<PAGE>
As Filed With the Securities and Exchange Commission on February 26, 1998
Registration No. 333-31127
811-8291
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 1 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2 [X]
ISI STRATEGY FUND, INC.
-----------------------
(Exact Name of Registrant as Specified in Charter)
717 Fifth Avenue
New York, New York 10022
------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 446-5600
R. Alan Medaugh
717 Fifth Avenue
New York, NY 10022
------------------
(Name and Address of Agent for Service)
Copy to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
- ------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
---
on ____, 1997 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a) of Rule 485
---
- ------------------------------------------------------------------------------
<PAGE>
ISI STRATEGY FUND, INC.
February 26, 1998
Cross Reference Sheet
(ISI Strategy Fund Shares)
Items Required by Form N-1A
<TABLE>
<S> <C> <C>
Part A Information Required in Prospectus Registration Statement Heading
Item 1. Cover Page Cover Page
Item 2. Synopsis Fee Table
Item 3. Condensed Financial Information Financial Highlights (unaudited)
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
Considerations
</TABLE>
- ---------
* Required information will be contained in the Registrant's first Annual
Report to Shareholders containing results of operations, when available.
** Omitted since the answer is negative or the item is not applicable.
<PAGE>
<TABLE>
<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
Part C Other Information
Part C contains the information required by the items
contained therein under the items set forth in the form.
</TABLE>
<PAGE>
The Prospectus dated September 15, 1997 as supplemented by Supplement
dated September 15, 1997 for the ISI Strategy Fund Shares of ISI Strategy
Fund, Inc. (the "Fund"), filed as part of Pre-Effective Amendment No.1 to
Registrant's Registration Statement on Form N-1A (No. 333-31127), filed with
the Securities and Exchange Commission via EDGAR on August 15, 1997 and in
final form pursuant to Rule 497(c), via EDGAR on September 15,1997 (Accession
Number 0000950116-97-001722) is incorporated herein by reference. The
Prospectus is supplemented by the addition of unaudited Financial Highlights
for the period from September 17, 1997 to November 30, 1997, filed herewith.
<PAGE>
Supplement dated February 26, 1998 to Prospectus dated September 15, 1997
as previously supplemented by a supplement dated September 15, 1997
of ISI Strategy Fund Shares
(A Class of ISI Strategy Fund, Inc.)
The Prospectus dated September 15, 1997, as previously supplemented
by a supplement dated September 15, 1997, relating to the ISI Strategy Fund
Shares of ISI Strategy Fund, Inc. (the "Fund") is hereby amended and
supplemented as follows:
By inserting the following section entitled "FINANCIAL HIGHLIGHTS"
after the section entitled "Fee Table":
FINANCIAL HIGHLIGHTS:
Set forth below are the Fund's unaudited financial highlights for the
period from September 17, 1997 (commencement of operations) through November
30, 1997. The Financial Statements and Notes to Financial Statements for the
period from September 17, 1997 through November 30, 1997 (unaudited) are
included in the Statement of Additional Information, which can be obtained at
no charge by calling 1-800-955-7175.
Financial Highlights (for a share outstanding throughout the period)
(Unaudited)
<TABLE>
<CAPTION>
For the Period
September 17, 1997(1)
through
November 30, 1997
- --------------------------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance
Net asset value at beginning of period............................ $.10.00
- --------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income.............................................. 0.07
Net realized and unrealized gain/(loss) on investments............. --
-------
Total from Investment Operations................................... 0.07
Net asset value at end of period................................... $ 10.07
=======
- --------------------------------------------------------------------------------------------------
Total Return(2).......................................................... 0.70%
- --------------------------------------------------------------------------------------------------
Ratios to Average Daily Net Assets:
Expenses............................................................ 1.00%(3)(4)
Net investment income............................................... 2.32%(3)(5)
- --------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of period (000)................................... $ 9,237
Portfolio turnover rate............................................. --
Average commissions per share....................................... $0.0291
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.
2 Total return excludes the effect of sales charge.
3 Annualized.
4 Without the waiver of advisory fees and reimbursement of expenses, the ratio
of expenses to average daily net assets would have been 3.63% (annualized).
5 Without the waiver of advisory fees and reimbursement of expenses, the ratio
of net investment income to average daily net assets would have been (0.31)%
(annualized).
PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE
<PAGE>
ISI STRATEGY FUND, INC.
February 26, 1998
Cross Reference Sheet
(Wilshire Institutional Strategy Fund Shares)
Items Required by Form N-1A
<TABLE>
<S> <C> <C>
Part A Information Required in Prospectus Registration Statement Heading
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
Considerations
</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, for the Wilshire
Institutional Shares when available.
<PAGE>
<TABLE>
<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
(ISI Shares only)
Part C Other Information
Part C contains the information required by the items
contained therein under the items set forth in the form.
</TABLE>
<PAGE>
The Prospectus for the Wilshire Institutional Strategy Fund
Shares of ISI Strategy Fund, Inc. (the "Fund") filed as part of Pre-Effective
Amendment No.1 to Registrant's Registration Statement on Form N-1A (File No.
333-31127), filed with the Securities and Exchange Commission via EDGAR on
August 15, 1997 is incorporated herein by reference.
<PAGE>
The Statement of Additional Information dated September 15, 1997 for
ISI Strategy Fund, Inc. (the "Fund"), filed as part of Pre-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A (No. 333-31127),
filed with the Securities and Exchange Commission via EDGAR on August 15, 1997
and in final form pursuant to Rule 497(e), via EDGAR on September 15, 1997
(Accession No. 0000950116-97-001722) is incorporated herein by reference. The
Statement of Additional Information is supplemented by the addition of
unaudited financial statements for the period from September 17, 1997 to
November 30, 1997, filed herewith.
<PAGE>
Supplement dated February 26, 1998 to Statement of Additional
Information dated September 15, 1997
relating to ISI Strategy Fund Shares
(A Class of ISI Strategy Fund, Inc.)
The Statement of Additional Information dated September 15, 1997, relating to
the ISI Strategy Fund Shares of ISI Strategy Fund, Inc. (the "Fund") is hereby
amended and supplemented as follows.
By inserting the following unaudited financial statements for the period from
September 17, 1997 through November 30, 1997, under the section entitled
"Financial Statement."
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
<PAGE>
ISI
Strategy
Fund Shares
- --------------------------------------------------------------------------------
Directors and Officers
Edward S. Hyman Nancy Lazar
Chairman Vice President
Truman T. Semans David R. Borger
Vice Chairman Vice President
James J. Cunnane Carrie L. Butler
Director Vice President
John F. Kroeger Thomas D. Stevens
Director Vice President
Louis E. Levy Margaret M. Beeler
Director Assistant Vice President
Eugene J. McDonald Keith C. Reilly
Director Assistant Vice President
R. Alan Medaugh Joseph A. Finelli
Director and President Treasurer
Michael J. Napoli, Jr. Amy M. Olmert
Director Secretary
Rebecca W. Rimel Scott J. Liotta
Director Assistant Secretary
Carl W. Vogt, Esq.
Director
Investment Objective
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 diversified investments in
U.S. equity securities and securities issued by the United States
Treasury ("U.S. Treasury Securities").
Investment Advisor
ISI Inc.
717 Fifth Avenue
New York, NY 10022
(800) 955-7175
Shareholder Servicing Agent
Investment Company Capital Corp.
P.O. Box 419426
Kansas City, MO 64141-6426
Distributor
ISI Group Inc.
717 Fifth Avenue
New York, NY 10022
(800) 955-7175
ISI
INTERNATIONAL STRATEGY & INVESTMENT
ISI
STRATEGY
FUND SHARES
(A Class of ISI Strategy Fund, Inc.)
[STRATEGY LOGO]
SEMI-ANNUAL REPORT
November 30, 1997
<PAGE>
Investment Advisor's Report
- --------------------------------------------------------------------------------
This is ISI Strategy Fund's first Investment Advisor's Report. We
appreciate your support.
Fund Investment Philosophy
The Strategy Fund is based on the idea that over a period of time changing
economic conditions present investment opportunities for stocks and bonds. The
Fund's 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 the active management of the percentage of assets held in stocks and
bonds. ISI's economic outlook serves as the basis for the Fund's asset
allocation strategy. The Strategy Fund patterns the equity portion of its
portfolio to replicate the overall U.S. stock market. Wilshire Associates is the
sub-advisor that manages the equity portfolio, matching their proprietary broad
stock market benchmark, the Wilshire 5000. The bond section is managed by ISI.
It is composed solely of Treasuries, whose maturity is actively managed in an
attempt to exceed the return of the Treasury market as a whole.
Investment Environment
The Asian financial crisis appears to have a wide scope and all its
implications are not yet understood. In general, financial crises are typically
good for surviving financial assets. U.S. stocks and bonds should benefit from
the increased liquidity and decreased inflation that are important results of
financial crises. For a historic perspective, please see the following stock
market chart on which we have noted earlier financial crises.
FINANCIAL CRISES AND STOCKS
[GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
S&P 500
-------
68:1 95.0
68:2 90.8
68:3 89.1
68:4 95.7
68:5 97.9
68:6 100.5
68:7 100.3
68:8 98.1
68:9 101.3
68:10 103.8
68:11 105.4
68:12 106.5
69:1 102.0
69:2 101.5
69:3 99.3
69:4 101.3
69:5 104.6
69:6 99.1
69:7 94.7
69:8 94.2
69:9 94.5
69:10 95.5
69:11 96.2
69:12 91.1
70:1 90.3
70:2 87.2
70:3 88.7
70:4 86.0
70:5 76.1
70:6 75.6
70:7 75.7
70:8 77.9
70:9 82.6
70:10 84.4
70:11 84.3
70:12 90.1
71:1 93.5
71:2 97.1
71:3 99.6
71:4 103.0
71:5 101.6
71:6 99.7
71:7 99.0
71:8 97.2
71:9 99.4
71:10 97.3
71:11 92.8
71:12 99.2
72:1 103.3
72:2 105.2
72:3 107.7
72:4 108.8
72:5 107.7
72:6 108.0
72:7 107.2
72:8 111.0
72:9 109.4
72:10 109.6
72:11 115.1
72:12 117.5
73:1 118.4
73:2 114.2
73:3 112.4
73:4 110.3
73:5 107.2
73:6 104.8
73:7 105.8
73:8 103.8
73:9 105.6
73:10 109.8
73:11 102.0
73:12 94.8
74:1 96.1
74:2 93.5
74:3 97.4
74:4 92.5
74:5 89.7
74:6 89.8
74:7 82.8
74:8 76.0
74:9 68.1
74:10 69.4
74:11 71.7
74:12 67.1
75:1 72.6
75:2 80.1
75:3 83.8
75:4 84.7
75:5 90.1
75:6 92.4
75:7 92.5
75:8 85.7
75:9 84.7
75:10 88.6
75:11 90.1
75:12 88.7
76:1 96.9
76:2 100.6
76:3 101.1
76:4 101.9
76:5 101.2
76:6 101.8
76:7 104.2
76:8 103.3
76:9 105.5
76:10 101.9
76:11 101.2
76:12 104.7
77:1 103.8
77:2 101.0
77:3 100.6
77:4 99.1
77:5 98.8
77:6 99.3
77:7 100.2
77:8 97.8
77:9 96.2
77:10 93.7
77:11 94.3
77:12 93.8
78:1 90.3
78:2 89.0
78:3 88.8
78:4 92.7
78:5 97.4
78:6 97.7
78:7 97.2
78:8 103.9
78:9 103.9
78:10 100.6
78:11 94.7
78:12 96.1
79:1 99.7
79:2 98.2
79:3 100.1
79:4 102.1
79:5 99.7
79:6 101.7
79:7 102.7
79:8 107.4
79:9 108.6
79:10 104.5
79:11 103.7
79:12 107.8
80:1 110.9
80:2 115.3
80:3 104.7
80:4 103.0
80:5 107.7
80:6 114.6
80:7 119.8
80:8 123.5
80:9 126.5
80:10 130.2
80:11 135.7
80:12 133.5
81:1 133.0
81:2 128.4
81:3 133.2
81:4 134.4
81:5 131.7
81:6 132.3
81:7 129.1
81:8 129.6
81:9 118.3
81:10 119.8
81:11 122.9
81:12 123.8
82:1 117.3
82:2 114.5
82:3 110.8
82:4 116.3
82:5 116.4
82:6 109.7
82:7 109.4
82:8 109.7
82:9 122.4
82:10 132.7
82:11 138.1
82:12 139.4
83:1 144.3
83:2 146.8
83:3 151.9
83:4 157.7
83:5 164.1
83:6 166.4
83:7 167.0
83:8 162.4
83:9 167.2
83:10 167.7
83:11 165.2
83:12 164.4
84:1 166.4
84:2 157.3
84:3 157.4
84:4 157.6
84:5 156.6
84:6 153.1
84:7 151.1
84:8 164.4
84:9 166.1
84:10 164.8
84:11 166.3
84:12 164.5
85:1 171.6
85:2 180.9
85:3 179.4
85:4 180.6
85:5 184.9
85:6 188.9
85:7 192.5
85:8 188.3
85:9 184.1
85:10 186.2
85:11 197.5
85:12 207.3
86:1 208.2
86:2 219.4
86:3 232.3
86:4 238.0
86:5 238.5
86:6 245.3
86:7 240.2
86:8 245.0
86:9 238.3
86:10 237.4
86:11 245.1
86:12 248.6
87:1 264.5
87:2 280.9
87:3 292.5
87:4 289.3
87:5 289.1
87:6 301.4
87:7 310.1
87:8 329.4
87:9 318.7
87:10 280.2
87:11 245.0
87:12 241.0
88:1 250.5
88:2 258.1
88:3 265.7
88:4 262.6
88:5 256.1
88:6 270.7
88:7 269.1
88:8 263.7
88:9 268.0
88:10 277.4
88:11 271.0
88:12 276.5
89:1 285.4
89:2 294.0
89:3 292.7
89:4 302.3
89:5 313.9
89:6 323.7
89:7 331.9
89:8 346.6
89:9 347.3
89:10 347.4
89:11 340.2
89:12 348.6
90:1 340.0
90:2 330.5
90:3 338.5
90:4 338.2
90:5 350.3
90:6 360.4
90:7 360.0
90:8 330.8
90:9 315.4
90:10 307.1
90:11 315.3
90:12 328.8
91:1 325.5
91:2 362.3
91:3 372.3
91:4 379.7
91:5 378.0
91:6 378.3
91:7 380.2
91:8 389.4
91:9 387.2
91:10 386.9
91:11 385.9
91:12 388.5
92:1 416.1
92:2 412.6
92:3 407.4
92:4 407.4
92:5 414.8
92:6 408.3
92:7 415.1
92:8 417.9
92:9 418.5
92:10 412.5
92:11 422.8
92:12 435.6
93:1 435.2
93:2 441.7
93:3 450.2
93:4 443.1
93:5 445.3
93:6 448.1
93:7 447.3
93:8 454.1
93:9 459.2
93:10 463.9
93:11 462.9
93:12 466.0
94:1 473.0
94:2 471.6
94:3 463.8
94:4 447.2
94:5 450.9
94:6 454.8
94:7 451.4
94:8 464.2
94:9 467.0
94:10 463.8
94:11 461.0
94:12 455.2
95:1 465.3
95:2 481.9
95:3 493.2
95:4 507.9
95:5 523.8
95:6 539.4
95:7 557.4
95:8 559.1
95:9 578.8
95:10 582.9
95:11 595.5
95:12 614.6
96:1 614.4
96:2 649.5
96:3 647.1
96:4 647.2
96:5 661.2
96:6 668.5
96:7 644.1
96:8 662.7
96:9 674.9
96:10 701.5
96:11 735.7
96:12 743.3
97:1 766.2
97:2 798.4
97:3 792.2
97:4 763.9
97:5 833.1
97:6 876.3
97:7 925.3
97:8 927.7
97:9 937.0
97:10 951.2
97:11 938.9
97:12 962.4
98:1 NA
Source: ISI Inc.
There are two factors holding us back from a full equity component. First,
the extent of this crisis and its solutions are not known. Second, unlike
earlier crises, the U.S. stock market did not sell off ahead of the actual
crisis, leaving stocks somewhat overvalued. As you will see in the portfolio
management section, the Fund currently has a 65% stock market weighting, as we
believe that the favorable elements for the U.S. economy will generally overcome
the negative impact on corporate earnings.
1
<PAGE>
Investment Advisor's Report (continued)
- --------------------------------------------------------------------------------
Portfolio Management
Overview
ISI's management strategy can be described this way: In a defensive
environment for financial assets, where rising interest rates and weak corporate
earnings are expected, the Fund will move toward a heavier weighting in
fixed-income securities with an emphasis on maturities of five years or less.
Conversely, in an environment more favorable to financial assets, low inflation,
declining interest rates and rising corporate profits, the Fund will move toward
a heavier weighting in equities along with longer maturity Treasuries (see table
below).
Strategies for Different Financial
Environments
- ----------------------------------------------------------
Weighting
Outlook for Financial Assets Equities Treasuries
- ----------------------------------------------------------
Defensive 40% 60%
- ----------------------------------------------------------
Neutral 60% 40%
- ----------------------------------------------------------
Aggressive 80% 20%
- ----------------------------------------------------------
Equity Portfolio
The goal of the Fund's equity portfolio is to provide broad exposure to the
U.S. equity market as represented by the Wilshire 5000, the broadest measure of
the U.S. equity market. Given the size of the potential universe of stocks and
the amount of assets we can invest, the initial portfolio has been built and
currently maintains an industry and capitalization profile very similar to that
of the benchmark Wilshire 5000. In order to achieve this profile, we have had to
alter the weightings of selected individual securities. We are quite pleased
with the minimal variances that are illustrated below in the capitalization
alignment of the portfolio relative to its benchmark.
ISI Strategy Fund Equity Portfolio
Capitalization Profile
(As of 11/30/97)
- ------------------------------------------------------------------
ISI Strategy Fund Wilshire 5000
Equity Portfolio Index Variance
- ------------------------------------------------------------------
First Decile 83.07% 82.37% 0.70%
- ------------------------------------------------------------------
Second Decile 8.85% 8.69% 0.16%
- ------------------------------------------------------------------
Third Decile 3.97% 3.96% 0.01%
- ------------------------------------------------------------------
Fourth Decile 1.65% 2.12% -0.47%
- ------------------------------------------------------------------
Fifth Decile 1.66% 1.23% 0.43%
- ------------------------------------------------------------------
Sixth Decile 0.55% 0.74% -0.19%
- ------------------------------------------------------------------
Seventh Decile 0.08% 0.45% -0.37%
- ------------------------------------------------------------------
Eighth Decile 0.00% 0.27% -0.27%
- ------------------------------------------------------------------
Ninth Decile 0.00% 0.13% -0.13%
- ------------------------------------------------------------------
Tenth Decile 0.17% 0.04% 0.13%
- ------------------------------------------------------------------
Portfolio Total 100.00% 100.00%
- ------------------------------------------------------------------
Similarly, the industry diversification of the portfolio is very much in
line with that of the benchmark Wilshire 5000. Also, the Fund's top 10 holdings
reflect a representation of the largest securities in the U.S. equity market
(see table on page 3). As the portfolio grows, we will continue to use sampling
technology to achieve the portfolio's desired overall characteristics. It is our
intention to continue to manage the portfolio with an eye toward maintaining an
industry and capitalization profile that closely reflects the alignment of the
benchmark Wilshire 5000.
2
<PAGE>
Investment Advisor's Report
- --------------------------------------------------------------------------------
(concluded)
ISI Strategy Fund Equity Portfolio --
Top 10 Holdings
(As of 11/30/97)
- -----------------------------------------------------
% Market
Company Value
- -----------------------------------------------------
General Electric Co. 1.87%
- -----------------------------------------------------
Microsoft Corp. 1.67%
- -----------------------------------------------------
Exxon Corp. 1.34%
- -----------------------------------------------------
Intel Corp. 1.31%
- -----------------------------------------------------
Coca-Cola Co. 1.27%
- -----------------------------------------------------
Merck & Co. Inc. 1.12%
- -----------------------------------------------------
Loews Corp. 1.08%
- -----------------------------------------------------
Wells Fargo & Co. 1.04%
- -----------------------------------------------------
Procter & Gamble Co. 1.03%
- -----------------------------------------------------
Pfizer Inc. 0.98%
- -----------------------------------------------------
Subtotal 12.71%
- -----------------------------------------------------
Bond Portfolio
The bond portfolio had an average maturity of 12.6 years as of November 28.
More recently, we have extended the portfolio's maturity to 13.2 years,
believing that one of the main benefits from the Asian financial crisis will be
lower inflation in the U.S. With "real" bond yields already high, lower
inflation should boost U.S. bond prices.
The Strategy Fund began on September 16 and now has over $10 million in
assets. We appreciate the vote of confidence you have given the newest member of
the ISI Family of Funds.
Sincerely,
/s/ R. Alan Medaugh
- -------------------
R. Alan Medaugh
President
December 19, 1997
SEC Calculations
- --------------------------------------------------------------------------------
The shareholder letter included in this report contains statistics designed
to help you evaluate the performance of your Fund's management. The Securities
and Exchange Commission (SEC) requires that when we report such figures, we also
include the Fund's total return, according to a standardized formula, for
various time periods through the end of the most recent calendar quarter. The
SEC total return figures differ from those we reported because the time periods
may be different and because the SEC calculation includes the impact of the
Fund's currently effective 4.45% maximum sales charge.
- ----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
% Return with
Periods ended 12/31/97: Sales Charge
- ----------------------------------------------------
One Year --
- ----------------------------------------------------
Since Inception (9/16/97) (3.89)%
- ----------------------------------------------------
These total returns correspond to those experienced by individual
shareholders only if their shares were purchased on the first day of each time
period and the maximum sales charge was paid.
Any performance figures shown are for the full period indicated. Since
investment return and principal value will fluctuate, an investor's shares may
be worth more or less than their original cost when redeemed. Past performance
is not an indicator of future results.
3
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
Statement of Net Assets November 30, 1997
(Unaudited)
Market
Value
Shares (Note A)
- --------------------------------------------------------
COMMON STOCKS -- 64.1%
Aerospace -- 1.0%
The Boeing Company 600 $ 31,875
Lockheed Martin Corporation 100 9,756
OEA, Inc. 200 6,225
Raytheon Company 200 11,187
Rockwell International Corporation 200 9,750
Rohr, Inc.* 300 9,187
United Technologies Corporation 200 14,988
---------
92,968
Air Transportation -- 0.3%
Airborne Freight Corporation 100 6,369
AMR Corporation* 100 12,119
Comair Holdings, Inc. 300 6,637
Federal Express Corporation* 100 6,706
---------
31,831
---------
Apparel -- 0.4%
Fabri-Centers of America* 500 10,469
NIKE, Inc. 600 29,213
---------
39,682
---------
Banks -- 5.5%
Banc One Corporation 200 10,275
The Bank of New York
Company, Inc. 300 16,125
BankAmerica Corporation 400 29,200
BankBoston Corporation 100 8,912
Bankers Trust New York
Corporation 100 11,856
Barnett Banks, Inc. 100 7,037
CCB Financial Corporation 100 9,600
Chase Manhattan Corporation 100 10,863
Citicorp 300 35,981
Community Banks, Inc. 100 4,225
CoreStates Financial Corporation 100 7,731
Fifth Third Bancorp 200 14,100
First Chicago NBD Corporation 300 23,475
First Financial Bancorp 200 9,425
First Union Corporation 600 29,250
Fleet Financial Group, Inc. 300 19,819
J. P. Morgan & Company
Incorporated 100 11,419
KeyCorp 200 13,487
Mellon Bank Corporation 200 11,338
National Bancorp of Alaska, Inc. 100 12,000
National City Bancshares, Inc. 210 10,080
National City Corporation 200 13,350
NationsBank Corporation 300 18,019
North Fork Bancorp, Inc. 200 6,075
Banks -- continued
Norwest Corporation 400 $ 14,975
ONBANCorp, Inc. 100 6,725
Pacific Century Financial
Corporation 100 5,100
PNC Bank Corp. 300 16,144
Provident Financial Group, Inc. 200 9,000
SunTrust Banks, Inc. 100 7,100
U.S. Bancorp 300 32,269
Wachovia Corporation 100 7,700
Wells Fargo & Company 200 61,450
Wilmington Trust Corporation 100 5,838
---------
509,943
---------
Business Machines -- 4.2%
3Com Corporation* 200 7,250
BMC Software, Inc.* 200 12,975
Centigram Communications
Corporation* 500 8,156
Cisco Systems, Inc.* 300 25,875
Compaq Computer Corporation 300 18,731
Concord EFS, Inc.* 300 7,650
Data Dimensions, Inc.* 300 5,475
Dell Computer Corporation* 500 42,094
Digital Equipment Corporation* 200 9,850
Honeywell, Inc. 100 6,550
International Business
Machines Corporation 400 43,825
MicroAge, Inc.* 400 8,050
Microsoft Corporation* 700 99,050
Novellus Systems, Inc.* 100 3,762
Oracle Corporation* 400 13,325
Pitney Bowes, Inc. 100 8,406
Sigma Designs, Inc.* 1,000 5,000
Sun Microsystems, Inc.* 300 10,800
Tech Data Corporation* 200 8,075
Xerox Corporation 600 46,612
---------
391,511
---------
Business Services -- 2.6%
America Online, Inc.* 100 7,550
Automatic Data Processing, Inc. 700 39,375
Computer Associates
International, Inc. 450 23,428
Cytec Industries Inc.* 200 9,150
DST Systems, Inc.* 200 7,412
First Data Corporation 400 11,325
Glasgal Communications, Inc.* 1,200 6,225
HBO & Company 400 17,950
Mentor Corporation 300 10,200
4
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
Statement of Net Assets (continued) November 30, 1997
(Unaudited)
Market
Value
Shares (Note A)
- --------------------------------------------------------
COMMON STOCKS -- continued
Business Services -- continued
National Service Industries 200 $ 9,362
PeopleSoft, Inc.* 200 13,088
Perceptron, Inc.* 400 8,850
Republic Industries, Inc.* 400 10,425
SS&C Technologies, Inc.* 800 9,050
Synopsys, Inc.* 200 8,225
Transworld Home Healthcare, Inc.* 700 5,512
USA Waste Services, Inc.* 500 16,531
Waste Management, Inc. 400 9,850
Yahoo! Inc.* 200 10,225
York Research Corporation* 1,100 8,800
---------
242,533
---------
Chemicals -- 1.8%
Air Products and Chemicals, Inc. 100 7,669
BetzDearborn, Inc. 100 6,087
Crompton & Knowles Corporation 200 5,300
The Dow Chemical Company 200 19,750
duPont (E.I.) de Nemours
and Company 700 42,394
Minnesota Mining and
Manufacturing Company 300 29,231
Monsanto Company 400 17,475
OXiGENE, Inc.* 400 7,100
PPG Industries, Inc. 300 17,381
Praxair, Inc. 200 8,787
---------
161,174
---------
Construction -- 0.5%
Masco Corporation 200 9,425
Puerto Rican Cement
Company, Inc. 200 8,438
Sherwin-Williams Company 600 17,137
Toll Brothers, Inc.* 400 9,650
---------
44,650
---------
Consumer Durables -- 0.4%
Bassett Furniture Industries, Inc. 400 11,750
Newell Company 400 16,325
Windmere-Durable Holdings Inc.* 400 9,650
---------
37,725
---------
Containers -- 0.2%
Crown Cork & Seal Company Inc. 200 9,763
Stone Container Corporation 500 6,250
---------
16,013
---------
Cosmetics -- 1.3%
Alberto-Culver Company 200 6,237
Colgate-Palmolive Company 300 20,044
Cosmetics -- continued
The Dial Corporation 400 $ 7,750
Gillette Corporation 200 18,463
Procter & Gamble Company 800 61,050
ThermoLase Corporation* 500 6,875
---------
120,419
---------
Domestic Oil -- 0.9%
Atlantic Richfield Company 400 32,600
Cornerstone Propane Partners, L.P. 400 9,350
Diamond Offshore Drilling, Inc. 200 9,975
Phillips Petroleum Company 200 9,687
Unocal Corporation 200 7,962
USX-Marathon Group 400 13,700
---------
83,274
---------
Drugs and Medicine -- 6.4%
Abbott Laboratories 200 13,000
American Home Products
Corporation 400 27,950
Amgen, Inc.* 400 20,450
Barr Laboratories, Inc.* 200 7,200
Baxter International Inc. 700 35,437
Bergen Brunswig Corporation 200 8,587
Boston Scientific Corporation* 200 9,038
Bristol-Myers Squibb Company 500 46,812
Cardinal Health, Inc. 100 7,575
Carter-Wallace, Inc. 500 8,281
Columbia/HCA Healthcare
Corporation 600 17,700
Eli Lilly and Company 400 25,225
Genentech, Inc.* 200 11,675
Guidant Corporation 200 12,850
HealthCare COMPARE Corporation* 200 10,425
HEALTHSOUTH Corporation* 400 10,500
Inhale Therapeutic Systems* 300 9,300
Johnson & Johnson 400 25,175
Medtronic, Inc. 1,100 52,525
Merck & Co., Inc. 700 66,194
PAREXEL International Corporation* 200 6,900
Pfizer Inc. 800 58,200
Renal Treatment Centers, Inc.* 300 9,994
Schering-Plough Corporation 600 37,613
Sola International, Inc.* 200 6,050
Sybron International Corporation* 200 8,800
Tenet Healthcare Corporation* 300 9,506
United Healthcare Corporation 200 10,413
Warner-Lambert Company 100 13,987
Zonagen, Inc.* 200 6,200
---------
593,562
---------
5
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
Statement of Net Assets (continued) November 30, 1997
(Unaudited)
Market
Value
Shares (Note A)
- --------------------------------------------------------
COMMON STOCKS -- continued
Electronics -- 3.9%
Alliant Techsystems, Inc.* 100 $ 5,944
AMP, Inc. 300 13,031
Applied Materials, Inc.* 600 19,800
EMC Corporation* 400 12,125
Electronic Data Systems Corporation 400 15,200
General Semiconductor, Inc.* 900 9,788
General Signal Corporation 200 8,162
GenRad, Inc.* 300 7,969
Glenayre Technologies, Inc.* 800 8,700
Hewlett-Packard Company 500 30,531
Intel Corporation 1,000 77,625
Level One Communications, Inc.* 200 8,350
Lucent Technologies, Inc. 400 32,050
Methode Electronics, Inc. - Class A 400 6,500
Micron Technology, Inc.* 500 12,437
Motorola, Inc. 200 12,575
MRV Communications, Inc.* 300 8,475
NETCOM On-Line Communication
Services, Inc. 500 9,938
NEXTEL Communications,
Inc.--Class A* 600 15,150
Nextlevel Systems, Inc.* 500 6,625
Tellabs, Inc.* 400 20,800
Texas Instruments Incorporated 200 9,850
Zilog, Inc.* 400 7,650
---------
359,275
---------
Energy and Utilities -- 2.4%
American Electric Power Company 200 9,912
Consolidated Edison Company
of New York, Inc. 300 11,325
Duke Energy Corporation 600 31,200
Edison International 500 13,406
Enron Corporation 400 15,500
FPL Group, Inc. 800 44,750
MDU Resources Group, Inc. 300 8,962
New York State Electric & Gas
Corporation 200 6,150
NICOR, Inc. 100 4,025
OGE Energy Corp. 200 10,175
PG&E Corporation 700 19,775
Southern Company 500 12,000
Texas Utilities Company 300 12,000
WICOR, Inc. 200 9,225
The Williams Companies, Inc. 200 10,688
---------
219,093
---------
Energy - Raw Materials -- 1.2%
AMCOL International Corporation 500 $ 12,000
Baker Hughes Incorporated 400 16,750
Burlington Resources Inc. 200 8,900
Halliburton Company 200 10,787
Helmerich & Payne, Inc. 100 7,606
Key Energy Group, Inc.* 300 7,294
McDermott International, Inc. 200 6,300
Occidental Petroleum Corporation 600 17,812
Schlumberger Limited 300 24,694
---------
112,143
---------
Food and Agriculture -- 3.1%
Archer-Daniels-Midland Company 400 8,550
Bob Evans Farms, Inc. 400 8,000
Campbell Soup Company 200 11,200
The Coca-Cola Company 1,200 75,000
Coca-Cola Enterprises Inc. 400 12,225
ConAgra, Inc. 600 21,563
CPC International, Inc. 100 10,337
Dean Foods Company 100 5,312
Flowers Industries, Inc. 400 7,975
General Mills, Inc. 100 7,400
H.J. Heinz Company 200 10,012
Kellogg Company 600 27,825
Lance, Inc. 200 5,088
McCormick & Co., Inc. 300 7,950
Nash Finch Company 400 7,500
PepsiCo, Inc. 400 14,750
Sara Lee Corporation 600 31,725
Suiza Foods Corporation* 200 11,638
---------
284,050
---------
Gold -- 0.1%
Homestake Mining Company 800 8,400
---------
Insurance -- 2.7%
Acceptance Insurance
Companies, Inc.* 300 7,293
Aetna Inc. 100 7,538
Allstate Corporation 300 25,763
American General Corporation 700 37,712
American International Group, Inc. 400 40,325
Amerin Corporation* 300 7,013
Chubb Corporation 200 14,187
Cigna Corporation 100 16,725
Erie Indemnity Company 200 5,850
General Re Corporation 100 19,850
Life Re Corporation 500 28,563
Marsh and McLennan Companies, Inc. 100 7,444
6
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
Statement of Net Assets (continued) November 30, 1997
(Unaudited)
Market
Value
Shares (Note A)
- --------------------------------------------------------
COMMON STOCKS -- continued
Insurance -- continued
The PMI Group, Inc. 100 $ 6,500
RLI Corp. 200 8,737
Selective Insurance Group, Inc. 100 5,038
Western National Corporation 300 8,850
---------
247,388
---------
International Oil -- 2.2%
Amoco Corp. 100 9,000
Aviva Petroleum, Inc.* 6,600 9,900
Chevron Corporation 700 56,131
Exxon Corporation 1,300 79,300
Mobil Corporation 300 21,581
Texaco Inc. 400 22,600
---------
198,512
---------
Liquor -- 0.2%
Anheuser-Busch Companies, Inc. 400 17,275
---------
Media -- 1.6%
AMC Entertainment Inc.* 500 10,969
CBS Corporation 500 15,000
Comcast Corporation 400 11,200
Cox Communications, Inc.* 300 10,181
Gannett Company, Inc. 200 11,612
Tele-Communications, Inc.* 400 9,163
Time Warner Inc. 600 34,950
Viacom, Inc. - Class B* 1,200 42,000
---------
145,075
---------
Miscellaneous Finance -- 4.0%
American Express Company 300 23,663
Area Bancshares Corporation 400 8,100
Associated Estates Realty Corporation 400 9,025
Brooks Fiber Properties, Inc.* 200 10,950
Cali Realty Corporation 100 3,969
Capital Factors Holdings, Inc.* 500 8,688
The Charles Schwab Corporation 500 19,281
CPB, Inc. 400 8,400
Everest Reinsurance Holdings, Inc. 200 7,588
Fannie Mae 600 31,687
First Washington Realty Trust, Inc. 400 10,075
FIRSTPLUS Financial Group, Inc. 200 7,625
Franklin Resources, Inc. 200 17,975
Freddie Mac 500 20,625
Green Tree Financial Corporation 400 12,250
Household International, Inc. 100 12,600
MBNA Corporation 500 13,281
Mechanics Savings Bank* 400 10,250
Merrill Lynch & Co., Inc. 200 14,038
Miscellaneous Finance -- continued
Morgan Stanley, Dean Witter,
Discover and Co. 300 $ 16,294
Northwest Savings Bank 400 5,600
Patriot American Hospitality, Inc. 300 9,375
Prime Retail, Inc. 600 8,663
SLM Holding Corporation 100 12,912
Travelers Group, Inc. 939 47,420
United Asset Management
Corporation 300 7,819
Washington Mutual, Inc. 200 13,825
---------
371,978
---------
Miscellaneous -- 0.3%
CIENA Corporation* 200 10,800
Lason Holdings, Inc.* 300 8,400
NEXTLINK Communications, Inc.* 400 8,100
---------
27,300
---------
Motor Vehicles -- 1.1%
Cascade Corporation 500 9,000
Chrysler Corporation 600 20,588
Eaton Corporation 100 9,444
Echlin Inc. 200 6,337
Ford Motor Company 400 17,200
General Motors Corporation 400 24,400
Navistar International Corporation* 300 6,600
U.S. Rentals, Inc.* 300 7,706
---------
101,275
---------
Non-Durables and Entertainment -- 0.9%
Mattel, Inc. 400 16,025
McDonald's Corporation 1,100 53,350
Service Corporation International 300 10,969
Tricon Global Restaurants, Inc.* 40 1,352
---------
81,696
---------
Non-Ferrous Metals -- 0.3%
Aluminum Company of America 300 20,175
Cyprus Amax Minerals Company 500 9,156
---------
29,331
---------
Optical and Photo -- 0.2%
Corning Inc. 200 8,487
Eastman Kodak Company 200 12,125
---------
20,612
---------
Paper and Forest Products -- 0.7%
Bowater Incorporated 200 8,975
Chesapeake Corporation 200 6,850
Georgia-Pacific Corporation 100 8,538
International Paper Company 200 9,488
7
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
Statement of Net Assets (continued) November 30, 1997
(Unaudited)
Market
Value
Shares (Note A)
- --------------------------------------------------------
COMMON STOCKS -- continued
Paper and Forest Products-- continued
Jefferson Smurfit Corporation* 500 $ 8,250
Kimberly-Clark Corporation 200 10,413
Weyerhaeuser Company 300 15,844
---------
68,358
---------
Producer Goods -- 3.3%
Albany International Corp. 300 7,294
AlliedSignal Inc. 400 14,850
Caterpillar Inc. 200 9,588
Corporate Express, Inc.* 400 6,250
Deere and Company 600 32,888
Dover Corporation 100 6,706
Emerson Electric Company 200 11,000
General Cigar Holdings, Inc.* 300 7,050
General Electric Company 1,500 110,625
Harnischfeger Industries, Inc. 200 7,637
Harsco Corporation 100 3,963
Illinois Tool Works, Inc. 400 21,925
Jabil Circuit, Inc.* 200 9,625
Tenneco, Inc. 200 8,662
Tokheim Corporation 600 11,288
Trinity Industries, Inc. 100 4,537
U.S. Industries, Inc. 300 7,725
UCAR International, Inc.* 200 7,988
Woodward Governor Company 300 9,825
York International Corporation 100 4,631
---------
304,057
---------
Railroad and Shipping -- 0.5%
Burlington Northern Santa Fe 400 36,600
Union Pacific Corporation 200 12,000
---------
48,600
---------
Real Property -- 0.3%
Arbor Property Trust 1,000 10,750
Simon DeBartolo Group, Inc. 400 13,075
---------
23,825
---------
Retail -- 3.1%
Barnes & Noble, Inc. 200 6,188
Borders Group, Inc.* 300 8,569
CUC International, Inc.* 300 8,625
CVS Corporation 200 13,275
Dayton Hudson Corporation 200 13,288
Family Dollar Stores, Inc. 300 8,306
Federated Department Stores, Inc.* 200 9,112
The Gap, Inc. 200 10,737
Giant Food, Inc. 200 6,750
Heilig-Meyers Company 600 7,763
The Home Depot, Inc. 600 33,562
Retail -- continued
J.C. Penney Company, Inc. 200 $ 12,850
Mac Frugals Bargains Closeouts, Inc.* 300 12,863
The May Department Stores Company 300 16,125
Safeway Inc.* 300 18,225
Sears, Roebuck and Co. 200 9,163
Shopko Stores, Inc.* 400 8,650
Toys "R" Us, Inc.* 300 10,238
Wal-Mart Stores, Inc. 1,300 51,919
Walgreen Company 700 22,531
---------
288,739
---------
Steel -- 0.2%
Allegheny Teledyne Inc. 400 10,300
National Steel Corporation - Class B* 600 9,000
---------
19,300
---------
Telephone -- 3.8%
AirTouch Communications, Inc.* 500 19,625
Ameritech Corporation 300 23,119
AT&T Corporation 900 50,288
Bell Atlantic Corporation 500 44,625
BellSouth Corporation 600 32,850
GTE Corporation 200 10,112
Intermedia Communications Inc.* 700 34,737
Jacor Communications, Inc.* 200 8,750
LCI International, Inc.* 300 8,269
MCI Communications Corporation 500 21,969
McLeodUSA Incorporated - Class A* 200 7,400
PairGain Technologies, Inc.* 300 7,087
SBC Communications Inc. 500 36,406
Sprint Corporation 200 11,713
U.S. West Communications Group 300 13,556
WorldCom, Inc.* 500 16,000
---------
346,506
---------
Tires and Rubber -- 0.2%
Cooper Tire and Rubber Company 300 6,712
The Goodyear Tire & Rubber Company 200 12,138
---------
18,850
---------
Tobacco -- 1.0%
Loews Corporation 600 63,675
Philip Morris Companies Inc. 700 30,450
---------
94,125
---------
Travel and Recreation -- 1.1%
AMERCO* 200 5,650
Carnival Corporation 600 32,437
Harrah's Entertainment, Inc.* 400 8,025
HFS, Inc.* 100 6,863
8
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
Statement of Net Assets (concluded) November 30, 1997
(Unaudited)
Market
Shares/ Value
Par (000) (Note A)
- --------------------------------------------------------
COMMON STOCKS -- concluded
Travel and Recreation -- continued
ITT Corporation* 100 $ 7,588
Marriott International, Inc. 100 7,244
Video Lottery Technologies, Inc.* 500 5,750
The Walt Disney Company 300 28,481
----------
102,038
----------
Trucking and Freight -- 0.2%
Expeditors International of
Washington, Inc. 200 7,788
Heartland Express, Inc.* 400 9,450
----------
17,238
----------
Total Common Stocks
(Cost $5,956,101) 5,920,324
----------
U.S. TREASURY BONDS -- 31.3%
10.375%, 11/15/12 $1,500 1,979,766
7.875%, 2/15/21 750 909,023
----------
Total U.S. Treasury Bonds
(Cost $2,849,297) 2,888,789
----------
REPURCHASE AGREEMENT -- 3.1%
Goldman Sachs & Co., 5.50% $289
Dated 11/28/97, to be repurchased
on 12/1/97, collateralized by
U.S. Treasury Bonds with a market
value of $295,191.
(Cost $289,000) $ 289,000
----------
Total Investment in Securities -- 98.5%
(Cost $9,094,398)** 9,098,113
----------
Other Assets in Excess of
Liabilities, Net -- 1.5% 138,884
----------
Net Assets -- 100.0% $9,236,997
==========
Net Asset Value and Redemption
Price Per Share
($9,236,997 / 917,290 shares outstanding) $10.07
======
Maximum Offering Price Per Share
($10.07 / 0.955 ) $10.54
======
- --------------------------------------------------------
* Non-income producing security.
** Also aggregate cost for federal tax purposes.
See Notes to Financial Statements.
9
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
(Unaudited) For the Period
September 16, 1997(1)
through
November 30, 1997
- --------------------------------------------------------------------------------------------------
<S><C>
INVESTMENT INCOME (NOTE A):
Interest $ 30,333
Dividends 11,542
--------
Total income 41,875
--------
EXPENSES:
Printing and postage 13,172
Custodian fee (Note A) 6,285
Audit fee 5,920
Investment advisory fee (Note B) 5,049
Transfer agent fee (Note B) 4,662
Distribution fee (Note B) 3,156
Pricing fee 1,836
Accounting fee (Note B) 1,641
Registration fees 1,540
Administration fee 1,515
Miscellaneous 824
Directors' fees 340
Organizational expense (Note A) 205
--------
Total expenses 46,145
Less: Fees waived and expenses reimbursed (Note B) (33,522)
--------
Net expenses 12,623
--------
Net investment income 29,252
--------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Change in unrealized appreciation or depreciation of investments 3,715
--------
Net unrealized gain on investments 3,715
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 32,967
========
</TABLE>
- --------------------------------------------------------
(1) Commencement of operations.
See Notes to Financial Statements.
10
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
(Unaudited) For the Period
September 16, 1997(1)
through
November 30, 1997
- ------------------------------------------------------------------------------------------------------
<S><C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 29,252
Net realized gain/(loss) from security transactions --
Change in unrealized appreciation or depreciation of investments 3,715
-----------
Net increase in net assets resulting from operations 32,967
-----------
CAPITAL SHARE TRANSACTIONS (NOTE C):
Proceeds from sale of shares 9,227,283
Value of shares issued in reinvestment of dividends --
Cost of shares repurchased (23,253)
-----------
Increase in net assets derived from capital share transactions 9,204,030
-----------
Total increase in net assets 9,236,997
NET ASSETS:
Beginning of period --
-----------
End of period $9,236,997
==========
</TABLE>
- --------------------------------------------------------
(1) Commencement of operations.
See Notes to Financial Statements.
11
<PAGE>
ISI Strategy Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout the period)
(Unaudited)
<TABLE>
<CAPTION>
For the Period
September 16, 1997(1)
through
November 30, 1997
- -----------------------------------------------------------------------------------
<S><C>
Per Share Operating Performance:
Net asset value at beginning of period $10.00
------
Income from Investment Operations:
Net investment income 0.07
Net realized and unrealized gain/(loss) on investments --
------
Total from Investment Operations 0.07
------
Net asset value at end of period $10.07
======
Total Return(2) 0.70%
Ratios to Average Daily Net Assets:
Expenses 1.00%(3,4)
Net investment income 2.32%(3,5)
Supplemental Data:
Net assets at end of period (000) $9,237
Portfolio turnover rate --
Average commissions per share $ 0.0291
</TABLE>
- --------------------------------------------------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.
(4) Without the waiver of advisory fees and reimbursement of expenses (Note B),
the ratio of expenses to average daily net assets would have been 3.66%
(annualized).
(5) Without the waiver of advisory fees and reimbursement of expenses (Note B),
the ratio of net investment income to average daily net assets would have
been (0.34)% (annualized).
See Notes to Financial Statements.
12
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
A. Significant Accounting Policies -- ISI Strategy Fund, Inc. (the "Fund"),
which was organized as a Maryland Corporation on June 12, 1997 and commenced
operations September 16, 1997, is registered under the Investment Company
Act of 1940 as a diversified, open-end investment management company. It
seeks to maximize total return through a combination of long-term growth of
capital and current income by actively apportioning investments between
diversified investments in U.S. equity securities and securities issued by
the United States Treasury ("U.S. Treasury Securities").
The Fund consists of one share class, ISI Shares, which has a 4.45% maximum
sales charge and a 0.25% distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles.
These estimates affect 1) the assets and liabilities that we report at the
date of the financial statements; 2) the contingent assets and liabilities
that we disclose at the date of the financial statements; and 3) the
revenues and expenses that we report for the period. Our estimates could be
different from the actual results. The Fund's significant accounting
policies are:
Security Valuation -- The Fund values a portfolio security that is primarily
traded on a national exchange by using the last price reported for the day.
If there are no sales or the security is not traded on a listed exchange,
the Fund values a security at the average of the last bid and asked prices
in the over-the-counter market. When a market quotation is unavailable, the
Investment Advisor determines a fair value using procedures that the Board
of Directors establishes and monitors. The Fund values short-term
obligations with maturities of 60 days or less at amortized cost.
Repurchase Agreements -- The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase agreement is
a short-term investment in which the Fund buys a debt security that the
broker agrees to repurchase at a set time and price. The third party, which
is the broker's custodial bank, holds the collateral in a separate account
until the repurchase agreement matures. The agreement ensures that the
collateral's market value, including any accrued interest, is sufficient if
the broker defaults. The Fund's access to the collateral may be delayed or
limited if the broker defaults and the value of the collateral declines or
if the broker enters into an insolvency proceeding.
Federal Income Taxes -- The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and gains
that are available for distribution under income tax regulations.
The Fund is organized as a regulated investment company. As long as it
maintains this status and distributes to its shareholders substantially all
of its taxable net investment income and net realized capital gains, it will
be exempt from most, if not all, federal income and excise taxes. As a
result, the Fund has made no provisions for federal income taxes.
Security Transactions, Investment Income, Distributions and Other -- The
Fund uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed. Interest
income is recorded on an accrual basis and includes the pro rata scientific
method for amortization of premiums and accretion of discounts when
appropriate. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. The Fund has deferred the costs incurred by its
organization and the initial
13
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
public offering of shares. These costs are being amortized on the
straight-line method over a five-year period, which began when the Fund
commenced investment activities.
B. Investment Advisory Fees, Transactions with Affiliates and Other Fees --
International Strategy & Investment Inc. ("ISI") is the Fund's investment
advisor, Wilshire Associates Incorporated ("Wilshire") is the Fund's
sub-advisor and Investment Company Capital Corp. ("ICC"), a subsidiary of
Bankers Trust New York Corporation, is the Fund's administrator.
As compensation for advisory services, the Fund pays ISI an annual fee based
on the Fund's average daily net assets. This fee is calculated daily and
paid monthly at the annual rate of 0.40%. As compensation for sub-advisory
services, ISI pays Wilshire an annual fee based on the Fund's average daily
net assets. This fee is calculated daily and paid monthly at the annual rate
of 0.16%. ISI and Wilshire have agreed to waive their annual fees
proportionately when necessary, and ISI has agreed to reimburse expenses
when necessary, so that the Fund's total operating expenses are no more than
1.00% of its average daily net assets.
As compensation for administrative services, the Fund pays ICC an annual fee
based on the Fund's average daily net assets. This fee is calculated daily
and paid monthly at the annual rate of 0.12%. ICC has agreed to waive its
fee until the Fund has $50 million in net assets or has been in operation
for one year, whichever occurs first.
Certain officers and directors of the Fund are also officers or directors of
the Fund's investment advisor, sub-advisor or administrator.
As compensation for its accounting services, the Fund pays ICC an annual fee
that is calculated daily and paid monthly from the Fund's average daily net
assets. The Fund paid ICC $1,641 for accounting services for the period
ended November 30, 1997.
As compensation for its transfer agent services, the Fund pays ICC a per
account fee that is calculated and paid monthly. The Fund paid ICC $4,662
for transfer agent services for the period ended November 30, 1997.
Effective September 22, 1997, Bankers Trust Company became the Fund's
custodian. Prior to September 22, 1997, PNC Bank served as the Fund's
custodian. From September 22, 1997 to November 30, 1997, the Fund accrued
$6,285 in custody expenses.
As compensation for providing distribution services, the Fund pays ISI Group
Inc., which is affiliated with ISI, an annual fee that is calculated daily
and paid monthly. This fee is paid at an annual rate equal to 0.25% of the
Fund's average daily net assets.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the period
ended November 30, 1997 was $216, and the accrued liability was $216.
C. Capital Share Transactions -- The Fund is authorized to issue up to 25
million shares of $.001 par value capital stock (20 million ISI Class, 5
million Wilshire Institutional Class). Transactions in shares of the Fund
were as follows:
For the Period
Sept. 16, 1997(1)
through
Nov. 30, 1997
-----------------
Shares sold 919,593
Shares issued to shareholders
on reinvestment of dividends --
Shares redeemed (2,303)
----------
Net increase in shares outstanding 917,290
==========
Proceeds from sale of shares $9,227,283
Value of reinvested dividends --
Cost of shares redeemed (23,253)
----------
Net increase from capital
share transactions $9,204,030
==========
- --------------------------------------------------------
(1) Commencement of operations.
14
<PAGE>
Notes to Financial Statements (concluded)
- --------------------------------------------------------------------------------
D. Investment Transactions -- Excluding short-term and U.S. government
obligations, purchases of investment securities aggregated $5,956,101 for
the period ended November 30, 1997. Purchases of U.S. government obligations
aggregated $2,854,423. There were no sales of investment securities during
the period.
On November 30, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $251,942
and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value was $248,227.
E. Net Assets -- On November 30, 1997, net assets consisted of:
Paid-in capital $9,204,030
Undistributed net investment
income 29,252
Unrealized appreciation
of investments 3,715
----------
$9,236,997
==========
- -----------------------------------------------
This report is prepared for the general
information of shareholders. It is authorized
for distribution to prospective investors only
when preceded or accompanied by an effec-
tive prospectus.
For more complete information regard-
ing any of the ISI Funds, including charges
and expenses, obtain a prospectus from your
investment representative or directly from
the Fund at 1-800-955-7175. Read it carefully
before you invest.
- -----------------------------------------------
<PAGE>
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:
Included in Part A of the Registration Statement:
Financial Highlights for the ISI Strategy Fund Shares
for the period from September 17, 1997 (commencement of
operations) through November 30, 1997 (unaudited).
Included in Part B of the Registration Statement:
Statement of Assets and Liabilities as of August 14, 1997.
Report of Deloitte & Touche LLP.
Statement of Net Assets as of November 30, 1997
(unaudited).
Statement of Operations for the period from September
17, 1997 (commencment of operations) through November
30, 1997 (unaudited).
Statement of Changes in Net Assets for the period from
September 17, 1997 (commencement of operations) through
November 30, 1997 (unaudited).
Notes to Financial Statements (unaudited)
(b) Exhibits:
(1) (a) Articles of Incorporation; (1)
(b) Articles of Amendment to Articles of
Incorporation; (1)
(2) By-Laws; (1)
(3) None;
(4) Form of Specimen Security; (2)
(5) (a) Investment Advisory Agreement between
Registrant and International Strategy &
Investment Inc., filed herewith;
(b) Sub-Advisory Agreement among Registrant,
International Strategy & Investment Inc. and
Wilshire Associates Incorporated, filed
herewith;
(6) (a) Distribution Agreement between Registrant
and International Strategy & Investment
Group Inc. with respect to the ISI Shares
Class, filed herewith;
C-1
<PAGE>
(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 Bankers Trust Company, filed herewith;
(9) Master Services Agreement (including
Administration, Transfer Agency and Accounting
Services appendices) between Registrant and
Investment Company Capital Corp., filed herewith;
(10) Opinion of Counsel; (3)
(11) Consent of Independent Auditors, filed herewith;
(12) None;
(13) Subscription Agreement re: initial $100,000
capital, filed herewith;
(14) None;
(15) Distribution Plan with respect to the ISI Shares
Class, filed herewith;
(16) Schedule of Computation of Performance
Information, filed herewith;
(18) Rule 18f-3 Plan, filed herewith;
(24) Powers of Attorney, filed herewith;
(27) Financial Data Schedule, filed herewith.
- ---------------------
1 Incorporated by reference to Registrant's Registration Statement on
Form N-1A (File No. 333-31127), filed via EDGAR with the Securities
and Exchange Commission on July 11, 1997.
2 Incorporated by reference to Exhibit 1 (Articles of Incorporation,
Articles of Amendment) and Exhibit 2 (By-Laws) of Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-31127) filed via EDGAR with the Securities and
Exchange Commission on August 15, 1997.
3 Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
333-31127), filed with the Securities and Exchange Commission via
EDGAR on August 15, 1997.
Item 25. Persons Controlled by or under Common Control with Registrant
C-2
<PAGE>
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 January 23,
1998:
Title of Class Number of Record Holders
-------------- ------------------------
ISI Shares 215
Wilshire Institutional Shares 1
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:
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
C-3
<PAGE>
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.
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
C-4
<PAGE>
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).
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 Principal Position and Offices
Business Address* Underwriter with Registrant
----------------- ----------- ---------------
<S> <C> <C>
Edward S. Hyman Chairman, Chief Executive Officer Chairman
and Director and Director
R. Alan Medaugh Director President
and Director
Nancy Lazar Executive Vice President
Vice President
and Director
Joel Fein Chief Financial None
Officer
</TABLE>
---------------------
* 717 Fifth Avenue
New York, New York 10022
C-5
<PAGE>
(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, the Registrant's investment advisor,
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 distributor,
International Strategy & Investment Group, Inc., 717 Fifth Avenue,
New York, New York 10022, the Registrant's custodian, Bankers Trust
Company, 130 Liberty Street, New York, NY 10006, or by the
Registrant's administrator, transfer agent, dividend disbursing agent
and accounting services provider, Investment Company Capital Corp.,
One South Street, Baltimore, MD 21202.
In particular, with respect to the records required by Rule
31a-1(b)(1), ICC maintains physical possession of all journals
containing itemized daily records of all purchases and sales of
securities, including sales and redemptions of Fund securities, and
Bankers Trust Company maintains physical possession of all receipts
and deliveries of securities (including certificate numbers if such
detail is not recorded by the custodian or transfer agent), all
receipts and disbursements of cash, and all other debts and credits.
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
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) Not applicable.
(c) A copy of the Registrant's 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-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meet all of
the requirements for effectiveness of this Post-Effective Amendment No. 1 to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this amendment to the 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 26th day of February, 1998.
ISI 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 amendment to the Registration Statement has been signed below by the
following persons in the capacities on the date(s) indicated:
* Chairman and Director February 26, 1998
- ------------------------ ----------------------
Edward S. Hyman Date
* Director February 26, 1998
- ------------------------ ----------------------
James J. Cunnane Date
* Director February 26, 1998
- ------------------------ ----------------------
John F. Kroeger Date
* Director February 26, 1998
- ------------------------ ----------------------
Louis E. Levy Date
* Director February 26, 1998
- ------------------------ ----------------------
Eugene J. McDonald Date
* Director February 26, 1998
- ------------------------ ----------------------
Michael J. Napoli, Jr. Date
* Director February 26, 1998
- ------------------------ ----------------------
Rebecca W. Rimel Date
* Director February 26, 1998
- ------------------------ ----------------------
Truman T. Semans Date
* Director February 26, 1998
- ------------------------ ----------------------
Carl W. Vogt, Esq. Date
/s/ R. Alan Medaugh President and Director February 26, 1998
- ------------------------ ----------------------
R. Alan Medaugh Date
/s/ Joseph A. Finelli Chief Financial February 26, 1998
- ------------------------ and Accounting ----------------------
Joseph A. Finelli Officer Date
* By: /s/Amy M. Olmert
------------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
ISI STRATEGY FUND, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
EDGAR
Exhibit Document
Number
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
(1)(a) Articles of Incorporation;1
(1)(b) Articles of Amendment to Articles of Incorporation;1
(2) By-Laws;(1)
(3) None;
(4) Form of Specimen Security;(2)
EX-99.B (5)(a) Investment Advisory Agreement between Registrant and International
Strategy & Investment Inc., filed herewith;
EX-99.B (5)(b) Sub-Advisory Agreement among Registrant, International Strategy &
Investment Inc. and Wilshire Associates Incorporated, filed herewith;
EX-99.B (6)(a) Distribution Agreement between Registrant and International Strategy & Investment
Group Inc. with respect to the ISI Shares Class, filed herewith;
(6)(b) Form of Distribution Agreement between Registrant and International Strategy &
Investment Group Inc. with respect to the Institutional Shares Class.(1)
(6)(c) Form of Agency Distribution Agreement between International Strategy & Investment
Group Inc. and Participating Broker-Dealers;(1)
(6)(d) Form of Shareholder Servicing Agreement between Registrant and Shareholder
Servicing Agents;(1)
(7) None;
EX-99.B (8) Form of Custodian Agreement between Registrant and Bankers Trust Company, filed
herewith;
EX-99.B (9) Master Services Agreement (including Administration, Transfer Agency and
Accounting Services appendices) between Registrant and Investment Company Capital
Corp., filed herewith;
(10) Opinion of Counsel;(3)
EX-99.B (11) Consent of Independent Auditors, filed herewith;
(12) None;
EX-99.B (13) Subscription Agreement re: initial $100,000 capital, filed herewith;
(14) None;
EX-99.B (15) Distribution Plan with respect to the ISI Shares Class, filed herewith;
(16) Schedule of Computation of Performance Information, filed herewith;
EX-99.B (18) Rule 18f-3 Plan, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith;
EX-27 (27) Financial Data Schedule, filed herewith.
</TABLE>
- ---------------------
1 Incorporated by reference to Registrant's Registration Statement on
Form N-1A (File No. 333-31127), filed via EDGAR with the Securities
and Exchange Commission on July 11, 1997.
2 Incorporated by reference to Exhibit 1 (Articles of Incorporation,
Articles of Amendment) and Exhibit 2 (By-Laws) of Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-31127) filed via EDGAR with the Securities and Exchange
Commission on August 15, 1997.
3 Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
333-31127), filed with the Securities and Exchange Commission via
EDGAR on August 15, 1997.
<PAGE>
ISI STRATEGY FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 12th day of
September, 1997 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");
-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 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 July 11, 1997;
(e) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") (File No. 333-31127)
and under the 1940 Act as filed with the SEC on July 11, 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
-2-
<PAGE>
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
(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
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<PAGE>
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.
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
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<PAGE>
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 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.
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<PAGE>
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.
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).
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<PAGE>
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 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.
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<PAGE>
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:
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<PAGE>
ISI STRATEGY FUND, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 12th day of September, 1997
by and among ISI STRATEGY FUND, INC., a Maryland corporation (the "Fund"),
INTERNATIONAL STRATEGY & INVESTMENT INC., a Delaware corporation (the
"Advisor"), and WILSHIRE ASSOCIATES INCORPORATED, a California corporation
(the "Sub-Advisor").
WHEREAS, the Advisor is the investment advisor to the Fund,
which is an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Advisor wish to retain the
Sub-Advisor for purposes of rendering advisory services to the Fund and the
Advisor in connection with the Advisor's responsibilities to 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 Sub-Advisor. The Fund hereby appoints the
Sub-Advisor to act as the Fund's Sub-Advisor under the supervision of the
Fund's Board of Directors and the Advisor, and the Sub-Advisor hereby accepts
such appointment, all subject to the terms and conditions contained herein.
2. Delivery of Documents. The Fund has furnished the
Sub-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 the State of Maryland on June 12, 1997 and all
amendments thereto (such Articles of Incorporation, as presently in
effect as they shall from time to time be amended are herein called
the "Articles of Incorporation");
(b) The Fund's Bylaws and all amendments thereto (such
Bylaws, as presently in effect as they shall from time to time be
amended, are herein called the "Bylaws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of the Sub-Advisor and
approving this Agreement;
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<PAGE>
(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 July 11, 1997;
(e) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File
No.333-31127) and under the 1940 Act (File No. 811-08291) as filed
with the SEC on July 11, 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 are supplements thereto are
herein called "Prospectus").
The Fund will furnish the Sub-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 Sub-Advisor. In carrying out its obligations
under Section 1 hereof, the Sub-Advisor shall:
(a) have full discretion to determine which issuers
and securities shall be represented in that portion of the Fund's
portfolio allocated to the Sub-Advisor by the Advisor and regularly
report thereon to the Fund's Board of Directors;
(b) formulate and implement continuing programs for
the purchases and sales of the securities of such issuers and
regularly report thereon to the Fund's Board of Directors;
(c) take, on behalf of the Fund, all actions
pertaining to investment management services which appear to the Fund
necessary to carry into effect such purchase and sale programs as
aforesaid, including the placing of orders for the purchase and sale
of securities of the Fund; and
(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.
4. Broker-Dealer Relationships. In circumstances where the
Sub-Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection and negotiation of its brokerage commission
rates, the Sub-Advisor in effecting securities transactions will seek to
obtain the best price and execution on an overall basis. In performing its
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<PAGE>
function, the Sub-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 Sub-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 ask 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 Sub-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 Sub-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
Sub-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 Sub-Advisor's overall responsibilities to the Fund.
5. Control by Fund's Board of Directors. Any recommendations
concerning the Fund's investment program for the Fund proposed by the
Sub-Advisor to the Fund and the Advisor pursuant to this Agreement, as well as
any other activities undertaken by the Sub-Advisor on behalf of the Fund
pursuant hereto, 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 Sub-Advisor 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;
(c) the provisions of the Articles of
Incorporation;
(d) the provisions of the Bylaws; 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, the Sub-Advisor and the Advisor as follows:
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<PAGE>
(a) The Sub-Advisor shall furnish, at its expense
and without cost to the Fund, the services of any officers of the
Fund, to the extent that such officers may be required by the Fund
for the proper conduct of its affairs.
(b) The Sub-Advisor shall maintain, at its expense
and without cost to the Fund, a trading function in order to carry
out its obligations under Section 3 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
(c) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation:
payments to the Advisor under the Investment Advisory Agreement
between the Fund and the Advisor; payments to the Fund's distributor
under the Fund's plan of distribution; 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 accounting agent or agents appointed by
the Fund; brokers' commission 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 expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection
with the 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
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 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; 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. Compensation. For the services to be rendered hereunder
by the Sub-Advisor, the Advisor shall pay to the Sub-Advisor monthly
compensation equal to .16% of the Fund's average daily net assets. Except as
hereinafter set forth, compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals paid monthly. If this
Agreement becomes effective subsequent to the first day of a month or shall
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<PAGE>
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent
with the calculations of the fees as set forth above.
9. Additional Responsibilities. The Sub-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
Sub-Advisor's charges in rendering such services will be billed monthly to the
Fund, subject to examination by the Fund's independent certified public
accountants. Payment or assumption by the Sub-Advisor of any Fund expense that
the Sub-Advisor is not required to pay or assume under this Agreement shall
not relieve the Sub-Advisor of any of its obligations to the Fund nor obligate
the Sub-Advisor to pay or assume any similar Fund expenses on any subsequent
occasions.
10. Use of Name. The Fund shall have the right to use the
name "Wilshire" in the name of a class or series of the Fund as mutually
agreed for so long as this Agreement remains in force and effect. However,
that term shall remain the property of the Sub-Advisor or its affiliates as
the case may be and the Fund may use that term after the termination of this
Agreement only with the specific written permission of the Sub-Advisor (or an
appropriate affiliate).
11. Term. This Agreement shall become effective at 12:01
a.m. on the date hereof and shall remain in force and effect, subject to
Section 13 hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial
two-year term, this Agreement shall continue in force and effect 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 of the
Fund (as defined in Section 2(a)(42) of 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" 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.
13. Termination. This Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund (as defined in Section 2(a)(42) of the 1940 Act), on sixty (60) days'
written notice to the Advisor and the Sub-Advisor. This Agreement may be
terminated at any time, without the payment of any penalty, by the Sub-Advisor
on sixty (60)
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<PAGE>
days' written notice to the Fund and the Advisor. The notice provided for
herein may be waived by any person to whom such notice is required. This
Agreement shall automatically terminate in the event of its assignment (as
defined in Section 2(a)(4) of the 1940 Act).
14. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor and the Fund are not to be deemed to be exclusive, and the Sub-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 partners of the Sub-Advisor may serve as officers
or Directors of the Fund, and that officers or Directors of the Fund may serve
as officers or partners of the Sub-Advisor to the extent permitted by law; and
that the partners of the Sub-Advisory are not prohibited from engaging in any
other business activity or from rendering services to any other person, or
from serving as partners, officers or directors of any other firm or
corporation, including other investment companies.
15. Liability of Sub-Advisor. In the performance of its
duties hereunder, the Sub-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 Sub-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 Sub-Advisor or its officers, directors or employees, or
reckless disregard by the Sub-Advisor 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 party, it is agreed that the address of the
Sub-Advisor for this purpose shall be 1299 Ocean Avenue, Santa Monica,
California, 90401 and the address of the Advisor and the Fund for this purpose
shall be 717 Fifth Avenue, New York, New York 10022.
17. Questions and 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 said 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers on the day
and year first above written.
Attest: ISI STRATEGY FUND, INC.
____________________ By: _______________________________________
Title:
Attest: INTERNATIONAL STRATEGY & INVESTMENT INC.
____________________ By: _______________________________________
Title:
Attest: WILSHIRE ASSOCIATES INCORPORATED
____________________ By:________________________________________
Title:
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<PAGE>
ISI STRATEGY FUND, INC.
ISI STRATEGY FUND SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 12th day of September, 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");
(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");
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<PAGE>
(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 July 11,
1997;
(e) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") (File No.
333-31127) and under the 1940 Act as filed with the SEC on July 11, 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
(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.
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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:
(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
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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.
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
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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
(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.
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<PAGE>
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.
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<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: Name:
Title:
[SEAL] INTERNATIONAL STRATEGY &
INVESTMENT GROUP INC.
Attest: By
----------------------- -----------------------------
Name: Name:
Title:
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EXHIBIT 8
FORM OF CUSTODIAN AGREEMENT
AGREEMENT dated as of ___________________________________ , 199_
between BANKERS TRUST COMPANY (the "Custodian") and ISI STRATEGY FUND, INC.
(the "Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter
referred to individually as a "Portfolio" and collectively, as the
"Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and
accepted by the Custodian or any Subcustodian (as that term is defined in
Section 4) (the "Property") pursuant to the terms and conditions set forth
herein. Without limitation, such Property shall include stocks and other
equity interests of every type, evidences of indebtedness, other instruments
representing same or rights or obligations to receive, purchase, deliver or
sell same and other noncash investment property of a Portfolio which is
acceptable for deposit ("Securities") and cash from any source and in any
currency ("Cash"). The Custodian shall not be responsible for any property of
a Portfolio held or received by the Customer or others and not delivered to
the Custodian or any Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian
to (a) settle Securities transactions and maintain cash in the country or
other jurisdiction in which the principal trading market for such Securities
is located, where such Securities are to be presented for payment or where
such Securities are acquired and (b) maintain cash and cash equivalents in
such countries in amounts reasonably necessary to effect the Customer's
transactions in such Securities. Instructions to settle Securities transactions
in any country shall be deemed to authorize the holding of such Securities and
Cash in that country.
3. Custody Account. The Custodian agrees to establish and maintain
one or more custody accounts on its books each in the name of a Portfolio
(each, an "Account") for any and all Property from time to time received and
accepted by the Custodian or any Subcustodian for the account of such
Portfolio. Upon delivery by the Customer to the Custodian of any Property
belonging to a Portfolio, the Customer shall, by Instructions (as herein
defined in Section 14), specifically indicate which
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Portfolio such Property belongs or if such Property belongs to more than one
Portfolio shall allocate such Property to the appropriate Portfolio. The
Custodian shall allocate such Property to the Accounts in accordance with the
Instructions; provided that the Custodian shall have the right, in its sole
discretion, to refuse to accept any Property that is not in proper form for
deposit for any reason. The Customer on behalf of each Portfolio, acknowledges
its responsibility as a principal for all of its obligations to the Custodian
arising under or in connection with this Agreement warrants its authority to
deposit in the appropriate Account any Property received therefor by the
Custodian or a Subcustodian and to give, and authorize others to give,
instructions relative thereto. The Custodian may deliver securities of the
same class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property,
as the same become payable and credit the same to the
appropriate Account;
(b) present for payment all Securities held in an Account which
are called, redeemed or otherwise become payable and all
coupons and other income items which call for payment upon
presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and
hold the cash received in such Account pursuant to this
Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received
for an Account, endeavor to receive Instructions, provided
that if such Instructions are not received in time for the
Custodian to take timely action, no action shall be taken
with respect thereto;
(d) whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock
dividend or stock split is received for an Account and such
rights entitlement or fractional interest bears an
expiration date, if after endeavoring to obtain Instructions
such Instructions are not received in time for the Custodian
to take timely action or if actual notice of such actions
was received too late to seek Instructions, sell in the
discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or
fractional interest and credit the Account with the net
proceeds of such sale:
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(e) execute in the Customer's name for an Account whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with
the payment of any such taxes to cooperate with the
Custodian in furnishing information, executing documents or
otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) -
(f), including, without limitation, affiliates of the
Custodian or any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody
accounts which have been established by the Custodian with (a) one of its U.S.
branches or another U.S. bank or trust company or branch thereof located in
the U.S., which is itself qualified under the Investment Company Act of 1940,
as amended ("1940 Act"), to act as custodian (individually, a "U.S.
Subcustodian"), or a U.S. securities depository or clearing agency or system
in which the Custodian or a U.S. Subcustodian participates (individually, a
"U.S. Securities System") or (b) one of its non-U.S. branches or
majority-owned non-U.S. subsidiaries, a non-U.S. branch or majority-owned
subsidiary of a U.S. bank or a non-U.S. bank or trust company, acting as
custodian (individually, a "non-U.S. Subcustodian"; U.S. Subcustodians and
non-U.S. Subcustodians, collectively, "Subcustodians"), or a non-U.S.
depository or clearing agency or system in which the Custodian or any
Subcustodian participates (individually, a "non-U.S. Securities System"; U.S.
Securities System and non-U.S. Securities System collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System
shall have been approved by Instructions: provided further that in each case
in which a non-U.S. Subcustodian or non-U.S. Securities System is employed,
(a) such Subcustodian or Securities System either is (i) a "qualified U.S.
bank" as defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an
"eligible foreign custodian" within the meaning of Rule 17f-5 or such
Subcustodian or Securities System is the subject of an order granted by the
U.S. Securities and Exchange Commission ("SEC") exempting such agent or the
subcustody arrangements thereto from all or part of the provisions of Rule
17f-5 and (b) the agreement between the Custodian and such non-U.S.
Subcustodian has been approved by Instructions; it being understood that the
Custodian shall have no liability or responsibility for determining whether
the approval of any Subcustodian or Securities System has been proper under
the 1940 Act or any rule or regulation thereunder.
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Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement Subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian
and non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its
foreign custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities as may reasonably be requested by the
Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5 requires
the Customer's Board of Trustees to directly approve its foreign custody
arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the nominal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which
is maintained by the Custodian in the custody of a Subcustodian employed
pursuant to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall require that (i)
the Account will be adequately indemnified or its losses adequately insured;
(ii) the Securities are not subject to any right, charge, security interest,
lien or claim of any kind in favor of such Subcustodian or its creditors
except a claim for payment in accordance with such agreement for their safe
custody or administration and expenses related thereto, (iii) beneficial
ownership of such Securities be freely transferable without the payment of
money or value other than for safe custody or administration and expenses
related thereto, (iv) adequate records will be maintained identifying the
Property held pursuant to such Agreement as
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belonging to the Custodian, on behalf of its customers and (v) to the extent
permitted by applicable law, officers of or auditors employed by, or other
representatives of or designated by, the Custodian, including the independent
public accountants of or designated by, the Customer be given access to the
books and records of such Subcustodian relating to its actions under its
agreement pertaining to any Property held by it thereunder or confirmation of
or pertinent information contained in such books and records be furnished to
such persons designated by the Custodian.
6. Use of Securities System. With respect to Property in the
Account(s) which are maintained by the Custodian or any Subcustodian in the
custody of a Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required
by its agreement with the Custodian to, identify on its
books such Property as being held for the account of the
Custodian or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
(c) Property deposited with a Securities System will be
maintained in an account holding only assets for customers
of the Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of
Independent Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash
and/or other property, and whether held by the Custodian or
a Subcustodian or in a Securities System as authorized
herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the
Custodian's own interest. The Custodian shall keep accurate
and detailed accounts of all investments, receipts,
disbursements and other transactions for each Account. All
accounts, books and records of the Custodian relating
thereto shall be open to inspection and audit at all
reasonable times
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during normal business hours by any person designated by the
Customer. All such accounts shall be maintained and
preserved in the form reasonably requested by the Customer.
The Custodian will supply to the Customer from time to time,
as mutually agreed upon, a statement in respect to any
Property in an Account held by the Custodian or by a
Subcustodian. In the absence of the filing in writing with
the Custodian by the Customer of exceptions or objections to
any such statement within sixty (60) days of the mailing
thereof, the Customer shall be deemed to have approved such
statement and in such case or upon written approval of the
Customer of any such statement, such statement shall be
presumed to be for all purposes correct with respect to all
information set forth therein.
(b) The Custodian shall take all reasonable action as the
Customer may request to obtain from year to year favorable
opinions from the Customer's independent certified public
accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the
Customer's Form N1-A and the Customer's Form N-SAR or other
periodic reports to the SEC and with respect to any other
requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver
to the Customer a written report prepared by the Custodian's
independent certified public accountants with respect to the
services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for
safeguarding Cash and Securities, including Cash and
Securities deposited and/or maintained in a securities
system or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably
be required by the Customer and as may reasonably be
obtained by the Custodian.
(d) The Customer may elect to participate in any of the
electronic on-line service and communications systems
offered by the Custodian which can provide the Customer, on
a daily basis, with the ability to view on-line or to print
on hard copy various reports of Account activity and of
Securities and/or Cash being held in any Account. To the
extent that such service shall include market values of
Securities in an Account, the Customer hereby acknowledges
that the Custodian now obtains and may in the future obtain
information on such values from outside sources that the
Custodian considers to be reliable and the Customer agrees
that the Custodian (i) does not verify or represent or
warrant either the reliability of such service nor the
accuracy or completeness of any such information furnished
or obtained by or through such service and (ii) shall be
without liability in selecting and utilizing such service or
furnishing any information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in an Account
which are held by the Custodian or any Subcustodian may be held by such entity
in the name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
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eligible for deposit in a Securities System as provided above may be
maintained with the Subcustodian or the Securities System in an account for
the Custodian's or Subcustodian's customers, unless prohibited by law, rule,
or regulation. The Custodian or Subcustodian, as the case may be, may combine
certificates representing Securities held in an Account with certificates of
the same issue held by it as fiduciary or as a custodian. In the event that
any Securities in the name of the Custodian or its nominee or held by a
Subcustodian and registered in the name of such Subcustodian or its nominee
are called for partial redemption by the issuer of such Security, the
Custodian may, subject to the rules or regulations pertaining to allocation of
any Securities System in which such Securities have been deposited, allot, or
cause to be allotted, the called portion of the respective beneficial holders
of such class of security in any manner the Custodian deems to be fair and
equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto
as are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit
B attached hereto (as such service therein described may be in effect from
time to time) (the "Proxy Service") and (iii) as may otherwise be agreed upon
between the Custodian and the Customer. The liability and responsibility of
the Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of
the immediately preceding sentence shall be as set forth in the description of
the Proxy Service and as may be agreed upon by the Custodian and the Customer
in connection with the furnishing of any such additional service and shall not
be affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in
an Account, execute any form of proxy to vote thereon, or give any consent or
take any action (except as provided in Section 3) with respect thereto except
upon the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged
or delivered by the Custodian or a Subcustodian upon receipt by the Custodian
of Instructions which include all information required by the Custodian.
Settlement and payment for Securities received for an Account and delivery of
Securities out of such Account may be effected in accordance with the
customary or established securities trading or securities processing practices
and procedures in the Jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such Securities
from such purchaser or dealer, as such practices and procedures may be
modified or supplemented in accordance with the standard operating procedures
of the Custodian in effect from time to time for that jurisdiction or market.
The Custodian shall not be liable for any loss which results from effecting
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transactions in accordance with the customary or established securities
trading or securities processing practices and procedures in the applicable
jurisdiction or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined
in the Global Guide provided to the Customer by the Custodian, the Custodian
may, at its sole option, reverse such credits or debits to the appropriate
Account in the event that the transaction does not settle, or the income is
not received in a timely manner, and the Customer agrees to hold the Custodian
harmless from any losses which may result therefrom.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the
Custodian shall not be required to comply with any
Instructions to settle the purchase of any securities for
the Account, unless there are sufficient immediately
available funds in the relevant currency in the Account,
provided that if, after all expenses, debits and withdrawals
of Cash in the relevant currency ("Debits") applicable to
the Account have been made and if after all Conditional
Credits, as defined below, applicable to the Account have
been made final entries as set forth in (c) below, the
amount of immediately available funds of the relevant
currency in such Account is at least equal to the aggregate
purchase price of all securities for which the Custodian has
received Instructions to settle on that date ("Settlement
Date"), the Custodian, upon settlement, shall credit the
Securities to the Account by making a final entry on its
books and records.
(b) Notwithstanding the foregoing, if after all Debits
applicable to the Account have been made, there remains
outstanding any Conditional Credit (as defined below)
applicable to the Account or the amount of immediately
available funds in a given currency in such Account are less
than the aggregate purchase price in such currency of all
securities for which the Custodian has received Instructions
to settle on the Settlement Date, the Custodian, upon
settlement, may credit the securities to the Account by
making a conditional entry on its books and records
("Conditional Credit"), pending receipt of sufficient
immediately available funds in the relevant currency in the
Account.
(c) If, within a reasonable time from the posting of a
Conditional Credit and after all Debits applicable to the
Account have been made, immediately available funds in the
relevant currency at least equal to the aggregate purchase
price in such currency of all securities subject to a
Conditional Credit on a Settlement Date are deposited into
the Account, the Custodian shall make the Conditional Credit
a final entry on its books and records. In such case, the
Customer shall be liable to the Custodian only for late
charges at a rate which the Custodian customary charges for
similar extensions of credit.
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(d) If, within a reasonable time from the posting of a
Conditional Credit and after all Debits applicable to the
Account have been made, immediately available funds in the
relevant currency at least equal to the aggregate purchase
price in such currency of all securities subject to a
Conditional Credit on a Settlement Date are not deposited
into the Account, the Customer authorizes the Custodian, as
agent, to sell the securities and credit the Account with
the proceeds of such sale. In such case, the Customer shall
be liable to the Custodian for any deficiencies,
out-of-pocket costs and expenses associated with the sale of
the securities, including but not limited to, shortfalls in
the sales proceeds and the Custodian is hereby authorized to
sell such other securities to the extent necessary to
satisfy such shortfalls with the net proceeds of such sales.
(e) The Customer agrees that it will not use the Account to
facilitate the purchase of securities without sufficient
funds in the Account (which funds shall not include the
expected proceeds of the sale of the purchased securities).
14. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance with Section 15 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or
otherwise become payable.
(c) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan or
merger, consolidation, reorganization, recapitalization or
readjustment.
(d) Upon conversion of Securities pursuant to their terms into
other securities.
(e) Upon exercise of subscription, purchase or other similar
rights represented by Securities.
(f) For the payment of interest, taxes, management or
supervisory fees, distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring
a pledge of Securities, but only against receipt of amounts
borrowed.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer.
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(i) For the purpose of redeeming shares of the capital stock of
the Customer against delivery of the shares to be redeemed
to the Custodian, a Subcustodian or the Customer's transfer
agent.
(j) For the purpose of redeeming in kind shares of the Customer
against delivery of the shares to be redeemed to the
Custodian, a Subcustodian or the Customer's transfer agent.
(k) For delivery in accordance with the provisions of any
agreement among the Customer, on behalf of a Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc., relating to
compliance with the rules of The Options Clearing
Corporation, the Commodities Futures Trading Commission and
of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Customer.
(l) For release of Securities to designated brokers under
covered call options, provided, however, that such
Securities shall be released only upon payment to the
Custodian of monies for the premium due and a receipt for
the Securities which are to be held in escrow. Upon exercise
of the option, or at expiration, the Custodian will receive
the Securities previously deposited from broker. The
Custodian will act strictly in accordance with Instructions
in the delivery of Securities to be held in escrow and will
have no responsibility or liability for any such Securities
which are not returned promptly when due other than to make
proper request for such return.
(m) For spot or forward foreign exchange transactions to
facilitate security trading or receipt of income from
Securities related transactions.
(n) Upon the termination of this Agreement as set forth in
Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 22 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular
class of Instructions in question and whose name and (if applicable) signature
and office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, or (iii)
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<PAGE>
a telephonic or oral communication by one or more persons as the Customer
shall have from time to time authorized to give the particular class of
Instructions in question and whose name has been filed with the Custodian; or
(iv) upon receipt of such other form of instructions as the Customer may from
time to time authorize in writing and which the Custodian has agreed in
writing to accept. Instructions in the form of oral communications shall be
confirmed by the Customer by tested telex or writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral instructions
prior to the Custodian's receipt of such confirmation. Instructions may relate
to specific transactions or to types or classes of transactions, and may be in
the form of standing instructions.
The Custodian shall have the night to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with
the Custodian pursuant to this Section has been authorized by the Customer to
give the Instructions in question and that such authorization has not been
revoked. The Custodian may act upon and conclusively rely on, without any
liability to the Customer or any other person or entity for any losses
resulting therefrom, any Instructions reasonably believed by it to be
furnished by the proper person or persons as provided above.
16. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions
of this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian
shall not be responsible for the title, validity or genuineness of any
Property or other property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in
acting upon, and may conclusively rely on, without liability for any loss
resulting therefrom, any notice, request consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed or
furnished by the proper party or parties, including, without limitation,
Instructions, and shall be indemnified by the Customer for any losses,
damages, costs and expenses (including, without limitation, the fees and
expenses of counsel) incurred by the Custodian and arising out of action taken
or omitted with reasonable care by the Custodian hereunder or under any
Instructions. The Custodian shall be liable to the Customer for any act or
omission to act of any Subcustodian to the same extent as if the Custodian
committed such act itself. With respect to a Securities System, the Custodian
shall only be responsible or liable for losses arising from employment of such
Securities System caused by the Custodian's own failure to exercise reasonable
care. In the event of any loss to the Customer by reason of the failure of the
Custodian or a Subcustodian to utilize reasonable care, the Custodian shall be
liable to the Customer to the extent of the Customer's actual damages at the
time such loss was discovered without reference to any special conditions or
circumstances. In no event shall the Custodian be liable for any consequential
or special damages. The Custodian shall be entitled to rely, and may act, on
advice of counsel (who may be counsel for the Customer) on all matters and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
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In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be
fully responsible for the security of the Customer's connecting terminal,
access thereto and the proper and authorized use thereof and the initiation
and application of continuing effective safeguards with respect thereto and
agree to defend and indemnify the Custodian and hold the Custodian harmless
from and against any and all losses, damages, costs and expenses (including
the fees and expenses of counsel) incurred by the Custodian as a result of any
improper or unauthorized use of such terminal by the Customer or by any
others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have
no liability for any loss occasioned by delay in the actual receipt of notice
by the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution
of securities transactions or affect the value of Property; acts of war,
terrorism, insurrection or revolution, strikes or work stoppages; the
inability of a local clearing and settlement system to settle transactions for
reasons beyond the control of the Custodian; hurricane, cyclone, earthquake,
volcanic eruption, nuclear fusion, fission or radioactivity, or other acts of
God.
The Custodian shall have no liability in respect of any loss, damage
or expense suffered by the Customer, insofar as such loss, damage or expense
arises from the performance of the Custodian's duties hereunder by reason of
the Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under
this Agreement.
The provisions of this Section shall survive termination of this
Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the
Customer agrees to indemnify the Custodian and its nominees, for any loss,
damage or expense suffered or incurred by the Custodian or its nominees
arising out of any violation of any investment restriction or other
restriction or limitation applicable to the Customer or any Portfolio pursuant
to any contract or any law or regulation. The provisions of this Section shall
survive termination of this Agreement.
18. Fees and Expenses. The Customer agrees to pay to the Custodian
such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and the Custodian's
reasonable out-of-pocket or incidental expenses in connection with the
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performance of this Agreement, including (but without limitation) legal fees
as described herein and/or deemed necessary in the judgment of the Custodian
to keep safe or protect the Property in the Account. The initial fee schedule
is attached hereto as Exhibit C. The Customer hereby agrees to hold the
Custodian harmless from any liability or loss resulting from any taxes or
other governmental charges, and any expense related thereto, which may be
imposed, or assessed with respect to any Property in an Account and also
agrees to hold the Custodian, its Subcustodians, and their respective nominees
harmless from any liability as a record holder of Property in such Account.
The Custodian is authorized to charge the applicable Account for such items
and the Custodian shall have a lien on the Property in the applicable Account
for any amount payable to the Custodian under this Agreement, including but
not limited to amounts payable pursuant to Section 13 and pursuant to
indemnities granted by the Customer under this Agreement. The provisions of
this Section shall survive the termination of this Agreement.
19. Tax Reclaims. With respect to withholding taxes deducted and
which may be deducted from any income received from any Property in an
Account, the Custodian shall perform such services with respect thereto as are
described in Exhibit D attached hereto and shall in connection therewith be
subject to the standard of care set forth in such Exhibit D. Such standard of
care shall not be affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties
hereto. No waiver of any provision hereto shall be deemed a continuing waiver
unless it is so designated. No failure or delay on the part of either party in
exercising any power or right under this Agreement operates as a waiver, nor
does any single or partial exercise of any power or right preclude any other
or further exercise thereof or the exercise of any other power or right.
21. Termination.
(a) Termination of Entire Agreement. This Agreement may be
terminated by the Customer or the Custodian by ninety (90)
days' written notice to the other; provided that notice by
the Customer shall specify the names of the persons to whom
the Custodian shall deliver the Securities in each Account
and to whom the Cash in such Account shall be paid. If
notice of termination is given by the Custodian, the
Customer shall, within ninety (90) days following the giving
of such notice, deliver to the Custodian a written notice
specifying the names of the persons to whom the Custodian
shall deliver the Securities in each Account and to whom the
Cash in such Account shall be paid. In either case, the
Custodian will deliver such Securities and Cash to the
persons so specified, after deducting therefrom any amounts
which the Custodian determines to be owed to it under
Sections 13, 18, and 24. In addition, the Custodian may in
its discretion withhold from such delivery such Cash and
Securities as may be necessary to settle transactions
pending at the time of such delivery. The Customer grants to
the Custodian a lien and right of setoff against the Account
and all Property held therein from time to time in the full
amount of the foregoing obligations. If within ninety
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(90) days following the giving of a notice of termination by
the Custodian, the Custodian does not receive from the
Customer a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities
in each Account and to whom the Cash in such Account shall
be paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a bank or trust company
doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or
may continue to hold such Securities and Cash until a
written notice as aforesaid is delivered to the Custodian,
provided that the Custodian's obligations shall be limited
to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may
be terminated by the Customer or the Custodian as to one or
more Portfolios (but less than all of the Portfolios) by
delivery of an amended Exhibit A deleting such Portfolios,
in which case termination as to such deleted Portfolios
shall take effect ninety (90) days after the date of such
delivery, or such earlier time as mutually agreed. The
execution and delivery of an amended Exhibit A which deletes
one or more Portfolios shall constitute a termination of
this Agreement only with respect to such deleted
Portfolio(s), shall be governed by the preceding provisions
of Section 21 as to the identification of a successor
custodian and the delivery of Cash and Securities of the
Portfolio(s) so deleted to such successor custodian and
shall not affect the obligations of the Custodian and the
Customer hereunder with respect to the other Portfolios set
forth in Exhibit A, as amended from time to time.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by
registered mail, telex or facsimile addressed to such other address as shall
have been furnished by the receiving party pursuant to the provisions hereof
and (b) shall be deemed effective when received, or, in the case of a telex,
when sent to the proper number and acknowledged by a proper answerback.
23. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its
related Accounts arising out of this Agreement, the Custodian shall look for
payment or satisfaction of any obligation solely to the assets and property of
the Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
24. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; provided
that, if there is more than one Account and the obligations secured pursuant
to this Section can be allocated to a specific Account or the Portfolio
related to such Account, such security interest and right of setoff will be
limited to Property held for that Account only and its related Portfolio.
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Should the Customer fail to pay promptly any amounts owed hereunder, Custodian
shall be entitled to use available Cash in the Account or applicable Account,
as the case may be, and to dispose of Securities in the Account or such
applicable Account as is necessary. In any such case and without limiting the
foregoing, Custodian shall be entitled to take such other action(s) or
exercise such other options, powers and rights as Custodian now or hereafter
has as a secured creditor under the New York Uniform Commercial Code or any
other applicable law.
25. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian
that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the
Customer is subject;
(ii) the terms of this Agreement do not violate any
obligation by which the Customer is bound, whether arising by contract,
operation of law or otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian a duly
executed Secretary's Certificate in the form of Exhibit E hereto or such other
evidence of such authorization as the Custodian may reasonably require,
whether by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer
that:
(i) the terms of this Agreement do not violate any
obligation by which the Custodian is bound, whether
arising by contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by
appropriate action and when executed and delivered
will be binding upon the Custodian in accordance
with its terms;
(iii) the Custodian will deliver to the Customer such
evidence of such authorization as the Customer may
reasonably require, whether by way of a certified
resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section
26(a) of the 1940 Act and warrants that it will
remain so qualified or upon ceasing to be so
qualified shall promptly notify the Customer in
writing.
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26. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Custodian.
27. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 22 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties
hereto that refer in any way to the Custodian. Customer shall not distribute
or permit the distribution of such materials if Custodian reasonably objects
in writing within ten (10) business days of receipt thereof (or such other
time as may be mutually agreed) after receipt thereof. The provisions of this
Section shall survive the termination of this Agreement.
[28. Representative Capacity and Binding Obligation. A copy of the
[Declaration of Trust/Trust Instrument] of the Customer is on file with The
Secretary of the [Commonwealth of Massachusetts/State of Delaware], and notice
is hereby given that this Agreement is not executed on behalf of the Trustees
of the Customer as individuals, and the obligations of this Agreement are not
binding upon any of the Trustees, officers or shareholders of the Customer
individually but are binding only upon the assets and property of the
Portfolios.]
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of
the Customer arising out of this Agreement.
29. Submission to Jurisdiction. Any suit, action or proceeding
arising out of this Agreement may be instituted in any State or Federal court
sitting in the City of New York, State of New York, United States of America,
and the Customer irrevocably submits to the non-exclusive jurisdiction of any
such court in any such suit, action or proceeding and waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of venue of any such suit, action or proceeding brought in such a
court and any claim that such suit, action or proceeding was brought in an
inconvenient forum.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such
providing party. The foregoing shall not be applicable to any information that
is publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required or
requested to be disclosed by any bank or other regulatory examiner of the
Custodian, Customer, or any Subcustodian, any auditor of the parties hereto,
by judicial or administrative process or otherwise by applicable law or
regulation. The provisions of this Section shall survive the termination of
this Agreement.
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31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity
or enforceability of any other provision of this Agreement.
32. Entire Agreement. This Agreement together with any exhibits
attached hereto, contains the entire agreement between the parties relating to
the subject matter hereof and supersedes any oral statements and prior
writings with respect thereto.
33. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
34. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered
by each of the parties hereto.
IN WITNESS WHEREOF, each of the parties has caused its duly
authorized signatories to execute this Agreement as of the date first written
above.
[NAME OF CUSTOMER]
By:_____________________________
Name:___________________________
Title:__________________________
By:_____________________________
Name:___________________________
Title:__________________________
BANKERS TRUST COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
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EXHIBIT A
To Custodian Agreement dated as of ______________,199__ between
Bankers Trust Company and _______________________.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first
WHEREAS clause of the above-referred to Custodian Agreement. Terms used herein
as defined terms unless otherwise defined shall have the meanings ascribed to
them in the above-referred to Custodian Agreement.
Dated as of:
[NAME OF CUSTOMER]
By:________________________
Name:______________________
Title:_____________________
By:________________________
Name:______________________
Title:_____________________
BANKERS TRUST COMPANY
By:________________________
Name:______________________
Title:_____________________
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of ________________, 199__ between
Bankers Trust Company and __________________.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless
otherwise defined below.
The Custodian provides a service, described below, for the
transmission of corporate communications in connection with shareholder
meetings relating to Securities held in the countries specified in the Global
Guide]. For the United States and Canada, the term "corporate communications"
means the proxy statements or meeting agenda, proxy cards, annual reports and
any other meeting materials received by the Custodian. For countries other
then the United States and Canada, the term "corporate communications" means
the meeting agenda only and does not include any meeting circulars, proxy
statements or any other corporate communications furnished by the issuer in
connection with such meeting. Non-meeting related corporate communications are
not included in the transmission service to be provided by the Custodian
except upon request as provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in
the official language of the country in which the related
security is held, the Custodian will as soon as practicable
after receipt of the original meeting agenda by a
Subcustodian provide an English translation prepared by that
Subcustodian.
2) If an English translation of the meeting agenda is
furnished, the local language agenda will not be furnished
unless requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof
or any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based
thereon.
<PAGE>
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language
agendas, and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention
to any required procedures will be very important. Upon timely receipt of
voting instructions, the Custodian will promptly forward such instructions to
the applicable Subcustodian. If voting instructions are not timely received,
the Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the
first paragraph, the Custodian wall not furnish the material described above
or seek voting instructions. However, if requested to exercise voting rights
at a specific meeting, the Custodian will endeavor to do so on a reasonable
efforts basis without any assurance that such rights will be so exercised at
such meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such
reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
Global Guide. The Custodian will notify the Customer as
<PAGE>
to the inclusion of additional countries or deletion of existing countries
after their inclusion or deletion and this Exhibit B will be deemed to be
automatically amended to include or delete such countries as the case may be.
Dated as of [NAME OF CUSTOMER]
By:________________________
Name:______________________
Title:_____________________
By:________________________
Name:______________________
Title:_____________________
BANKERS TRUST COMPANY
By:________________________
Name:______________________
Title:_____________________
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of _____________, 199__ between
Bankers Trust Company and ________________.
CUSTODY FEE SCHEDULE
This Exhibit C shall be amended upon delivery by the Custodian of a new
Exhibit C to the Customer and acceptance thereof by the Customer and shall be
effective as of the date of acceptance by the Customer or a date agreed upon
between the Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of _____________, 199__ between
Bankers Trust Company and ______________.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When Withholding tax has been deducted with respect to income from
any Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer
and advise what documentation, if any, is required to obtain the exemption.
Upon receipt of such documentation from the Customer, the Custodian will file
for exemption on the Customer's behalf and notify the Customer when it has
been obtained.
In connection with providing the foregoing service, the Custodian
shall be entitled to apply categorical treatment of the Customer according to
the Customer's nationality, the particulars of its organization and other
relevant details that shall be supplied by the Customer. It shall be the duty
of the Customer to inform the Custodian of any change in the organization,
domicile or other relevant fact concerning tax treatment of the Customer and
further to inform the Custodian if the Customer is or becomes the beneficiary
of any special ruling or treatment not applicable to the general nationality
and category or entity of which the Customer is a part under general laws and
treaty provisions. The Custodian may rely on any such information provided by
the Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the
jurisdictions in question. In addition, the Custodian may seek the advice of
counsel or other professional tax advisers in such jurisdictions. The
Custodian is entitled to rely, and may act, on information set forth in such
services and on advice received from a Subcustodian,
<PAGE>
counsel or other professional tax advisers and shall be without liability to
the Customer for any action reasonably taken or omitted pursuant to
information contained in such services or such advice.
Dated as of [NAME OF CUSTOMER]
By:________________________
Name:______________________
Title:_____________________
BANKERS TRUST COMPANY
By:________________________
Name:______________________
Title:_____________________
<PAGE>
EXHIBIT E
[Name of Entity]
Certificate of the Secretary
I, [Name of Secretary], hereby certify that I am the Secretary
of [Name of Entity], a [type of entity] organized under the laws of
[jurisdiction] (the "Company"), and as such I am duly authorized to, and do
hereby, certify that:
1. Organizational Documents. The Company's organizational documents,
and all amendments thereto, have been filed with the appropriate governmental
officials of [jurisdiction], the Company continues to be in existence and is
in good standing, and no action has been taken to repeal such organizational
documents, the same being in full force and effect on the date hereof.
2. By-Laws. The Company's By-Laws have been duly adopted and no action
has been taken to repeal such By-Laws, the same being in full force and effect.
3. Resolutions. Resolutions have been duly adopted on behalf of the
Company, which resolutions (i) have not in any way been revoked or rescinded,
(ii) have been in full force and effect since their adoption, to and including
the date hereof, and are now in full force and effect, and (iii) are the only
corporate proceedings of the Company now in force relating to or affecting the
matters referred to therein, including, without limitation, confirming that
the Company is duly authorized to enter into a certain custody agreement with
Bankers Trust Company (the "Agreement"), and that certain designated officers,
including those identified in paragraph 4 of this Certificate, are authorized
to execute said Agreement on behalf of the Company, in conformity with the
requirements of the Company's organizational documents, Bylaws, and other
pertinent documents to which the Company may be bound.
4. Incumbency. The following named individuals are duly elected (or
appointed), qualified, and acting officers of the Company holding those
offices set forth opposite their respective names as of the date hereof, each
having full authority, acting individually, to bind the Company as a legal
matter, with respect to all matters pertaining to the Agreement, and to
execute and deliver said Agreement on behalf of the Company, and the
signatures set forth opposite the respective names and titles of said officers
are their true, authentic signatures:
Name Title Signature
[Name] [Position] _________________________________
[Name] [Position] _________________________________
[Name] [Position] _________________________________
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
[Date], 19__.
By:_________________________________
Name:_______________________________
Title: Secretary
I, [Name of Confirming Officer], [Title] of the Company, hereby
certify that on this ___ day of [Date], 19__, [Name of Secretary] is the duly
elected Secretary of the Company and that the signature above is his genuine
signature.
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
ISI STRATEGY FUND, INC.
MASTER SERVICES AGREEMENT
THIS AGREEMENT is made as of the 12th day of September, 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
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<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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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 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.
-4-
<PAGE>
(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.
(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>
INDEPENDENT AUDITOR'S CONSENT
ISI Strategy Fund, Inc.:
We consent to the incorporation by reference in Post-Effective
Amendment No. 1 to the Registration Statement No. 333-31127 of ISI Strategy
Fund, Inc. of our report dated August 14, 1997 appearing in the Statement of
Additional Information, which is a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
February 24, 1998
Princeton, New Jersey
<PAGE>
ISI STRATEGY FUND, INC.
SUBSCRIPTION AGREEMENT
For and in consideration of the mutual agreements herein
contained, International Strategy & Investment Group Inc. (the "ISI Group")
hereby agrees to purchase from ISI Strategy Fund, Inc., a Maryland corporation
(the "Fund"), and the Fund agrees to sell 9,999 shares of the Fund's ISI
common stock and 1 share of the Fund's Wilshire Institutional common stock,
each having a par value of $.001 per share, at a price of $10.00 per share
(the "Shares"), upon the terms and conditions set forth herein and as part of
a public offering pursuant to the terms and conditions of the Fund's
Registration Statement on Form N-1A (No. 333-31127), as amended and
supplemented, initially filed with the Securities and Exchange Commission on
July 11, 1997.
ISI Group agrees to purchase such Shares and to pay the full
consideration therefor to the Fund upon demand.
ISI Group hereby confirms to the Fund its representations
that it is purchasing such Shares for investment purposes, with no present
intention of redeeming or reselling any portion thereof, and its agreement
that in the event it should dispose of any of such Shares, such transaction
will be effected by redeeming such Shares through the Fund.
Dated: August 12, 1997 INTERNATIONAL STRATEGY & INVESTMENT
GROUP INC.
By: ______________________________________
Title:
Subscription Accepted:
ISI STRATEGY FUND, INC.
By: ______________________________________
Title:
<PAGE>
ISI STRATEGY FUND, INC.
ISI STRATEGY FUND SHARES
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 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;
-1-
<PAGE>
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 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. 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 the purpose
of voting on such continuance. This Plan may be terminated at any time (i) by
a vote of a majority of the Directors who are not interested persons of the
Fund (as defined in the 1940 Act) or (ii) 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.
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<PAGE>
ISI STRATEGY FUND, INC.
Exhibit 16
Schedule of Computation of Performance Quotations
(unaudited)
This Schedule is included to illustrate how total return will be calculated.
1. Total Return
The examples presented use actual data for the Fund's ISI Strategy Fund Shares
class for the period from September 17, 1997 (commencement of operations)
through November 30, 1997.
(a) Average Annual Total Return Pursuant to SEC Rules
P(1+T) = ERV
P = initial payment = $1,000
2.5 month ERV = $1,007
n = 2.5
---
12
T = average annual total return = 3.50%
(b) Aggregate Total Return Pursuant to SEC Rules
P(1+T) = ERV
P = initial payment = $1,000
ERV = $1,007
T = aggregate total return = 0.7%
(c) Average Annual Total Return Pursuant to Non-
Standardized Computation
P(1+T)n = ERV
P = initial investment = $10,000
<PAGE>
2.5 month ERV = $1,007
n = 2.5
---
12
T = average annual total return = 3.5%
(d) Aggregate Total Return Pursuant to Non-Standardized
Computation
P(1+T) = ERV
P = initial payment = $10,000
ERV = $1,007
T = aggregate total return = 0.7%
<PAGE>
ISI Strategy Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
ISI Strategy Fund Shares and
Wilshire Institutional Strategy Fund Shares
Adopted on 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. This Plan must be amended to properly describe
(through additional exhibits hereto or otherwise) each additional class of
shares approved by the Fund's Board of Directors. 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.
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
1
<PAGE>
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 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.
- --------
(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>
Date Approved: June 17, 1997
Ratification of Articles of Incorporation
RESOLVED, that the filing of the Articles of Incorporation of ISI
Strategy Fund, Inc. by the Fund's incorporator be, and the same hereby is,
ratified.
Date Approved: June 17, 1997
Ratification of By-Laws
RESOLVED, that the By-Laws of ISI Strategy Fund, Inc. in the form
presented to this meeting be, and they hereby are, ratified, confirmed and
approved.
Date Approved: June 17, 1997
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.
Date Approved: June 17, 1997
Approval of Distribution Agreements, Plan of Distribution,
Form of Agency Distribution Agreement and Form of Shareholder
Servicing Agreement
RESOLVED, that the proposed Distribution Agreement, between the Fund
and International Strategy & Investment Group, Inc. ("ISI Group") for
distribution of the Fund's ISI Strategy Fund Shares (the "ISI Shares") be, and
the same hereby is, approved, in substantially the form presented to this
meeting, and that the appropriate officers of the
3
<PAGE>
Fund be, and they hereby are, authorized and directed to enter into and
execute such Distribution Agreement with such modifications as said officers
shall deem necessary or appropriate or as may be required to conform with the
requirements of any applicable statute, regulation or regulatory body;
FURTHER RESOLVED, that the proposed Plan of Distribution for the ISI
Shares (the "ISI Plan") is determined to be reasonably likely to benefit the
Fund and its shareholders;
FURTHER RESOLVED, that the expenditures contemplated by the ISI Plan
are comparable to expenditures for other similar funds;
FURTHER RESOLVED, that the ISI Plan be, and the same hereby is,
approved;
FURTHER RESOLVED, that the proposed Distribution Agreement, between
the Fund and ISI Group for distribution of the Fund's Wilshire Institutional
Strategy Fund Shares be, and the same hereby is, approved, in substantially
the form presented to this meeting, and that the appropriate officers of the
Fund be, and they hereby are, authorized and directed to enter into and
execute such Distribution Agreement with such modifications as said officers
shall deem necessary or appropriate or as may be required to conform with the
requirements of any applicable statute, regulation or regulatory body;
FURTHER RESOLVED, that the proposed form of Agency Distribution
Agreement be, and the same hereby is, approved; and
FURTHER RESOLVED, that the proposed form of Shareholder Servicing
Agreement of the Fund be, and the same hereby is approved.
4
<PAGE>
EXHIBIT A
Exhibits to Registrant's 18f-3 Plan
1. Articles of Incorporation filed as Exhibit 1(a) to Registrant's
Registration Statement on Form N-1A (No. 333- 31127) filed with the Securities
and Exchange Commission via EDGAR on July 11, 1997, (Accession No.
0000950116-97-001293) and is herein incorporated by reference.
2. Articles of Amendment to Articles of Incorporation filed as Exhibit 1(b) to
Registrant's Registration Statement on Form N-1A (No. 333-31127) filed with
the Securities and Exchange Commission via EDGAR on July 11, 1997, (Accession
No. 0000950116-97-001293) and are herein incorporated by reference.
3. By-Laws filed as Exhibit 2 to Registrant's Registration Statement on Form
N-1A (No. 333-31127) filed with the Securities and Exchange Commission via
EDGAR on July 11, 1997, (Accession No. 0000950116-97-001293) and are herein
incorporated by reference.
4. Specimen Security incorporated by reference to Exhibits 1(a), 1(b) and 2 to
Registrant's Registration Statement on Form N-1A (No. 333-31127) filed with
the Securities and Exchange Commission via EDGAR on July 11, 1997, (Accession
No. 0000950116-97-001293) and is herein incorporated by reference.
5. Distribution Agreement between Registrant and International Strategy &
Investment Group Inc. with respect to Registrant's ISI Strategy Fund Shares
filed as Exhibit 6(a) to this Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (No. 333-31127) and is herein incorporated
by reference.
6. Form of Distribution Agreement between Registrant and International
Strategy & Investment Group Inc. with respect to Registrant's Wilshire
Institutional Strategy Fund Shares filed as Exhibit 6(b) to Registrant's
Registration Statement on Form N-1A (No. 333-31127) filed with the Securities
and Exchange Commission via EDGAR on July 11, 1997, (Accession No.
0000950116-97-001293) and is herein incorporated by reference.
7. Distribution Plan with respect to the ISI Strategy Fund Shares filed as
Exhibit 15 to this Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (No. 333-31127) and is herein incorporated by
reference.
8. Form of Agency Distribution Agreement between International Strategy &
Investment Group Inc. and transmitting brokers filed as Exhibit 6(c) to
Registrant's Registration Statement on Form N-1A (No. 333-31127) filed with
the Securities and Exchange Commission via EDGAR on July 11, 1997, (Accession
No. 0000950116-97-001293) and is herein incorporated by reference.
9. Prospectus relating to Registrant's ISI Shares, as amended and supplemented
from time to time, is herein incorporated by reference.
10. Prospectus relating to Registrant's Institutional Shares, as amended and
supplemented from time to time, is herein incorporated by reference.
5
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<PAGE>
ISI 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, Amy M. Olmert 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 ISI
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 any 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: February 26, 1998
---------------------
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001041927
<NAME> ISI STRATEGY FUND
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 9,094,398
<INVESTMENTS-AT-VALUE> 9,098,113
<RECEIVABLES> 271,103
<ASSETS-OTHER> (946)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,368,270
<PAYABLE-FOR-SECURITIES> 105,738
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,535
<TOTAL-LIABILITIES> 131,273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,204,030
<SHARES-COMMON-STOCK> 917,290
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29,252
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,715
<NET-ASSETS> 9,236,997
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</TABLE>
