shares") are available through International Strategy & Investment Group Inc.
(the "Distributor"), or the Fund's transfer agent, and may be purchased only by
qualified retirement plans that meet the $1,000,000 minimum investment
requirement. (See "How to Invest in the Institutional Shares.")
This Prospectus sets forth basic information that investors should know
about the Fund prior to investing, and should be retained for future reference.
A Statement of Additional Information dated , 1997, has been filed with the
Securities and Exchange Commission (the "SEC") and is hereby incorporated by
reference. It is available upon request and without charge by contacting the
Fund at the above address or telephone number.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
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.
The date of this Prospectus is , 1997.
<PAGE>
1. Fee Table
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) ............ None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower) ........................................................... None
Annual Fund Operating Expenses:
(as a percentage of average daily net assets)
Management Fees (net of fee waivers) ................................................... 0.00%*
12b-1 Fees .............................................................................. None
Other Expenses (net of fee waivers) ...................................................... 0.75%*
-------
Total Fund Operating Expenses (net of fee waivers) .................................... 0.75%*
=======
</TABLE>
- -----------
*The Advisor has voluntarily agreed to waive its fees and to reimburse expenses
to the extent required so that the Total Fund Operating Expenses do not exceed
0.75% of the Institutional Share's average daily net assets. In addition, the
Fund's administrator has voluntarily agreed to waive its fee until the earlier
of such time as the Fund's net assets reach $50 million or the Fund has been in
operation for one year. Absent fee waivers, Management Fees would be .40%,
Other Expenses (including administration fees) would be 1.15% and Total Fund
Operating Expenses would be 1.80% of the Institutional Share's average daily
net assets.
Example:
1 year 3 years
-------- --------
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period: $ $
The Expenses and Example should not be considered a representation of future
expenses. Actual expenses may be greater or less than those shown.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in the Institutional Shares will bear directly or
indirectly. A person who purchases Institutional Shares through a financial
institution may be charged separate fees by the financial institution. (For
more complete descriptions of the various costs and expenses, see "How to
Invest in the Instutitional Shares", "Investment Advisor", "Administrator" and
"Distributor.") The Expenses and Example appearing in the table above are based
on the Fund's estimated amounts for the current fiscal year ending May 31,
1998. The foregoing table has not been audited by _____________________, the
Fund's independent auditors.
2. Investment Program
Investment Objective and Policies
The Fund's investment objective is to maximize total return through a
combination of long-term growth of capital and current income. The Fund seeks
to achieve this objective through an active asset allocation strategy that
involves apportioning the Fund's assets between U.S. Treasury Securities and
diversified investments in U.S. equity securities. There can be no assurance
that the Fund's investment objective will be met.
Allocation of Investments
International Strategy & Investment Inc. ("ISI" or the "Advisor"), the Fund's
advisor, and Wilshire Associates Incorporated ("Wilshire"), the Fund's
sub-advisor (collectively, the "Advisors"), are responsible for selecting the
2
<PAGE>
Fund's investments. (See "Investment Advisor and Sub-Advisor.") The Fund will
invest primarily in U.S. equity securities (including common stocks, preferred
stocks, convertible debt, warrants, other securities convertible into or
exchangeable for common stocks, and Standard & Poor's ("S&P") depository
receipts ("SPDRs")), securities index futures contracts, and U.S. Treasury
Securities.
Edward S. Hyman, Chairman of ISI and the Fund and R. Alan Medaugh, President of
ISI and President and a Director of the Fund, will allocate the Fund's assets
between U.S. equity securities and U.S. Treasury Securities based on ISI's
analysis of the pace of the economy and its forecasts for the direction of
interest rates and corporate earnings. Under normal market conditions, the Fund
will invest its assets in a ratio of (1) approximately 80% equity securities to
20% U.S. Treasury Securities when an aggressive strategy is deemed warranted,
(2) approximately 60% equity securities to 40% U.S. Treasury Securities when a
neutral strategy is deemed warranted, and (3) approximately 40% equity
securities to 60% U.S. Treasury Securities when a defensive strategy is deemed
warranted. As discussed below, the Fund may, especially during its early
stages, use securities index futures contracts as a means of obtaining exposure
to the U.S. equity markets. The allocation of the Fund's assets will be
reviewed periodically in light of ISI's forecasts and may be reallocated when
ISI determines it appropriate. The Fund's assets will be rebalanced on a
quarterly basis if at that time the market value of the equity portion of the
portfolio is below 40% or above 80% of the Fund's total assets. There can be no
assurance that the Advisor's forecasts will accurately predict economic trends
or that portfolio strategies based on these forecasts will be effective.
U. S. Equity Securities
Wilshire and its affiliates have, since 1983, focused on building and
maintaining portfolios based on the Wilshire 5000 Index and other custom
structured U.S. equity applications and currently have $____ billion under
management in these portfolios. In managing the U.S. equity securities in the
Fund's portfolio Wilshire will attempt to capture the return of the broad U.S.
equity market. Ultimately, Wilshire expects that the performance and volatility
of the Fund's equity portfolio will approximately resemble that of the Wilshire
5000 Index ("Wilshire 5000" or "Index"). The Wilshire 5000 consists of all U.S.
common stocks that trade on a regular basis on the New York and American Stock
Exchanges and in the NASDQ over-the-counter market. Approximately 7,300 stocks,
including large-, medium-, and small-capitalization stocks are included in the
Index. In constructing the Fund's portfolio, Wilshire will, as the Fund grows,
conduct a stratified sampling of the Wilshire 5000 resulting optimally in the
purchase of 1,500 to 2,000 common stocks of issuers included in the Index based
on sector allocation and other investment techniques in an attempt to achieve
performance and volatility comparable to the Index.
Initially, Wilshire may use securities index futures contracts and SPDRs to
gain market exposure without purchasing individual stocks. For example, the
Fund may invest in security index futures contracts on the Standard & Poor's
500 Index ("S&P 500") and the Russell 2000 Index as well as S&P 500 SPDRs and
S&P MidCap 400 Index SPDRs for market exposure.
For more information on securities index futures contracts, see "Futures
Contracts" under "Other Investment Policies and Risk Considerations" below.
A SPDR is a share of common stock in a unit investment trust ("UIT") that is
currently traded on the American Stock Exchange. SPDRs represent a
proportionate undivided interest in a basket of securities owned by the UIT
which consists of substantially all of the common stocks, in substantially the
same weighting, as the component stocks of a specified S&P index. The
performance of a SPDR is intended to track the performance of the component
stocks of the relevant S&P index. The composition and weighting of the
securities owned by the UIT will be adjusted from time to time to conform to
periodic changes in the volatility and relative weightings of such S&P index.
See "Risk Considerations" below for more information about SPDRs.
U.S. Treasury Securities
ISI will manage the U.S. Treasury Securities in the Fund's portfolio with a
view toward, first, a high level of total return with relative stability of
principal and, second, high current income. Therefore, in addition to yield,
the potential for capital gains and appreciation resulting from possible
changes in interest rates will be a consideration in selecting investments. ISI
will be free to take advantage of the entire range of maturities offered by
U.S. Treasury Securities and may adjust the average maturity of such securities
held in the Fund's portfolio from time to time, depending on its assessment of
the relative yields available
3
<PAGE>
on securities of different maturities and its expectations of future changes in
interest rates. Thus, at certain times the average maturity of the U.S.
Treasury Securities held by the Fund may be relatively short (from under one
year to five years, for example) and at other times may be relatively long
(over 10 years, for example). In determining which direction interest rates are
likely to move, the Advisor relies on the economic analysis made by Mr. Hyman.
There can be no assurance that such economic analysis will accurately predict
interest rate trends or that portfolio strategies based on Mr. Hyman's economic
analysis will be effective.
Risk Considerations
The investment policies of the Fund entail certain risks and considerations of
which an investor should be aware.
U.S. Equity Securities. The Fund will invest in U.S. equity securities which
are subject to market risks that may cause their prices to fluctuate over time
and the price fluctuations may differ from changes in the value of the Wilshire
5000. Fluctuations in the value of the U.S. equity securities held by the Fund
will cause the value of the Shares to fluctuate. An investment in SPDRs is
subject to the same risk of fluctuation in value as the basket of common stocks
underlying the SPDR. In particular, the price at which the underlying SPDR
securities may be sold and the value of the SPDR may be adversely affected if
the secondary trading markets for the SPDRs are limited or absent.
Additionally, the basket of common stocks underlying the SPDR may not exactly
replicate the performance of the specified index because of transaction costs
and other expenses. The basket of common stocks underlying the SPDR may also be
unable to fully replicate the performance of the specified S&P index due to the
temporary unavailability of certain underlying securities or due to other
extraordinary circumstances.
U.S. Treasury Securities. U.S. Treasury Securities are considered among the
safest of fixed-income investments. Because of this added safety, the yields
available from U.S. Treasury Securities are generally lower than the yields
available from corporate debt securities. As with other debt securities, the
value of U.S. Treasury Securities changes as interest rates fluctuate. This is
especially true for securities with longer maturities and for STRIPS
(securities that do not pay interest currently but which are purchased at a
discount and are payable in full at maturity). Changes in the value of
portfolio securities will not affect interest income from those securities but
will be reflected in the Fund's net asset value. Thus, a decrease in interest
rates will generally result in an increase in the value of the Shares.
Conversely, during periods of rising interest rates, the value of the Shares
will generally decline. The magnitude of these fluctuations will generally be
greater at times when the average maturity of the U.S. Treasury Securities held
by the Fund is longer.
Other Investment Policies and Risk Considerations
Futures Contracts. The Fund may engage in securities index futures contracts in
order to obtain exposure to certain market segments, facilitate allocation of
investments among asset classes and for the purposes of hedging the portfolio's
investments. A securities index futures contract obligates the seller to
deliver (and the purchaser to take), effectively, an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the trade is made. No physical delivery of the underlying stocks in
the index is made. Futures contracts will be entered on domestic exchanges and
boards of trade, subject to applicable Commodities and Futures Trading
Commission ("CFTC") Rules. These transactions may be entered into for bona fide
hedging and other permissible risk management purposes.
In connection with transactions in futures contracts, the Fund will be required
to deposit as "initial margin" a specified amount of cash or short-term U.S.
Government securities. The initial margin required for a securities index
futures contract is set by the exchange on which the contract is traded with
review and oversight by the CFTC. Thereafter, subsequent payments (referred to
as "variation margin") are made to and from the broker to reflect changes in
the value of the futures contract. The Fund will not enter into futures
contracts, if immediately thereafter, the sum of the amounts of initial margin
deposits on the Fund's open futures contracts entered into for other than "bona
fide hedging" would exceed 5% of the value of the Fund's total assets.
Participation in the futures markets involves investment risks and transaction
costs to which the Fund would not be subject absent the use of these
strategies. Gains and losses on futures contracts, such as securities index
futures contracts, depend on the Advisor's ability to predict correctly
4
<PAGE>
the direction of securities prices, interest rates and other economic factors.
Other risks associated with the use of futures contracts are (i) imperfect
correlation between the price of futures contracts and movements in the prices
of the securities underlying the index or of the securities being hedged in the
case of bona fide hedging strategies; (ii) the fact that skills needed to use
these investment strategies are different from those needed to select portfolio
securities; (iii) the possible absence of a liquid secondary market for any
particular instrument at any particular time; and (iv) the possible need to
defer closing out certain positions to avoid adverse tax consequences. The risk
that the Fund will be unable to close out a futures position will be minimized
by only entering into futures contracts for which there appears to be a liquid
exchange or secondary market. In addition, the possible risk of loss of trading
futures contracts in certain strategies can be substantial, due to both the low
margin deposits required and the high degree of leverage involved in futures
pricing.
Other Investments. For temporary, defensive purposes, the Fund may invest up to
100% of its assets in high quality, short-term money market instruments, and in
notes or bonds issued by the U.S. Treasury Department or by other agencies of
the U.S. Government.
Repurchase Agreements. The Fund may agree to purchase U.S. Treasury securities
from creditworthy financial institutions, such as banks and broker-dealers,
subject to the seller's agreement to repurchase the securities at an
established time and price. Default by, or bankruptcy proceedings with respect
to, the seller may, however, expose the Fund to possible loss because of
adverse market action or delay in connection with the disposition of the
underlying obligations.
Purchase of When Issued Securities. From time to time, in the ordinary course of
business, the Fund may make purchases of U.S. Treasury securities, at the
current market value of the securities, on a when-issued basis. A segregated
account of the Fund, consisting of cash or liquid securities equal at all times
to the amount of the when-issued commitments will be established and maintained
by the Fund at the Fund's custodian. While the Fund will purchase securities on
a when-issued basis only with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date if it is deemed
advisable to limit the effects of adverse market action. The value of U.S.
Treasury securities so purchased or sold is subject to market fluctuation and no
interest accrues to the purchaser during this period. The Fund will ordinarily
invest no more than [40]% of its net assets at any time in securities purchased
on a when-issued basis.
[Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are at all times
secured by cash or money market instruments, which are maintained in a
segregated account pursuant to applicable regulations and that are at least
equal to market value, determined daily, of the loaned securities. As with any
extensions of credit, there are risk of delay in recovery, and in some cases,
even loss of rights in the collateral should the borrower of the securities
fail financially. In determining whether to lend securities to a particular
borrower, the Advisors (subject to review by the Fund's Board of Directors)
will consider all relevant facts and circumstances including the
creditworthiness of the borrower. The Fund will not lend portfolio securities
in excess of [20]% of the value of its total assets. The Board of Directors
will monitor the Fund's lending of portfolio securities.]
3. Investment Restrictions
The Fund's investment program is subject to a number of restrictions which
reflect both self-imposed standards and federal regulatory limitations. The
Fund's investment objective and investment restrictions numbered 1 and 2 are
matters of fundamental policy and may not be changed without shareholder
approval. Investment restriction number 3 may be changed by a majority vote of
the Board of Directors. The Fund will not:
1) Concentrate 25% or more of its total assets in securities of issuers in any
one industry (for these purposes the U.S. Government, its agencies and
instrumentalities are not considered an industry);
2) With respect to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any single issuer or purchase more
than 10% of the outstanding voting securities of any one issuer, except
the U.S. Government, its agencies and instrumentalities; and
3) Invest more than 15% of the value of its net assets in illiquid securities.
5
<PAGE>
The Fund is subject to further investment restrictions that are set forth in
the Statement of Additional Information.
4. How to Invest in the Institutional Shares
Qualified retirement plans may purchase Institutional Shares through the
Distributor or by completing the Application Form attached to this Prospectus
and returning it, together with payment of the purchase price, as instructed in
the Application.
The minimum initial investment in Institutional Shares is $1,000,000. There is
no minimum for subsequent investments. Orders for purchases of Institutional
Shares are accepted on any day on which the New York Stock Exchange is open for
business (a "Business Day"). Purchase orders for Institutional Shares will be
executed at a per share purchase price equal to the net asset value next
determined after receipt of the purchase order and immediately available funds.
The Distributor may, in its sole discretion, refuse to accept any purchase
order. The Fund reserves the right to suspend the sale of Institutional Shares
at any time at the discretion of the Advisors and the Distributor.
The net asset value per share is determined daily as of the close of the New
York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time), on each
Business Day. Net asset value per share of a class is calculated by valuing its
share of the Fund's assets, deducting all liabilities attributable to that
class, and dividing the resulting amount by the number of then outstanding
shares of the class. For this purpose, portfolio securities will be given their
market value where feasible. If a portfolio security is traded on a national
exchange, on the valuation date, the last quoted sale price (or in the absence
of recorded sales, the average of readily available closing bid and asked
prices) will generally be used. Securities or other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established from time to time and
monitored by the Fund's Board of Directors. Debt obligations with maturities of
60 days or less are valued at amortized cost, which constitutes fair value as
determined by the Directors.
In the interest of economy and convenience and because of the operating
procedures for the Institutional Shares, certificates representing such shares
will not be issued. Beneficial owners of Institutional Shares will have the
same rights and ownership with respect to such shares as if certificates had
been issued.
[Purchases Through Automatic Investing Plan
Shareholders may purchase Institutional Shares regularly by means of an
Automatic Investing Plan with a pre-authorized check drawn on their checking
accounts. Under this plan, the shareholder may elect to have a specified amount
invested monthly or quarterly in Institutional Shares. The minimum initial
investment is $___. Each subsequent investment must be at least $___ for monthly
investments and $___ for quarterly investments. The amount specified by the
shareholder will be withdrawn from the shareholder's checking account using the
pre-authorized check. This amount will be invested in Institutional Shares at
the applicable Offering Price determined on the date the amount is available for
investment. Participation in the Automatic Investing Plan may be discontinued by
either the Fund or the shareholder upon 30 days' prior written notice to the
other party. A shareholder who wishes to enroll in the Automatic Investing Plan
or who wishes to obtain additional purchase information may do so by completing
the appropriate section of the Application Form attached to this Prospectus.]
Purchases Through Dividend Reinvestment
Shareholders may elect to have their distributions (capital gains and/or
dividend income) paid by check or reinvested in additional Institutional
Shares. Unless the shareholder elects otherwise, all income dividends and
capital gains distributions will be reinvested in additional Institutional
Shares at net asset value. Shareholders may elect to terminate automatic
reinvestment by giving written notice to the Fund's transfer agent (the
"Transfer Agent") (see "Custodian, Transfer Agent and Accounting Services")
either directly or through the Distributor, at least five days before the next
date on which dividends or distributions will be paid.
6
<PAGE>
5. How to Redeem Institutional Shares
Institutional Shares may be redeemed by the record owner on any Business Day by
transmission of a redemption order through the Distributor, or by regular or
express mail to the Transfer Agent at its address listed under "Custodian,
Transfer Agent and Accounting Services." Record owners may also redeem
Institutional Shares by telephone (in amounts up to $________.) (See "Telephone
Redemptions" below.) A redemption order is effected at the net asset value per
share next determined after receipt of the order in proper form. Redemption
orders received after 4:00 p.m. (Eastern Time), or the close of the New York
Stock Exchange, whichever is earlier, will be effected at the net asset value
next determined on the following Business Day. Payment for redeemed
Institutional Shares will be made to or at the direction of the record owner.
Payment will be made as promptly as feasible and, under most circumstances,
within three Business Days.
Dividends payable up to the date of redemption of Institutional Shares will be
paid on the next dividend payable date. If all of the Institutional Shares in a
shareholder's account have been redeemed on a dividend payable date, the
dividend will be remitted by check to the shareholder.
The Fund has the power under its Articles of Incorporation to redeem
shareholder accounts amounting to less than $500 (as a result of redemptions)
upon 60 days' notice.
Systematic Withdrawal Plan
Shareholders who hold Institutional Shares having a value of $________ or more
may arrange to have a portion of their Shares redeemed monthly or quarterly
under the Fund's Systematic Withdrawal Plan. Such payments are drawn from
income dividends, and, to the extent necessary, from Institutional Share
redemptions (which would be a return of principal and, if reflecting a gain,
would be taxable). If redemptions continue, a shareholder's account may
eventually be exhausted. A shareholder who wishes to participate in the
Systematic Withdrawal Plan may do so by completing the appropriate section of
the Application Form attached to this Prospectus.
6. Telephone Redemptions
Record owners may redeem Institutional Shares, in amounts up to $ , by
notifying the Transfer Agent by telephone on any Business Day between the hours
of 8:30 a.m. and 5:30 p.m. (Eastern Time) or by regular or express mail at its
address listed under "Custodian, Transfer Agent and Accounting Services."
Telephone redemption privileges are automatic. Shareholders may specifically
request that no telephone redemptions be accepted for their accounts. This
election may be made on the Application Form or at any time thereafter by
completing and returning appropriate documentation supplied by the Transfer
Agent.
A telephone redemption placed by 4:00 p.m. (Eastern Time) or the close of the
New York Stock Exchange, whichever is earlier, is effective that day. Telephone
redemptions placed after 4:00 p.m. (Eastern Time) will be effected at the net
asset value as determined on the next Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include requiring the investor to provide certain personal identification
information at the time an account is opened and prior to effecting each
redemption requested by telephone. In addition, all telephone redemption
requests will be recorded and investors may be required to provide additional
telecopied written instructions of such transaction requests. If these
procedures are employed, neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for following instructions
received by telephone that either of them reasonably believes to be genuine.
During periods of extreme economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. In such event,
requests should be made by regular or express mail. (See "How to Redeem
Institutional Shares.")
7. Dividends and Taxes
Dividends and Distributions
The Fund's policy is to distribute to record owners substantially all of its
taxable net investment income (including net short-term capital gains) in the
form of quarterly dividends. The Fund may distribute to record owners any
taxable net capital gains on an annual basis or, alternatively, may elect to
retain net capital gains and pay tax thereon.
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<PAGE>
Tax Treatment of Dividends and Distributions
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
the shareholders, and the discussion here is not intended as a substitute for
careful tax planning.The Statement of Additional Information sets forth further
information concerning taxes.
The Fund expects to be taxed as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended. As long as the Fund
qualifies for this tax treatment, it will be relieved of federal income tax on
amounts distributed to shareholders, but shareholders, unless otherwise exempt,
will generally pay federal income or capital gains taxes on the amounts so
distributed. Reinvested dividends will be taxed as if they had been distributed
on the reinvestment date.
Distributions from the Fund out of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, will be
taxed to shareholders as long-term capital gains regardless of the length of
time the shareholder has held the Shares. All other income distributions will be
taxed to shareholders as ordinary income. Corporate shareholders may be eligible
for the corporate dividends received deduction on a portion of dividends
received from the Fund. Shareholders will be advised annually as to the tax
status of all distributions.
Ordinarily, shareholders will include all dividends declared by the Fund as
income in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Fund in the year in which the dividends were
declared.
The sale, exchange or redemption of Institutional Shares is a taxable event for
the shareholder.
The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
Shareholders are urged to consult with their tax advisors concerning the
application of state and local taxes to investments in the Fund, which may
differ from the federal income tax consequences described above. For example,
under certain specified circumstances, state income tax laws may exempt from
taxation distributions of a regulated investment company to the extent that
such distributions are derived from interest on federal obligations.
Shareholders are urged to consult with their tax advisors regarding whether,
and under what conditions such exemption is available.
8. Management of the Fund
The overall business affairs of the Fund are managed by its Board of Directors.
The Board approves all significant agreements between the Fund and persons or
companies furnishing services to the Fund, including the Fund's agreements with
its investment advisor, sub-advisor, distributor, administrator, custodian and
transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to the Distributor, to the Advisors and to the
Fund's administrator. A majority of the Directors of the Fund have no
affiliation with the Distributor, the Advisors or the Fund's administrator.
The Fund's Directors and officers are as follows:
Edward S. Hyman Chairman
Truman T. Semans Vice Chairman
James J. Cunnane Director
John F. Kroeger Director
Louis E. Levy Director
Eugene J. McDonald Director
Michael J. Napoli, Jr. Director
Rebecca W. Rimel Director
Carl W. Vogt, Esq. Director
R. Alan Medaugh Director and President
David R. Borger Vice President
Carie L. Butler Vice President
Nancy Lazar Vice President
Scott J. Liotta Vice President and Secretary
Thomas D. Stevens Vice President
Edward J. Veilleux Vice President
Margaret M. Beeler Assistant Vice President
Keith C. Reilly Assistant Vice President
Joseph A. Finelli Treasurer
Laurie D. Collidge Assistant Secretary
9. Investment Advisor and Sub-Advisor
International Strategy & Investment Inc. is the Fund's investment advisor and
Wilshire Associates Incorporated is the Fund's sub-advisor. ISI employs Messrs.
Edward S.
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<PAGE>
Hyman and R. Alan Medaugh. Due to their stock ownership, Messrs. Hyman and
Medaugh may be deemed to be controlling persons of ISI. As of July 31, 1997, the
Advisor had approximately $ __ million under management. The Advisor also acts
as investment advisor to Total Return U. S. Treasury Fund, Inc., Managed
Municipal Fund, Inc. and North American Government Bond Fund, Inc., open-end
investment companies with approximately $_____ million in net assets as of July
31, 1997. Wilshire is a registered investment advisor with approximately $______
of net assets under management as of July 31, 1997. Wilshire currently provides
advisory or sub-advisory services to ______ [open-end investment companies] with
approximately $_____ of combined net assets as of July 31, 1997. Wilshire is a
[describe ownership of Wilshire] and is controlled by its [President and
Chairman], Mr. Dennis Tito who, as of July 31, 1997 owned __% of Wilshire's
outstanding voting securities.
Pursuant to the terms of the Investment Advisory Agreement, ISI supervises and
manages all of the Fund's operations. Under the Investment Advisory and
Sub-Advisory Agreements, ISI delegates to Wilshire certain of its duties,
provided that ISI continues to supervise the performance of Wilshire and report
thereon to the Board of Directors (see "Investment Program").
As compensation for providing investment advisory services, ISI is entitled to
receive an annual fee, calculated daily and payable monthly, equal to .40% of
the Fund's average daily net assets. As compensation for providing sub-advisory
services, Wilshire is entitled to receive an annual fee from ISI, payable from
its advisory fee, calculated daily and payable monthly, equal to .16% of the
Fund's average daily net assets. ISI and Wilshire have voluntarily agreed to
waive their annual fees proportionately, to the extent necessary, and ISI has
voluntarily agreed to reimburse expenses to the extent necessary, so that total
operating expenses do not exceed 1.00% of the Fund's average daily net assets.
The address of the Advisor is 717 Fifth Avenue, New York, New York 10022,
telephone (800) 955-7175. The address of Wilshire is 1299 Ocean Avenue, Suite
700, Santa Monica, California 90401.
Portfolio Managers
The Fund's portfolio managers are Edward S. Hyman and R. Alan Medaugh of ISI,
and Thomas D. Stevens, David R. Borger, and Michael J. Napoli, Jr. of Wilshire.
Mr. Hyman, Chairman of the Fund and ISI, is responsible for developing the
forecasts and economic analysis on which the allocation strategy and the
selection of investments in the Fund's portfolio of U.S. Treasury Securities
are based (see "Investment Program"). Before joining ISI, Mr. Hyman was a vice
chairman and member of the Board of C.J. Lawrence Inc. and prior thereto, an
economic consultant at Data Resources. He writes a variety of international and
domestic economic research reports which follow trends that may determine the
direction of interest rates. These international and domestic reports are sent
to ISI's private institutional clients in the United States and overseas. The
periodical Institutional Investor, which rates analysts and economists on an
annual basis, has rated Mr. Hyman as its "first team" economist, which is its
highest rating, in each of the last [seventeen] years.
Mr. Medaugh, President and Director of the Fund and President of ISI, is
responsible for executing the allocation strategy as well as the day-to-day
management of the Fund's portfolio of U.S. Treasury Securities. Prior to
joining ISI, Mr. Medaugh was Managing Director of C.J. Lawrence Fixed Income
Management and prior thereto Senior Vice President and bond portfolio manager
at Fiduciary Trust International. While at Fiduciary Trust International, Mr.
Medaugh led their Fixed-Income Department which managed $5 billion of
international fixed income portfolios for institutional clients. Mr. Medaugh
also had prior experience as a bond portfolio manager at both Putnam Management
Company and Fidelity Management and Research.
Mr. Stevens, Mr. Borger and Mr. Napoli have shared responsibility for managing
the Fund's portfolio of U.S. equity securities since the Fund's inception. Mr.
Stevens is a Senior Vice President and Principal of Wilshire, Chief Investment
Officer of Wilshire Asset Management ("WAM"), a division of Wilshire and a Vice
President of the Fund. He has been employed with Wilshire since 1980. Prior to
joining Wilshire, Mr. Stevens was a portfolio manager and analyst at the
National Bank of Detroit. Mr. Borger is a Vice President and Principal at
Wilshire, Director of Research at WAM and a Vice President of the Fund. Mr.
Borger has been employed with Wilshire since 1986. Before joining Wilshire, he
was a Vice President and Chief of Quantitative Investment Methods at the
National Bank of Detroit where he managed an equity index fund. Mr. Napoli is a
Vice President and Principal of Wilshire, Director of Marketing for WAM, and a
Director of the Fund. Mr.
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<PAGE>
Napoli has been employed with Wilshire from 1991 to the present. Prior to
joining Wilshire, he was employed with Drexel Burnham Lambert, Bankers Trust
Co. and Ameri-trust Company.
10. Administrator
Investment Company Capital Corp. ("ICC"), One South Street, Baltimore, Maryland
21202, provides administration services to the Fund. ICC is an indirect
subsidiary of Alex. Brown Incorporated [language re Bankers Trust to come].
ICC supervises the day-to-day operations of the Fund, including the preparation
of registration statements, proxy materials, shareholder reports, compliance
with all requirements of securities laws in the states in which the
Institutional Shares are distributed and oversight of the relationship between
the Fund and its other service providers. As compensation for these services
ICC is entitled to receive an annual fee, calculated daily and payable monthly
equal to .12% of the Fund's average daily net assets. ICC has voluntarily
agreed to waive its fee until the earlier of such time as the Fund has $50
million in net assets or has been in operation for one year.
ICC is also the Fund's transfer and dividend disbursing agent and provides
accounting services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
11. Distributor
International Strategy & Investment Group Inc. ("ISI Group" or the
"Distributor"), 717 Fifth Avenue, New York, New York 10022, acts as distributor
of the Fund's shares. ISI Group is a broker-dealer that was formed in 1991 and
is an affiliate of the Advisor. ISI Group employs Mr. Edward S. Hyman and Ms.
Nancy Lazar. Due to their stock ownership, Mr. Hyman and Ms. Lazar may be
deemed to be controlling persons of IS Group. The Distributor receives no
compensation for distributing the Institutional Shares.
The Distributor bears all expenses associated with advertisements, promotional
materials, sales literature and printing and mailing prospectuses to other than
Fund shareholders.
12. Custodian, Transfer Agent and Accounting Services
Investment Company Capital Corp., One South Street, Baltimore, Maryland 21202
(telephone: (800) 882-8585), is the Fund's transfer and dividend disbursing
agent and provides accounting services to the Fund.
[ --------- acts as custodian of the Fund's assets.]
13. Performance Information
From time to time, the Fund may advertise its performance, including
comparisons with other mutual funds with similar investment objectives and to
stock or other relevant indices.
All such advertisements will show the average annual total return, net of the
Fund's maximum sales charge, over one-, five- and ten-year periods or, if such
periods have not yet elapsed, shorter periods corresponding to the life of the
Fund. Such return quotations will be computed by finding average annual
compounded rates of return over such periods that would equate an assumed
initial investment of $1,000 to the ending redeemable value, net of the maximum
sales charge and other fees, according to the required standardized
calculation. During its first year of operation, the Fund may, in lieu of
annualizing its total return, use an aggregate total return calculated in the
same manner. The standardized calculation is required by the SEC to provide
consistency and comparability in investment company advertising and is not
equivalent to a yield calculation. If the Fund compares its performance to
other funds or to relevant indices, the Fund's performance will be stated in
the same terms in which such comparative data and indices are stated, which is
normally total return rather than yield.
The performance of the Fund may be compared to data prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. and Morningstar
Inc., independent services which monitor the performance of mutual funds. The
performance of the Fund may also be compared to the Wilshire 5000 Index, the
CDA/Wiesenberger Domestic Asset Allocation Average Mutual Fund, [the Consumer
Price Index, the Standard & Poor's 500 Stock Index and other market indices
such as NASDAQ.] The Fund may also use total return performance data as
reported in the following national financial and industry publications that
monitor the performance of mutual funds: Money Magazine, Forbes, Business Week,
Barron's, Investor's Daily, IBC/Donoghue's Money Fund Report and The Wall
Street Journal.
10
<PAGE>
Performance will fluctuate and any statement of performance should not be
considered as respresentative of the future performance of the Fund.
Performance is generally a function of the type and quality of instruments held
by the Fund, operating expenses and market conditions. Any fees charged by
banks with respect to customer accounts through which Institutional Shares may
be purchased, although not included in calculations of performance, will reduce
performance results.
The Fund's annual portfolio turnover rate (the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the portfolio during the year, excluding securities with maturities of one year
or less) may vary from year to year, as well as within a year, depending on
market conditions. In accordance with its investment objectives, the Fund may
shift its investments between U.S. Treasury Securities and U.S. equity
securities from time to time which may result in relatively high portfolio
turnover. A high level of portfolio turnover may generate relatively high
transaction costs and may increase the amount of taxes payable by the Fund's
shareholders. The Fund estimates its portfolio turnover rate will not exceed
100% in the fiscal year ending, May 31, 1998. (See "Dividends and Taxes.")
14. General Information
Capital Shares
The Fund is an open-end diversified management investment company organized
under the laws of the State of Maryland on June 12, 1997, and is authorized to
issue 25 million shares of capital stock with a par value of $.001 per share.
Shares of the Fund have equal rights with respect to voting. Voting rights are
not cumulative, so the holders of more than 50% of the outstanding shares of
capital stock voting together for election of Directors may elect all the
members of the Board of Directors of the Fund. In the event of liquidation or
dissolution of the Fund, each share is entitled to its portion of the Fund's
assets after all debts and expenses have been paid. The fiscal year end of the
Fund is May 31.
The Board of Directors of the Fund is authorized to establish additional
"series" of shares of capital stock, each of which would evidence interests in
a separate portfolio of securities, and separate classes of each series of the
Fund. The shares offered by this Prospectus have been designated "Wilshire
Institutional Strategy Fund Shares." The Board has no present intention of
establishing any additional series of the Fund but the Fund does have one other
class of shares in addition to the shares offered hereby, "ISI Strategy Fund
Shares." Information about that class may be obtained by calling the
Distributor at (800) ___ ____. Different classes of the Fund may be offered to
certain investors and holders of such shares may be entitled to certain
exchange privileges not offered to Institutional Shares. All classes of the
Fund share a common investment objective, portfolio and advisory fee, but the
classes may have different distribution expenses and sales charges and,
accordingly, performance may differ.
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders but special
meetings of shareholders will be held under certain circumstances. Shareholders
of the Fund reserve the right, under certain circumstances, to request that a
meeting of shareholders be held for the purpose of considering the removal of a
Director from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting.
Reports
The Fund furnishes shareholders with semi-annual reports containing information
about the Fund and its operations, including a list of investments held in the
Fund's portfolio and financial statements. The annual financial statements are
audited by the Fund's independent auditors, _____________________.
Fund Counsel
Morgan Lewis & Bockius LLP serves as counsel to the Fund.
Shareholder Inquiries
Shareholders with inquiries concerning their Institutional Shares should
contact the Transfer Agent at (800) 882-8585, the Fund at (800) 955-7175, the
Advisors, a Participating Dealer or Shareholder Servicing Agent, as
appropriate.
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<PAGE>
WILSHIRE INSTITUTIONAL STRATEGY FUND SHARES
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "Wilshire Institutional Strategy Fund Shares" and mail
with this Application to:
ISI Mutual Funds
P.O. Box 419426
Kansas City, MO 64141-6426
For assistance in completing this form, please call the Transfer Agent
at (800) 882-8585.
To open an IRA account, call ISI at (800) 955-7175 to request an Application.
The minimum initial purchase is $1,000,000.
Your Account Registration (Please Print)
Name on Account
- ------------------------------------------------------------------------------
Name of Corporation, Trust or Partnership
- ------------------------------------------------------------------------------
Tax ID Number
/ / Corporation / / Partnership / / Trust
/ / Non-Profit or Charitable Organization / / Other_______
If a Trust, please provide the following:
- --------------------------------------------------------------------------------
Date of Trust For the Benefit of
- --------------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)
- ------------------------------------------------------------------------------
Existing Account No., if any
Mailing Address
- -------------------------------------------------------------------------------
Name of Individual to Receive Correspondence
- --------------------------------------------------------------------------------
Street
- --------------------------------------------------------------------------------
City State Zip
( )
- --------------------------------------------------------------------------------
Daytime Phone
<PAGE>
Initial Investment
The minimum initial purchase for the Wilshire Institutional Shares of the Fund
is $1,000,000 except there is no minimum for qualified retirement plans or for
subsequent investments.
Indicate the amount to be invested and the method of payment:
__A. By Mail: Enclosed is a check in the amount of $______ payable to ISI
Strategy Fund, Inc.
__B. By Wire: A bank wire in the amount of $______ has been sent
from_____________________ _______________________
Name of Bank Wire Control Number
Wire Instructions
Follow the instructions below to arrange for a wire transfer for initial
investment:
o Send completed Application by overnight carrier to ISI Funds at the
address listed above.
o Call 1-800-882-8585 to obtain new investor's Fund account number.
o Wire payment of the purchase price to Investors Fiduciary Trust Company
("IFTC"), as follows:
IFTC
a/c ISI Funds
Acct. # _______
ABA # 1010-0362-1
Kansas City, Missouri 64105
Please include the following information in the wire:
o ISI Strategy Fund, Inc. -- Wilshire Institutional Shares
o "For further credit to ________________________________________ ."
(Investor's Fund Account Number)
Distribution Options
Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Institutional Shares of the
Fund.
Income Dividends Capital Gains
/ / Reinvested in additional shares / / Reinvested in
additional shares
/ / Paid in Cash / / Paid in Cash
Automatic Investing Plan (Optional)
/ / I authorize you as Agent for the Automatic Investing Plan to automatically
invest $____________ for me, on a monthly or quarterly basis, on or about the
20th of each month or if quarterly, the 20th of January, April, July and
October, and to draw a bank draft in payment of the investment against my
checking account. (Bank drafts may be drawn on commercial banks only.)
Minimum Initial Investment: $____
Subsequent Investments (check one): / / Monthly ($____ minimum)
/ / Quarterly ($____ minimum)
|-------------------------------|
| Please attach a voided check.|
|-------------------------------|
- ------------------------------------- -------------------------------------
Bank Name Depositor's Signature Date
- ------------------------------------- -------------------------------------
Existing ISI Strategy Fund Account No., Depositor's Signature Date
if any (if joint acct., both must sign)
Systematic Withdrawal Plan (Optional)
/ / Beginning the month of ____________________ , 19__ , please send me checks
on a monthly or quarterly basis, as indicated below, in the amount of
$--------------------- , from shares that I own, payable to the account
registration address as shown above. (Participation requires minimum account
value of $_______.)
Frequency (check one): / / Monthly / / Quarterly (January, April, July and
October)
Telephone Transactions
I understand that I will automatically have telephone redemption privileges
(for amounts up to $______) unless I mark the box below.
No, I/We do not want: / / Telephone redemption privileges
Redemptions effected by telephone will be wired to the bank account designated
below:
<PAGE>
Bank Account Designation (This Section Must Be Completed)
Please attach a blank voided check to provide account and bank routing
information.
- --------------------------------------------------------------------------------
Name of Bank Branch
- --------------------------------------------------------------------------------
Bank Address City/State/Zip
- --------------------------------------------------------------------------------
Name(s) on Account
- --------------------------------------------------------------------------------
Account Number A.B.A. Number
Acknowledgment, Certificate and Signature
- -----------------------------------------------------------------------------
The Fund may be required to withhold and remit to the U.S. Treasury 31% of
any taxable dividends, capital gains distributions and redemption proceeds
paid to any individual or certain other non-corporate shareholders who fail
to provide the information and/or certifications required below. This backup
withholding is not an additional tax, and any amounts withheld may be
credited against the shareholder's ultimate U.S. tax liability.
By signing this Application, I hereby certify under penalties of perjury
that the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
/ / U.S. Citizen/Taxpayer:
/ / I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
/ / If no Tax ID Number or Social Security Number has been provided above,
I have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish my
correct Social Security Number or Tax ID Number, I may be subject to a
penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may request
such form by calling the Transfer Agent at 800-882-8585.)
/ / Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes: ---------------------
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal Revenue
Service.
- -----------------------------------------------------------------------------
I have received a copy of the Fund's prospectus dated , 1997. I
acknowledge that the telephone redemption and exchange privileges are automatic
and will be effected as described in the Fund's current prospectus (see
"Telephone Transactions"). I also acknowledge that I may bear the risk of loss
in the event of fraudulent use of such privileges. If I do not want telephone
redemption or exchange privileges, I have so indicated on this Application.
- -------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
- -------------------------------------------------------------------------------
Signature of Corporate Officer, General Partner, Trustee, etc. Date
<PAGE>
Person(s) Authorized to Conduct Transactions
The following person(s) ("Authorized Person(s)") are currently officers,
trustees, general partners or other authorized agents of the investor. Any *
of the Authorized Person(s) is, by lawful and appropriate action of the
investor, a person entitled to give instructions regarding purchases and
redemptions or make inquiries regarding the Account.
- --------------------------------------------------------------------------------
Name/Title
- --------------------------------------------------------------------------------
Name/Title
- --------------------------------------------------------------------------------
Name/Title
- --------------------------------------------------------------------------------
Name/Title
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date
The signature appearing to the right of each Authorized Person is that person's
signature. The Fund's transfer agent (the "Transfer Agent") may, without
inquiry, act upon the instructions (whether verbal, written, or provided by
wire telecommunication, or any other process) of any perrson claiming to be an
Authorized Person. Neither the Transfer Agent nor any entity on behalf of which
the Transfer Agent is acting shall be liable for any claims or expenses
(including legal fees) or for any losses resulting from actions taken upon any
instructions believed to be genuine. The Transfer Agent may continue to rely on
the instructions made by any person claiming to be an Authorized Person until
it is informed through an amended Application that the person is no longer an
Authorized Person and it has a reasonable period (not to exceed one week) to
process the amended Application. Provisions of the Application shall be equally
Applicable to any successor of the Transfer Agent.
* If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from
any one Authorized Person. Written instructions will require signatures of
the number of Authorized Persons indicated in this space.
Certificate of Authority
Investors must complete one of the following two Certificates of Authority.
Certificate A: FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS (With a Board
of Directors or Board of Trustees.)
I_____________________ , Secretary of the above-named investor, do hereby
certify that at a meeting on ________________ , at which a quorum was present
throughout, the Board of Directors (Board of Trustees) of the investor duly
adopted a resulution which is in full force and effect and in accordance with
the investor's charter and by-laws, which resolution did the following: (1)
empowered the officers/trustees executing this Application (or amendment) to do
so on behalf of the investor; (2) empowered the above-named Authorized
Person(s) to effect securities transactions for the investor on the terms
described above; (3) authorized the Secretary to certify, from time to time,
the names and titles of the officers of the investor and to notify ICC when
changes in officers occur; and (4) authorized the Secretary to certify that
such a resolution has been duly adopted and will remain in full force and
effect until ICC receives a duly-executed amendment to the Certification form.
Witness my hand and seal on behalf of the investor:
This ______ day of __________ , 199__ Secretary ____________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the investor.
- --------------------------------------------------------------------------------
Signature and title Date
Certificate B: FOR PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all general partners/trustees of the
investor and that they have done the following under the authority of the
investor's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application (or amendment) to do so on behalf of
the investor; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the investor on the terms described above; (3)
authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the investor and to notify ICC when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until ICC receives a further duly-executed certification. (If there
are not enough spaces here for all necessary signatures, complete a separate
certificate containing the language of this Certificate B and attach it to the
Application).
- --------------------------------------------------------------------------------
Signature and title Date
- --------------------------------------------------------------------------------
Signature and title Date
<PAGE>
WILSHIRE INSTITUTIONAL
STRATEGY FUND
SHARES
(A Class of ISI Strategy Fund, Inc.)
No person has been authorized to give any information or to make
representations not contained in this Prospectus in connection with any
offering made by this Prospectus and, if given or made, such information must
not be relied upon as having been authorized by the Fund or the Distributor.
TABLE OF CONTENTS
Page
----
1. Fee Table ........................ 2
2. Investment Program ............... 2
3. Investment Restrictions ......... 5
4. How to Invest in the Institutional
Shares ........................... 6
5. How to Redeem Institutional
Shares ........................... 7
6. Telephone Redemptions ............ 7
7. Dividends and Taxes ............... 7
8. Management of the Fund ............ 8
9. Investment Advisor and
Sub-Advisor ..................... 8
10. Administrator .................. 10
11. Distributor ..................... 10
12. Custodian, Transfer Agent and
Accounting Services ............ 10
13. Performance Information ......... 10
14. General Information ............... 11
[LOGO TO COME]
WILSHIRE INSTITUTIONAL
STRATEGY FUND
SHARES
(A Class of ISI Strategy Fund, Inc.)
An open-end mutual fund seeking to maximize total return through a
combination of long-term growth of capital and current income by actively
apportioning investments between securities issued by the United States
Treasury ("U.S. Treasury Securities") and diversified investments in U.S.
equity securities.
, 1997
PROSPECTUS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------------------------
ISI STRATEGY FUND, INC.
717 Fifth Avenue
New York, New York 10022
----------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS FOR THE
APPLICABLE CLASS, WHICH MAY BE OBTAINED FROM YOUR
PARTICIPATING DEALER OR BY WRITING OR CALLING INTERNATIONAL
STRATEGY & INVESTMENT GROUP INC., 717 FIFTH AVENUE, NEW YORK,
NEW YORK 10022, (800) 955-7175
Statement of Additional Information Dated: _________, 1997
Relating to the Prospectuses of
ISI Strategy Fund Shares Dated: __________, 1997
and
Wilshire Institutional Strategy Fund Shares
Dated: __________, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<C> <C>
1. General Information and History....................................................... 1
2. Investment Objectives and Policies.................................................... 1
3. Valuation of Shares and Redemption.................................................... 5
4. Federal Tax Treatment of Dividends and
Distributions....................................................................... 5
5. Management of the Fund................................................................ 9
6. Investment Advisory and Other Services................................................ 14
7. Administration........................................................................ 15
8. Distribution of Fund Shares........................................................... 16
9. Brokerage............................................................................. 18
10. Capital Shares........................................................................ 19
11. Semi-Annual Reports................................................................... 20
12. Custodian, Transfer Agent and
Accounting Services................................................................. 20
13. Independent Auditors.................................................................. 21
14. Control Persons and Principal Holders of
Securities.......................................................................... 21
15. Performance and Yield Computations.................................................... 21
16. Financial Statements ................................................................. 22
</TABLE>
<PAGE>
1. GENERAL INFORMATION AND HISTORY
ISI Strategy Fund, Inc. (the "Fund") is an open-end management
investment company. Under the rules and regulations of the Securities and
Exchange Commission (the "SEC"), all mutual funds are required to furnish
prospective investors with certain information concerning the activities of the
company being considered for investment. The Fund currently offers two classes
of shares: ISI Strategy Fund Shares (the "ISI Shares") and Wilshire
Institutional Strategy Fund Shares (the "Institutional Shares"). There are two
separate prospectuses for the Fund's shares: one for the ISI Shares and one for
the Institutional Shares. Each prospectus contains important information
concerning the classes of shares offered thereby and the Fund, and may be
obtained without charge from the Fund's distributor (the "Distributor") or from
Participating Dealers that offer shares of the respective classes of the Fund
(the "Shares") to prospective investors. Prospectuses may also be obtained from
Shareholder Servicing Agents. As used herein the term "Prospectus" describes
information common to the prospectuses of the two classes of the Fund's Shares,
unless the term "Prospectus" is modified by the appropriate class designation.
As used herein, the "Fund" refers to ISI Strategy Fund, Inc. and specific
references to any class of the Fund's Shares will be made using the name of such
class. Some of the information required to be in this Statement of Additional
Information is also included in the Fund's current Prospectuses. To avoid
unnecessary repetition, references are made to related sections of the
Prospectuses. In addition, the Prospectuses and this Statement of Additional
Information omit certain information for the Fund and its business that is
contained in the Registration Statement about the Fund and its Shares filed with
the SEC. Copies of the Registration Statement as filed, including such omitted
items, may be obtained from the SEC by paying the charges prescribed under its
rules and regulations.
The Fund was incorporated under the laws of the State of Maryland
on June 12, 1997. The Fund filed a registration statement with the SEC
registering itself as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") and its Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and commenced operations on ___________, 1997.
Under a license agreement dated __________, 1997 between the Fund
and International Strategy & Investment Inc., International Strategy &
Investment Inc. licenses to the Fund the "ISI" name and logo, but retains rights
to that name and logo, including the right to permit other investment companies
to use them.
[Under a license agreement dated _________, 1997 between the Fund
and Wilshire Associates Incorporated, Wilshire Associates Incorporated licenses
to the Fund the "Wilshire" name and logo, but retains rights to that name and
logo, including the right to permit other investment companies to use them.]
2. INVESTMENT OBJECTIVES AND POLICIES
Investment Objective and Policies of the Fund
The Fund's investment objective and its general investment
policies are described in the Prospectus. Additional investment restrictions are
set forth below. This Statement of Additional Information also describes other
investment practices in which the Fund may engage.
Except as specifically identified under "Investment Restrictions"
in the Prospectus and in this Statement of Additional Information, the
investment policies described in these documents are not fundamental, and the
Directors may change such policies without an affirmative vote of a majority of
the Fund's outstanding Shares (as defined under "Capital Shares" below). The
Fund's investment objective is fundamental, however, and may not be changed
without such a vote.
-1-
<PAGE>
Repurchase Agreements
The Fund may agree to purchase securities issued by the United
States Treasury ("U.S. Treasury Securities") from financial institutions, such
as banks and broker-dealers, subject to the seller's agreement to repurchase the
securities at an established time and price. Such repurchase agreements will be
fully collateralized. The Fund's procedures regarding repurchase agreements are
discussed in greater detail in the Fund's Prospectuses. The collateral for these
repurchase agreements will be held by the Fund's custodian or by a duly
appointed sub-custodian. The Fund will enter into repurchase agreements only
with banks and broker-dealers that have been determined to be creditworthy by
the Fund's Board of Directors under criteria established with the assistance of
the Fund's investment advisor. The list of approved banks and broker-dealers
will be monitored regularly by the Fund's investment advisor (the "Advisor") and
the Fund's sub-advisor (the Sub-Advisor") (collectively, the "Advisors") and
reviewed at least quarterly by the Fund's Board of Directors. The seller under a
repurchase agreement may be required to maintain the value of the securities
subject to the repurchase agreement at not less than the repurchase price.
Default by the seller would, however, expose the Fund to possible loss because
of adverse market action or delay in connection with the disposition of the
underlying obligations. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, the Fund may be delayed or limited
in its ability to sell the collateral.
When-Issued Securities
The Fund may make purchases of U.S. Treasury Securities, at the
current market value of the securities, on a when-issued basis. When such
transactions are negotiated, the yield to maturity is fixed. The coupon interest
rate on such U.S. Treasury Securities is fixed at the time of the U.S. Treasury
auction date therefore determining the price to be paid by the Fund, but
delivery and payment will take place after the date of the commitment. A
segregated account of the Fund, consisting of cash, cash equivalents or U.S.
Treasury Securities equal at all times to the amount of the when-issued
commitments will be established and maintained by the Fund at the Fund's
custodian. Additional cash or U.S. Treasury Securities will be added to the
account when necessary. While the Fund will purchase securities on a when-issued
basis only with the intention of acquiring the securities, the Fund may sell the
securities before the settlement date if it is deemed advisable to limit the
effects of adverse market action. The securities so purchased or sold are
subject to market fluctuation and no interest accrues to the purchaser during
this period. At the time the Fund makes the commitment to purchase or sell
securities on a when-issued basis, it will record the transaction and thereafter
reflect the value of such security purchased or, if a sale, the proceeds to be
received, in determining its net asset value. At the time of delivery of the
securities, their value may be more or less than the purchase or sale price.
Futures Contracts
The Fund may enter into futures contracts based on indexes or
groups of securities ("Futures Contracts"). Each such Futures Contract provides
for a cash payment, equal to the amount, if any, by which the value of the index
at maturity is above or below the value of the index at the time the contract
was entered into, times a fixed index "multiplier". The index underlying such a
Futures Contract is generally a broad based index of securities designed to
reflect movements in the relevant market as a whole. The index assigns weighted
values to the securities included in the index, and its composition is changed
periodically. Futures Contracts have been designed by exchanges which have been
designated as "contract markets" by the Commodity Futures Trading Commission
(the "CFTC"), and must be executed through a futures commission merchant ("FCM")
(i.e. futures broker), which is a member of the relevant contract market. The
exchanges guarantee performance of the contracts as between the clearing members
of the exchange.
-2-
<PAGE>
At the same time a Futures Contract is purchased or sold, the Fund must
allocate cash or securities as a performance bond or deposit payment ("initial
deposit"). The initial deposit varies but may be as low as 5% or less of the
value of the contract. Daily thereafter, the Futures Contract is valued and the
payment of "variation margin" may be required since each day the Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.
Although Futures Contracts call for the making or acceptance of a cash
settlement at a specified future time, the contractual obligation is usually
fulfilled before such date by buying or selling, as the case may be, on a
commodities exchange, an identical Futures Contract calling for settlement in
the same month, subject to the availability of a liquid secondary market. The
Fund incurs brokerage fees when it purchases and sells Futures Contracts. The
purpose of the acquisition or sale of a Futures Contract, in the case of a
portfolio such as that of the Fund which holds or intends to acquire equity
securities, is to attempt to protect the Fund from market fluctuations, obtain
exposure to a particular market or market segment without actually buying or
selling securities, and/or facilitate the allocation of investments among asset
classes. For example, if the Fund owns stocks replicating the Wilshire _____
Index, the Fund might sell index Futures Contracts based on such index as a
hedge against market decline. The use of Futures Contracts as an investment
technique allows the Fund to maintain a hedging position without having to sell
its portfolio securities.
To the extent the Fund enters into Futures Contracts for these
purposes, the assets in the segregated asset account maintained to cover the
Fund's obligations with respect to such Futures Contracts will consist of liquid
assets from its portfolio in an amount equal to the difference between the
fluctuating market value of such Futures Contracts and the aggregate value of
the initial and variation margin payments made by the Fund with respect to such
Futures Contracts.
Although the Fund believes that use of such contracts will benefit the
Fund, if the investment judgment of the Advisor about the general direction of
interest rates is incorrect, the Fund's overall performance would be poorer than
if it had not entered into any such contract. For example, if the Fund has
hedged against the possibility of a market decline and instead the market rises,
the Fund will lose part or all of the benefit of the increased value of its
securities portfolio which it has hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may be, but will
not necessarily be, at increased prices which reflect the rising market. The
Fund may also have to sell securities at a time when it may be disadvantageous
to do so.
Various additional risks exist with respect to the trading of futures.
For example, the Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in such instruments will depend on the degree to
which price movements in the underlying index correlate with price movements in
the relevant portion of the Fund's portfolio. The trading of futures entails the
additional risk of imperfect correlation between movements in the futures price
and the price of the underlying index. The Fund's ability to engage in futures
strategies will also depend on the availability of liquid markets in such
instruments. Transactions in these instruments are also subject to the risk of
brokerage firm or clearing house insolvencies. The liquidity of a secondary
market in a Futures Contract may be adversely affected by "daily price
fluctuation limits", established by exchanges, which limit the amount of
fluctuation in the price of a contract during a single trading day and prohibit
trading beyond such limit. In addition, the exchanges on which futures are
traded may impose limitations governing the maximum number of positions on the
same side of the market and involving the same underlying instrument which may
be held by a single investor, whether acting alone or in concert with others
(regardless of whether such contracts are held on the same or different
exchanges or held or written in one or more accounts or through one or more
brokers). In addition, the ordinary spreads between prices in the cash and
futures markets, due to differences in the natures of those markets, are subject
to distortions. First, all participants in the futures market are subject to
initial deposit and variation margin requirements. Rather than meeting
additional variation
-3-
<PAGE>
margin requirements, investors may close out Futures Contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, from the point of view of speculators, the
margin deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price distortions. Due to
the possibility of distortion, a correct forecast of general market trends by
the Advisor may still not result in a successful transaction.
Investment Restrictions
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal
limitations. The investment restrictions recited below are in addition to those
described in the Fund's Prospectus, and are matters of fundamental policy and
may not be changed without the affirmative vote of a majority of the outstanding
Shares. The percentage limitations contained in these restrictions apply at the
time of purchase of securities.
Accordingly, the Fund will not:
1. Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only from banks and in an amount not
exceeding 10% of the value of the total assets of the Fund at the
time of such borrowing, provided that, while borrowings by the
Fund equaling 5% or more of the Fund's total assets are
outstanding, the Fund will not purchase securities for
investment;
2. Invest in real estate or mortgages on real estate;
3. Purchase or sell commodities or commodities contracts (except
that the Fund may purchase or sell futures contracts based on
underlying securities indexes);
4. Act as an underwriter of securities within the meaning of the
Federal securities laws, except insofar as it might be deemed to
be an underwriter upon disposition of certain portfolio
securities acquired within the limitation on purchases of
restricted securities;
5. Issue senior securities;
6. Make loans, except that the Fund may purchase or hold debt
instruments and may enter into repurchase agreements [and make
loans of portfolio securities] in accordance with its investment
objective and policies;
3. VALUATION OF SHARES AND REDEMPTION
Valuation
The net asset value per Share is determined daily as of the close
of the New York Stock Exchange, which is ordinarily 4:00 p.m. (Eastern Time)
each day on which the New York Stock Exchange is open for business (a "Business
Day"). The New York Stock Exchange is open for business on all weekdays except
for the following holidays: New Year's Day, Martin Luther King, Jr.'s Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Redemption
The Fund may suspend the right of redemption or postpone the date
of payment during any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and
-4-
<PAGE>
regulations of the SEC; (b) the New York Stock Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC so that
valuation of the net assets of the Fund is not reasonably practicable.
Under normal circumstances, the Fund will redeem Shares by check
as described in the Prospectus. However, if the Board of Directors determines
that it would be in the best interests of the remaining shareholders of the Fund
to make payment of the redemption price in whole or in part by a distribution in
kind of readily marketable securities from the portfolio of the Fund in lieu of
cash, in conformity with applicable rules of the SEC, the Fund will make such
distributions in kind. If Shares are redeemed in kind, the redeeming shareholder
will incur brokerage costs in later converting the assets into cash. The method
of valuing portfolio securities is described under "How to Invest" in each
Prospectus and such valuation will be made as of the same time the redemption
price is determined. The Fund, however, has elected to be governed by Rule 18f-1
under the Investment Company Act pursuant to which the Fund is obligated to
redeem Shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund during any 90-day period for any one shareholder.
4. FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional federal tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectus is not intended as a substitute for
careful tax planning.
The following general discussion of federal income tax
consequences is based on the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
Qualification as Regulated Investment Company
The Fund expects to be taxed as a regulated investment company
("RIC") under Subchapter M of the Code. As a RIC, the Fund is exempt from
federal income tax on its net investment income and capital gains which it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gains over net long-term capital losses) for the year (the
"Distribution Requirement") and satisfies certain other requirements of the Code
that are described below. Distributions of investment company taxable income
made during the taxable year or, under certain specified circumstances, within
12 months after the close of the taxable year, will satisfy the Distribution
Requirement. The Distribution Requirement for any year may be waived if a RIC
establishes to the satisfaction of the Internal Revenue Service that it is
unable to satisfy the Distribution Requirement by reason of distributions
previously made for the purpose of avoiding liability for federal excise tax
(discussed below).
The Fund may make investments in securities (such as STRIPS) that
bear "original issue discount" or "acquisition discount" (collectively, "OID
Securities"). The holder of such securities is deemed to have received interest
income even though no cash payments have been received. Accordingly, OID
Securities may not produce sufficient current cash receipts to match the amount
of distributable net investment income the Fund must distribute to satisfy the
Distribution Requirement.
-5-
<PAGE>
In some cases, the Fund may have to borrow money or dispose of other investments
in order to make sufficient cash distributions to satisfy the Distribution
Requirement.
In addition to satisfaction of the Distribution Requirement, in
order to qualify as a RIC the Fund must, generally, (1) derive at least 90% of
its gross income from dividends, interest, certain payments with respect to
securities, loans and gains from the sale or other disposition of stock or
securities, or from other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in stock or securities (the "Income Requirement"), and (2) derive less
than 30% of its gross income (exclusive of certain gains from designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from gains on the sale or other disposition of any of the following
investments if such investments are held for less than three months (the
"Short-Short Gain Test"): (a) stock or securities (as defined in Section
2(a)(36) of the Investment Company Act); (b) options, futures or forward
contracts (other than options, futures or forward contracts on foreign
currencies) and (c) foreign currencies (or options, futures or forward contracts
on foreign currencies) but only if such currencies (or options, futures or
forward contracts) are not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with respect to stocks
or securities).
Finally, at the close of each quarter of its taxable year, at
least 50% of the value of the Fund's assets must consist of cash and cash items,
U.S. Government securities, securities of other regulated investment companies,
and securities of other issuers (as to which the Fund has not invested more than
5% of the value of its total assets in securities of such issuer and as to which
the Fund does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or two or
more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses or related trades or businesses (the "Asset
Diversification Test"). Generally, the Fund will not lose its status as a RIC if
it fails to meet the Asset Diversification Test solely as a result of a
fluctuation in value of portfolio assets not attributable to a purchase. The
Fund may curtail its investment in certain securities where the application
thereto of the Asset Diversification Test is uncertain.
Although the Fund intends to distribute substantially all of its
net investment income and may distribute its capital gains for any taxable year,
the Fund will be subject to federal income taxation to the extent any such
income or gains are not distributed.
Fund Distributions
The Fund anticipates that it will distribute substantially all of
its investment company taxable income for each taxable year. Such distributions
will be taxable to shareholders as ordinary income, regardless of whether such
distributions are paid in cash or are reinvested in Shares.
The Fund may either retain or distribute to shareholders the
excess, if any, of net long-term capital gains over net short-term capital
losses ("net capital gains") for each taxable year. If such gains are
distributed as a capital gains distribution, they are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
held Shares, whether or not such gains were recognized by the Fund prior to the
date on which a shareholder acquired Shares and whether or not the distribution
was paid in cash or reinvested in Shares. The aggregate amount of distributions
designated by the Fund as capital gains distributions may not exceed the net
capital gains of the Fund for any taxable year, determined by excluding any net
capital losses and net long-term capital losses attributable to transactions
occurring after October 31 of such year and by treating any such net capital
losses or net long-term capital losses as if they arose on the first day of the
following taxable year. Conversely, if the Fund elects to retain its net capital
gains, it will be taxed thereon (except to the extent of any available capital
loss carryovers) at the applicable corporate
-6-
<PAGE>
capital gains tax rate. In such event, it is expected that the Fund also will
elect to have shareholders treated as having received a distribution of such
gains, with the result that shareholders will be required to report such gains
on their returns as long-term capital gains, will receive a refundable tax
credit for their allocable share of capital gains tax paid by the Fund on the
gains, and will increase the tax basis for their Shares by an amount equal to 65
percent of the deemed distribution.
In the case of corporate shareholders, Fund distributions (other
than capital gains distributions) generally qualify for the 70% dividends
received deduction to the extent of the gross amount of qualifying dividends
received by the Fund for the year. Generally, and subject to certain
limitations, a dividend will be treated as a qualifying dividend if it has been
received from a domestic corporation. For purposes of the alternative minimum
tax and the environmental tax, corporate shareholders generally will be required
to take the full amount of any dividend received from the Fund into account in
determining their adjusted current earnings for purposes of computing
"alternative minimum taxable income."
Investors should be careful to consider the tax implications of
buying Shares of the Fund just prior to the ex-dividend date of an ordinary
income dividend or capital gains distribution. The price of Shares purchased at
that time may reflect the amount of the forthcoming ordinary income dividend or
capital gains distribution. Those purchasing just prior to an ordinary income
dividend or capital gains distribution will be taxable on the entire amount of
the dividend or distribution received even though the dividend or capital gains
distribution was earned by the Fund before the shareholder purchased the Shares.
Generally, gain or loss on the sale of Shares will be capital
gain or loss, which will be long-term capital gain or loss if the Shares have
been held for more than one year and otherwise will be short-term capital gain
or loss. However, any loss realized upon the sale, exchange or redemption of
Shares held for six months or less and has previously received a capital gains
distribution with respect to the Share (or any undistributed net capital gains
of the Fund with respect to such Share are included in determining the
shareholder's long-term capital gains), the shareholder must treat the loss as a
long-term capital loss to the extent any capital gains distributions have been
paid with respect to such Shares (or any undistributed net capital gains of the
Fund with respect to such Shares have been included in determining the
shareholder's long-term capital gains). In addition, any loss realized on a sale
or other disposition of Shares will be disallowed to the extent an investor
repurchases (or enters into a contract or option to repurchase) Shares within a
period of 61 days (beginning 30 days before and ending 30 days after the
disposition of the Shares). This loss disallowance rule will apply to Shares
received through the reinvestment of dividends during the 61-day period.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and
such distributions will be taxable to shareholders as ordinary dividends to the
extent of the Fund's current and accumulated earnings and profits. Such
distributions will be eligible for the dividends received deduction in the case
of corporate shareholders.
The Fund will provide a statement annually to shareholders as to
the federal tax status of distributions paid (or deemed to be paid) by the Fund
during the year, including the amount of dividends eligible for the corporate
dividends received deduction.
The Fund will be required in certain cases to withhold and remit
to the United States Treasury 31% of distributions paid to any shareholder (1)
who has provided either an incorrect tax identification number or no number at
all, (2) who is subject to backup withholding by the Internal
-7-
<PAGE>
Revenue Service for failure to report the receipt of interest or dividend income
properly, or (3) who has failed to certify to the Fund that he is not subject to
backup withholding.
Excise Tax; Miscellaneous Considerations
The Code imposes a non-deductible 4% excise tax on regulated
investment companies that do not distribute in each calendar year an amount
equal to 98% of their ordinary income for the calendar year plus 98% of their
capital gain net income for the one-year period ending on October 31 of such
calendar year. The excise tax is imposed on the undistributed part of this
required distribution. In addition, the balance of such income must be
distributed during the next calendar year to avoid liability for the excise tax
in that year. For the foregoing purposes, a company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. For purposes of the excise tax, a regulated
investment company must reduce its capital gain net income by the amount of any
net ordinary loss for the calendar year (but only to the extent the capital gain
net income for the one-year period ending on October 31 exceeds the net capital
gains for such period). Because the Fund intends to distribute all of its income
currently (or to retain, at most, its "net capital gains" and pay tax thereon),
the Fund does not anticipate incurring any liability for this excise tax.
However, the Fund may, in certain circumstances, be required to liquidate
portfolio investments in order to make sufficient distributions to avoid excise
tax liability. The liquidation of investments in such circumstances may affect
the ability of the Fund to satisfy the Short-Short Gain Test.
Rules of state and local taxation of dividend and capital gains
distributions from regulated investment companies often differ from the rules
for federal income taxation described above. Shareholders are urged to consult
their tax advisers as to the consequences of federal, state and local tax rules
affecting an investment in the Fund.
5. MANAGEMENT OF THE FUND
The overall business affairs of the Fund are the responsibility
of the Board of Directors. The Board approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including the
Fund's agreements with its investment advisor, sub-advisor, distributor,
administrator, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's executive officers, to the Advisors, the
Distributor, and the Fund's administrator. A majority of the directors of the
Fund have no affiliation with the Advisors, the Distributor, or the Fund's
administrator.
Directors and Officers
The Directors and executive officers of the Fund, their
respective dates of birth and their principal occupations during the last five
years are set forth below. Unless otherwise indicated, the address of each
Director and executive officer is 717 Fifth Avenue, New York, New York 10022.
* EDWARD S. HYMAN, Chairman and Director (4/8/45)
Chairman, International Strategy & Investment Inc. (registered
investment advisor), Chairman, ISI Inc. (investments) and Chairman
and President, ISI Group Inc. (registered investment advisor and
registered broker-dealer), 1991-Present.
*TRUMAN T. SEMANS, Vice Chairman and Director (10/27/26)
Alex. Brown & Sons Incorporated, One South Street, Baltimore,
Maryland 21202. Managing Director, Alex. Brown & Sons Incorporated
and Director, Investment Company Capital Corp. (registered
investment advisor); Formerly, Vice Chairman, Alex. Brown
Incorporated.
-8-
<PAGE>
JAMES J. CUNNANE, Director (3/11/38)
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141.
Managing Director, CBC Capital (merchant banking), 1993-Present;
Formerly, Senior Vice President and Chief Financial Officer, General
Dynamics Corporation (defense), 1989-1993, and Director, The Arch
Fund (registered investment company).
JOHN F. KROEGER, Director (8/11/24)
37 Pippins Way, Morristown, New Jersey 07960. Director/Trustee, AIM
Funds (registered investment companies); Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm); General
Manager, Shell Oil Company.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director,
Kimberly-Clark Corporation (personal consumer products) and
Household International (finance and banking); Chairman of the
Quality Control Inquiry Committee, American Institute of Certified
Public Accountants; Formerly, Trustee, Merrill Lynch Funds for
Institutions, 1991-1993; Adjunct Professor, Columbia
University-Graduate School of Business, 1991-1992; Partner, KPMG
Peat Marwick, retired 1990.
EUGENE J. MCDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 1000, 2200 West Main
Street, Durham, North Carolina 27705. President, Duke Management
Company (investments); Executive Vice President, Duke University
(education, research and health care); Director, Central Bank &
Trust (banking), Key Funds (registered investment companies), AMBAC
Treasurers Trust (registered investment company) and DP Mann
Holdings (insurance).
R. ALAN MEDAUGH, Director and President (8/20/43)
President, International Strategy & Investment Inc., 1991-Present.
MICHAEL J. NAPOLI, JR., Director (10/1/51)
1299 Ocean Avenue, Suite 700, Santa Monica, CA 90401. Vice President
and Principal, Wilshire Associates Incorporated; Director of
Marketing, Wilshire Asset Management, 1991-Present.
REBECCA W. RIMEL, Director (4/10/51)
The Pew Charitable Trusts, One Commerce Square, 2005 Market Street,
Suite 1700, Philadelphia, PA 19103-7017; President and Chief
Executive Officer, The Pew Charitable Trusts; Director and Executive
Vice President, The Glenmede Trust Company; Formerly, Executive
Director, The Pew Charitable Trusts.
CARL W. VOGT, Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2604. Senior Partner, Fulbright & Jaworski
L.L.P. (law); Director, Yellow Corporation (trucking); Formerly,
Chairman and Member, National Transportation Safety Board; Director,
National Railroad Passenger Corporation (Amtrak) and Member,
Aviation System Capacity Advisory Committee (Federal Aviation
Administration).
EDWARD J. VEILLEUX, Vice President (8/26/43)
Alex. Brown & Sons Incorporated, One South Street, Baltimore,
Maryland 21202. Principal, Alex. Brown & Sons Incorporated; Vice
President, Armata Financial Corp. (registered broker-dealer);
Executive Vice President, Investment Company Capital Corp.
(registered investment advisor).
-9-
<PAGE>
NANCY LAZAR, Vice President (8/1/57)
Executive Vice President and Secretary, International Strategy &
Investment Inc., 1991-Present.
CARRIE L. BUTLER, Vice President (5/1/67)
Assistant Vice President, International Strategy & Investment Inc.,
1991-Present.
SCOTT J. LIOTTA, Vice President and Secretary (3/18/65)
Alex. Brown & Sons Incorporated, One South Street, Baltimore,
Maryland 21202. Manager, Fund Administration, Alex. Brown & Sons
Incorporated, July 1996-Present; Formerly, Manager and Foreign
Markets Specialist, Putnam Investments Inc. (registered investment
companies), April 1994-July 1996; and Supervisor, Brown Brothers
Harriman & Co. (domestic and global custody), August 1991-April
1994.
THOMAS D. STEVENS, Vice President (5/27/49)
Wilshire Associates Incorporated, 1299 Ocean Avenue, Suite 700,
Santa Monica, CA 90401. Senior Vice President and Principal,
Wilshire Associates Incorporated; Chief Investment Officer, Wilshire
Asset Management.
DAVID R. BORGER, Vice President (12/33/48)
Wilshire Associates Incorporated, 1299 Ocean Avenue, Suite 700,
Santa Monica, CA 90401. Vice President and Principal, Wilshire
Associates Incorporated; Director of Research, Asset Management
Division.
MARGARET M. BEELER, Assistant Vice President (3/1/67)
Assistant Vice President, International Strategy & Investment Inc.,
May 1996-Present; Marketing Representative, U.S. Healthcare, Inc.,
1995-1996; Sales Manager, Donna Maione, Inc., 1994-1995; Sales
Manager, Deborah Wiley California, 1989-1994.
KEITH C. REILLY, Assistant Vice President (6/2/66)
Assistant Vice President, International Strategy & Investment Inc.,
May 1996-Present; Select Private Banking Officer, Assistant
Manager, Chemical Bank, 1995-1996; Financial Consultant, Dreyfus
Corporation, 1989-1995.
JOSEPH A. FINELLI, Treasurer (1/24/57)
Alex. Brown & Sons Incorporated, One South Street, Baltimore,
Maryland 21202. Vice President, Alex. Brown & Sons Incorporated and
Vice President Investment Company Capital Corp. (registered
investment advisor), September 1995-Present; Formerly, Vice
President and Treasurer, The Delaware Group of Funds (registered
investment companies) and Vice President, Delaware Management
Company, Inc. (investments), 1980-August 1995.
LAURIE D. COLLIDGE, Assistant Secretary (1/1/66)
Alex. Brown & Sons Incorporated, One South Street, Baltimore,
Maryland 21202. Asset Management Department, Alex. Brown & Sons
Incorporated, 1991-Present.
- ---------
* A Director who is an "interested person" as defined in the Investment
Company Act.
Directors and officers of the Fund are also directors and
officers of some or all of the other investment companies managed, administered,
advised or distributed by the Advisor or the Distributor or by any of their
respective affiliates. There are currently 13 funds in the Flag Investors/ISI
Funds and Alex. Brown Cash Reserve Fund, Inc. fund complex (the "Fund Complex").
Mr. Hyman serves as Chairman of four funds in the Fund Complex. Mr. Medaugh
serves as a
-10-
<PAGE>
Director and President of two funds and as President of two other funds in the
Fund Complex. Mr. Semans serves as Chairman of five funds and as a Director of
six other funds in the Fund Complex. Messrs. Cunnane, Kroeger, Levy and McDonald
serve as Directors of each fund in the Fund Complex. Ms. Rimel serves as a
director of eleven funds in the Fund Complex. Mr. Vogt serves as a Director of
ten funds in the Fund Complex. Ms. Lazar and Ms. Butler serve as Vice Presidents
of four funds in the Fund Complex. Mr. Veilleux serves as Executive Vice
President of one fund and as Vice President of each of the other funds in the
Fund Complex. Ms. Musa and Mr. Reilly each serve as Assistant Vice President for
four funds in the Fund Complex. Mr. Liotta serves as Vice President and
Secretary, Mr. Finelli serves as Treasurer and Ms. Collidge serves as Assistant
Secretary, respectively, for each of the funds in the Fund Complex.
Some of the Directors of the Fund are customers of, and have
had normal brokerage transactions with, the Fund's administrator in the ordinary
course of business. All such transactions were made on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
persons. Additional transactions may be expected to take place in the future.
Officers of the Fund receive no direct remuneration in such
capacity from the Fund. Officers and Directors of the Fund who are officers or
directors of the Advisors, the Distributor or the Fund's administrator may be
considered to have received remuneration indirectly. As compensation for his or
her services as director, each Director who is not an "interested person" of the
Fund (as defined in the Investment Company Act) (a "Disinterested Director")
receives an aggregate annual fee (plus reimbursement for reasonable
out-of-pocket expenses incurred in connection with his or her attendance at
Board and committee meetings) from all Flag Investors/ISI Funds and Alex. Brown
Cash Reserve Fund, Inc. for which such Director serves. In addition, the
Chairman of the Fund Complex's Audit Committee receives an aggregate annual fee
from the Fund Complex. Payment of such fees and expenses is allocated among all
such funds described above in direct proportion to their relative net assets.
-11-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Estimated Total Compensation
Estimated Aggregate Pension or From
Compensation Retirement the Fund and Fund Complex
From the Fund for Initial Benefits Accrued Payable to Directors
Name of Person, Fiscal Period Ending as Part of Fund for the Initial Fiscal Period
Position May 31, 1998 Expenses Ending May 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Edward S. Hyman $0 $0 $0
Chairman
*Truman T. Semans $0 $0 $0
Vice Chairman
*R. Alan Medaugh $0 $0 $0
Director and President
*Michael J. Napoli, Jr. $0 $0 $0
Director
James J. Cunnane $______(1) + $39,000 for service on 13
Director Boards in the Fund Complex
John F. Kroeger $______(1) + $49,000 for service on 13
Director Boards in the Fund Complex
Louis E. Levy $______(1) + $39,000 for service on 13
Director Boards in the Fund Complex
Eugene J. McDonald $______(1) + $39,000 for service on 13
Director Boards in the Fund Complex
Rebecca W. Rimel $______(1) + $39,000 for service on 11(2)
Director Boards in the Fund Complex
Carl W. Vogt, Esq. $______(1) + $39,000 for service on 10(2)
Director Boards in the Fund Complex
</TABLE>
- ----------
* Denotes an individual who is an "interested person" as defined in the
Investment Company Act.
+ The Fund Complex has adopted a retirement plan for eligible Directors,
as described below. The actuarially computed pension expense for the
Fund for the initial fiscal period is estimated to be $_________.
(1) Of the amounts payable to Messrs. Cunnane, Kroeger, Levy, McDonald,
Vogt and Ms. Rimel, $______, $______, $______, $______, $______, and
$______ is estimated to be deferred pursuant to a deferred
compensation plan.
(2) Ms. Rimel and Mr. Vogt receive proportionately higher compensation
from each fund for which they serve as a Director.
The Fund Complex has adopted a retirement plan (the
"Retirement Plan") for Directors who are not employees of the Fund, the Fund's
administrator or their respective affiliates (the "Participants"). After
completion of six years of service, each Participant will be entitled to receive
an annual retirement benefit equal to a percentage of the fee earned by the
Participant in his or her last year of service. Upon retirement, each
Participant will receive annually 10% of such fee for each year that he or she
served after completion of the first five years, up to a maximum annual benefit
of 50% of the fee earned by the Participant in his or her last year of service.
The fee will be paid quarterly, for life, by each Fund for which he or she
serves. The Retirement Plan is unfunded and unvested. Such fees are allocated to
each fund in the Fund Complex based upon the relative net assets of such fund to
the Fund Complex.
Set forth in the table below are the estimated annual benefits
payable to a Participant upon retirement assuming various years of service and
payment of a percentage of the fee earned by such Participant in his or her last
year of service, as described above. The approximate credited years of service
at December 31, 1996 are as follows: for Mr. Cunnane, 2 years; for Mr. Kroeger,
14 years; for Mr. Levy, 2 years; for Mr. McDonald, 4 years; for Ms. Rimel, 1
year and for Mr. Vogt, 1 year.
-12-
<PAGE>
<TABLE>
<CAPTION>
Years of Service Estimated Annual Benefits Payable By
- ---------------- ------------------------------------
Fund Complex Upon Retirement
-----------------------------
Chairman of Audit Committee Other Participants
---------------------------- ------------------
<C> <C> <C>
6 years $ 4,900 $ 3,900
7 years $ 9,800 $ 7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>
Any Director who receives fees from the Fund is permitted to
defer a minimum of 50%, or up to all, of his or her annual compensation pursuant
to a Deferred Compensation Plan. Messrs. Cunnane, Kroeger, Levy, McDonald and
Vogt and Ms. Rimel have each executed a Deferred Compensation Agreement.
Currently, the deferring Directors may select various Flag Investors and Alex.
Brown Funds in which all or part of their deferral account shall be deemed to be
invested. Distributions from the deferring Directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of ten
years.
Code of Ethics
The Board of Directors of the Fund has adopted a Code of
Ethics pursuant to Rule 17j-1 under the Investment Company Act. The Code of
Ethics applies to the personal investing activities of the directors and
officers of the Fund, as well as to designated officers, directors and employees
of the Advisors and the Distributor. As described below, the Code of Ethics
imposes additional restrictions on the Advisor's investment personnel, including
the portfolio managers and employees who execute or help execute a portfolio
manager's decisions or who obtain contemporaneous information regarding the
purchase or sale of a security by the Fund.
The Code of Ethics requires that covered employees of the
Advisors, certain directors or officers of the Distributor, and all Fund
Directors who are "interested persons", preclear any personal securities
investments (with certain exceptions, such as non-volitional purchases or
purchases which are part of an automatic dividend reinvestment plan). The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities and special preclearance of the
acquisition of securities in private placements. Furthermore, the Code of Ethics
provides for trading "blackout periods" that prohibit trading by investment
personnel and certain other employees within periods of trading by the Fund in
the same security. Officers, directors and employees of the Advisor and the
Distributor may comply with codes instituted by those entities so long as they
contain similar requirements and restrictions.
6. INVESTMENT ADVISORY AND OTHER SERVICES
On June 17, 1997, the Board of Directors of the Fund, including a
majority of the Disinterested Directors, approved an Investment Advisory
Agreement between the Fund and ISI and a Sub-Advisory Agreement among the Fund,
ISI, and Wilshire Associates Incorporated ("Wilshire" or the "Sub-Advisor"),
both of which contracts are described in greater detail below. The Investment
Advisory Agreement and the Sub-Advisory Agreement were approved by the sole
shareholder of the Fund on ______. ISI is a registered investment advisor that
was formed in January, 1991. ISI employs Messrs. Edward S. Hyman, the Fund's
Chairman, and R. Alan Medaugh, the Fund's President. ISI is also investment
advisor to Total Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc.
and North American Government Bond Fund, Inc.
-13-
<PAGE>
Wilshire, a [California] corporation, is a registered investment
advisor with approximately $______ in net assets under management as of July 31,
1997. Wilshire currently provides investment advisory services to __ open-end
registered investment companies with $___ of net assets under management as of
July 31, 1997. Wilshire is controlled by its [President and Chief Executive
Officer], Mr. Dennis Tito, who, as of July 31, 1997, owned ___% of Wilshire's
outstanding voting securities.
Under the Investment Advisory Agreement, ISI: (1) formulates and
implements continuing programs for the purchase and sales of securities, (2)
determines what securities (and in what proportion) shall be represented in the
Fund's portfolio (3) provides the Fund's Board of Directors with regular
financial reports and analysis with respect to the Fund's portfolio investments
and operations, and the operations of comparable investment companies, (4)
obtains and evaluates economic, statistical, and financial information pertinent
to the Fund, (5) takes on behalf of the Fund, all actions which appear to the
Advisor necessary to carry into effect its purchase and sale programs. ISI has
delegated these responsibilities to Wilshire for a portion of the Fund's
portfolio, provided that ISI continues to supervise the performance of Wilshire
and report thereon to the Fund's Board of Directors. Any investment program
undertaken by ISI or Wilshire will at all times be subject to the policies and
control of the Fund's Board of Directors. Neither ISI or Wilshire shall be
liable to the Fund or its shareholders for any act of omission by ISI or
Wilshire or any losses sustained by the Fund or its shareholders except in the
case of willful misfeasance, bad faith, gross negligence, or reckless disregard
of duty. The services of ISI and Wilshire to the Fund are not exclusive and both
ISI and Wilshire are free to render similar services to others.
As compensation for these services, ISI is entitled to receive an
annual fee from the Fund calculated daily and paid monthly, at the annual rate
of .40%. of the Fund's daily net asset value. As compensation for its services,
Wilshire is entitled to receive a fee from ISI, payable out of ISI's advisory
fee, calculated daily and payable monthly, at the annual rate of .16% of the
Fund's average daily net assets. ISI and Wilshire have voluntarily agreed to
waive their annual fees proportionately to the extent necessary, and ISI has
voluntarily agreed to reimburse expenses to the extent necessary, so that total
operating expenses do not exceed 1.00% of the Fund's average daily net assets.
Each of the Investment Advisory and the Sub-Advisory Agreements has
an initial term of two years and will continue in effect from year to year
thereafter if such continuance is specifically approved at least annually by the
Fund's Board of Directors, including a majority of the Disinterested Directors
who have no direct or indirect financial interest in such agreements, by votes
cast in person at a meeting called for such purpose, or by a vote of a majority
of the outstanding shares (as defined under "Capital Stock") The Fund or ISI may
terminate the Investment Advisory Agreement on sixty days' written notice
without penalty. The Investment Advisory Agreement will terminate automatically
in the event of assignment (as defined in the Investment Company Act). The
Sub-Advisory Agreement has similar termination provisions.
7. ADMINISTRATION
Investment Company Capital Corp. ("ICC"), One South Street,
Baltimore, Maryland 21202, provides administration services to the Fund. Such
services include: monitoring the Fund's regulatory compliance, supervising all
aspects of the Fund's service providers, arranging, but not paying for, the
printing and mailing of prospectuses, proxy materials and shareholder reports,
preparing and filing all documents required by the securities laws of any state
in which the Shares are sold, establishing the Fund's budgets, monitoring the
Fund's distribution plans, preparing the Fund's financial information and
shareholder reports, calculating dividend and distribution payments and
arranging for the preparation of state and federal tax returns.
As compensation for its administration services, ICC is
entitled to receive an annual fee calculated daily and payable monthly equal to
.12% of the Fund's average daily net assets. ICC has voluntarily agreed to waive
its fee until the earlier of such time as the Fund has $50 million in net assets
or has been in operation for one year.
-14-
<PAGE>
The services of ICC to the Fund are not exclusive and ICC is
free to render similar services to others.
ICC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Fund. (See "Custodian, Transfer Agent
and Accounting Services".) ICC is an indirect subsidiary of Alex. Brown
Incorporated. [INSERT RE BANKERS TRUST].
8. DISTRIBUTION OF FUND SHARES
International Strategy & Investment Group Inc. ("ISI Group" or
the "Distributor") serves as the exclusive distributor of the Fund's Shares
pursuant to two separate Distribution Agreements, one for each class of the
Fund's shares (collectively the "Distribution Agreements"). ISI Group, a
Delaware corporation, is a broker-dealer that was formed in 1991 and is an
affiliate of the Advisor.
The Distribution Agreements provide that ISI Group has the
exclusive right to distribute the related class of shares either directly or
through other broker-dealers and further provide that ISI Group will: solicit
and receive orders for the purchase of Shares; accept or reject such orders on
behalf of the Fund in accordance with the Fund's currently effective prospectus
and transmit such orders as are accepted to the Fund's transfer agent as
promptly as possible; receive requests for redemption and transmit such
redemption requests to the Fund's transfer agent as promptly as possible;
respond to inquiries from the Fund's shareholders concerning the status of their
accounts with the Fund; with respect to the ISI shares class, provide the Fund's
Board of Directors for their review with quarterly reports required by Rule
12b-1; maintain such accounts, books and records as may be required by law or be
deemed appropriate by the Fund's Board of Directors; and take all actions deemed
necessary to carry into effect the distribution of the Shares. ISI Group has not
undertaken to sell any specific number of Shares. The Distribution Agreements
further provide that, in connection with the distribution of Shares, ISI Group
will be responsible for all of its promotional expenses. The services by ISI
Group to the Fund are not exclusive, and ISI Group shall not be liable to the
Fund or its shareholders for any act or omission by ISI Group or any losses
sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for providing distribution and related
administrative services for the ISI Shares as described above, the Fund will pay
ISI Group , on a monthly basis, an annual fee, equal to .25% of the Fund's
average daily net assets. ISI Group expects to allocate on a proportional basis
up to all of its fees to broker-dealers who enter into Agency Distribution
Agreements with ISI Group ("Participating Dealers") under which such
broker-dealers have agreed to process investor purchase and redemption orders
and respond to inquiries from Fund shareholders concerning the status of their
accounts and the operations of the Fund.
ISI Group receives no compensation for distributing the
Institutional Shares.
Pursuant to Rule 12b-1 under the Investment Company Act, which
provides that investment companies may pay distribution expenses, directly or
indirectly, only pursuant to a plan adopted by the investment company's board of
directors and approved by its shareholders, the Fund has adopted a Plan of
Distribution for the ISI Shares (the "ISI Plan"). Under the ISI Plan, the Fund
pays a fee to ISI Group for distribution and other shareholder servicing
assistance as set forth in the ISI Shares Distribution Agreement, and ISI Group
is authorized to make payments out of its fees to Participating Dealers.
Each of the Distribution Agreements have an initial term of
two years. The Distribution Agreements and, in the case of the ISI Shares
Distribution Agreement, the Plan encompassed therein will remain in effect from
year to year as specifically approved (a) at least annually by the Fund's Board
of Directors and (b) by the affirmative vote of a majority of the Disinterested
Directors, by votes cast in person at a meeting called for such purpose. The
Distribution Agreements, forms of Agency Distribution Agreements and the ISI
Plan were most
-15-
<PAGE>
recently approved by the Fund's Board of Directors, including a majority of the
Disinterested Directors on June 17, 1997.
In approving the ISI Plan, the Directors concluded, in the
exercise of reasonable business judgment, that there was a reasonable likelihood
that the ISI Plan would benefit the Fund and its shareholders. The ISI Plan will
be renewed only if the Directors make a similar determination in each subsequent
year. The ISI Plan may not be amended to increase materially the fee to be paid
pursuant to the ISI Shares Distribution Agreement without the approval of the
Fund's shareholders. The ISI Plan may be terminated at any time, and the
Distribution Agreements may be terminated at any time upon 60 days' notice,
without penalty, by a vote of a majority of the Fund's Disinterested Directors
or by a vote of a majority of the outstanding Shares. Any Agency Distribution
Agreements may be terminated in the same manner at any time. The Distribution
Agreements and any Agency Distribution Agreements shall automatically terminate
in the event of assignment.
During the continuance of the ISI Plan, the Fund's Board of
Directors will be provided for their review, at least quarterly, a written
report concerning the payments made under the ISI Plan to ISI Group pursuant to
the ISI Shares Distribution Agreement, to Participating Dealers pursuant to
Agency Distribution Agreements and to Shareholder Servicing Agents pursuant to
Shareholder Servicing Agreements. Such reports shall be made by the persons
authorized to make such payments. In addition, during the continuance of the ISI
Plan, the selection and nomination of the Fund's Disinterested Directors shall
be committed to the discretion of the Disinterested Directors then in office.
In addition, [with respect to the ISI Shares,] the Fund may
enter into Shareholder Servicing Agreements with certain financial institutions,
such as banks, to act as Shareholder Servicing Agents, pursuant to which ISI
Group will allocate a portion of its distribution fee as compensation for such
financial institutions' ongoing shareholder services. Although banking laws and
regulations prohibit banks from distributing shares of open-end investment
companies such as the Fund, according to interpretations from various bank
regulatory authorities, financial institutions are not prohibited from acting in
other capacities for investment companies, such as the shareholder servicing
capacities described above. Should future legislative, judicial or
administrative action prohibit or restrict the activities of the Shareholder
Servicing Agents in connection with the Shareholder Servicing Agreements, the
Fund may be required to alter materially or discontinue its arrangements with
the Shareholder Servicing Agents. Such financial institutions may impose
separate fees in connection with these services and investors should review the
applicable Prospectus and this Statement of Additional Information in
conjunction with any such institution's fee schedule.
Under the ISI Plan, amounts allocated to Participating Dealers
and Shareholder Servicing Agents may not exceed amounts payable to the
Distributor, with respect to shares held by or on behalf of customers of such
entities. Payments under the ISI Plan are made as described above regardless of
the Distributor's actual cost of providing distribution services and may be used
to pay the Distributor's overhead expenses. If the cost of providing
distribution services to the Fund in connection with the sale of the ISI Shares
is less than .25% of the ISI Shares' average daily net assets for any period,
the unexpended portion of the distribution fee may be retained by the
Distributor. The ISI Plan does not provide for any charges to the Fund for
excess amounts expended by the Distributor and, if the ISI Plan is terminated in
accordance with its terms, the obligation of the Fund to make payments to the
distributor pursuant to the ISI Plan will cease and the Fund will not be
required to make any payments past the date the ISI Shares Distribution
Agreement terminates. In return for payments received pursuant to the ISI Plan,
ISI will pay the distribution-related expenses of the ISI Class including one or
more of the following: advertising expenses; printing and mailing of
prospectuses to other than current shareholders; compensation to dealers and
sales personnel; and interest, carrying or other financing charges.
Except as described elsewhere, the Fund pays or causes to be
paid all continuing expenses of the Fund, including, without limitation:
investment advisory, administration and distribution fees; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions, if any,
-16-
<PAGE>
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing Shares; all costs and expenses in connection with the
maintenance of registration of the Fund and its Shares with the SEC and various
states and other jurisdictions (including filing fees, legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting and distributing prospectuses of the Fund and supplements thereto to
the shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Disinterested Directors and Disinterested members of
any advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in Shares or in cash;
charges and expenses of any outside service used for pricing of the Shares; fees
and expenses of legal counsel or independent auditors, in connection with any
matter relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
assumed by the Advisors, the Distributor or the Fund's administrator.
9. BROKERAGE
ISI and Wilshire, subject to the supervision of ISI, are each
responsible for decisions to buy and sell securities for a portion of the Fund's
portfolio, for broker-dealer selection and for negotiation of commission rates.
Purchases and sales of securities on a securities exchange are
effected through broker-dealers who charge a commission for their services.
Brokerage commissions are subject to negotiation between the Advisors and the
broker-dealers. The Advisors may direct purchase and sale orders to any
broker-dealer, including, to the extent and in the manner permitted by
applicable law, ISI Group.
In over-the-counter transactions, orders are placed directly
with a principal market maker and such purchases normally include a mark up over
the bid to the broker-dealer based on the spread between the bid and asked price
for the security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. The Fund will not deal with ISI
Group in any transaction in which ISI Group acts as a principal; that is, an
order will not be placed with ISI Group if execution of the trade involves ISI
Group serving as a principal with respect to any part of the Fund's order, nor
will the Fund buy or sell over-the-counter securities with ISI Group acting as
market maker.
The Advisors' primary consideration in effecting securities
transactions is to obtain best price and execution of orders on an overall
basis. As described below, however, the Advisors may, in their discretion,
effect agency transactions with broker-dealers that furnish statistical,
research or other information or services which are deemed by the Advisors to be
beneficial to the Fund's investment program. Certain research services furnished
by broker-dealers may be useful to the Advisors with clients other than the
Fund. Similarly, any research services received by the Advisors through
placement of portfolio transactions of other clients may be of value to the
Advisors in fulfilling its obligations to the Fund. No specific value can be
determined for research and statistical services furnished without cost to the
Advisors by a broker-dealer. The Advisors are of the opinion that because the
material must be analyzed and reviewed by their staffs, its receipt does not
tend to reduce expenses, but may be beneficial in supplementing the Advisors's
research and analysis. Therefore, it may tend to benefit the Fund by improving
the Advisors's investment advice. In over-the-counter transactions, the Advisors
will not pay any commission or other remuneration for research services. The
Advisors' policy is to pay a broker-dealer higher commissions for transactions
effected on an agency (but not on a principal) basis for particular transactions
than might be charged if a different broker-dealer had been chosen when, in the
Advisors' opinion, this
-17-
<PAGE>
policy furthers the overall objective of obtaining best price and execution.
Subject to periodic review by the Fund's Board of Directors, the Advisors are
also authorized to pay broker-dealers higher commissions on brokerage
transactions for the Fund in order to secure research and investment services
described above. However, Wilshire has no current intention to do so. The
allocation of orders among broker-dealers and the commission rates paid by the
Fund will be reviewed periodically by the Board. The foregoing policy under
which the Fund may pay higher commissions to certain broker-dealers in the case
of agency transactions, does not apply to transactions effected on a principal
basis.
Subject to the above considerations, the Board of Directors
has authorized the Fund to effect portfolio transactions, on an agency basis,
through ISI Group. At the time of such authorization, the Board adopted certain
policies and procedures incorporating the standards of Rule 17e-1 under the
Investment Company Act which requires that the commissions paid ISI Group must
be "reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
Rule 17e-1 also contains requirements for the review of such transactions by the
Board of Directors and requires the Advisors to furnish reports and to maintain
records in connection with such reviews. The ISI Shares Distribution Agreement
does not provide for any reduction in the distribution fee to be received by ISI
Group from the Fund as a result of profits from brokerage commissions on
transactions of the Fund effected through ISI Group.
The Advisors manage other investment accounts. It is possible
that, at times, identical securities will be acceptable for the Fund and one or
more of such other accounts; however, the position of each account in the
securities of the same issuer may vary and the length of time that each account
may choose to hold its investment in such securities may likewise vary. The
timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities consistent with the
investment policies of the Fund or one or more of these accounts is considered
at or about the same time, transactions in such securities will be allocated
among the accounts in a manner deemed equitable by the Advisors. The Advisors
may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable execution.
Such simultaneous transactions, however, could adversely affect the ability of
the Fund to obtain or dispose of the full amount of a security which it seeks to
purchase or sell.
10. CAPITAL SHARES
Under the Fund's Articles of Incorporation, the Fund may issue
up to 25 million Shares of its capital stock with a par value of $.001 per
Share.
The Fund's Articles of Incorporation provide for the
establishment of separate series and separate classes of Shares by the Directors
at any time without shareholder approval. The Fund currently has one Series and
two classes of shares: ISI Strategy Fund Shares and Wilshire Institutional
Strategy Fund Shares. All Shares of the Fund regardless of class have equal
rights with respect to voting, except that with respect to any matter affecting
the rights of the holders of a particular series or class, the holders of each
series will vote separately. Any such series will be a separately managed
portfolio and shareholders of each series will have an undivided interest in the
net assets of that series. For tax purposes, the series will be treated as
separate entities. Generally, each class of Shares issued by a particular series
will be identical to every other class and expenses of the Fund (other than
12b-1 fees and any applicable service fees) are prorated between all classes of
a series based upon the relative net assets of each class. Any matters affecting
any class exclusively will be voted on by the holders of such class.
Shareholders of the Fund do not have cumulative voting rights,
and, therefore, the holders of more than 50% of the outstanding Shares voting
together for election of Directors may elect all the members of the Board of
Directors of the Fund. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.
-18-
<PAGE>
The Fund's By-laws provide that any director of the Fund may
be removed by the shareholders by a vote of a majority of the votes entitled to
be cast for the election of Directors. A meeting to consider the removal of any
Director or Directors of the Fund will be called by the Secretary of the Fund
upon the written request of the holders of at least one-tenth of the outstanding
Shares of the Fund entitled to vote at such meeting.
There are no preemptive, conversion or exchange rights
applicable to any of the Shares. The Fund's issued and outstanding Shares are
fully paid and non-assessable. In the event of liquidation or dissolution of the
Fund, each Share is entitled to its portion of the Fund's assets (or the assets
allocated to a separate series of Shares if there is more than one series) after
all debts and expenses have been paid.
As used in this Statement of Additional Information, the term
"majority of the outstanding Shares" means the vote of the lesser of (i) 67% or
more of the Shares present at a meeting, if the holders of more than 50% of the
outstanding Shares are present or represented by proxy, or (ii) more than 50% of
the outstanding Shares.
11. SEMI-ANNUAL REPORTS
The Fund furnishes shareholders with semi-annual reports
containing information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
12. CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES
_______________ has been retained to act as custodian of the
Fund's investments. ________ receives such compensation from the Fund for its
services as custodian as may be agreed to from time to time by _____________ and
the Fund. Investment Company Capital Corp., One South Street, Baltimore,
Maryland 21202 (telephone: (800) 882-8585) has been retained to act as the
Fund's transfer and dividend disbursing agent. As compensation for these
services, ICC receives up to $_____ per account per year plus reimbursement for
out-of-pocket expenses incurred in connection therewith.
ICC also provides accounting services to the Fund. As
compensation for these services, ICC is entitled to receive an annual fee,
calculated daily and paid monthly, as shown below.
[TO BE REVISED]
<TABLE>
<CAPTION>
Average Net Assets Incremental Annual Accounting Fee
------------------ ---------------------------------
<C> <C> <C>
$ 0 - $ 10,000,000 $13,000(fixed fee)
$ 10,000,000 - $ 20,000,000 .100%
$ 20,000,000 - $ 30,000,000 .080%
$ 30,000,000 - $ 40,000,000 .060%
$ 40,000,000 - $ 50,000,000 .050%
$ 50,000,000 - $ 60,000,000 .040%
$ 60,000,000 - $ 70,000,000 .030%
$ 70,000,000 - $ 100,000,000 .020%
$100,000,000 - $ 500,000,000 .015%
$500,000,000 - $1,000,000,000 .005%
over $1,000,000,000 .001%
</TABLE>
In addition, the Fund will reimburse ICC for certain
out-of-pocket expenses incurred in connection with ICC's provision of accounting
services under the Master Services Agreement.
-19-
<PAGE>
13. INDEPENDENT AUDITORS
The annual financial statements of the Fund are audited by the
Fund's independent auditors _______________________.
14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To Fund management's knowledge, the following persons owned
beneficially 5% or more of the Fund's outstanding Shares, as of _______________,
1997.
[ ]
As of such date, to Fund management's knowledge, Directors and
officers as a group owned less than 1% of the Fund's total outstanding Shares of
either class.
15. PERFORMANCE COMPUTATIONS
For purposes of quoting and comparing the performance of the
Fund to that of other open-end diversified management investment companies and
to stock or other relevant indices in advertisements or in certain reports to
shareholders, performance will be stated in terms of total return.
The total return quotations, under the rules of the SEC, must
be calculated according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1,5 or 10)
ERV = ending redeemable value at the end of the 1-, 5- or 10-year
periods (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the 1-, 5- or 10-year
periods.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one-, five- and ten-year periods or a shorter period dating from the
effectiveness of the Fund's registration statement or the date the Fund (or a
series) commenced operations (provided such date is subsequent to the date the
registration statement became effective). In calculating the ending redeemable
value for the ISI Shares, the maximum sales load (4.45%) is deducted from the
ending redeemable value and all dividends and distributions by the Fund are
assumed to have been reinvested at net asset value as described in the
Prospectus on the reinvestment dates during the period. "T" in the formula above
is calculated by finding the average annual compounded rate of return over the
period that would equate an assumed initial payment of $1,000 to the ending
redeemable value. Any sales loads that might in the future be made applicable at
the time to reinvestments would be included as would any recurring account
charges that might be imposed by the Fund. The Institutional Shares are sold
without a sales load.
The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth above
in order to compare more accurately the Fund's performance with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., the Fund calculates its
aggregate and average annual total return for the specified periods of time by
assuming the
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<PAGE>
investment of $10,000 in Shares and assuming the reinvestment of each dividend
or other distribution at net asset value on the reinvestment date.
For this alternative computation, the Fund assumes that the $10,000
invested in Shares is net of all sales charges. The Fund will, however, disclose
the maximum sales charges and will also disclose that the performance data does
not reflect sales charges and that inclusion of sales charges would reduce the
performance quoted. Such alternative total return information will be given no
greater prominence in such advertising that the information prescribed under SEC
rules, and all advertising containing performance data will include a legend
disclosing that such performance data represents past performance and that the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less that their original
cost.
16. FINANCIAL STATEMENTS.
To be filed by amendment.
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<PAGE>
Part C Other Information
Part C contains the information required by the items
contained therein under the items set forth in the form.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part
of the Registration Statement.
(a) Financial statements:
To be filed by Pre-Effective Amendment.
(b) Exhibits:
(1) (a) Articles of Incorporation; (1)
(b) Articles of Amendment to Articles of
Incorporation; (1)
(2) By-Laws; (1)
(3) None;
(4) Incorporated herein by reference to Exhibit (1)
Form of Articles of Incorporation, Articles of
Amendment and Exhibit (2) By-Laws;
(5) (a) Form of Investment Advisory Agreement between
Registrant and International Strategy &
Investment Inc.(1)
(b) Form of Sub-Advisory Agreement among
Registrant, International Strategy &
Investment Inc. and Wilshire Associates
Incorporated.(2)
(6) (a) Form of Distribution Agreement between
Registrant and International Strategy &
Investment Group Inc. with respect to the
ISI Shares Class;(1)
(b) Form of Distribution Agreement between
Registrant and International Strategy &
Investment Group Inc. with respect to the
Institutional Shares Class.(1)
(c) Form of Agency Distribution Agreement
between International Strategy &
Investment Group Inc. and Participating
Broker-Dealers; (1)
(d) Form of Shareholder Servicing Agreement
between Registrant and
Shareholder Servicing Agents; (1)
(7) None;
(8) Form of Custodian Agreement between Registrant
and [ ]; (2)
-------------------------
(9) Form of Master Services Agreement (including
Administration, Transfer Agency and Accounting
Services appendices) between Registrant and
Investment Company Capital Corp.; (1)
(10) Opinion of Counsel; (2)
(11) Consent of Independent Auditors; (2)
C-3
<PAGE>
(12) None;
(13) Form of Subscription Agreement re: initial
$100,000 capital; (2)
(14) None;
(15) Form of Distribution Plan with respect to the
ISI Shares Class; (1)
(16) Schedule of Computation of Performance
Information; (2)
(18) Rule 18f-3 Plan(1)
(24) Powers of Attorney; (1)
(27) Financial Data Schedule. (2)
- ---------------------
(1) Filed herewith.
(2) To be filed by Pre-Effective Amendment.
Item 25. Persons Controlled by or under Common Control with Registrant
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number of record
holders of each class of securities of the Registrant.
The following information is given as of ________, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
ISI Shares 0
Wilshire Institutional Shares 0
Item 27. Indemnification
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified in any manner against any liability which
may be incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Sections 1, 2, 3 and 4 of Article VIII of Registrant's
Articles of Incorporation, included as Exhibit 1 to this Registration Statement
and incorporated herein by reference, provide as follows:
C-4
<PAGE>
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of
the Corporation shall have any liability to the Corporation or
its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such
person is a director or officer at the time of any proceeding
in which liability is asserted.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to
the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of
Directors of the Corporation may make further provision for
indemnification of directors, officers, employees and agents
in the By-Laws of the Corporation or by resolution or
agreement to the fullest extent permitted by the Maryland
General Corporation law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time
amended. No further amendment to the Charter of the
Corporation shall decrease, but may expand, any right of any
person under this Article VIII based on any event, omission or
proceeding prior to such amendment.
Sections 1, 2, 3, 4 and 5 of Article XIII of Registrant's
By-Laws, included as Exhibit 2 to this Registration Statement and incorporated
herein by reference, provide as follows:
Section 1. Indemnification. The Corporation shall indemnify
its Directors to the fullest extent that indemnification of
Directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same
extent as its Directors and to such further extent as is
consistent with law. The Corporation shall indemnify its
Directors and officers who while serving as Directors or
officers also serve at the request of the Corporation as a
Director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan to the
fullest extent consistent with law. This Article XIII shall
not protect any such person against any liability to the
Corporation or any shareholder thereof to which such person
would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 2. Advances. Any current or former Director or officer
of the Corporation claiming indemnification within the scope
of this Article XIII shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with proceedings to which he is a party in
the manner and to the full extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as such statutes are now or
hereafter in force.
Section 3. Procedure. On the request of any current or former
Director or officer requesting indemnification or an advance
under this Article XIII, the Board of Directors shall
determine, or cause to be determined, in a manner consistent
with the Maryland General Corporation Law, the 1933 Act and
the 1940 Act, as such statutes are now or hereafter in force,
whether the standards required by this Article XIII have been
met.
C-5
<PAGE>
Section 4. Other Rights. The indemnification provided by this
Article XIII shall not be deemed exclusive of any other right,
in respect of indemnification or otherwise, to which those
seeking such indemnification may be entitled under any
insurance or other agreement, vote of shareholders or
disinterested Directors or otherwise, both as to action by a
Director or officer of the Corporation in his official
capacity and as to action by such person in another capacity
while holding such office or position, and shall continue as
to a person who has ceased to be a Director or officer and
shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 5. Maryland Law. References to the Maryland General
Corporation Law in this Article XIII are to such law as from
time to time amended.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event of a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person in connection with the securities being registered) the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1940 Act
and will be governed by the final adjudication of such issue. In the absence of
a determination by a court of competent jurisdiction, the determinations that
indemnification against such liabilities is proper, and advances can be made,
are made by a majority of a quorum of the disinterested, non-party directors of
the Fund, or an independent legal counsel in a written opinion, based on review
of readily available facts.
Item 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment
advisor of the Registrant, and each director, officer or
partner of any such investment advisor, is or has been, at any
time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee,
partner or trustee.
[During the last two years, no director or officer of
International Strategy & Investment Inc., the Registrant's
investment advisor, has engaged in any other business,
profession, vocation or employment of a substantial nature
other than that of the business of investment management and,
through affiliates, investment banking.]
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment
sub-advisor of the Registrant, and each director, officer or
partner of any such investment sub-advisor, is or has been, at
any time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee,
partner, or trustee.
The list required by this Item 28 of officers and directors of
Wilshire Associates Incorporated, together with the
information as to any other business, profession, vocation or
employment of substantial nature engaged in by such officers
and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Wilshire
Associates Incorporated pursuant to the Investment Advisors
Act of 1940 (File No. 801-36233).
C-6
<PAGE>
Item 29. Principal Underwriters
(a) International Strategy & Investment Group Inc. acts as
distributor for ISI Total Return U.S. Treasury Fund Shares
(a class of Total Return U.S. Treasury Fund, Inc.), ISI
Managed Municipal Fund Shares (a class of Managed
Municipal Fund, Inc.) and ISI North American Government
Bond Fund Shares (a class of North American Government
Bond Fund, Inc.).
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Position and Offices
Business Address* Principal Underwriter with Registrant
- ----------------- ------------------------- ---------------------
<S> <C> <C>
Edward S. Hyman Chairman and Director Chairman
and Director
R. Alan Medaugh Director President
and Director
Nancy Lazar Executive Director
Vice President
and Director
Joel Fein Chief Financial None
Officer
</TABLE>
- ---------------------
* 717 Fifth Avenue
New York, New York 10022
(c) Not applicable.
Item 30. Location of Accounts and Records
With respect to each account, book or other document required
to be maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the
Rules [17 CFR 270.31a-1 to 31a-3] promulgated thereunder, furnish the names and
address of each person maintaining physical possession of each such account,
book or other document.
International Strategy & Investment Inc., 717 Fifth Avenue,
New York, New York 10022, maintains physical possession of each such
account, book or other document of the Fund, except for those
maintained by the Registrant's sub-advisor, Wilshire Associates
Incorporated, 1299 Ocean Avenue, Suite 700, Santa Monica, CA 90401, the
Registrant's custodian, [PNC Bank, National Association, Airport
Business Park, 200 Stevens Drive, Lester, Pennsylvania 19113,] or by
the Registrant's transfer agent, dividend disbursing agent and
accounting services provider, Investment Company Capital Corp., One
South Street, Baltimore, MD 21202.
Item 31. Management Services
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
C-7
<PAGE>
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
See Exhibit 8.
Item 32. Undertakings
Furnish the following undertakings in substantially the
following form in all initial Registration Statements filed under the 1933 Act:
(a) Not applicable.
(b) Registrant hereby undertakes to file a post-effective
amendment containing reasonably current financial
statements, which need not be certified, within four
to six months from the effective date of this
Registration Statement or the commencement of
operations of the Fund, whichever is later.
(c) Registrant hereby undertakes to furnish each
prospective person to whom a prospectus will be
delivered with a copy of the Registrant's latest
annual report, when such annual report is issued, to
shareholders containing information called for by
Item 5A of Form N-1A, upon request and without charge
by contacting Registrant at (800) 955-7175.
C-8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly authorized
in the City of Baltimore, in the State of Maryland, on the 11th day of July,
1997.
THE STRATEGY FUND, INC.
By: /s / R. Alan Medaugh
-----------------------------
R. Alan Medaugh,
President and Director
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities on the date(s) indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Edward S. Hyman July 11, 1997
- ------------------------- Director ------------------
Edward S. Hyman Date
/s/ Truman T. Semans July 11, 1997
- ------------------------- Director ------------------
Truman T. Semans Date
/s/ James J. Cunnane July 11, 1997
- ------------------------- Director ------------------
James J. Cunnane Date
/s/ John F. Kroeger July 11, 1997
- ------------------------- Director ------------------
John F. Kroeger Date
/s/ Louis E. Levy July 11, 1997
- ------------------------- Director ------------------
Louis E. Levy Date
/s/ Eugene J. McDonald July 11, 1997
- ------------------------- Director ------------------
Eugene J. McDonald Date
/s/ Michael J. Napoli, Jr. July 11, 1997
- ------------------------- Director ------------------
Michael J. Napoli, Jr. Date
/s/ Rebecca W. Rimel July 11, 1997
- ------------------------- Director ------------------
Rebecca W. Rimel Date
/s/ Carl W. Vogt July 11, 1997
- ------------------------- Director ------------------
Carl W. Vogt Date
/s/ R. Alan Medaugh July 11, 1997
- ------------------------- President and -------------------
R. Alan Medaugh Director Date
/s/ Joseph A. Finelli July 11, 1997
- ------------------------- Chief Financial -------------------
Joseph A. Finelli and Accounting Date
Officer
* By:__________________
R. Alan Medaugh
</TABLE>
<PAGE>
ISI STRATEGY FUND, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EDGAR
Exhibit
Number Document
-----------------------------------------------------------
<S> <C>
EX-99.B(1) (a) Articles of Incorporation. (1)
EX-99.B (b) Articles of Amendment to Articles of Incorporation. (1)
EX-99.B(2) By-Laws. (1)
(4) Incorporated herein by reference to EX.99.B(1) Articles of
Incorporation, Articles of Amendment and EX.99.B(2) By-Laws;
EX-99.B(5) (a) Form of Investment Advisory Agreement between Registrant and
International Strategy & Investment Inc. (1)
(b) Form of Sub-Advisory Agreement among Registrant,
International Strategy & Investment Inc. and Wilshire
Associates Incorporated. (2)
EX-99.B(6) (a) Form of Distribution Agreement between Registrant and
International Strategy & Investment Group Inc. with respect to the ISI
Shares Class (1)
EX-99.B(6) (b) [Form of Distribution Agreement between Registrant and
International Strategy & Investment Group Inc. with respect to the
Institutional Shares Class.](1)
EX-99.B(6) (c) Form of Agency Distribution Agreement between International
Strategy & Investment Group Inc. and Participating Broker-Dealers. (1)
EX-99.B(6) (d) Form of Shareholder Servicing Agreement between Registrant
and Shareholder Servicing Agents. (1)
Form of Custodian Agreement between Registrant and
[______________]. (2)
EX-99.B(9) Form of Master Services Agreement (including Administration,
Transfer Agency and Accounting Services Appendices) between
Registrant and Investment Company Capital Corp. (1)
(10) Opinion of Counsel. (2)
(11) Consent of Independent Auditors. (2)
(13) Form of Subscription Agreement with respect to the initial
capitalization of the Fund. (2)
EX-99.B(15) Form of Distribution Plan with respect to the ISI Shares Class. (1)
(16) Schedule of Computation of Performance Information. (2)
EX-99.B(18) Rule 18f-3 Plan (1)
EX-99.B(24) Powers of Attorney. (1)
(27) Financial Data Schedule. (2)
</TABLE>
----------------------
(1) Filed herewith.
(2) To be filed by Pre-Effective Amendment.
<PAGE>
EX-99.B(1)(a)
ARTICLES OF INCORPORATION
OF
THE STRATEGY FUND, INC.
ARTICLE I
THE UNDERSIGNED, R. Alan Medaugh, whose post office address is
717 Fifth Avenue, New York, New York 10022, being at least eighteen years of
age, does hereby act as an incorporator, under and by virtue of the General Laws
of the State of Maryland authorizing the formation of corporations and with the
intention of forming a corporation.
ARTICLE II
The name of the Corporation is The Strategy Fund, Inc.
ARTICLE III
The purpose for which the Corporation is formed is to act as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act").
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and
other investments including assets in cash.
(2) To issue and sell shares of its capital stock in such
amounts and on such terms and conditions and for such purposes and for such
amount or kind of consideration as may now or hereafter be permitted by law.
<PAGE>
(3) To redeem, purchase or otherwise acquire, hold, dispose
of, resell, transfer, reissue or cancel (all without the vote or consent of the
shareholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by law and by the Charter of the
Corporation.
(4) To enter into a written contract or contracts with any
person or persons providing for a delegation of the management of all or part of
this Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors of the Corporation. Any such contract or
contracts may be made with any person even though such person may be an officer,
other employee, director or shareholder of this Corporation or a corporation,
partnership, trust or association in which any such officer, other employee,
director or shareholder may be interested.
(5) To enter into a written contract or contracts appointing
one or more underwriters, distributors or agents for the sale of the shares of
the Corporation on such terms and conditions as the Board of Directors of the
Corporation may deem reasonable and proper, and to allow such person or persons
a commission on the sale of such shares. Any such contract or contracts may be
made with any person even though such person may be an officer, other employee,
director or shareholder of this Corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
shareholder may be interested.
(6) To enter into a written contract or contracts employing
such custodian or custodians for the safekeeping of the property of the
Corporation and of its shares, such dividend disbursing agent or agents, and
such transfer agent or agents and registrar or registrars for its shares, and
such agent or agents for accounting and other administrative services on such
terms and conditions as the Board of Directors of the Corporation may deem
reasonable and proper for the conduct of the affairs of the Corporation, and to
pay the fees and disbursements of such custodians, dividend disbursing agents,
transfer agents, registrars and accounting and administrative services agents
out of the income and/or any other property of the Corporation. Notwithstanding
any other provisions of the Charter or the By-Laws of the Corporation, the Board
of Directors of the Corporation may cause any or all of the property of the
Corporation to be transferred to, or to be acquired and held in the name of, a
custodian so appointed or any nominee or nominees of this Corporation or nominee
or nominees of such custodian satisfactory to the Board of Directors of the
Corporation.
(7) To employ the same person, partnership (general or
limited), association, trust or corporation in any multiple capacity under
Sections (4), (5) and (6) of this Article, who may receive compensation from the
Corporation in as many capacities in which such person, partnership (general or
limited), association, trust or corporation shall serve the Corporation.
(8) To do any and all such further acts or things and to
exercise any and all such further powers or rights as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of the purposes stated in Article III
hereof.
-2-
<PAGE>
The Corporation shall be authorized to exercise and enjoy all
of the powers, rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the
Corporation in the State of Maryland is c/o Investment Company Capital Corp, One
South Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is Edward J. Veilleux, a citizen of this State, who
resides there, and the post office address of the resident agent is One South
Street, Baltimore, Maryland 21202.
ARTICLE VI
Section 1. The total number of shares of capital stock which
the Corporation shall have the authority to issue is twenty-five million
(25,000,000) shares, of the par value of 1 mil ($.001) per share and of the
aggregate par value of twenty-five thousand dollars ($25,000), of which twenty
million (20,000,000) shares are designated "ISI Strategy Fund Shares", and five
million (5,000,000) shares are designated "Wilshire Institutional Strategy Fund
Shares". Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end investment company under the 1940 Act, the Board of
Directors of the Corporation shall have the power and authority, without the
approval of the holders of any outstanding shares, to increase or decrease the
number of shares of capital stock, or the number of shares of capital stock of
any class or series, that the Corporation has authority to issue.
Section 2. Any fractional share shall carry proportionately
all the rights of a whole share, excepting any right to receive a certificate
evidencing such fractional share, but including, without limitation, the right
to vote and the right to receive dividends.
Section 3. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the Charter and
the By-Laws of the Corporation. All shares issued pursuant to the Charter of the
Corporation for which the price or consideration fixed thereon shall have been
paid shall be deemed to be fully paid and non-assessable.
Section 4. The Board of Directors of the Corporation shall
have authority to classify and reclassify any authorized but unissued shares of
capital stock from time to time by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of the capital stock; provided that the Board of Directors of the
Corporation shall not classify or reclassify
-3-
<PAGE>
any of such shares into any class or series of stock which is prior to any class
or series of capital stock then outstanding with respect to rights upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the general assets of, the Corporation, except that there may be
variations so fixed and determined among different series and classes as to
investment objectives, purchase price, right of redemption, allocation of
expenses, special rights as to dividends, and in liquidation, with respect to
assets belonging to a particular series or class, voting powers and conversion
rights. Subject to the provisions of Section 7 of this Article VI and applicable
law, the power of the Board of Directors of the Corporation to classify or
reclassify any of the shares of capital stock shall include, without limitation,
authority to classify or reclassify any such stock into a class or classes of
capital stock and to divide and classify shares of any class into one or more
series of such class, by determining, fixing or altering one or more of the
following:
(A) The distinctive designation of such class or
series and the number of shares to constitute such class or series;
provided that, unless otherwise prohibited by the terms of such class
or series, the number of shares of any class or series may be decreased
by the Board of Directors of the Corporation in connection with any
classification or reclassification of unissued shares and the number of
shares of such class or series may be increased by the Board of
Directors of the Corporation in connection with any such classification
or reclassification, and any shares of any class or series which have
been redeemed, purchased or otherwise acquired by the Corporation shall
remain part of the authorized capital stock and be subject to
classification and reclassification as provided herein.
(B) Whether or not and, if so, the rates, amounts and
times at which, and the conditions under which, dividends shall be
payable on shares of such class or series.
(C) Whether or not shares of such class or series
shall have voting rights in addition to any general voting rights
provided by law and the Charter of the Corporation and, if so, the
terms of such additional voting rights.
(D) The rights of the holders of shares of such class
or series upon the liquidation, dissolution or winding up of the
affairs, or upon any distribution of the assets, of the Corporation.
(E) Any other rights, restrictions, including
restrictions on transferability, and qualifications of shares of such
class or series, not inconsistent with law and the Charter of the
Corporation.
Section 5. The Board of Directors of the Corporation shall
have authority to issue from time to time shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors of the
Corporation may deem advisable, subject to such limitations as may be set forth
in the Charter or the By-Laws of the Corporation or in the Maryland General
Corporation Law.
-4-
<PAGE>
Section 6. No holder of stock of the Corporation shall, as
such holder, have any preemptive right to purchase or subscribe for any shares
of the capital stock of the Corporation or any other security of the Corporation
which it may issue or sell (whether out of the number of shares authorized by
the Charter of the Corporation, or out of any shares of the capital stock of the
Corporation acquired by it after the issue thereof, or otherwise) other than
such right, if any, as the Board of Directors of the Corporation, in its
discretion, may determine.
Section 7. Shares of Common Stock of the Corporation shall
have the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(A) Assets Belonging to a Class. All consideration
received by the Corporation for the issue or sale of stock of any class
of Common Stock, together with all assets in which such consideration
is invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class of shares of Common Stock with respect
to which such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights of creditors,
and shall be so handled upon the books of account of the Corporation.
Such consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of
such proceeds in whatever form, are herein referred to as "assets
belonging to" such class. Any assets, income, earnings, profits, and
proceeds thereof, funds or payments which are not readily attributable
to any particular class shall be allocable among any one or more of the
classes in such manner and on such basis as the Board of Directors of
the Corporation, in its sole discretion, shall deem fair and equitable.
(B) Liabilities Belonging to a Class. The assets
belonging to any class of Common Stock shall be charged with the
liabilities in respect of such class, and shall also be charged with
such class's share of the general liabilities of the Corporation
determined as hereinafter provided. The determination of the Board of
Directors of the Corporation shall be conclusive as to the amount of
such liabilities, including the amount of accrued expenses and
reserves; as to any allocation of the same to a given class; and as to
whether the same are allocable to one or more classes. The liabilities
so allocated to a class are herein referred to as "liabilities
belonging to" such class. Any liabilities which are not readily
attributable to any particular class shall be allocable among any one
or more of the classes in such manner and on such basis as the Board of
Directors of the Corporation, in its sole discretion, shall deem fair
and equitable.
(C) Dividends and Distributions. Shares of each class
of Common Stock shall be entitled to such dividends and distributions,
in stock or in cash or both, as may be declared from time to time by
the Board of Directors of the Corporation, acting in its sole
discretion, with respect to such class, provided, however, that
dividends and
-5-
<PAGE>
distributions on shares of a class of Common Stock shall be paid only
out of the lawfully available "assets belonging to such class" as such
phrase is defined in Section 7(A) of this Article VI.
(D) Liquidating Dividends and Distributions. In the
event of the liquidation or dissolution of the Corporation,
shareholders of each class of Common Stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to shareholders, but other than general assets not
belonging to any particular class of stock, the assets belonging to
such class; and the assets so distributable to the shareholders of any
class of Common Stock shall be distributed among such shareholders in
proportion to the number of shares of such class held by them and
recorded on the books of the Corporation. In the event that there are
any general assets not belonging to any particular class of stock and
available for distribution, such distribution shall be made to the
holders of stock of all classes of Common Stock in proportion to the
asset value of the respective classes of Common Stock determined as
hereinafter provided.
(E) Voting. Each shareholder of each class of Common
Stock shall be entitled to one vote for each share of Common Stock,
irrespective of the class, then standing in his name on the books of
the Corporation, and on any matter submitted to a vote of shareholders,
all shares of Common Stock then issued and outstanding and entitled to
vote shall be voted in the aggregate and not by class except that: (i)
when expressly required by law, shares of Common Stock shall be voted
by individual class and (ii) only shares of Common Stock of the
respective class or classes affected by a matter shall be entitled to
vote on such matter. At all meetings of the shareholders, the holders
of one-third of the shares of stock of the Corporation entitled to vote
at the meeting, present in person or by proxy, shall constitute a
quorum for the transaction of any business, except as otherwise
provided by statute or by the Charter of the Corporation. In the
absence of a quorum, no business may be transacted, except that the
holders of a majority of the shares of stock present in person or by
proxy and entitled to vote may adjourn the meeting from time to time,
without notice other than announcement at the meeting, except as
otherwise required by the By-Laws of the Corporation, until the holders
of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present, any business
may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting, in person or by proxy,
of holders of the number of shares of stock of the Corporation in
excess of a majority thereof which may be required by the laws of the
State of Maryland, the 1940 Act, or any other applicable statute, the
Charter or the By-Laws of the Corporation, for action upon any given
matter shall not prevent action at such meeting upon any other matter
or matters which may properly come before the meeting, if there shall
be present at the meeting, in person or by proxy, holders of the number
of shares of stock of the Corporation required for action in respect of
such other matter or matters.
(F) Redemption. To the extent the Corporation has
funds or other property legally available therefor, each holder of
shares of Common Stock of the
-6-
<PAGE>
Corporation shall be entitled to require the Corporation to redeem all
or any part of the shares of Common Stock of the Corporation standing
in the name of such holder on the books of the Corporation, and all
shares of Common Stock issued by the Corporation shall be subject to
redemption by the Corporation, at the redemption price of such shares
as in effect from time to time as may be determined by the Board of
Directors of the Corporation in accordance with the provisions hereof,
subject to the right of the Board of Directors of the Corporation to
suspend the right of redemption of shares of Common Stock of the
Corporation or postpone the date of payment of such redemption price in
accordance with provisions of applicable law. Without limiting the
generality of the foregoing, the Corporation shall, to the extent
permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of Common Stock of the Corporation (i) if
such redemption is, in the opinion of the Board of Directors of the
Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal
Revenue Code, as now or hereafter in force, (ii) if the value of such
shares in the account maintained by the Corporation or its transfer
agent for any class of Common Stock is less than any minimum
established by the Corporation or (iii) if the net income with respect
to any particular class of Common Stock should be negative or it should
otherwise be appropriate to carry out the Corporation's
responsibilities under the 1940 Act, in each case subject to such
further terms and conditions as the Board of Directors of the
Corporation may from time to time adopt. The redemption price of shares
of Common Stock of the Corporation shall, except as otherwise provided
in this Section 7(F), be the net asset value thereof as determined by
the Board of Directors of the Corporation from time to time in
accordance with the provisions of applicable law, less such redemption
fee or other charge, if any, as may be fixed by resolution of the Board
of Directors of the Corporation. Payment of the redemption price shall
be made in cash by the Corporation at such time and in such manner as
may be determined from time to time by the Board of Directors of the
Corporation unless, in the opinion of the Board of Directors of the
Corporation, which shall be conclusive, conditions exist which make
payment wholly in cash unwise or undesirable; in such event the
Corporation may make payment wholly or partly by securities or other
property included in the assets belonging or allocable to the class of
the shares redemption of which is being sought, the value of which
shall be determined as provided herein.
(G) Conversion or Exchange. Each holder of any class
of Common Stock of the Corporation, who either surrenders his share
certificate in good delivery form to the Corporation or, if the shares
in question are not represented by certificates, delivers to the
Corporation a written request in good order signed by the shareholder,
shall, subject to such procedures as may be established by the Board of
Directors of the Corporation, be entitled to convert or exchange the
shares in question on the basis hereinafter set forth, into shares of
stock of any other class of the Corporation. The Corporation shall
determine the net asset value, as provided herein, of the shares to be
converted and may deduct therefrom a conversion or exchange cost, in an
amount determined within the discretion of the Board of Directors of
the Corporation. Within five (5) business days after such surrender and
payment of any conversion or exchange cost, the Corporation
-7-
<PAGE>
shall issue to the shareholder such number of shares of stock of the
class desired as, taken at the net asset value thereof determined as
provided herein in the same manner and at the same time as that of the
shares surrendered, shall equal the net asset value of the shares
surrendered, less any conversion or exchange cost as aforesaid. Any
amount representing a fraction of a share may be paid in cash at the
option of the Corporation. Any conversion or exchange cost may be paid
and/or assigned by the Corporation to the underwriter and/or to any
other entity, as it may elect.
(H) Restrictions on Transferability. If, in the
opinion of the Board of Directors of the Corporation, concentration in
the ownership of shares of Common Stock might cause the Corporation to
be deemed a personal holding company within the meaning of the Internal
Revenue Code, as now or hereafter in force, the Corporation may at any
time and from time to time refuse to give effect on the books of the
Corporation to any transfer or transfers of any share or shares of
Common Stock in an effort to prevent such personal holding company
status.
ARTICLE VII
The number of directors of the Corporation shall be ten (10),
which number may be increased or decreased pursuant to the By-Laws of the
Corporation but shall never be less than three (3) except for any period during
which shares of the Corporation are held by less than three shareholders. The
name of the director who shall act until the directors are elected by the
Corporation's shareholders or until his successor is duly elected and qualify
is:
R. Alan Medaugh
ARTICLE VIII
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall have any
liability to the Corporation or its shareholders for damages. This limitation on
liability applies to events occurring at the time a person serves as a director
or officer of the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses to its
officers to the same extent as to its directors and to such further extent as is
consistent with law. The Board of Directors of the Corporation may make further
provision for indemnification of
-8-
<PAGE>
directors, officers, employees and agents in the By-Laws of the Corporation or
by resolution or agreement to the fullest extent permitted by the Maryland
General Corporation Law.
Section 3. No provision of this Article VIII shall be
effective to protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 4. References to the Maryland General Corporation Law
in this Article VIII are to such law as from time to time amended. No further
amendment to the Charter of the Corporation shall decrease, but may expand, any
right of any person under this Article VIII based on any event, omission or
proceeding prior to such amendment.
ARTICLE IX
Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practices by or
pursuant to the direction of the Board of Directors of the Corporation, as to
the amount of assets, obligations or liabilities of the Corporation, as to the
amount of net income of the Corporation from dividends and interest for any
period or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation or as to
any other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or shares of capital stock of the
Corporation, and any reasonable determination made in good faith by the Board of
Directors of the Corporation as to whether any transaction constitutes a
purchase of securities on "margin", a sale of securities "short", or an
underwriting of the sale of, or a participation in any underwriting or selling
group in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all holders
of its capital stock, past, present and future, and shares of the capital stock
of the Corporation are issued and sold on the condition and understanding,
evidenced by the purchase of shares of capital stock or acceptance of share
certificates, that any and all such determinations shall be binding as
aforesaid. No provision of the Charter of the Corporation shall be effective (i)
to require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or (ii) to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
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<PAGE>
ARTICLE X
The duration of this Corporation shall be perpetual.
ARTICLE XI
Section 1. The Corporation reserves the right from time to
time to make any amendments to its Charter which may now or hereafter be
authorized by law, including any amendments changing the terms or contract
rights, as expressly set forth in its Charter, of any of its outstanding stock
by classification, reclassification or otherwise, but no such amendment which
changes such terms or contract rights of any of its outstanding stock shall be
valid unless such amendment shall have been authorized by not less than a
majority of the aggregate number of the votes entitled to be cast thereon by a
vote at a meeting or, when authorized by law, by the unanimous written consent
of the Directors of the Corporation as provided in the Corporation's By-Laws.
Section 2. Notwithstanding any provision of the General Laws
of the State of Maryland requiring any action to be taken or authorized by the
affirmative vote of a greater proportion than the majority of the total number
of shares of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding of that class of
stock entitled to vote thereon, except as otherwise provided in the Charter of
the Corporation.
Section 3. So long as permitted by Maryland law, the books of
the Corporation may be kept outside of the State of Maryland at such place or
places as may be designated from time to time by the Board of Directors of the
Corporation or in the By-Laws of the Corporation.
Section 4. In furtherance, and not in limitation, of the
powers conferred by the laws of the State of Maryland, the Board of Directors of
the Corporation is expressly authorized:
(A) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by the By-Laws of the
Corporation to the shareholders, and except as otherwise required by
the 1940 Act.
(B) From time to time to determine whether and to
what extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
shareholders, and no shareholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by
law or authorized by resolution of the Board of Directors or of the
shareholders of the Corporation.
(C) Without the assent or vote of the shareholders,
to authorize the issuance from time to time of shares of the stock of
any class of the Corporation, whether
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<PAGE>
now or hereafter authorized, for such consideration as the Board of
Directors of the Corporation may deem advisable.
(D) Without the assent or vote of the shareholders,
to authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the property of the
Corporation, real and personal.
(E) Notwithstanding anything in the Charter of the
Corporation to the contrary, to establish in its absolute discretion
the basis or method for determining the value of the assets belonging
to any class, and the net asset value of each share of any class of the
Corporation for purposes of sales, redemptions, repurchases of shares
or otherwise.
(F) To determine in accordance with generally
accepted accounting principles and practices what constitutes net
profits, earnings, surplus or net assets in excess of capital, and to
determine what accounting periods shall be used by the Corporation for
any purpose, whether annual or any other period, including daily; (i)
to set apart out of any funds of the Corporation such reserves for such
purposes as it shall determine and to abolish the same; (ii) to declare
and pay any dividends and distributions in cash, securities or other
property from surplus or any funds legally available therefor, at such
intervals (which may be as frequently as daily) or on such other
periodic basis, as it shall determine; (iii) to declare such dividends
or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of
the effectiveness of such declarations; (iv) to establish payment dates
for dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations
thereof; and (v) to provide for the payment of declared dividends on a
date earlier or later than the specified payment date in the case of
shareholders of the Corporation redeeming their entire ownership of
shares of any class of the Corporation.
(G) In addition to the powers and authorities granted
herein and by statute expressly conferred upon it, the Board of
Directors of the Corporation is authorized to exercise all such powers
and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of Maryland law,
the Charter and the By-Laws of the Corporation.
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<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator of The
Strategy Fund, Inc., has signed the Articles of Incorporation on this 13th day
of June, 1997.
/s/ R. Alan Medaugh
---------------------
R. Alan Medaugh
Incorporator
WITNESS:
/s/ Keith C. Reilly
-------------------------------
Name: Keith C. Reilly
THE UNDERSIGNED incorporator of The Strategy Fund, Inc. who
executed the foregoing Articles of Incorporation of which this Certificate is
made a part, hereby acknowledges the same to be his act and further acknowledges
that, to the best of his knowledge, the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
/s/ R. Alan Medaugh
----------------------
R. Alan Medaugh
Incorporator
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<PAGE>
EX-99.B(1)(b)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE STRATEGY FUND, INC.
THE STRATEGY FUND, INC. (the "Corporation"), a corporation organized
under the laws of the State of Maryland, having its principal place of business
at 717 Fifth Avenue, New York, New York 10022, does hereby certify to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to the authority contained in Section 2-605(a)(4) of
the Maryland General Corporation Law and under authority contained in Article
XI, Section 1 of the Articles of Incorporation of the Corporation, the full
Board of Directors by resolution unanimously passed on June 17, 1997, have
changed the name of the Corporation to ISI Strategy Fund, Inc.
THIRD: Pursuant to the requirements of Section 2-607 of the Maryland
General Corporation Law, the Board of Directors has determined to file of record
these Articles of Amendment, which Amendment is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law to be made
without action by the stockholders and which Amendment is solely for the purpose
of changing the name of the Corporation.
FOURTH: Article II of the Articles of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
The name of the Corporation is:
ISI Strategy Fund, Inc.
FIFTH: These Articles of Amendment shall be effective as of the later
of the time the State Department of Assessments and Taxation of Maryland accepts
these Articles of Amendment of record on July 3, 1997.
<PAGE>
IN WITNESS WHEREOF, The Strategy Fund, Inc. has caused these
Articles of Amendment to be signed in its corporate name and on its behalf by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary as of the 3rd day of July, 1997.
THE STRATEGY FUND, INC.
By: /s/ R. Alan Medaugh
-----------------------
R. Alan Medaugh
President
[SEAL]
Attest:
/s/ Scott J. Liotta
- --------------------
Scott J. Liotta
Vice President and Secretary
<PAGE>
THE UNDERSIGNED, President of The Strategy Fund, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth herein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ R. Alan Medaugh
--------------------
R. Alan Medaugh
President
<PAGE>
EX-99.B(2)
BY-LAWS
OF
ISI STRATEGY FUND, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the
Corporation shall be in the city of New York, State of New York.
Section 2. Principal Executive Office. The principal executive
office of the Corporation shall be in the City of New York, State of New York.
Section 3. Other Offices. The Corporation may have such other
offices in such places as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meetings. An annual meeting of the
shareholders of the Corporation shall not be required to be held in any year in
which shareholders are not required to elect directors under the Investment
Company Act of 1940, as amended (the "1940 Act") even if the Corporation is
holding a meeting of the shareholders for a purpose other than the election of
directors. If the Corporation is required by the 1940 Act to hold a meeting to
elect directors, the meeting shall be designated as the Annual Meeting of
shareholders for that year and shall be held within 120 days after the
occurrence of an event requiring the election of directors. The Board of
Directors may, in its discretion, hold a meeting to be designated as the Annual
Meeting of shareholders on a date within the month of March, in any year where
an election of directors by shareholders is not required under the 1940 Act. The
date of an Annual Meeting shall be set by appropriate resolution of the Board of
Directors, and shareholders shall vote on the election of directors and transact
any other business as may properly be brought before the Annual Meeting.
<PAGE>
Section 2. Special Meetings. Special meetings of the
shareholders, unless otherwise provided by law or by the Charter or the
Corporation may be called for any purpose or purposes by a majority of the Board
of Directors or the President, and shall be called by the President or Secretary
on the written request of the shareholders as provided by the Maryland General
Corporation Law. Such request shall state the purpose or purposes of the
proposed meeting and the matters proposed to be acted on at it; provided,
however, that unless requested by shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the shareholders held during the preceding twelve
(12) months.
Section 3. Place of Meetings. The regular meeting, if any, and
any special meeting of the shareholders shall be held at such place within the
United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice; Shareholder
List. (a) Notice of the place, date and time of the holding of each regular and
special meeting of the shareholders and the purpose or purposes of the meeting
shall be given personally or by mail, not less than ten nor more than ninety
days before the date of such meeting, to each shareholder entitled to vote at
such meeting and to each other shareholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid. The notice of every
meeting of shareholders may be accompanied by a form of proxy approved by the
Board of Directors in favor of such actions or persons as the Board of Directors
may select.
(b) Notice of any meeting of shareholders shall be
deemed waived by any shareholder who shall attend such meeting in person or by
proxy, or who shall, either before or after the meeting, submit a signed waiver
of notice which is filed with the records of the meeting. A meeting of
shareholders convened on the date for which it was called may be adjourned from
time to time without further notice to a date not more than 120 days after the
original record date.
(c) At least five (5) days prior to each meeting
of shareholders, the officer or agent having charge of the share transfer books
of the Corporation shall make a complete list of shareholders entitled to vote
at such meeting, in alphabetical order with the address of and the number of
shares held by each shareholder.
Section 5. Organization. At each meeting of the shareholders,
the Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, or in the
absence or the inability to act of the Chairman of the Board, the President and
all the Vice Presidents, a chairman chosen by the shareholders shall act as
chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
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<PAGE>
Section 6. Voting. (a) Except as otherwise provided by statute
or the Charter of the Corporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
shareholders to one vote for every share of such stock standing in his name on
the record of shareholders of the Corporation as of the record date determined
pursuant to Section 5 of Article VI hereof or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth (30) day before the
meeting. In all elections for directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election the
share is entitled to be voted.
(b) Each shareholder entitled to vote at any
meeting of shareholders may authorize another person or persons to act for him
by a proxy signed by such shareholder or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is permitted by law.
Except as otherwise provided by statute, the Charter of the Corporation or these
By-Laws, any corporate action to be taken by vote of the shareholders shall be
authorized by a majority of the total votes cast at a meeting of shareholders at
which a quorum is present by the holders of shares present in person or
represented by proxy and entitled to vote on such action, except that a
plurality of all the votes cast at a meeting at which a quorum is present is
sufficient to elect a director.
(c) If a vote shall be taken on any question other
than the election of directors, which shall be by written ballot, then unless
required by statute or these By-Laws, or determined by the chairman of the
meeting to be advisable, any such vote need not be by ballot. On a vote by
ballot, each ballot shall be signed by the shareholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
Section 7. Inspectors. The Board may, in advance of any
meeting of shareholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any shareholder entitled to vote at the meeting shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote at it, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be shareholders.
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<PAGE>
Section 8. Consent of Shareholders in Lieu of Meeting. Except
as otherwise provided by statute any action required to be taken at any regular
or special meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of shareholders' meetings: (i) a unanimous written consent which sets
forth the action and is signed by each shareholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting but not entitled to vote at it.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the
Charter of the Corporation, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the shareholders by law or by the Charter
of the Corporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number of
directors shall in no event be less than three (except for any period during
which shares of the Corporation are held by fewer than three shareholders) nor
more than fifteen. Any vacancy created by an increase in directors may be filled
in accordance with Section 6 of this Article III. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article III at the time of such decrease. Directors need
not be shareholders.
Section 3. Election and Term of Directors. Directors shall be
elected by plurality vote of a quorum cast by written ballot at the regular
meeting of shareholders, if any, or at a special meeting held for that purpose.
The term of office of each Director shall be from the time of his election and
qualification and until his successor shall have been elected and shall have
qualified, or until his death, or until he shall have resigned, or have been
removed as hereinafter provided in these By-Laws, or as otherwise provided by
statute or the Charter of the Corporation.
Section 4. Resignation. A Director of the Corporation may
resign at any time by giving written notice of his resignation to the Board or
the Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
- 4 -
<PAGE>
Section 5. Removal of Directors. Any Director of the
Corporation may be removed by the shareholders by a vote of a majority of the
votes entitled to be cast for the election of Directors.
Section 6. Vacancies. The shareholders may elect a successor
to fill a vacancy on the Board of Directors which results from the removal of a
Director. A majority of the remaining Directors, whether or not sufficient to
constitute a quorum, may fill a vacancy on the Board of Directors which results
from any cause except an increase in the number of Directors, and a majority of
the entire Board of Directors may fill a vacancy which results from an increase
in the number of Directors; provided, however, that no vacancies shall be filled
by action of the remaining Directors, if after the filling of said vacancy or
vacancies, fewer than two-thirds of the Directors then holding office shall have
been elected by the shareholders of the Corporation. In the event that at any
time there is a vacancy in any office of a Director which vacancy may not be
filled by the remaining Directors, a special meeting of the shareholders shall
be held as promptly as possible and in any event within sixty days, for the
purpose of filling said vacancy or vacancies. A Director elected by the Board of
Directors of the Corporation to fill a vacancy serves until the next annual
meeting of shareholders and until his successor is elected and qualifies. A
Director elected by the shareholders of the Corporation to fill a vacancy which
results from the removal of a Director serves for the balance of the term of the
removed Director.
Section 7. Regular Meetings. Regular meetings of the Board
may be held with notice at such times and places as may be determined by the
Board of Directors.
Section 8. Special Meetings. Special meetings of the Board may
be called by the Chairman of the Board, the President, or by a majority of the
Directors either in writing or by vote at a meeting, and may be held at any
place in or out of the State of Maryland as the Board may from time to time
determine.
Section 9. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter provided, in
which notice shall be stated the time and place of the meeting. Notice of each
such meeting shall be delivered to each Director, either personally or by
telephone, telegraph, cable or wireless, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, or by commercial delivery services addressed to him at his residence or
usual place of business, at least three days before the day on which such
meeting is to be held.
Section 10. Waiver of Notice of Special Meetings. Notice of
any special meeting need not be given to any Director who shall, either before
or after the meeting, sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting. Except as otherwise
specifically required by these By-Laws, a notice or waiver of notice of any
meeting need not state the purposes of such meeting.
Section 11. Quorum and Voting. One-third, but not fewer than
three members, of the members of the entire Board shall be present in person at
any meeting of the Board in order to
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<PAGE>
constitute a quorum for the transaction of business at such meeting, and except
as otherwise expressly required by statute, the Charter of the Corporation,
these By-Laws, the 1940 Act or other applicable statute, the act of a majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board; provided, however, that the approval of any contract with
an investment adviser or principal underwriter, as such terms are defined in the
1940 Act, which the Corporation enters into or any renewal or amendment thereof,
the approval of the fidelity bond required by the 1940 Act, and the selection of
the Corporation's independent public accountants shall each require the
affirmative vote of a majority of the Directors who are not interested persons,
as defined in the 1940 Act, of the Corporation. In the absence of a quorum at
any meeting of the Board, a majority of the Directors present thereat may
adjourn the meeting from time to time, but not for a period greater than thirty
(30) days at any one time, to another time and place until a quorum shall
attend. Notice of the time and place of any adjourned meeting shall be given to
the Directors who were not present at the time of the adjournment and, unless
such time and place were announced at the meeting at which the adjournment was
taken, to the other Directors. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called.
Section 12. Chairman. The Board of Directors may at any time
appoint one of its members as Chairman of the Board, who shall serve at the
pleasure of the Board and who shall perform and execute such duties and powers
as may be conferred upon or assigned to him by the Board or these By-Laws, but
who shall not by reason of performing and executing these duties and powers be
deemed an officer or employee of the Corporation.
Section 13. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if one has been selected and is present,
shall preside. In the absence or inability of the Chairman of the Board to
preside at a meeting, the President, or, in his absence or inability to act,
another Director chosen by a majority of the Directors present, shall act as
chairman of the meeting and preside at it. The Secretary (or, in his absence or
inability to act, any person appointed by the Chairman) shall act as secretary
of the meeting and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee; provided, however, that for so long as
the Corporation is registered as an investment company under the 1940 Act, this
Section shall be inapplicable to the approval of any investment advisory
agreement, sub-advisory agreement or any plan (or agreement containing a plan)
pursuant to Rule 12b-1 under the 1940 Act.
Section 15. Meeting by Conference Telephone. Members of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time; provided, however, that for so
long as the Corporation is registered as an investment company under the 1940
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<PAGE>
Act, this Section shall be inapplicable to the approval of any investment
advisory agreement, sub- advisory agreement or any plan (or agreement containing
a plan) pursuant to Rule 12b-1 under the 1940 Act.
Section 16. Compensation. Any Director, whether or not he is a
salaried officer, employee or agent of the Corporation, may be compensated for
his services as Director or as a member of a committee, or as Chairman of the
Board or chairman of a committee, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the
Directors may from time to time determine.
Section 17. Investment Policies. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the current Prospectus of the Corporation filed from time to time with the
Securities and Exchange Commission and as required by the 1940 Act. The Board,
however, may delegate the duty of management of the assets and the
administration of its day-to-day operations to an individual or corporate
management company or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors or the shareholders of
the Corporation in accordance with the provisions of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board may, by
resolution adopted by a majority of the entire Board, designate an Executive
Committee, Compensation Committee, Audit Committee and Nomination Committee,
each of which shall consist of two or more of the Directors of the Corporation,
which committee shall have and may exercise all the powers and authority of the
Board with respect to all matters other than as set forth in Section 3 of this
Article IV.
Section 2. Other Committees of the Board. The Board of
Directors may from time to time, by resolution adopted by a majority of the
whole Board, designate one or more other committees of the Board, each such
committee to consist of two or more Directors and to have such powers and duties
as the Board of Directors may, by resolution, prescribe.
Section 3. Limitation of Committee Powers. No committee of the
Board shall have power or authority to:
(a) recommend to shareholders any action requiring
authorization of shareholders pursuant to statute or the Charter;
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<PAGE>
(b) approve or terminate any contract with an
investment adviser or principal underwriter, as such terms are defined in the
1940 Act, or take any other action required to be taken by the Board of
Directors by the 1940 Act;
(c) amend or repeal these By-Laws or adopt new
By-Laws;
(d) declare dividends or other distributions or
issue capital stock of the Corporation; and
(e) approve any merger or share exchange which does
not require shareholder approval.
Section 4. General. One-third, but not less than two members,
of the members of any committee shall be present in person at any meeting of
such committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such chairman
or any two members of any committee may fix the time and place of its meetings
unless the Board shall otherwise provide. In the absence or disqualification of
any member or any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member, or to dissolve any such committee.
All committees shall keep written minutes of their proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
ARTICLE V
Officers, Agents and Employees
Section 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint such other officers,
agents and employees as it may deem necessary or proper. Any two or more offices
may be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. The Board may from time to time elect or appoint, or
delegate to the President the power to appoint, such other officers (including
one or more Assistant Vice Presidents, one or more Assistant Treasurers and one
or more Assistant Secretaries) and such agents, as may be necessary or desirable
for the business of the
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<PAGE>
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.
Section 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board, the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate such power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Such removal shall be without prejudice to such person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any committee or to any officer in respect of other officers under
his control. No officer shall be precluded from receiving such compensation by
reason of the fact that he is also a Director of the Corporation.
Section 6. Bonds or Other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief
executive officer of the Corporation. In the absence of the Chairman of the
Board (or if there be none), he shall preside at all meetings of the
shareholders and of the Board of Directors. He shall have, subject to the
control of the Board of Directors, general charge of the business and affairs of
the Corporation. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers.
Section 8. The Vice Presidents. In the absence or disability
of the President, or when so directed by the President, any Vice President
designated by the Board of Directors may perform any or all of the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of which the
President is a member or chairman by
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designation of ex-officio, except when designated by the Board. Each Vice
President shall perform such other duties as from time to time may be conferred
upon or assigned to him by the Board or the President.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible
for, all the funds and securities of the Corporation, except those which the
Corporation has placed in the custody of a bank or trust company or member of a
national securities exchange (as that term is defined in the Securities Exchange
Act of 1934) pursuant to a written agreement designating such bank or trust
company or member of a national securities exchange as custodian of the property
of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be
deposited to the credit of the Corporation;
(d) receive, and give receipts for, moneys due and
payable to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or authorized by the Board,
taking proper vouchers therefor; and
(f) in general, perform all the duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 10. Assistant Treasurers. In the absence or disability
of the Treasurer, or when so directed by the Treasurer, any Assistant Treasurer
may perform any or all of the duties of the Treasurer, and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer. Each Assistant Treasurer shall perform all such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings of the Board, the
committees of the Board and the shareholders;
(b) see that all notices are duly given in
accordance with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such
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certificates shall be a facsimile, as hereinafter provided) and affix and attest
the seal to all other documents to be executed on behalf of the Corporation
under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 12. Assistant Secretaries. In the absence or
disability of the Secretary, or when so directed by the Secretary, any Assistant
Secretary may perform any or all of the duties of the Secretary, and, when so
acting, shall have all the powers of, and be subject to all restrictions upon,
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be conferred upon or assigned to him by the Board of Directors,
the President or the Secretary.
Section 13. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any Director.
ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing the
number of shares of stock of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by the President, a
Vice President, or the Chairman of the Board, and countersigned by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 2. Rights of Inspection. There shall be kept at the
principal executive office, which shall be available for inspection during usual
business hours in accordance with the General Laws of the State of Maryland, the
following corporate documents: (a) By-Laws, (b) minutes of proceedings of the
shareholders, (c) annual statements of affairs, and (d) voting trust agreements,
if any. One or more persons who together are and for at least six months have
been shareholders of record of at least five percent of the outstanding stock of
any class may inspect and copy during usual
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business hours the Corporation's books of account and stock ledger in accordance
with the General Laws of the State of Maryland.
Section 3. Transfer of Shares. Transfers of shares of stock of
the Corporation shall be made on the stock records of the Corporation at the
direction of the person named on the Corporation's books or named in the
certificate or certificates for such shares (if issued) only by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for such shares
properly endorsed or accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of shareholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in any such share or shares on the part of any other person.
Section 4. Transfer Agents and Registrars. The Corporation may
have one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
Section 5. Record Date and Closing of Transfer Books. The
Board of Directors may set a record date for the purpose of making any proper
determination with respect to shareholders, including which shareholders are
entitled to notice of a meeting, vote at a meeting (or any adjournment thereof
), receive a dividend, or be allotted or exercise other rights. The record date
may not be more than ninety (90) days before the date on which the action
requiring the determination will be taken; and, in the case of a meeting of
shareholders, the record date shall be at least ten (10) days before the date of
the meeting. The Board of Directors shall not close the books of the Corporation
against transfers of shares during the whole or any part of such period.
Section 6. Regulations. The Board may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates.
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss, theft, destruction or
mutilation of such certificate, and the Corporation may issue a new certificate
of stock in the place of any certificate theretofore issued by it which the
owner thereof shall allege to have been lost, stolen or destroyed or which shall
have been mutilated, and the Board may, in its discretion, require such owner or
his legal representatives to give to the Corporation a bond in such sum, limited
or unlimited, and in such form and with such surety or sureties, as the Board in
its
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absolute discretion shall determine, to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss or destruction
of any such certificate, or issuance of a new certificate. Anything herein to
the contrary notwithstanding, the Board, in its absolute discretion, may refuse
to issue any such new certificate, except pursuant to legal proceedings under
the laws of the State of Maryland.
Section 8. Stock Ledgers. The Corporation shall not be
required to keep original or duplicate stock ledgers at its principal office in
the City of New York, New York, but stock ledgers shall be kept at the office(s)
of the Transfer Agent(s) of the Corporation's capital stock.
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal, bearing
the name of the Corporation, which shall be in the charge of the Secretary. The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof. If the corporation is required to place its corporate seal on a
document, it is sufficient to meet any requirement of any law, rule, or
regulation relating to a corporate seal to place the word "Seal" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of
the Corporation shall end on the last day of May in each year.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
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Section 2. Custodians. All securities and other investments
shall be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the 1940 Act, and the general rules and regulations thereunder.
ARTICLE X
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Money market
instruments, bonds or other securities at any time owned by the Corporation may
be held on behalf of the Corporation or sold, transferred or otherwise disposed
of subject to any limits imposed by these By-Laws, and pursuant to authorization
by the Board and, when so authorized to be held on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name of
the Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
ARTICLE XI
Independent Public Accountants
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the Board of Directors or the shareholders in
accordance with the provisions of the 1940 Act.
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ARTICLE XII
Annual Statements
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the shareholders based upon each such examination shall be mailed to
each shareholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be placed on file
at the Corporation's principal office in the State of New York. Each such report
shall show the assets and liabilities of the Corporation as of the close of the
annual or semi-annual period covered by the report and the securities in which
the funds of the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or semi-annual
period covered by the report and any other information required by the 1940 Act,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify
its Directors to the fullest extent that indemnification of Directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify its officers to the same extent as its Directors and to such further
extent as is consistent with law. The Corporation shall indemnify its Directors
and officers who while serving as Directors or officers also serve at the
request of the Corporation as a Director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the fullest extent consistent with
law. This Article XIII shall not protect any such person against any liability
to the Corporation or any shareholder thereof to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Section 2. Advances. Any current or former Director or officer
of the Corporation claiming indemnification within the scope of this Article
XIII shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the Maryland
General
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Corporation Law, the Securities Act of 1933 (the "1933 Act") and the 1940 Act,
as such statutes are now or hereafter in force.
Section 3. Procedure. On the request of any current or former
Director or officer requesting indemnification or an advance under this Article
XIII, the Board of Directors shall determine, or cause to be determined, in a
manner consistent with the Maryland General Corporation Law, the 1933 Act and
the 1940 Act, as such statutes are now or hereafter in force, whether the
standards required by this Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this
Article XIII shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested Directors or otherwise, both as to action by a Director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a Director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Maryland Law. References to the Maryland General
Corporation Law in this Article XIII are to such law as from time to time
amended.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
annual meeting of the shareholders or at any special meeting of the shareholders
at which a quorum is present or represented, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors.
<PAGE>
EX-99-B(5)
ISI STRATEGY FUND, INC.
FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the __th day of
_______, 199_ by and between ISI STRATEGY FUND, INC., a Maryland corporation
(the "Fund"), and INTERNATIONAL STRATEGY & INVESTMENT INC., a Delaware
corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under
the Investment Advisors Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the Fund's investment advisor. The Advisor shall manage the
Fund's affairs and shall supervise all aspects of the Fund's operations (except
as otherwise set forth herein), including the investment and reinvestment of the
cash, securities or other properties comprising the Fund's assets, subject at
all times to the policies and control of the Fund's Board of Directors. The
Advisor hereby accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided. The Advisor shall give the Fund
the benefit of its best judgment, efforts and facilities in rendering its
service as Advisor.
2. Delivery of Documents. The Fund has furnished the Advisor with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on June 12, 1997 and all amendments thereto
(such Articles of Incorporation, as presently in effect and as they shall from
time to time be amended, are herein called the "Articles of Incorporation");
(b) The Fund's By-laws and all amendments thereto (such By-laws,
as presently in effect and as they shall from time to time be amended, are
herein called the "By-laws");
<PAGE>
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act of 1940 on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission (the "SEC") on
_________ __, 1997;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-______) and
under the 1940 Act as filed with the SEC on _______ __, 1997 relating to the
shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties of Investment Advisor. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objectives and
policies of the Fund and regularly report thereon to the Fund's Board of
Directors;
(b) determine which issuers and securities shall be represented
in a portion of the Fund's portfolio and regularly report thereon to the Fund's
Board of Directors;
(c) provide the Fund with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, utilities, stationery, supplies and similar items for the Fund's
principal office;
(d) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund's
portfolio or the activities in which they engage, or with respect to securities
which the Advisor considers desirable for inclusion in the Fund's portfolio;
(e) take all actions necessary to carry into effect the Fund's
purchase and sale programs; and
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(f) maintain such books and records, in cooperation with the
Fund's administrator and the Fund's distributors, as may be required by law or
deemed advisable by the Board of Directors.
4. Broker-Dealer Relationships. In circumstances where the Advisor
is responsible for decisions to buy and sell securities for the Fund,
broker-dealer selection and negotiation of its brokerage commission rates, the
Advisor in effecting securities transactions will seek to obtain the best price
and execution on an overall basis. In performing this function, the Advisor
shall comply with applicable policies established by the Board of Directors and
shall provide the Board of Directors with such reports as the Board of Directors
may require in order to monitor the Fund's portfolio transaction activities.
Portfolio securities may be purchased or sold by the Fund in principal
transactions. The Advisor may also purchase securities from underwriters which
include a commission paid by the issuer to the underwriter. The purchase price
paid to dealers serving as market makers may include a spread between the bid
and asked prices. The price to the Fund in any transaction may be less favorable
than that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
Subject to policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provided brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities to the Fund. The Advisor is further
authorized to allocate the orders placed by it on behalf of the Fund to
broker-dealers who provide research or statistical material or other services to
the Fund or to the Advisor. Such allocation shall be in such amounts and
proportions as the Advisor shall determine and the Advisor will report on said
allocation regularly to the Board of Directors of the Fund, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
Subject to policies established by the Board of Directors in
compliance with applicable law, the Advisor may direct various broker-dealers to
execute portfolio transactions for the Fund on an agency basis. If the purchase
or sale of securities consistent with the investment policies of the Fund or one
or more other account of the Advisor is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Advisor in compliance with applicable law and the
National Association of Securities Dealers, Inc.'s rules. Such transactions, in
accordance with applicable laws and regulations, may be combined or bundled in
order to obtain the best net price and most favorable execution.
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5. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Articles of Incorporation;
(d) the provisions of the By-laws; and
(e) any other applicable provisions of Federal and state law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost
to the Fund, the services of and one or more officers of the Fund, to the extent
that such officers may be required by the Fund, for the proper conduct of its
affairs; travel expenses of employees and officers of the Advisor; office space,
equipment, research services and supplies; expenses of maintaining accounts,
books, and records, except to the extent such services are provided by a third
party pursuant to a contract with the Fund; and
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: payments to the Fund's
administrator and distributor under the Fund's plan of distribution; the charges
and expenses of any registrar, any custodian or depositary appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions, chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to Federal,
State or other governmental agencies; the costs and the expenses of engraving or
printing of certificates representing shares of the Fund; all costs and expenses
in connection with registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all
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expenses or shareholders' and Directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of Directors or Director members of any advisory board or committee who
are not "interested persons" of the Fund (as defined in the 1940 Act); all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not "interested
persons" (as defined in the 1940 Act) of the Fund and of independent
accountants, in connection with any matter relating to the Fund; membership dues
of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors including
a majority of the Fund's directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund and shareholders of the Fund, the Advisor may
delegate to a sub-advisor its duties enumerated in Section 3 hereof. The Advisor
shall continue to supervise the performance of any such sub-advisor and shall
report regularly thereon to the Fund's Board of Directors, but shall not be
responsible for the sub-advisor's performance under the sub-advisory agreement.
(b) The Advisor may, but shall not be under any duty to, perform
services on behalf of the Fund which are not required by this Agreement upon the
request of the Fund's Board of Directors. Such services will be performed on
behalf of the Fund and the Advisor's charge in rendering such services may be
billed monthly to the Fund, subject to examination by the Fund's independent
accountants. Payment or assumption by the Advisor of any Fund expense that the
Advisor is not required to pay or assume under this Agreement shall not relieve
the Advisor of any of its obligations to the Fund nor obligate the Advisor to
pay or assume any similar Fund expense on any subsequent occasions.
9. Compensation. (a) For the services to be rendered and the
expenses assumed by the Advisor, the Fund shall pay to the Advisor monthly
compensation at an annual amount, calculated daily and paid monthly, equal to
.40% of the Fund's average daily net assets.
(b) Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for the part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above.
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10. Non-Exclusivity. The services of the Advisor to the Fund are
not to be deemed to be exclusive, and the Advisor shall be free to render
investment advisory or other services to others (including other investment
companies) and to engage in other activities, so long as its services under this
Agreement are not impaired thereby. It is understood and agreed that officers or
directors of the Advisor may serve as officers or Directors of the Fund, and
that officers or Directors of the Fund may serve as officers or directors of the
Advisor to the extent permitted by law; and that the officers and directors of
the Advisor are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, trustees or directors of any other firm, trust or corporation,
including other investment companies.
11. Term and Renewal. This Agreement shall become effective as of
the date hereof and shall continue in force and effect, subject to Section 12
hereof, for two years from the date hereof. Following the expiration of its
initial two-year term, this Agreement shall continue in force and effect and
thereafter from year to year, provided that such continuance is specifically
approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of
a majority of the outstanding voting securities (as defined in the 1940 Act);
and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of a party to this Agreement (other than as Directors of the Fund) by
votes cast in person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time
without the payment of any penalty, by the Fund upon vote of the Fund's Board of
Directors or a vote of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act) or by the Advisor, upon sixty (60) days' written
notice to the other party. The notice provided for herein may be waived by
either party. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
13. Liability of Advisor. In the performance of its duties
hereunder, the Advisor shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to ensure
the accuracy of all services performed under this Agreement, but the Advisor
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under the Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is
-6-
<PAGE>
agreed that the address of the Fund and of the Advisor for this purpose shall be
717 Fifth Avenue, New York, New York 10022.
15. Questions of Interpretation. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States courts or in the absence of any controlling decision
of any such court, by rules, regulations or orders of the SEC issued pursuant to
the 1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise the provisions of this Agreement shall
be interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate by their respective offices as of the day and year
first above written.
[SEAL] ISI STRATEGY FUND, INC.
Attest: ____________________ By: ___________________________
Title
[SEAL] INTERNATIONAL STRATEGY &
INVESTMENT INC.
Attest: ____________________ By: ___________________________
Title
-7-
<PAGE>
EX-99.B(6)(a)
ISI STRATEGY FUND, INC.
ISI STRATEGY FUND SHARES
FORM OF
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of __________, 1997, by and
between ISI STRATEGY FUND, INC., a Maryland corporation (the "Fund"), and
INTERNATIONAL STRATEGY & INVESTMENT GROUP INC., a Delaware corporation ("ISI").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and
WHEREAS, the Fund wishes to appoint ISI as the exclusive
distributor of the class of shares of the Fund known as the ISI Strategy Fund
Shares (the "Shares") and ISI wishes to become the distributor of the Shares;
and
WHEREAS, the compensation to ISI hereunder and the payments
contemplated by paragraph 9 constitute the financing of activities intended to
result in the sale of Shares, and this Agreement is entered into pursuant to a
"written plan" pursuant to Rule 12b-1 under the 1940 Act (the "Plan") allowing
the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints ISI as the exclusive
distributor of the Shares for the period and on the terms set forth in this
Agreement. ISI accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished ISI with
copies, properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with the
Secretary of State of Maryland on June 12, 1997 and all amendments thereto
(the "Articles of Incorporation");
-1-
<PAGE>
(b) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of ISI as the distributor of the Shares and
approving this Agreement;
(d) The Fund's Notification of Registration filed pursuant
to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as filed with
the Securities and Exchange Commission (the "SEC") on _____________, 1997;
(e) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No. 33-________)
and under the 1940 Act as filed with the SEC on _______________, 1997 relating
to the Fund and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish ISI from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. ISI agrees that all solicitations
for subscriptions for Shares shall be made in accordance with the Fund's
Articles of Incorporation and By-Laws, and its then current Registration
Statement, Prospectus and Statement of Additional Information, and shall not at
any time or in any manner violate any provisions of the laws of the United
States or of any state or other jurisdiction in which solicitations are then
being made. In carrying out its obligations hereunder, ISI shall undertake the
following actions and responsibilities:
(a) receive orders for the purchase of Shares, accept or
reject such orders on behalf of the Fund in accordance with the currently
effective Prospectus for the Shares and the Fund's Statement of Additional
Information and transmit such orders as are so accepted to the Fund's transfer
agent as promptly as possible;
(b) receive requests for redemption from holders of Shares
and transmit such redemption requests to the Fund's transfer agent as promptly
as possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(d) provide to the Fund's Treasurer, at least quarterly, a
written report of the amounts expended in connection with all distribution
services rendered pursuant to this Agreement, including an explanation of the
purposes for which such expenditures were made; and
-2-
<PAGE>
(e) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares and perform such
other administrative duties with respect to the Shares as the Fund's Board of
Directors may require.
4. Distribution of Shares. ISI shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that ISI does
not undertake to sell all or any specific portion of the Shares. The Fund shall
not sell any of the Shares except through ISI and securities dealers who have
valid Agency Distribution Agreements with ISI. Notwithstanding the provisions of
the foregoing sentence the Fund may issue its Shares at their net asset value to
any shareholder of the Fund purchasing such Shares with dividends or other cash
distributions received from the Fund pursuant to an offer made to all
shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by ISI pursuant to this Agreement, as well as any other activities
undertaken by ISI on behalf of the Fund pursuant hereto, shall at all times be
subject to any directives of the Board of Directors of the Fund. The Board of
Directors may agree, on behalf of the Fund, to amendments to this Agreement,
provided that the Fund must obtain prior approval of the shareholders of the
Fund to any amendment which would result in a material increase in the amount
expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, ISI shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of the
Fund under the 1933 Act and the 1940 Act and any amendments and supplements
thereto;
(c) the provisions of the Articles of Incorporation of the
Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association
of Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
(f) any other applicable provisions of federal and state
law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and ISI as follows:
-3-
<PAGE>
(a) ISI shall furnish, at its expense and without cost to
the Fund, the services of personnel to the extent that such services are
required to carry out their obligations under this Agreement;
(b) ISI shall bear the expenses of any promotional or sales
literature used by ISI or furnished by ISI to purchasers or dealers in
connection with the public offering of the Shares, the expenses of advertising
in connection with such public offering and all legal expenses in connection
with the foregoing; and
(c) the Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor and administrator; the charges and expenses of any
registrar, any custodian or depositary appointed by the Fund for the safekeeping
of its cash, portfolio securities and other property, and any stock transfer,
dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and corporate fees payable by the Fund to federal,
state or other governmental agencies; the cost and expense of engraving or
printing of stock certificates representing Shares; all costs and expenses in
connection with maintenance of registration of the Fund and the Shares with the
SEC and various states and other jurisdictions (including filing fees and legal
fees and disbursements of counsel) except as provided in subparagraph (a) above;
the expenses of printing, including typesetting, and distributing prospectuses
of the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
directors who are not "interested persons" of the Fund (as defined in the 1940
Act) or members of any advisory board or committee; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
Shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's Shares; charges and expenses of legal counsel, including counsel
to the directors who are not "interested persons" of the Fund (as defined in the
1940 Act), and of independent accountants, in connection with any matter
relating to the Fund; a portion of membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
8. Delegation of Responsibilities. ISI may, but shall be under
no duty to, perform services on behalf of the Fund which are not required by
this Agreement upon the request of the Fund's Board of Directors. Such services
will be performed on behalf of the Fund and ISI's charges in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by ISI of any Fund expense that
ISI is not required to pay or assume under this Agreement shall not relieve ISI
of any of its obligations to the Fund or obligate ISI to pay or assume any
similar Fund expense on any subsequent occasions.
-4-
<PAGE>
9. Compensation. For the services to be rendered and the
expenses assumed by ISI, the Fund shall pay to ISI, compensation at the annual
rate of .25% of the average daily net assets invested in the Shares of the Fund.
Except as hereinafter set forth, continuing compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month
compensation for the part of the month during which this Agreement is in effect
shall be prorated in a manner consistent with the calculations of the fees as
set forth above.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that ISI may compensate its investment representatives for opening
accounts, processing investor letters of transmittal and applications and
withdrawal and redemption orders, responding to inquiries from Fund shareholders
concerning the status of their accounts and the operations of the Fund, and
communicating with the Fund and its transfer agent on behalf of the Fund
shareholders.
11. Agency Distribution Agreements. ISI may enter into agency
distribution agreements (the "Agency Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a transmitting
broker in connection with the proposed offering. All Agency Distribution
Agreements shall be in substantially the form of the agreement attached hereto
as Exhibit "A". For processing Fund shareholders' redemption orders, responding
to inquiries from Fund shareholders concerning the status of their accounts and
the operations of the Fund and communicating with the Fund, its transfer agent
and ISI, ISI may pay each such transmitting broker an amount not to exceed that
portion of the compensation paid to ISI hereunder that is attributable to
accounts of Fund shareholders who are customers of such transmitting broker.
12. Non-Exclusivity. The services of ISI to the Fund are not
to be deemed exclusive and ISI shall be free to render distribution or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that directors, officers or employees of
ISI may serve as directors or officers of the Fund, and that directors or
officers of the Fund may serve as directors, officers and employees of ISI to
the extent permitted by law; and that directors, officers and employees of ISI
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, directors
or officers of any other firm or corporation, including other investment
companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the
vote of a majority of the outstanding voting securities (as defined in the 1940
Act), and
-5-
<PAGE>
(b) by the affirmative vote of a majority of the directors
who are not "interested persons" of the Fund (as defined in the 1940 Act) and do
not have a financial interest in the operation of this Agreement, by votes cast
in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and who do not have a financial interest in the
operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act) or (iv) by ISI. The
notice provided for herein may be waived by each party. This Agreement shall
automatically terminate in the event of its assignment as defined in the 1940
Act.
15. Liability. In the performance of its duties hereunder, ISI
shall be obligated to exercise care and diligence and to act in good faith and
to use its best efforts within reasonable limits in performing all services
provided for under this Agreement, but shall not be liable for any act or
omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of ISI or reckless disregard by ISI of its duties under
this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, it is agreed that for this purpose
the address of the Fund and ISI shall be 717 Fifth Avenue, New York, New York
10022.
17. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers as of the day and year first above
written.
[SEAL] ISI STRATEGY FUND, INC.
Attest: _______________ By: _______________________
Name: Scott J. Liotta Name: R. Alan Medaugh
Title: President
[SEAL] INTERNATIONAL STRATEGY &
INVESTMENT GROUP INC.
Attest: ________________ By ________________________
Name: Nancy Lazar Name: Edward S. Hyman
Title:_____________________
-7-
<PAGE>
EX-99.B6(b)
ISI STRATEGY FUND, INC.
WILSHIRE INSTITUTIONAL STRATEGY FUND SHARES
FORM OF
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the ____ day of ___________, 19___, by
and between ISI STRATEGY FUND, INC., a Maryland corporation (the "Fund"), and
INTERNATIONAL STRATEGY & INVESTMENT GROUP INC., a Delaware corporation ("ISI").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint ISI as the exclusive
distributor of the class of shares of the Fund known as the Wilshire
Institutional Strategy Fund Shares (the "Shares") and ISI wishes to become the
distributor of the Shares; and
NOW, THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints ISI as distributor for the
Shares for the period and on the terms set forth in this Agreement. ISI accepts
such appointment and agrees to render the services set forth herein.
2. Delivery of Documents. The Fund has furnished ISI with
copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation and all
amendments thereto (the "Articles of Incorporation");
<PAGE>
(b) The Fund's By-Laws and all amendments thereto
(such By- Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of ISI as the distributor of the Shares and
approving this Agreement;
(d) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC") on
_______________;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File No.
33-__________) and under the 1940 Act (File No. 811-___________) as filed with
the SEC on ________________ relating to the Fund, and all amendments thereto;
and
(f) The Fund's most recent prospectus for the Shares
(such prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish ISI from time to time with copies,
properly certified or authenticated, of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the SEC.
3. Duties as Distributor. ISI agrees that all solicitations
for subscriptions for Shares shall be made in accordance with the Fund's
Articles of Incorporation and By-Laws, and its then current Registration
Statement, Prospectus and Statement of Additional Information, and shall not at
any time or in any manner violate any provisions of the laws of the United
States or of any state or other jurisdiction in which solicitations are then
being made. In carrying out its obligations hereunder, ISI shall undertake the
following actions and responsibilities:
(a) receive orders for the purchase of Shares, accept
or reject such orders on behalf of the Fund in accordance with the currently
effective Prospectus for the Shares and the Fund's Statement of Additional
Information and transmit such orders as are so accepted to the Fund's transfer
agent as promptly as possible;
(b) receive requests for redemption from holders of
Shares and transmit such redemption requests to the Fund's transfer agent as
promptly as possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund; and
2
<PAGE>
(d) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares and perform such
other administrative duties with respect to the Shares as the Fund's Board of
Directors may require.
4. Distribution of Shares. ISI shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that ISI does
not undertake to sell all or any specific portion of the Shares. The Fund shall
not sell any of the Shares except through ISI and securities dealers who have
valid Agency Distribution Agreements with ISI. Notwithstanding the provisions of
the foregoing sentence, the Fund may issue its Shares at their net asset value
to any shareholder of the Fund purchasing such Shares with dividends or other
cash distributions received from the Fund pursuant to an offer made to all
shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by ISI pursuant to this Agreement, as well as any other activities
undertaken by ISI on behalf of the Fund pursuant hereto, shall at all times be
subject to any directives of the Board of Directors of the Fund. The Board of
Directors may agree, on behalf of the Fund, to amendments to this Agreement.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, ISI shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any amendments and supplements
thereto;
(c) the provisions of the Articles of Incorporation
of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of federal and
state law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and ISI as follows:
(a) ISI shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such services are
required to carry out their obligations under this Agreement;
3
<PAGE>
(b) ISI shall bear the expenses of any promotional or
sales literature used by ISI or furnished by ISI to purchasers or dealers in
connection with the public offering of the Shares, the expenses of advertising
in connection with such public offering and all legal expenses in connection
with the foregoing; and
(c) the Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; all costs and expenses in connection with maintenance of
registration of the Fund and the Shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel) except as provided in subparagraph (a) above, the expenses of printing,
including typesetting, and distributing prospectuses of the Fund and supplements
thereto to the Fund's shareholders; all expenses of shareholders' and Directors'
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of Directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) or members of any advisory
board or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; charges and
expenses of legal counsel, including counsel to the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act), and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
8. Delegation of Responsibilities. ISI may, but shall be under
no duty to, perform services on behalf of the Fund which are not required by
this Agreement upon the request of the Fund's Board of Directors. Such services
will be performed on behalf of the Fund and ISI's charge in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by ISI of any Fund expense that
ISI is not required to pay or assume under this Agreement shall not relieve ISI
of any of its obligations to the Fund or obligate ISI to pay or assume any
similar Fund expense on any subsequent occasions.
9. Compensation. ISI shall receive no compensation for the
services to be rendered and the expenses assumed by it pursuant to this
Agreement.
4
<PAGE>
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that ISI may, from its own resources, compensate its investment
representatives for opening accounts, processing investor letters of transmittal
and applications and withdrawal and redemption orders, responding to inquiries
from Fund shareholders concerning the status of their accounts and the
operations of the Fund, and communicating with the Fund and its transfer agent
on behalf of the Fund shareholders.
11. Agency Distribution Agreements. ISI may enter into agency
distribution agreements (the "Agency Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a transmitting
broker in connection with the proposed offering. All Agency Distribution
Agreements shall be in substantially the form of the agreement attached hereto
as Exhibit "A". For processing Fund shareholders' redemption orders, responding
to the inquiries from Fund shareholders concerning the status of their accounts
and the operations of the Fund and communicating with the Fund, its transfer
agent and ISI, ISI may, from its own resources, compensate each such
transmitting broker for such services.
12. Non-Exclusivity. The services of ISI to the Fund are not
to be deemed exclusive and ISI shall be free to render distribution or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that directors, officers or employees of
ISI may serve as directors or officers of the Fund, and that directors or
officers of the Fund may serve as directors, officers and employees of ISI to
the extent permitted by law; and that directors, officers and employees of ISI
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, directors
or officers of any other firm or corporation, including other investment
companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act), and
(b) by the affirmative vote of a majority of the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) and do not have a financial interest in the operation of this Agreement, by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the operation
of this Agreement, (iii) by vote of a majority of the Fund's outstanding voting
securities
5
<PAGE>
(as defined in the 1940 Act) or (iv) by ISI. The notice provided for herein may
be waived by each party. This Agreement shall automatically terminate in the
event of its assignment (as the term is defined in the 1940 Act).
15. Liability. In the performance of its duties hereunder, ISI
shall be obligated to exercise care and diligence and to act in good faith and
to use its best efforts within reasonable limits in performing all services
provided for under this Agreement, but shall not be liable for any act or
omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of ISI or reckless disregard by ISI of its duties under
this Agreement.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, it is agreed that the address of both
ISI and the Fund for this purpose shall be 717 Fifth Avenue, New York, New York
10022.
17. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] ISI STRATEGY FUND, INC.
Attest:__________________ By _____________________________________
Title:
[SEAL] INTERNATIONAL STRATEGY & INVESTMENT
GROUP INC.
Attest:__________________ By _____________________________________
Title:
<PAGE>
EX-99.B(6)(c)
ISI FAMILY OF FUNDS
717 Fifth Avenue
New York, New York 10022
FORM OF
AGENCY DISTRIBUTION AGREEMENT
_______________________, 19___
Gentlemen:
International Strategy & Investment Group Inc. ("ISI"), a
Delaware corporation, serves as distributor (the "Distributor") of the ISI
Family of Mutual Funds (collectively, the "Funds", individually a "Fund"). The
Funds are open-end investment companies registered under the "Investment Company
Act of 1940, as amended (the "Investment Company Act"). The Funds offer their
shares ("Shares") to the public in accordance with the terms and conditions
contained in the Prospectus of each Fund. The term "Prospectus" used herein
refers to the prospectus on file with the Securities and Exchange Commission
which is part of the registration statement of each Fund under the Securities
Act of 1933 (the "Securities Act"). In connection with the foregoing you may
serve as a participating dealer (and, therefore, accept orders for the purchase
or redemption of Shares, respond to shareholder inquiries and perform other
related functions) on the following terms and conditions:
1. Transmitting Broker. You are hereby designated as a Broker
and as such are authorized (i) to accept orders for the purchase of Shares and
to transmit to the Funds such orders and payment made therefore, (ii) to accept
orders for the redemption of Shares and to transmit to the Funds such orders and
all additional material, including any certificates for Shares, as may be
required to complete the redemption and (iii) to assist shareholders with the
foregoing and other matters relating to their investments in each Fund, in each
case subject to the terms and conditions set forth in the Prospectus of each
Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
Shares.
2. Limitation of Authority. No person is authorized to make
any representations concerning the Funds or the Shares except those contained in
the Prospectus of each Fund and in such printed information as the Distributor
may subsequently prepare. No person is authorized to distribute any sales
material relating to any Fund without the prior written approval of the
Distributor.
<PAGE>
3. Compensation. As compensation for such services, you will
look solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
by shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $250,000 for each Fund for which you are
to be compensated, and provided that in all cases your name is transmitted with
each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the
provisions contained in the Securities Act governing the distribution of
prospectuses to persons to whom you offer Shares. You further agree to deliver,
upon our request, copies of any amended Prospectus of the relevant Fund to
purchasers whose Shares you are holding as record owner and to deliver to such
persons copies of the annual and interim reports and proxy solicitation
materials of the Funds. We agree to furnish to you as many copies of each
Prospectus, annual and interim reports and proxy solicitation materials as you
may reasonably request.
5. Qualification to Act. You represent that you are a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"). Your expulsion or suspension from the NASD will automatically terminate
this Agreement on the effective date of such expulsion or suspension. You agree
that you will not offer Shares to persons in any jurisdiction in which you may
not lawfully make such offer due to the fact that you have not registered under,
or are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of
Shares under the Securities Act. The Funds intend to comply with applicable
state laws. We will notify you of the states or other jurisdictions in which the
Shares may be sold. You agree that you will offer Shares to your customers only
in those states where there has been compliance with state laws applicable to
the sale of such Shares. We assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction. We will file with the Department of
State in New York a State Notice and a Further State Notice with respect to the
Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full
authority to take such action as it deems advisable in respect of all matters
pertaining to the offering of its Shares, including the right not to accept any
order for the purchase of Shares.
<PAGE>
8. Record Keeping. You will (i) maintain all records required
by law to be kept by you relating to transactions in Shares and, upon request by
any Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to
you except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this Agreement is intended to operate
as a waiver by the Distributor or you of compliance with any provision of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either
party, without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to
the above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us one copy of this agreement.
INTERNATIONAL STRATEGY &
INVESTMENT GROUP INC.
________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: ____________________________________
By: ___________________________________________
Address: ______________________________________
Date: ________________________
<PAGE>
EX-99.B(6)(d)
ISI STRATEGY FUND, INC.
717 Fifth Avenue
New York, New York 10022
FORM OF
SHAREHOLDER SERVICING AGREEMENT
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement
with you concerning the provision of support services to your clients and
customers ("Customers") who may from time to time beneficially own shares of our
shares of common stock ("Shares").
The terms and conditions of this Servicing Agreement are as
follows:
Section 1. (a) You agree to provide the following services to
Customers who may from time to time beneficially own Shares: (i) aggregating and
processing purchase and redemption requests for Shares from Customers and
placing net purchase and redemption orders with our distributor; (ii) processing
dividend payments from us on behalf of Customers; (iii) providing information
periodically to Customers showing their positions in Shares; (iv) arranging for
bank wires; (v) responding to Customer inquiries relating to the services
performed by you; (vi) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to Customers; and (viii) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. You will provide to Customers a schedule of any
fees that you may charge directly to them for such services. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all
records required by law relating to transactions in Shares and, upon our
request, promptly make such of these records available to us as we may
reasonably request in connection with our operations, and (ii) promptly notify
us if you experience any difficulty in maintaining the records described in the
foregoing clauses in an accurate and complete manner.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently
<PAGE>
used in your business, or any personnel employed by you) as may be reasonably
necessary or beneficial in order to provide the aforementioned services to
Customers.
Section 3. Neither you nor any of your officers, employees,
agents or assigns are authorized to make any representations concerning us or
Shares except those contained in our then current prospectus for such Shares,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority to act as
agent for us in any matter or in any respect. You may, upon prior written notice
to us, delegate your responsibilities hereunder to another person or persons;
provided, however, that notwithstanding any such delegation, you will remain
responsible for the performance of all of your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees, agents or assigns regarding
your responsibilities hereunder or the purchase, redemption, transfer or
registration of Shares by or on behalf of Customers. You and your employees
will, upon request, be available during normal business hours to consult with us
or our designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will cause our distributor pay to you, and you
will accept as full payment therefor, a fee at the annual rate of ___ of 1% of
the average daily net asset value of the Customers' Shares held of record by you
from time to time, which fee will be computed daily and payable ______. For
purposes of determining the fees payable under this Section 5, the average daily
net asset value of the Customers' Shares will be computed in the manner
specified in our registration statement (as the same is in effect from time to
time) in connection with the computation of the net asset value of Shares for
purposes of purchases and redemptions. The fee rate stated above may be
prospectively increased or decreased by us or by our distributor, at any time
upon notice to you. Further, we may, in our discretion and without notice,
suspend or withdraw the sale of Shares, including the sale of such shares to you
for the account of any Customer or Customers.
Section 6. You will furnish us or our designees with such
information relating to your performance under this Agreement as we or they may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
shall otherwise cooperate with us and our designees (including, without
limitation, any auditors designated by us), in connection with the preparation
of reports to our Board of Directors concerning this Agreement and the monies
paid or payable by us pursuant hereto, as well as any other reports or filings
that may be required by law.
Section 7. We may enter into other similar services agreements
with any other person or persons without your consent.
-2-
<PAGE>
Section 8. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our distributor, and
is terminable, without penalty, at any time by us or by you upon ten days'
notice to the other party hereto and shall automatically terminate in the event
of its assignment, as that term is defined in the Investment Company Act of
1940, as amended.
Section 9. This Agreement will be construed in accordance with
the laws of the State of Maryland.
Section 10. All notices and other communications to either you
or us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device, if to us at the address below, and if to you,
at the address specified by you after your signature below:
ISI Strategy Fund, Inc.
717 Fifth Avenue
New York, New York 10022
Attention: R. Alan Medaugh
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to us, at the address set forth in Section 10 above.
Very truly yours,
ISI STRATEGY FUND, INC.
Date: __________________ By: ____________________________
Authorized Officer
Accepted and Agreed to:
________________________________
Date: __________________ By: ____________________________
Authorized Officer
Address: _______________________
_______________________
_______________________
-3-
<PAGE>
EX-99.B(9)
FORM OF
MASTER SERVICES AGREEMENT
THIS AGREEMENT is made as of the ____________ day of
_____________, 1997 by and between ISI STRATEGY FUND, INC., a Maryland
corporation (the "Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland
corporation ("ICC").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain ICC to provide certain
services on behalf of the Fund, as set forth in the Appendices to this
Agreement, and ICC is willing so to serve.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ICC to perform such
services and to serve such functions on behalf of the Fund as set forth in the
Appendices to this Agreement, on the terms set forth in this Agreement and the
Appendices hereto. ICC accepts such appointment and agrees to furnish such
services and serve such functions. The Fund may have currently outstanding one
or more series or classes of its shares of common stock, par value $.001 per
share ("Shares") and may from time to time hereafter issue separate series or
classes of its Shares or classify and reclassify Shares of any series or class,
and the appointment effected hereby shall constitute appointment for the
provision of services with respect to all existing series and classes and any
additional series and classes unless the parties shall otherwise agree in
writing.
2. Delivery of Documents. The Fund has furnished ICC with
copies properly certified or authenticated of the following documents and will
furnish ICC from time to time with copies, properly certified or authenticated,
of all amendments of or supplements thereto, if any:
(a) Resolutions of the Fund's Board of Directors
authorizing the appointment of ICC to act in such capacities on behalf of the
Fund as set forth in the Appendices to this Agreement, and the entering into of
this Agreement by the Fund;
(b) The Fund's Articles of Incorporation and all
amendments thereto (the "Charter") and the Fund's By-Laws and all amendments
thereto (the "By-Laws");
(c) The Fund's most recent Registration Statement on
Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") and
under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") relating to the Shares; and
<PAGE>
(d) Copies of the Fund's most recent prospectus or
prospectuses, including amendments and supplements thereto (collectively, the
"Prospectus").
3. Services to be Provided; Fees. During the term of this
Agreement, ICC shall perform the services and act in such capacities on behalf
of the Fund as set forth herein and in the Appendices to this Agreement. For the
services performed by ICC for the Fund, the Fund will compensate ICC in such
amounts as may be agreed to from time to time by the parties in writing.
4. Records. The books and records pertaining to the Fund which
are in the possession of ICC shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Rule 31a-1 under the
1940 Act and other applicable securities laws, rules and regulations. The Fund,
or the Fund's authorized representatives, shall have access to such books and
records at all times during ICC's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
ICC to the Fund or the Fund's authorized representative at the Fund's expense.
5. Cooperation With Accountants. In addition to any
obligations set forth in an Appendix hereto, ICC shall cooperate with the Fund's
independent accountants and shall take all reasonable actions in the performance
of its obligations under this Agreement to ensure that the necessary information
is made available to such accountants for the expression of such accountants'
opinion of the Fund's financial statements or otherwise, as such may be required
by the Fund from time to time.
6. Compliance with Governmental Rules and Regulations. The
Fund assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act, the Commodities Exchange Act (if applicable),
and any laws, rules and regulations of governmental authorities having
jurisdiction. ICC undertakes to comply with all applicable requirements of the
1933 Act, the 1934 Act, the 1940 Act, the Commodities Exchange Act (if
applicable), and all laws, rules and regulations of governmental authorities
having jurisdiction with respect to the performance by ICC of its duties under
this Agreement, including the Appendices hereto.
7. Expenses.
(a) ICC shall bear all expenses of its employees and
overhead incurred in connection with its duties under this Agreement and shall
pay all salaries and fees of the Fund's directors and officers who are employees
of ICC.
(b) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor, administrator and distributor; the charges and
expenses of any registrar, any custodian or depositary appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
stock transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to
-2-
<PAGE>
the Fund in connection with portfolio securities transactions to which the Fund
is a party; all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Fund to federal, state or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and its Shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the expenses of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of directors or members of any advisory board or committee other than
such directors or members who are "interested persons" of the Fund (as defined
in the 1940 Act); all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; charges and
expenses of legal counsel, including counsel to the directors of the Fund who
are not "interested persons" of the Fund (as defined in the 1940 Act), and of
independent accountants, in connection with any matter relating to the Fund; a
portion of membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
8. Liability; Indemnification. Neither ICC nor any of its
officers, directors or employees shall be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which this
Agreement, including the Appendices hereto, relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its or their part in
the performance of, or from reckless disregard by it or them of, its or their
obligations and duties under this Agreement. The Fund agrees to indemnify and
hold harmless ICC and its nominees from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the 1933 Act, the 1934 Act, the 1940 Act, and any state and
federal securities and blue sky laws, all as currently in existence or as
amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which ICC takes or does or omits to take or do at the request or
on the direction of or in reliance on the advice of the Fund; provided, that
neither ICC nor any of its nominees shall be indemnified against any liability
to the Fund or to its shareholders (or any expenses incident to such liability)
arising out of ICC's own willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under this Agreement.
Notwithstanding anything else in this Agreement or any Appendix hereto to the
contrary, ICC shall have no liability to the Fund for any consequential, special
or indirect losses or damages which the Fund may incur or suffer as a
consequence of ICC's performance of the services provided in this Agreement or
any Appendix hereto.
9. Responsibility of ICC. ICC shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by ICC in writing. In the performance of its
duties hereunder, ICC shall be obligated to exercise care and
-3-
<PAGE>
diligence and to act in good faith and to use its best efforts within reasonable
limits in performing services provided for under this Agreement, but ICC shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of ICC or reckless
disregard by ICC of its duties under this Agreement. Notwithstanding anything in
this Agreement to the contrary, ICC shall have no liability to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of ICC's performance of the services provided
hereunder.
10. Non-Exclusivity. The services of ICC to the Fund are not
to be deemed exclusive and ICC shall be free to render accounting or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that directors, officers or employees of
ICC may serve as directors or officers of the Fund, and that directors or
officers of the Fund may serve as directors, officers and employees of ICC to
the extent permitted by law; and that directors, officers and employees of ICC
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, directors
or officers of any other firm or corporation, including other investment
companies.
11. Notice. Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, to the Fund at 717 Fifth Avenue, New
York, New York 10022, Attention: R. Alan Medaugh, or to ICC at One South Street,
Baltimore, Maryland 21202, Attention: Mr. Edward J. Veilleux.
12. Miscellaneous.
(a) This Agreement shall become effective as of the
date first above written and shall remain in force until terminated. This
Agreement, or any Appendix hereto, may be terminated at any time without the
payment of any penalty, by either party hereto on sixty (60) days' written
notice to the other party.
(b) This Agreement shall be construed in accordance
with the laws of the State of Maryland.
(c) If any provisions of this Agreement shall be held
or made invalid in whole or in part, the other provisions of this Agreement
shall remain in force. Invalid provisions shall, in accordance with the intent
and purpose of this Agreement, be replaced by mutual consent of the parties with
such valid provisions which in their economic effect come as close as legally
possible to such invalid provisions.
(d) Except as otherwise specified in the Appendices
hereto, ICC shall be entitled to rely on any notice or communication believed by
it to be genuine and correct and to have been sent to it by or on behalf of the
Fund.
-4-
<PAGE>
(e) ICC agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present, or potential shareholders, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where ICC may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund.
(f) Any part of this Agreement or any Appendix
attached hereto may be changed or waived only by an instrument in writing signed
by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
ISI STRATEGY FUND, INC.
By:_______________________________________
Title:
INVESTMENT COMPANY CAPITAL CORP.
By:_______________________________________
Title:
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<PAGE>
Appendix I
FORM OF
TRANSFER AGENCY SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
ISI STRATEGY FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the Master
Services Agreement dated as of ________________, 1997 (the "Master Services
Agreement") between ISI STRATEGY FUND, INC. and INVESTMENT COMPANY CAPITAL CORP.
Defined terms not otherwise defined herein shall have the meaning set forth in
the Master Services Agreement.
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall
mean any officer of the Fund and any other person, who is fully authorized by
the Fund's Board of Directors, to give Oral and Written Instructions on behalf
of the Fund. Such persons are listed in the Certificate attached hereto.
(b) "Oral Instructions". The term "Oral Instructions" shall
mean oral instructions received by ICC from an Authorized Person or from a
person reasonably believed by ICC to be an Authorized Person.
(c) "Written Instructions". The term "Written Instructions"
shall mean written instructions signed by two Authorized Persons and received by
ICC. The instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
2. Instructions. Unless otherwise provided in this Appendix, ICC shall
act only upon Oral and Written Instructions. ICC shall be entitled to rely upon
any Oral and Written Instruction it receives from an Authorized Person (or from
a person reasonably believed by ICC to be an Authorized Person) pursuant to this
Agreement. ICC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of the Fund's
Articles of Incorporation, the Master Services Agreement, or any Appendix
attached thereto, or of any vote, resolution or proceeding of the Fund's Board
of Directors or shareholders.
The Fund agrees to forward to ICC Written Instructions
confirming Oral Instructions so that ICC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by ICC
-6-
<PAGE>
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. The Fund further agrees that
ICC shall incur no liability to the Fund in acting upon Oral or Written
Instructions, provided such instructions reasonably appear to have been received
from an Authorized Person.
If ICC is in doubt as to any action it should or should not
take, ICC may request directions or advice, including Oral or Written
Instructions, from the Fund. ICC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which ICC believes,
in good faith, to be consistent with those directions, advice or Oral of Written
Instructions. Notwithstanding the foregoing, ICC shall have no obligation (i) to
seek such directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions unless,
under the terms of other provisions of this Appendix, the same is a condition of
ICC's properly taking or not taking such action.
3. Description of Services.
(a) General Services To be Provided. ICC shall provide to the
Fund the following services on an ongoing basis:
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with
shareholders, if necessary, to complete or
correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in
conjunction with proxy solicitations; solicit
and tabulate proxies; receive and tabulate
proxy cards for meetings of the Fund's
shareholders;
(vi) Countersign securities;
(vii) Direct shareholder confirmation of activity;
(viii) Provide toll-free lines for direct shareholder
use, plus customer liaison staff for on-line
inquiry response;
(ix) Mail duplicate confirmation to broker-dealers
of their clients' activity, whether executed
through the broker-dealer or directly with
ICC;
-7-
<PAGE>
(x) Provide periodic shareholder lists and
statistics to the Fund;
(xi) Provide detail for underwriter/broker
confirmations;
(xii) Mail periodic year-end tax and statement
information;
(xiii) Provide timely notification to investment
advisor, accounting agent, and custodian of
Fund activity; and
(xiv) Perform other participating broker-dealer
shareholder services as may be agreed upon
from time to time.
(b) Purchase of Shares. ICC shall issue and credit an account
of an investor, in the manner described in the Prospectus, once it receives: (i)
a purchase order; (ii) proper information to establish a shareholder account;
and (iii) confirmation of receipt by, or crediting of funds for such order to,
the Fund's custodian.
(c) Redemption of Shares. ICC shall redeem the Fund's shares
only in accordance with the provisions of the Prospectus and each shareholder's
individual directions. Shares shall be redeemed at such time as the shareholder
tenders his or her shares and directs the method of redemption in accordance
with the terms set forth in the Prospectus. If securities are received in proper
form, Shares shall be redeemed before the funds are provided to ICC. When the
Fund provides ICC with funds, redemption proceeds will be wired (if requested)
or a redemption check issued. All redemption checks shall be drawn to the
recordholder unless third party payment authorizations have been signed by the
recordholder and delivered to ICC.
(d) Dividends and Distributions. Upon receipt of certified
resolutions of the Fund's Board of Directors authorizing the declaration and
payment of dividends and distributions, ICC shall issue the dividends and
distributions in shares, or, upon shareholder election, pay such dividends and
distributions in cash. Such issuance or payment shall be made after deduction
and payment of the required amount of funds to be withheld in accordance with
any applicable tax laws or other laws, rules or regulations. The Fund's
shareholders shall receive tax forms and other information, or permissible
substitute notice, relating to dividends and distributions, paid by the Fund as
are required to be filed and mailed by applicable law, rule or regulation. ICC
shall maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends and distributions paid by the Fund to its
shareholders as required by tax or other law, rule or regulation.
(e) Shareholder Account Services. If authorized in the
Prospectus, ICC shall arrange for the following services, in accordance with the
applicable terms set forth in the Prospectus: (i) the issuance of Shares
obtained through any pre-authorized check plan and direct purchases through
broker wire orders, checks and applications; (ii) exchanges of shares of any
fund for Shares of the Fund with which the Fund has exchange privileges; (iii)
automatic redemption from an account
-8-
<PAGE>
where that shareholder participates in an automatic redemption plan; and (iv)
redemption of Shares from an account with a check writing privilege.
(f) Communications to Shareholders. Upon timely Written
Instructions, ICC shall mail all communications by the Fund to its shareholders,
including, reports to shareholders, confirmations of purchases and sales of
Shares, monthly or quarterly statements, dividend and distribution notices, and
proxy material.
(g) Records. ICC shall maintain records of the accounts for
each shareholder showing the following information: (i) name, address and U.S.
Tax Identification or Social Security number; (ii) number and class of Shares
held and number and class of Shares for which certificates, if any, have been
issued, including certificate numbers and denominations; (iii) historical
information regarding the account of each shareholder, including dividends and
distributions paid and the date and price for all transactions on a
shareholder's account; (iv) any stop or restraining order placed against a
shareholder's account; (v) any correspondence relating to the current
maintenance of a shareholder's account; (vi) information with respect to
withholdings; and (vii) any information required in order for ICC to perform any
calculations contemplated or required by this Appendix or the Master Services
Agreement.
(h) Lost or Stolen Certificates. ICC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued upon: (i) the
shareholder's pledge of a lost instrument bond or such other appropriate
indemnity bond issued by a surety company approved by ICC; and (ii) completion
of a release and indemnification agreement signed by the shareholder to protect
ICC.
(i) Shareholder Inspection of Stock Records. Upon requests
from Fund shareholders to inspect stock records, ICC will notify the Fund and
the Fund shall deliver Oral or Written Instructions granting or denying each
such request. Unless ICC has acted contrary to the Fund's Instructions, the Fund
agrees to release ICC from any liability for refusal or permission for a
particular shareholder to inspect the Fund's shareholder records.
(j) Withdrawal of Shares and Cancellation of Certificates.
Upon receipt of Written Instructions, ICC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
(k) Telephone Transactions. In accordance with the terms of
the Prospectus, ICC shall act upon shareholder requests made by telephone for
redemption or exchange of ISI shares; provided that (i) the shareholder has
authorized telephone transactions on the Fund's Account Application or otherwise
in writing, (ii) if the request is a redemption, the amount to be redeemed does
not exceed $50,000 and (iii) ICC has complied with the identification and other
security procedures required by the Fund in connection with telephone
transactions.
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<PAGE>
4. Fees. As compensation for the services performed by ICC for the Fund
pursuant to this Appendix, the Fund will pay to ICC such amounts as may be
agreed to from time to time by the parties in writing.
5. Delegation of Responsibilities. ICC may subcontract to any third
party all or any part of its obligations under this Appendix; provided that any
such subcontracting shall not relieve ICC of any of its obligations under this
Appendix. All subcontractors shall be paid by ICC.
-10-
<PAGE>
Appendix II
FORM OF
ADMINISTRATIVE SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
ISI STRATEGY FUND, INC.
and INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the Master Services
Agreement dated as of _____________, 1997 (the "Master Services Agreement")
between ISI STRATEGY FUND, INC. and INVESTMENT COMPANY CAPITAL CORP. Defined
terms not otherwise defined herein shall have the meaning set forth in the
Master Services Agreement.
1. Services to be Provided. ICC will perform the following services on an
ongoing basis.
(a) supervise and manage all aspects of the Fund's operations, other
than portfolio management and distribution;
(b) provide the Fund with such executive, administrative, clerical and
bookkeeping services as are deemed advisable by the Fund's Board of Directors;
(c) provide the Fund with, or obtain, adequate office space and all
necessary equipment and services, including telephone service, heat, utilities,
stationery supplies and similar items for any offices as are deemed advisable by
the Fund's Board of Directors;
(d) arrange, but not pay for, the periodic updating of Prospectuses and
supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and state Blue Sky
authorities;
(e) supervise the operations of the Fund's transfer and
dividend-disbursing agent; and
(f) provide the Fund with such administrative and clerical services for
the maintenance of certain shareholder records as are deemed advisable by the
Fund's Board of Directors.
2. Fees. For the service performed by ICC for the Fund pursuant to this
Appendix, the Fund will pay to ICC compensation for such services as the parties
may agree to from time to time in writing.
-11-
<PAGE>
Appendix III
FORM OF
ACCOUNTING SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
ISI STRATEGY FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of
the Master Services Agreement dated as of ___________, 1997 (the "Master
Services Agreement") between ISI STRATEGY FUND, INC. and INVESTMENT COMPANY
CAPITAL CORP. Defined terms not otherwise defined herein shall have the meaning
set forth in the Master Services Agreement.
1. Accounting Services to be Provided. ICC will perform the following accounting
functions if required:
(a) Journalize investment, capital share and income and
expense;
(b) Verify investment buy/sell trade tickets when received
from the Fund's investment advisor and transmit trades to the Fund's custodian
for proper settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain tax lots for each security;
(e) Reconcile cash and investment balances with the custodian,
and provide the Fund's investment advisor with the beginning cash balance
available for investment purposes;
(f) Update the cash availability throughout the day as
required by the Fund's investment advisor;
(g) Post to and prepare the Fund's Statement of Net Assets and
Liabilities and the Statement of Operations;
(h) Calculate various contractual expenses (e.g., advisor and
custody fees);
(i) Monitor the expense accruals and notify Fund management of
any proposed adjustments;
-12-
<PAGE>
(j) Control all disbursements from the Fund and authorize such
disbursements upon written instructions from the President or any other officer
of the Fund or the investment advisor;
(k) Calculate capital gains and losses;
(l) Determine the Fund's net income;
(m) Obtain security market quotes from independent pricing
services approved by the investment advisor, or if such quotes are unavailable,
then obtain such prices from the investment advisor, and in either case
calculate the market value of portfolio investments;
(n) Transmit or mail a copy of the daily portfolio valuation
to the Fund's investment advisor;
(o) Compute the Fund's net asset value;
(p) As appropriate, compute the yields, total return, expense
ratios, portfolio turnover rate;
(q) Prepare a monthly financial statement, which will include
the following items:
o Schedule of Investments;
o Statement of Net Assets and Liabilities;
o Statement of Operations;
o Statement of Changes in Net Assets;
o Cash Statement;
o Schedule of Capital Gains and Losses;
(r) Assist in the preparation of:
o Federal and State Tax Returns;
o Excise Tax Returns;
o Annual and Semi-Annual Shareholder Reports;
o Rules 24 (e)-2 and 24 (f)-2 Notices;
o Annual and Semi-Annual Reports on Form N-SAR;
o Monthly and Quarterly Statistical Data Information
Reports Sent to Performance Tracking Companies;
(s) Assist in the Blue Sky and federal registration and
compliance process;
(t) Assist in the review of registration statements; and
(u) Assist in monitoring compliance with Sub-Chapter M of the
Internal Revenue Code.
-13-
<PAGE>
2. Records. ICC shall keep the following records: (a) all books and records with
respect to the Fund's books of account; and (b) records of the Fund's securities
transactions.
3. Liaison With Accountants. In addition to ICC's obligations relating to the
Fund's independent accountants set forth in the Master Services Agreement, ICC
shall act as liaison with the Fund's independent accountants and shall provide
account analyses, fiscal year summaries, and other audit related schedules.
4. Compensation. For services performed by ICC pursuant to this Appendix, the
Fund will pay to ICC compensation for such services as the parties may agree to
from time to time in writing.
-14-
<PAGE>
EX-99.B(15)
ISI STRATEGY FUND, INC.
ISI STRATEGY FUND SHARES
FORM OF
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the ISI Strategy Fund Shares (the "Shares") of
ISI Strategy Fund, Inc. (the "Fund"). Other capitalized terms herein have the
meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) The distributor for the shares
(the "Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments
made to it under the distribution agreement between the Distributor and the Fund
with respect to the Shares (the "Distribution Agreement") and to make payments
on behalf of the Fund to Shareholder Servicing Agents under Shareholder
Servicing Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement which is an annual fee, calculated
on an average daily net basis and paid monthly, equal to .25% of the average
daily net assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of the Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include the fees of the Fund's investment advisor; the charges and expenses of
any registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or account agent or agents
-1-
<PAGE>
appointed by the Fund; brokers' commissions chargeable to the Fund in connection
with portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable to the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing Shares; all costs and
expenses in connection with maintenance of registration to the Fund and its
Shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and directors' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders, fees and travel expenses of
directors or director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in Shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's Shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not interested persons
(as defined in the 1940 Act) of the Fund and of independent certified public
accountants, in connection with any matter relating to the Fund; a portion of
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided therein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of their regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons at a meeting
called for the purpose of voting on this Plan; [and (ii) by a vote of holders of
at least a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act).] This Plan shall, unless terminated as hereinafter provided,
continue in effect until and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the Fund's Board of
Directors and by the vote of a majority of the Directors of the Fund who are not
interested persons of the Fund (as defined in the 1940 Act), cast in person at a
meeting called for
-2-
<PAGE>
the purpose of voting on such continuance. This Plan may be terminated at any
time by a vote of a majority of the Directors who are not interested persons of
the Fund (as defined in the 1940 Act) or by the vote of the holders of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act). This Plan may not be amended to increase materially the amount of payments
to be made without shareholder approval, as set forth in (ii) above, and all
amendments must be approved in the manner set forth under (i) above.
-3-
<PAGE>
EX-99.B(18)
ISI Strategy Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
ISI Strategy Fund Shares and
Wilshire Institutional Strategy Fund Shares
Adopted June 17, 1997
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of ISI Strategy Fund, Inc. (the
"Fund"), including a majority of the Directors of the Fund who are not
"interested persons" of the Fund (the "Independent Directors") pursuant to Rule
18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act").
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC-20813, IC-14695 and IC-15592, respectively) (collectively, the
"Order"). On June 17, 1997, the Fund elected to rely on Rule 18f-3 rather than
the Order, as permitted by Rule 18f-3 subject to certain conditions, and created
a multiple class distribution arrangement for its classes of shares of the
common stock of the Fund's one existing series (the "Series"). The multiple
class distribution arrangement will be effective on the date of effectiveness of
the Fund's registration statement or any post-effective amendment thereto that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing and future classes of Fund shares.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. For each additional class of shares approved by the Fund's
Board of Directors after the date hereof, the appropriate officers of the Fund
will attest the resolutions approving such class as an exhibit hereto. Before
any material amendment of the Plan, the Fund is required to obtain a finding by
a majority of the Board, and a majority of the Independent Directors, that the
Plan as proposed to be amended, including the expense allocations, is in the
best interests of each class individually and the Fund as a whole.
<PAGE>
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly attributable to such class ("Class
Expenses") (1); and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
III. Expense Allocations
Expenses of each class created after the date hereof must be
allocated as follows: (i) distribution and shareholder servicing payments
associated with any Rule 12b-1 Plan or
- --------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
2
<PAGE>
servicing agreement, if any, relating to each respective class of shares
(including any costs relating to implementing such plans or any amendment
thereto) will be borne exclusively by that class; (ii) any incremental transfer
agency fees relating to a particular class will be borne exclusively by that
class; and (iii) Class Expenses relating to a particular class will be borne
exclusively by that class.
The methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes of shares of the
Fund and the proper allocation of income and expenses among the various classes
of shares of the Fund are required to comply with the Fund's internal control
structure pursuant to applicable auditing standards, including Statement on
Auditing Standards No. 55, and to be reviewed as part of the independent
accountants' review of such internal control structure. The independent
accountants' report on the Fund's system of internal controls required by Form
N-SAR, Item 77B, is not required to refer expressly to the procedures for
calculating the classes' net asset values.
3
<PAGE>
EXHIBIT A
Exhibits to Registrant's 18f-3 Plan
1. Form of Articles of Incorporation.
2. Form of By-Laws.
3. Form of Distribution Agreement between Registrant and International Strategy
& Investment Group Inc. with respect to Registrant's ISI Strategy Fund Shares.
4. Form of Distribution Agreement between Registrant and International Strategy
& Investment Group Inc. with respect to Registrant's Wilshire Institutional
Strategy Fund Shares.
5. Distribution Plan with respect to the ISI Strategy Fund Shares.
6. Form of Agency Distribution Agreement between International Strategy &
Investment Group Inc. and transmitting brokers.
7. Prospectus relating to Registrant's ISI Shares.
8. Prospectus relating to Registrant's Institutional Shares.
4
<PAGE>
Approval of Rule 18f-3 Plan
RESOLVED, that the Directors, including a majority of the
Directors who are not "interested persons" of the Fund, have determined that the
creation of multiple classes of shares in the best interests of the Fund;
FURTHER RESOLVED, that the Fund may offer two classes of
shares:
(i) ISI Strategy Fund Shares (the "ISI Shares"), which are offered
in connection with the Fund's Distribution Plan for such
shares, adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 authorizing distribution fees in the
aggregate of .25% of the average daily net assets attributable
to the ISI Shares; and
(ii) Wilshire Institutional Strategy Fund Shares, which are offered
without a Rule 12b-1 Plan or sales charges.
FURTHER RESOLVED, that the Fund's proposed Rule 18f-3 Plan,
including the expense allocations described therein, is in the best interests of
the Fund and each of its classes;
FURTHER RESOLVED, that the proposed Rule 18f-3 Plan for the
Fund be, and hereby is, approved, in substantially the form presented to this
meeting; and
FURTHER RESOLVED, that the proper officers of the Fund be, and
they hereby are, authorized and directed to take any and all actions necessary
or appropriate to cause the proposed Rule 18f-3 Plan to be filed with the
Securities and Exchange Commission.
5
<PAGE>
EX-99.B(24)
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Edward S. Hyman, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as Chairman and a director of the Fund
such Registration Statement and any and all such pre- and post-effective
amendments filed with the Securities and Exchange Commission under the 1933 Act
and the 1940 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorney-in-fact
and agent, or either of them or their substitute or substitutes, shall lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Edward S. Hyman
-------------------------------
Edward S. Hyman
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Truman T. Semans
-------------------------------
Truman T. Semans
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Eugene J. McDonald
-------------------------------
Eugene J. McDonald
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ John F. Kroeger
-------------------------------
John F. Kroeger
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis E. Levy
-------------------------------
Louis E. Levy
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ James J. Cunnane
-------------------------------
James J. Cunnane
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, her true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in her
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/ Rebecca W. Rimel
-------------------------------
Rebecca W. Rimel
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph A. Finelli, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as Chief Financial and Accounting Officer
of the Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Joseph A. Finelli
-------------------------------
Joseph A. Finelli
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and R. Alan
Medaugh, and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable The Strategy Fund, Inc. (the "Fund") to comply with
the Securities Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Fund's Registration Statement on Form N-1A pursuant to the
1933 Act and the 1940 Act, together with any and all pre- and post-effective
amendments thereto, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director of the Fund such Registration Statement and any
and all such pre- and post-effective amendments filed with the Securities and
Exchange Commission under the 1933 Act and the 1940 Act, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorney-in-fact and agent, or either of them or their
substitute or substitutes, shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
-------------------------------
Carl W. Vogt
Date: June 17, 1997
----------------
<PAGE>
THE STRATEGY FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Michael J. Napoli, Jr., whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and R. Alan Medaugh, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable The Strategy Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Michael J. Napoli, Jr.
-------------------------------
Michael J. Napoli, Jr.
Date: June 17, 1997
----------------
