1933 Act File No. 2-10822
1940 Act File No. 811-515
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 52 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 53
(Check appropriate box or boxes)
THE WALL STREET FUND, INC.
(Exact name of registrant as specified in charter)
230 Park Avenue, New York, New York 10169
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 856-8250
Robert P. Morse, President
The Wall Street Fund, Inc.
230 Park Avenue
New York, New York 10169
(Name and address of Agent for Service)
Approximate Date of Proposed Public Offering ...................... May 1, 1998
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ X ] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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This Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. On March 31, 1997 Registrant filed a Rule 24f-2 Notice for
Registrant's most recent fiscal year which ended December 31, 1997.
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<PAGE>
FORM N-IA
CROSS REFERENCE SHEET
(as required by rule 495)
FORM N-1A PART A ITEM NO. PROSPECTUS LOCATION
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Item 1. Cover Page .............................. Cover Page
Item 2. Synopsis ................................ Summary Statement; Fee Table
Item 3. Condensed Financial Information ......... Financial Highlights
Item 4. General Description of Registrant ....... Summary Statement; Investment
Objectives; Investment
Policy; Investment
Restrictions
Item 5. Management of the Fund .................. Investment Advisory and Other
Services; General Information
Item 6. Capital Stock and other Securities ...... Dividends and Distributions;
Taxation; Share Ownership
Information; General
Information
Item 7. Purchase of Securities being Offered .... How to Buy Shares
Item 8. Redemption or Repurchase ................ Redemption and Repurchase of
Shares
Item 9. Pending Legal Proceedings ............... *
LOCATION IN STATEMENT OF
FORM N-1A PART B ITEM NO. ADDITIONAL INFORMATION
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Item 10. Cover Page .............................. Cover Page
Item 11. Table of Contents ....................... Table of Contents
Item 12. General Information and History ......... Investment Objectives and
Policies; Management of
the Fund
Item 13. Investment Objectives and Policies ...... Investment Objectives and
Policies
Item 14. Management of the Fund .................. Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities ............... Principal Holders of
Securities
Item 16. Investment Advisory and
Other Services ...................... Included in Prospectus under
"Investment Advisory and
Other Services"
Item 17. Brokerage Allocation and
Other Services ...................... Brokerage Allocations
* Answer negative or inapplicable
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<PAGE>
LOCATION IN STATEMENT OF
FORM N-1A PART B ITEM NO. ADDITIONAL INFORMATION
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Item 18. Capital Stock and other Securities ...... Included in Prospectus Under
"Dividends and
Distributions"; "Taxation";
"Share Ownership
Information"; "General
Information"
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered ............ Included in Prospectus Under
"How to Buy Shares";
"Redemption and Repurchase of
Shares"; "Determination of
Net Asset Value"
Item 20. Tax Status .............................. Tax Status
Item 21. Underwriters ............................ Underwriter
Item 22. Calculation of Performance Data ......... Calculation of Performance
Data
Item 23. Financial Statements .................... Financial Statements
FORM N-1A PART C ITEM NO. LOCATION IN PART C
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Item 24. Financial Statements and Exhibits ....... Financial Statements and
Exhibits
Item 25. Persons Controlled by or Under Common
Control with Registrant ............. *
Item 26. Number of Holders of Securities ......... Number of Holders of
Securities
Item 27. Indemnification ......................... Indemnification
Item 28. Business and Other Connections
of Investment Advisor ............... Business and Other
Connections of Investment
Advisor
Item 29. Principal Underwriters .................. Principal Underwriters
Item 30. Location of Accounts and Records ........ Location of Accounts and
Records
Item 31. Management Services ..................... *
Item 32. Undertakings ............................ *
* Answer negative or inapplicable
-ii-
<PAGE>
DIRECTORS
Clifton H.W. Maloney
Robert P. Morse, Chairman
Sharon A. Queeney
Harlan K. Ullman
OFFICERS
Robert P. Morse, President
Michael R. Linburn, Vice President
Allen C. Post, Vice President
Michael Miola, Secretary and Treasurer
INVESTMENT ADVISER
Wall Street Management Corporation
230 Park Avenue
New York, New York 10169
CUSTODIAN
The Bank of New York
110 Washington Street
New York, New York 10286
TRANSFER AGENT
American Data Services, Inc.
150 Motor Parkway
Hauppauge, New York 11788
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
PROSPECTUS
May 1, 1998
<PAGE>
PROSPECTUS
<PAGE>
THE WALL STREET FUND, INC.
230 Park Avenue, New York, New York 10169
Telephone: (212) 856-8250
The Wall Street Fund, Inc. (the "Fund") is an open-end, diversified management
investment company. Its primary investment objective is growth of capital. The
Fund invests in equity-type securities which offer prospects of sustained growth
in value, in the opinion of the Fund's investment adviser and officers. In
addition, the Fund may invest in convertible stocks and bonds, U.S. government
bonds and corporate bonds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. The Fund also has a Statement of Additional
Information. You may request a free copy by writing to the address shown at the
top of this page. The Fund's Statement of Additional Information is incorporated
herein by reference, and has been filed with the Securities and Exchange
Commission. You may also review the SAI and other information about the Fund at
the Commission's Web site at " http://www.sec.gov"
YOU SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS AND OF THE STATEMENT OF ADDITIONAL INFORMATION IS
MAY 1, 1998.
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<PAGE>
TABLE OF CONTENTS
Summary Statement.........................................................3
Fee Table.................................................................4
Financial Highlights......................................................5
Investment Objectives.....................................................6
Investment Policy.........................................................6
Investment Restrictions...................................................10
Portfolio Turnover........................................................12
Determination of Net Asset Value..........................................12
How to Buy Shares.........................................................13
Redemption and Repurchase of Shares.......................................18
Dividends and Distributions...............................................20
Taxation..................................................................21
Investment Advisory and Other Services....................................22
General Information.......................................................25
No dealer, salesman or any other person has been authorized to give information
or to make any representations other than those contained in this Prospectus. If
given or made, such information and representations must not be relied upon as
having been authorized by the Fund or its Underwriter. This Prospectus does not
constitute an offering in any jurisdiction in which such offering may not
lawfully be made.
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<PAGE>
SUMMARY STATEMENT
This Prospectus provides information about shares ("Share(s)") of The Wall
Street Fund, Inc. (the "Fund"). The Fund continuously offers its shares.
The Fund is an open-end, diversified management investment company. The Fund's
primary investment objective is to produce growth of capital. Current income is
the Fund's secondary objective. The Fund invests in equity-type securities which
offer prospects of sustained growth in value, in the opinion of the Fund's
investment adviser and officers. In addition, the Fund may invest in convertible
stocks and bonds, U.S. government bonds and corporate bonds. See "Investment
Objectives," "Investment Policy," "Investment Restrictions".
Wall Street Management Corporation ("WSMC") serves as the Fund's investment
adviser. It provides research, statistical, advisory and managerial services to
the Fund. In turn, the Fund pays WSMC a monthly advisory fee. See "Investment
Advisory and Other Services".
WSMC also serves as principal underwriter of the Shares. You may acquire Shares
with a minimum initial purchases of $2,000 (except the minimum initial
investment under a payroll deduction arrangement is $500.) You may purchase
additional Shares with a minimum purchase of $100. Shares are sold at net asset
value, minus a sales charge ranging from 4.0% to 0% of the offering price,
depending upon the total amount of Shares purchased. (The sales charge is
equivalent to 4.17% to 0% of the net amount invested.) See "How to Buy Shares"
and "Determination of Net Asset Value".
Stockholders may redeem Shares at net asset value. Presently, there is no fee
charged at redemption. See "Redemption and Repurchase of Shares". As the values
of the Fund's investments fluctuate, the value of the Shares fluctuates.
Similarly, the Fund realizes gains or losses when it sells its portfolio
securities, depending upon whether the sale prices are higher or lower than the
prices paid by the Fund when it bought the securities. The Fund also may earn
income in the form of dividends or interest on its investments. In turn, the
Fund distributes substantially all of this income, less expenses, to its
Stockholders. Stockholders may automatically reinvest any dividends and
distributions in additional Shares without paying a sales charge. See "Dividends
and Distributions" and "Taxation".
This prospectus and other information about the Fund is available at the Fund's
Web site, which is located at "http://www.thewallstreetfund.com". Information
about the Fund is also available at Web sites maintained by persons who are not
affiliated with the Fund, although information at independent Web sites may be
incomplete. For example, the Fund has noted that performance charts on certain
Web sites fail to clearly identify the fact that distributions of capital gains
made by the Fund from time to time result in a reduction of the per share net
asset value of the Fund's shares, although distributions of gains to
stockholders generally represent a positive tax advantage for investors. See
"Dividends and Distributions."
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<PAGE>
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchase
(as a percentage of offering price).................................. 4.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) ................................. None
Maximum Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as
applicable).......................................................... None
Redemption Fees (as a percentage of amount
redeemed, if applicable)............................................. None
Exchange Fee.......................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees....................................................... .75%
12b-1 Fees............................................................ None
Other Expenses (after expense reimbursements)......................... 1.07%
Transfer Agent and Custodian Fees........................................ 0.24%
Professional Fees (includes legal and accounting)........................ 0.44%
Miscellaneous............................................................ 0.39%
TOTAL FUND OPERATING EXPENSES......................................... 1.82%
Example 1 Year 3 Years 5 Years 10 Years
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You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return
and (2) redemption at the end of
each time period: $58 $95 $135 $245
The purpose of this Table is to assist you in understanding the various costs
and expenses that an investor in the Fund will bear directly or indirectly. The
amount of expenses actually incurred in the year ended December 31, 1997 was
$286,784 (see "Investment Advisory and Other Services - Expense Limitation").
The above example should not be considered a representation of past or future
expenses; actual expenses incurred may be greater or less than those shown in
the example.
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<PAGE>
FINANCIAL HIGHLIGHTS
(For one Share outstanding throughout the years ended December 31)
The figures below for the 5 years ended December 31, 1997 have been audited by
Coopers & Lybrand L.L.P., the Fund's independent accountants, as indicated in
their report on page B-15 of the Statement of Additional Information. The
remaining figures, which have also been audited, are not covered by the
accountant's current report. Further information about the Fund's performance is
contained in the Fund's annual report to shareholders which may be obtained
without charge from the Fund.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $7.96 $8.19 $7.42 $8.03 $7.60 $7.27 $5.54 $7.09 $6.57 $5.53
Income from investment
operations:
Net investment income
(loss) (0.08) (.06) (.03) (0.02) (0.02) 0.01 0.03 0.00 0.06 0.02
Net realized and unrealized
gain (loss) on
investments (0.13) 0.98 2.60 (0.38) 1.00 0.54 2.95 (1.44) 1.35 1.02
--------------------------------------------------------------------------------------
Total from investment
operations (0.21) 0.92 2.57 (0.40) 0.98 0.55 2.98 (1.44) 1.41 1.04
--------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income 0.00 0.00 0.00 0.00 0.00 (0.01) (0.03) (0.02) (0.07) 0.00
Distribution from realized
gains from security
transactions (0.41) (1.15) (1.80) (0.21) (0.55) (0.21) (1.21) (0.09) (0.82) 0.00
Return of capital
distribution 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 0.00 0.00
--------------------------------------------------------------------------------------
Total distributions (0.41) (1.15) (1.80) (0.21) (0.55) (0.22) (1.25) (0.11) (0.89) 0.00
---------------------------------------------------------------------------------------
Net asset value,
end of year $7.34 $7.96 $8.19 $7.42 $8.03 $7.60 $7.27 $5.54 $7.09 $6.57
---------------------------------------------------------------------------------------
Total return* (2.37%) 11.45% 36.50% (4.86%) 13.17% 7.61% 54.36% (20.36%) 22.19% 18.74%
Ratios/supplemental data
Net assets, end of year
(in $000's) 15,577 15,939 14,383 11,080 11,561 11,202 11,032 8,825 13,500 12,101
Ratio of expenses to
average net assets 1.82% 1.84% 2.02% 2.12% 2.04% 2.15% 2.10% 2.04% 1.79% 1.97%
Ratio of expenses to
average net assets, net
of expense reimbursement 1.82% 1.82% 1.90% 1.96% 1.96% 1.97% 1.98% 2.00% 1.79% 1.95%
Ratio of investment income
(loss) to average net
assets (0.96%) (0.70%) (0.50%) (0.47%) (0.31%) (0.08%) 0.30% 0.03% 0.85% 0.31%
Ratio of net investment
income (loss) to
average net assets, net
of reimbursement (0.96%) (0.68%) (0.38%) (0.31%) (0.23%) 0.09% 0.43% 0.07% 0.85% 0.33%
Portfolio turnover rate 121.12% 142.11% 143.27% 89.01% 107.22% 112.47% 159.52% 142.06% 132.98% 203.78%
Average commission rate
paid .0513 .0666 - - - - - - - -
_____________
<FN>
* Excluding sales charge.
</FN>
</TABLE>
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<PAGE>
INVESTMENT OBJECTIVES
The primary objective of the Fund is growth of capital. To achieve that
objective the Fund will normally emphasize investment in common stocks which
offer prospects of sustained growth in value, in the opinion of the Fund's
investment adviser. In addition, the Fund may invest in convertible stocks and
bonds, U.S. government bonds and corporate bonds to achieve its objective.
The Fund's secondary objective is current income through the receipt of interest
or dividends from investments, although receipt of income may accompany capital
appreciation.
There can be no assurance that the Fund will achieve its investment objective.
As the values of the securities owned by the Fund increase or decrease, the
value of your Shares will increase or decrease, respectively. In addition to the
factors that may affect the value of any particular investment owned by the
Fund, the value of your Shares may also fluctuate with movements in the stock
and bond markets. In this way, the risks inherent in investing are applicable to
the Fund, as well as to an individual investor.
INVESTMENT POLICY
It is the policy of the Fund to invest in common stocks, convertible securities,
preferred stocks, corporate bonds and securities of the United States Government
or its agencies. There is no restriction as to the amount of the Fund's assets
which may be invested in any type of security. However, the Fund's investments
are subject to its investment restrictions and status as a diversified fund.
This policy may not be changed without the vote of a majority of the Fund's
outstanding voting securities.*
However, the Fund may invest more or less broadly than as stated above. It may
invest in debt securities, i.e. corporate bonds, convertible bonds and
convertible preferreds. The Fund will purchase corporate bonds rated no lower
than investment grade, BBB by Standard & Poor's Corporation and Baa by Moody's
Investment Services, Inc. Investment grade bonds possess some speculative
characteristics. The Fund may also purchase unrated bonds when such bonds are of
comparable quality, in the opinion of the Fund's investment adviser.
In general, the Fund will invest in securities of companies which have been in
business for at least three years, but the Fund will invest without regard to
the period of time such securities have been publicly traded. The Fund may
invest without restriction in common stock that is
__________
* The phrase "vote of a majority of the Fund's outstanding voting securities,"
as used herein, is defined in Section 2(a)(42) of the Investment Company Act of
1940 to mean the vote, at the annual or a special meeting of Stockholders duly
called, of the lesser of (i) 67% or more of the Shares present at such meeting,
if holders of more than 50% of the outstanding Shares are present or represented
by proxy; or (ii) more than 50% of the outstanding Shares.
- 6 -
<PAGE>
traded on listed securities exchanges or over the counter. There is no
restriction as to the size of businesses in which the Fund may invest. However,
the Fund's investment adviser intends to invest the Fund's assets in a mixture
of large, medium and small size companies, subject to the Fund's investment
restrictions and status as a diversified fund.
When analyzing investments for the Fund, the Fund's investment adviser focuses
on financial ratios such as pre-tax margins, return on equity and cash flow
which are actually or expected to be superior to those of the average company.
While price to earnings ratios (P/E) are important valuation criteria, there is
no limitation or emphasis on high or low P/E stocks. In the opinion of the
investment adviser, P/E ratios are important in relationship to the financial
ratios mentioned above.
- 7 -
<PAGE>
At December 31, 1997, the net assets of the Fund were invested approximately:
- 93.19% in common stocks;
- 5.56% in convertible debt securities; and
- 1.25% in cash, receivables, and other assets less liabilities.
See "Schedule of Investments" in the financial statements in the Statement of
Additional Information.
The various investment restrictions which have been adopted by the Fund as
matters of fundamental policy are summarized under "Investment Restrictions" on
page 8. In practical application, the Fund attempts to attain its investment
objectives by relying on three fundamental practices:
- Careful selection of securities - based on the performance and
position of individual companies and their industries relative to
alternative investments.
- Broad diversification among industries and their companies - fundamental
to spreading the risk that is inherent in any single investment while
recognizing that such risk cannot be eliminated.
Continuous scrutiny of investments - realization of security values depends upon
many factors, including timing, trends of the market, and the economy.
RISK CONSIDERATIONS
INTEREST RATE AND MARKET RISK
To the extent the Fund invests in common stocks, a general market decline in any
country where the Fund is invested may also cause a decline in the value of the
Fund and your Shares. To the extent the Fund invests in debt securities, changes
in interest rates in any country where the Fund is invested will affect the
value of the Fund and your Shares. Rising interest rates typically have a
negative effect on the value of debt securities. Changes in the stock markets
and interest rates are unpredictable and may happen in the future.
FOREIGN SECURITIES
The Fund may purchase securities issued by companies organized in foreign
countries, including Canada and Australia. However, the Fund will not invest
more than 20% of its total assets in such securities as a result of any such
purchase. Although the Fund intends to invest in
- 8 -
<PAGE>
companies located in foreign nations which it considers to have relatively
stable governments, there are certain risks inherent in such investments. There
is the possibility of expropriation, nationalization or confiscatory taxation,
taxation of income and other foreign taxes. Foreign exchange controls (which may
include suspension of the ability to transfer currency from a country), default
in foreign government securities, political or social instability or diplomatic
developments could adversely affect the Fund's investments in securities of
foreign issuers. In addition, in many countries there is less publicly available
information about issuers than is generally available with respect to U.S.
companies. Furthermore, unlike U.S. companies, foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be comparable. In
many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. Foreign securities transactions may be subject to
higher brokerage costs than domestic securities transactions. In addition,
foreign securities markets may also be smaller, less liquid, and subject to
greater price volatility than those in the United States. Transactions in
foreign securities may involve greater time from the trade date until settlement
than for domestic securities transactions. Foreign investments involve the risk
of possible losses through holding of securities by custodian and securities
depositories in foreign countries. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
AMERICAN DEPOSITORY RECEIPTS
The Fund may purchase and sell American Depository Receipts ("ADRs"). Typically,
a U.S. bank or trust company issues ADRs which evidence ownership of underlying
securities issued by a foreign corporation. Generally, ADRs in registered form
are designed for use in the U.S. securities markets. The Fund does not consider
ADRs to be foreign securities for purposes of its restrictions. The Fund may
invest in ADRs through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by the issuer of the underlying security and a
depository. An unsponsored facility is established by a depository without the
issuer of the underlying security. If the Fund is a holder of an unsponsored
ADR, it generally will bear all the costs of such facility. Frequently, the
depository has no obligation to distribute to the Fund communications received
from the issuer of the deposited security or to pass through to the Fund voting
rights in respect of the underlying security and the market value of an
unsponsored ADR. Therefore, there may not be a correlation between information
concerning the issuer of an underlying security and the market value of an
unsponsored facility. Investing in ADRs also involves risks similar to those
inherent in investing directly in foreign securities, as discussed above.
- 9 -
<PAGE>
DIVERSIFICATION
In order to diversify its risk, the Fund rarely invests of more than 3% of its
net asset value at cost in any one security.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security may be
converted at a stated price within a specified period of time into a certain
quantity of the common stock of the same or a different issuer. Convertible
securities are senior to common stocks in a corporation's capital structure,
although convertible securities are usually subordinated to similar
nonconvertible securities. Convertible securities provide a fixed-income stream
and, through their conversion feature, participation in increases or decreases
in the market value of the convertible security's underlying common stock. As
with debt securities, convertible securities tend to increase in value when
interest rates decline and tend to decrease in value when interest rates rise.
The price of a convertible security is also influenced by the value of the
underlying common stock. That is, it tends to increase as the value of the
underlying stock rises, and it tends to decrease as the value of the underlying
stock declines.
YEAR 2000
Like other mutual funds, as well as other financial and business organizations
around the world, the Fund could be adversely affected if the computer systems
used by WSMC and other service providers do not properly process and calculate
date-related information and data as of and after January 1, 2000. this is
commonly known as the "Year 2000 Issue." WSMC is taking steps that it believes
are reasonably designed to address the Year 2000 Issue with respect to computer
systems it uses. The Fund is also taking steps to obtain reasonable assurances
that the Fund's other service providers are also taking comparable steps. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid an adverse impact to the Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions as fundamental
policies. This means that they may not be changed without the vote of a majority
of the Fund's outstanding voting securities. Pursuant to such policies, the Fund
may not:
1. Invest more than 5% of its total assets (at the time of purchase) in any
issuer (other than the U.S. Government, its agencies and instrumentalities).
- 10 -
<PAGE>
2. Invest in the securities of any single issuer, if immediately after and as a
result of such investment, the Fund owns more than 10% of the outstanding
securities, or more than 10% of the outstanding voting securities of any such
issuer.
3. Concentrate more than 25% of the value of its assets in any one industry or
any small group of related industries.
4. Invest in other companies for the purpose of exercising control or
management.
5. Purchase or sell real estate or real estate mortgage loans; provided that the
Fund may invest in securities issued by companies which invest in real estate or
interests therein.
6. Purchase or sell commodities or commodity contracts.
7. Make loans to other persons; provided that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan.
8. Underwrite the securities of other issuers except insofar as the Fund may
technically be deemed an "underwriter" under the Securities Act of 1933, as
amended, in selling portfolio securities.
9. Invest in securities which cannot be readily resold to the public because of
legal or contractual restrictions on resale or for which no readily available
market exists or in the securities of any company which has, together with any
predecessor, a record of less than three years' continuing operation.
10. Purchase securities on margin (except for short-term credit necessary for
clearance of portfolio transactions) or sell securities short or write, sell or
buy puts or calls, or any combination thereof.
11. Purchase the securities of other investment companies except as an incident
of a merger or consolidation or by purchase on the open market without sales
commissions other than customary brokers' commissions.
12. Purchase or hold securities of any issuer any of whose officers, directors,
trustees or security holders is an officer or director of the Fund or its
investment adviser, if after such purchase one or more of such persons owns
beneficially more than .5 of 1% of such securities and all of them own
beneficially more than 5% of the securities of such company.
- 11 -
<PAGE>
13. Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only to an amount not exceeding 5% of the cost value of all
its assets and for a period not exceeding 60 days.
14. Pledge, mortgage or hypothecate its assets taken at market to an extent
greater than 15% of its gross assets taken at cost.
15. Permit its officers or directors or the officers or directors of its
investment adviser to take long or short trading positions in Shares.
16. Issue senior securities.
PORTFOLIO TURNOVER
Portfolio changes will be made promptly in the event that the Fund's investment
adviser shall consider such action appropriate, without regard to the length of
time any security involved was held or the impact of such changes on turnover
consistent with the Fund's objectives.
During the years 1997 and 1996, the rates of turnover of the Fund's portfolio
were 121.12% and 142.11%, respectively. The portfolio turnover ratio for 1997
reflected both a change in the assets under management and, the Adviser's
restructuring of a portion of the portfolio. The portfolio turnover rate is
calculated by dividing the lesser of the annual sales or purchases of portfolio
securities by the monthly average value of the portfolio securities held by the
Fund during the year (excluding all securities whose maturities or expiration
dates at the time of acquisition were one year or less). If portfolio turnover
is high, it may result in higher brokerage costs and additional capital gains
taxes. See "Taxation," below.
When considering prospective investments, the Fund anticipates retaining
securities purchased over a period of time. However, surveillance of the
portfolio relative to alternative investments may lead to disposition of a
security in a short period of time.
DETERMINATION OF NET ASSET VALUE
Shares are sold (with a sales charge), and the Fund redeems Shares, at the "net
asset value," of Shares next determined after receipt of an order to purchase
Shares or a receipt of an order to redeem Shares, as the case may be. The Fund's
net asset value per Share is determined on each day during which the New York
Stock Exchange (the "NYSE") is open for trading as of the time of the close of
regular trading on the Exchange, which is currently 4:00 p.m. (EST). The NYSE is
closed for trading on the following dates in 1998: January 1, January 19,
February 16,
- 12 -
<PAGE>
April 10, May 25, July 3, September 7, November 26, and December
25. For purposes of the foregoing determinations, every security in the
portfolio which is listed on the NYSE is valued at the last reported sale price
on the NYSE or, if there was no such sale, at the mean of the most recent bid
and asked prices. The same method is also used for all other listed exchange
securities. Over-the-counter securities are valued at the mean between the
closing bid and asked prices. When market quotations are not readily available,
securities and other assets will be valued at fair value as determined in good
faith by the Fund's Board.
Trading in foreign securities markets is generally completed each day at various
times prior to the close of the NYSE. The values of foreign securities held by
the Fund will be determined as of such times for purposes of determining the net
asset value of the Fund. If events which materially affect the value of foreign
securities occur subsequent to the close of the securities market on which such
securities are primarily traded, the investments affected thereby will be valued
at "fair value" as described above.
Cash and other assets are added to the value of the securities to arrive at
total assets. Liabilities, which may include the investment advisory fees,
custodian and transfer agent fees, fees for auditing and legal services, and
accrued taxes, are deducted from the total value of securities, cash and other
assets in order to determine the total net asset value of the Fund. The net
asset value is then divided by the number of outstanding Shares in order to
determine the net asset value per Share.
HOW TO BUY SHARES
Shares are continually offered to investors at a public offering price, which is
the net asset value per share next determined following receipt of the purchase
order, plus a sales charge which will vary as shown below under "Purchase of
Shares".
PURCHASE OF SHARES
Shares may be purchased, with a minimum initial investment of $2,000 (except the
initial investment may be $500 or more under a payroll deduction arrangement)
and a minimum subsequent investment of $100 through securities dealers with whom
WSMC has sales agreements ("Dealers"). Upon purchase, the proper number of full
and fractional Shares are credited to the Stockholder's account and confirmed by
the Fund's Transfer Agent, American Data Services, Inc.. In the event an
investor fails to make a payment for Shares purchased, WSMC will complete the
transaction so as to avoid a reduction in the Fund's net asset value. The Fund
does not issue Share certificates unless requested to do so, and in no event
does it issue certificates for fractional Shares. There is no charge for
issuance of Share certificates. Any order may be rejected by the Fund or its
investment advisor.
You can purchase Shares of the Fund by sending an application form with your
check payable to The Wall Street Fund, Inc., c/o American Data Services, Inc.,
150 Motor Parkway, Suite 109, Hauppauge, NY 11788.
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<PAGE>
To make additional purchases, enclose a check with the form attached to your
account statement or mail a check with your account number clearly indicated on
the check.
Shares are sold at the public offering price, which is the net asset value per
Share next determined following receipt of the purchase order as set forth above
(purchase orders received through Dealers by WSMC or directly by American Data
Services, Inc. after 4:00 P.M. (EST), will be deemed received on the next
business day), plus a sales charge which varies with the amount being purchased
as follows:
<TABLE>
<CAPTION>
Allowance to
Sales Charge Selected
Sales Charge as Percentage* Dealers as
as Percentage of of the Net Percentage of the
Amount of Purchase the Offering Price Amount Invested Offering Price
<S> <C> <C> <C>
Less than $100,000..............................4.00% 4.17% 3.75%
$100,000 or more but less than $175,000.........3.00 3.09 2.75
$175,000 or more, but less than $250,000........2.00 2.04 1.75
$250,000 or more, but less than $500,000........1.00 1.01 0.75
$500,000 and over...............................0.00 0.00 0.00
<FN>
* Rounded to the nearest one-hundredth percent.
</FN>
</TABLE>
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<PAGE>
Shares of the Fund may be purchased at the net asset value next determined and
without a sales charge by:
1. Officers, directors, partners and employees of the Fund, WSMC, Morse,
Williams & Co., Inc., Morse Williams Holding Co., Inc., broker-dealers who have
currently effective sales agreements with WSMC and affiliates of such companies
including their spouses and children; and
2. Any trust, pension or profit-sharing or other benefit plan for the persons
described in item 1, above.
3. Any investment advisory client of Morse, Williams & Co., Inc.
All such net asset value purchases are made upon the written assurance that the
purchase is made for investment purposes and the shares purchased may not be
resold except through redemption by the Fund. The term "purchase", as used in
the first column above, refers to (i) a single purchase by an individual, or
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his or her spouse and their children under
the age of 21, purchasing Shares for his, her or their own account; (ii) single
purchases by a trustee or other fiduciary purchasing Shares for a single trust
estate or single fiduciary account (including pension, profit-sharing, or other
employee benefit trust created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code")) although more than
one beneficiary is involved; (iii) purchases by tax-exempt organizations
enumerated in Sections 501(c)(3) or (13) of the Code; (iv) purchases by any
"company", as that term is defined in Section 2(a)(8) of the Investment Company
Act of 1940 ("the 1940 Act"), but not including purchases by any such company
which has not been in existence for at least six months or which has no purpose
other than the purchases of Shares or shares of other registered investment
companies at a discount; and (v) purchases by employee benefit plans not
qualified under Section 401 of the Code, including plans or arrangements which
provide a means for employees, or an employer ("employer" being defined as a
single employer or two or more employers, each of which is an affiliated person
of the other under Section 2(a)(3)(C) of the 1940 Act), on behalf of employees,
to purchase shares of a registered open-end investment company or companies by
means of a payroll deduction plan or otherwise. The term "purchase" shall not
include purchases by (A) any group of individuals whose funds are combined,
directly or indirectly, for the purchase of redeemable securities of a
registered investment company jointly or through a trustee, agent, custodian, or
other representative; (B) a trustee, agent, custodian, or other representative
of such a group of individuals; or (C) any group of individuals whose sole
organizational nexus is that the participants therein are credit-card holders of
- 15 -
<PAGE>
a company, policyholders of an insurance company, customers of either a bank or
broker-dealer, or clients of any investment adviser. Purchases by a company or a
non-qualified employee benefit plan, as described in clauses (iv) and (v) above,
will qualify for the above quantity discounts only if the Fund and WSMC are able
to realize economies of scale in the sales effort and sale-related expense by
means of the companies, employers, or plans making the Fund's Prospectus
available to individual investors or employees and forwarding investments by
such persons to the Fund and by any such employers or plans bearing the expense
of any payroll deduction plan.
CUMULATIVE QUANTITY DISCOUNTS
Any investor who first acquired Shares on or after June 1, 1976 may accumulate
"purchases" (as defined above) of Shares to take advantage of the reduced sales
charges listed above. Such cumulative quantity discounts are based upon the
aggregate public offering price of Shares previously purchased or acquired and
then owned by such person plus the aggregate public offering price of the Shares
being purchased. Thus, for example, if any investor purchased Shares in any year
or years since June 1, 1976 at an aggregate public offering price of $25,000, a
purchase of $75,000 worth of additional Shares in 1997 or any subsequent year
will be subject to the 3.00% sales charge applicable to transactions of more
than $100,000 but less than $175,000. WSMC must be notified when a sale takes
place which would qualify for the reduced charges on the basis of previous
purchases and reduction will be granted when the aggregate holdings are
confirmed through a check of the records of the Fund.
LETTERS OF INTENT
The method of achieving reduced sales charges described in the preceding
paragraph also applies to all "purchases" of Shares based upon the aggregate
public offering price of Shares purchased within a 13-month period pursuant to a
written statement of intention (a "Letter of Intent"), which form may be
obtained from WSMC at 230 Park Avenue, New York, NY 10169. Upon completion of a
Letter of Intent, it must be returned to the Fund c/o American Data Services,
Inc., 24 West Carver Street, 2nd Floor, Huntington, NY 11743.
The form Letter of Intent provides that out of the initial purchase, or
subsequent purchases if necessary, 5% of the dollar amount specified for
purchase over the 13-month period shall be held in escrow by The Bank of New
York in the form of unissued Shares in an account in the investor's name. All
dividends and any capital gains distributions on the escrowed shares will be
paid directly to the investor's account. When the total minimum investment
specified under the Letter of Intent is completed by the investor within the
13-month period, the escrowed Shares will be released from escrow. If the
intended investment is not completed, the investor will be asked to pay the Fund
an amount equal to the difference
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<PAGE>
between the sales charge he has paid pursuant to the Letter of Intent and sales
charge applicable to the Shares he has actually purchased, in accordance with
the table set forth above. If the investor does not pay the difference in sales
charge within 20 days after written request therefore by the Fund or his
investment dealer, the Fund will cause to be redeemed an appropriate number of
the escrowed Shares in order to realize the difference.
RETIREMENT PLANS
Shares may be purchased by virtually all types of tax deferred retirement plans.
Please contact the Fund at 1-800-443-4693 to obtain plan forms and/or custody
agreements for the following:
- Individual Retirement Accounts
- Roth IRA Accounts
- Educational IRA Accounts
- Simplified Employee Pension Plans
Star Bank, N.A. serves as fiduciary and custodian of the above-mentioned
retirement plans. Dividends and distributions will be automatically reinvested
without a sales charge. For further details, including rights of revocation,
fees charged, tax consequences and redemption information, see the specific plan
documents which can be obtained from the Fund. Investors should consult with
their tax advisor before establishing any of the tax-deferred retirement plans
listed above.
AUTOMATIC WITHDRAWAL PLAN
Investors owning or purchasing a total of $15,000 or more of Shares, valued at
the current public offering price, may establish an Automatic Withdrawal Plan
account. Under an Automatic Withdrawal Plan account, an investor requests a
check either monthly, as of the twenty-fifth or nearest business day, or
quarterly for a fixed amount, specified by the investor (minimum amount of
$200). The minimum amount of $200 per withdrawal is, of course, not a
recommended amount and may not be suitable in all instances.
The payments specified by an investor will be made out of the proceeds of
redemption of Shares credited to his account. Accordingly, since the withdrawal
payments represent the proceeds for Share redemptions, an investor's invested
capital will be reduced to the extent that withdrawal payments exceed the income
dividends and capital gains distributions paid and reinvested on his Shares.
Continued withdrawals in excess of current income risk the exhaustion of
invested capital.
All dividends and distributions of Shares are reinvested in additional Shares at
net asset value per Share, that is, without sales charge.
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<PAGE>
REDEMPTION AND REPURCHASE OF SHARES
The Fund redeems all full and fractional Shares upon receipt of a written
request in proper form from the Stockholder or a repurchase order from a
Stockholder's securities dealer. Redemption or repurchase orders are accepted on
any day the NYSE is open for business. The net asset value per Share used for
purposes of redemption and repurchase is the net asset value per Share next
determined after a tender for redemption or repurchase is received. Tenders for
redemption and orders for repurchase received after 4:00 P.M. (EST), will be
deemed received on the next business day. No redemption or repurchase charge is
imposed by the Fund, although the Board has the power to impose a charge not to
exceed 1% of the net asset value per Share. However, the Fund has no present
intention of imposing any such charge.
Payment for Shares redeemed or repurchased is made as soon as reasonably
practicable and, in any event, must be made within seven days after proper
tender of the Shares to the Fund's Transfer Agent (see "Procedure for Direct
Redemption" below), except that the right of redemption and repurchase may be
suspended or the payment date postponed (a) for any period during which the NYSE
is closed (other than customary weekend and holiday closings) or during which
trading on the NYSE is restricted; (b) for any period during which an emergency
exists as a result of which (i) disposal by the Fund of securities owned by it
is not reasonably practicable or (ii) is not reasonably practicable for the Fund
to determine fairly the value of its net assets; or (c) for such other periods
as the Securities and Exchange Commission (the "SEC") may by order permit for
the protection of Stockholders.
If the Fund is requested to redeem or repurchase Shares for which it has not yet
received good payment, the Fund may delay or cause to be delayed the mailing of
a redemption or repurchase check until such time as it has assured itself that
good payment (e.g., cash or certified check drawn on a United States bank) has
been collected for the purchase of such Shares. This procedure may take up to
fifteen days or more.
All redemption and repurchase payments will be made by check, except that if the
Board determines that it is in the best interest of the remaining Stockholders,
redemptions and repurchases may be made in kind from the portfolio of the Fund,
in lieu of cash, taking such securities at their value employed in determining
net asset value, and selecting the securities in such manner as the Board may
deem fair and equitable. In such event, the Fund may comply with Rule 18f-1
promulgated by the SEC under Section 18(f) of the 1940 Act, pursuant to which
the Fund, upon filing a notification of election with the SEC, would redeem and
repurchase Shares solely in cash during any 90-day period for any one
- 18 -
<PAGE>
Stockholder up to the lesser of $250,000 or 1% of the net asset value of the
Fund at the beginning of such 90-day period. In the event of redemptions or
repurchases in kind, a stockholder may incur brokerage commissions in realizing
cash thereon.
Because the net asset value of a Share fluctuates as a result of changes in the
value of securities owned by the Fund, the amount received upon redemption may
be more or less than the amount paid for such Shares.
PROCEDURE FOR DIRECT REDEMPTION
A Stockholder wishing to redeem Shares may do so by tendering certificates
evidencing ownership of such Shares (endorsing the stock power on the reverse
side) to the Fund's Transfer Agent, American Data Services, Inc., 150 Motor
Parkway, Suite 109, Hauppauge, NY 11788, as agent for the Fund. If Share
certificates are not held, a letter to the Fund's Transfer Agent requesting
redemption is all that is required. In either case, however, the Stockholder's
signature must be guaranteed by an "eligible guarantor institution". An eligible
guarantor institution is defined as an institution that is a member of a
Medallion Program, located in or having a correspondent in New York City. Such
institutions generally include national or state banks, savings associations,
savings and loan associations, trust companies, savings banks, credit unions and
members of a recognized stock exchange. In certain instances, the Transfer Agent
may require additional documents such as, but not limited to, trust instruments,
death certificates, appointments as executor or administrator, or certificates
of corporate authority. Payment for Shares redeemed will be made by the Fund to
the Stockholder within the time period described above.
PROCEDURE FOR REPURCHASE FROM SECURITIES DEALERS
A Stockholder may request his or her securities dealer to place an order with
the Fund to repurchase such Stockholder's Shares; such orders may be placed with
the Fund by telephone, telegraph or letter. These repurchase arrangements are
for the convenience of Stockholders and, as mentioned above, the Fund does not
presently impose a charge on such orders. However, a securities dealer may
impose a charge on the Stockholder for transmitting the repurchase order to the
Fund. For a Stockholder requesting repurchase through his or her securities
dealer, payment will be made by the Fund to such securities dealer within the
time period described above after proper tender of the certificates for the
Shares, if any, and stock power with signatures guaranteed, to the Fund's
Transfer Agent in the manner described under "Procedure for Direct Redemption"
above.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
In addition to any increase in the value of your Shares as a result of increases
in the value of the Fund's investments, the Fund may earn income in the form of
dividends and interest on its investments. It is the Fund's policy to distribute
substantially all of this income, less expenses, to its shareholders. Capital
gains or losses are the result of the Fund's sale of its portfolio securities at
prices that are higher or lower than the prices paid by the Fund to buy such
securities. Total profits from such sales, less losses, represent net realized
capital gains. The Fund distributes net realized capital gains, if any, to
shareholders annually.
Under present policy, Stockholders may elect to automatically reinvest any
dividends and distributions in additional full and fractional Shares at net
asset value per Share (calculated as of the date of payment), that is, without
imposition of a sales charge. Other Stockholders will receive dividends, if any,
from net investment income in cash, with a separate opportunity to reinvest each
such dividend at net asset value, and receive distributions from net capital
gains realized by the Fund on the sale of securities in Shares, unless they have
previously elected, or elect in each instance, to receive cash. Fractional
increments may be paid in Shares or cash, depending upon the circumstances.
Under the Fund's cumulative investment and Automatic Withdrawal Plans,
reinvestment of both dividends and distributions in full and fractional Shares
is automatic.
Dividends and distributions are payable when, as, and if declared by the Board.
- 20 -
<PAGE>
TAXATION
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Code to the extent that its net investment income and net
realized capital gains are distributed. Whether paid in cash or in additional
Shares and regardless of the length of time the Fund's Shares have been owned by
Stockholders who are subject to federal income taxes, distributions from
long-term capital gains are taxable as such. Dividends from net investment
income or net short-term capital gains will be taxable as ordinary income,
whether received in cash or in additional Shares. For those investors subject to
tax, if purchases of Shares of the Fund are made shortly before the record date
for a dividend or capital gain distribution, a portion of the investment will be
returned as a taxable distribution. Shareholders are notified annually by the
Fund as to the federal tax status of dividends and distributions paid by the
Fund. In addition, the Fund's statements for the prior year will reference what
portion of the Fund's capital gain distributions represent 28% rate gain. The
remainder of the capital gain distributions represent 20% rate gain.
Dividends which are declared in October, November or December to shareholders of
record in such a month by which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
paid by the Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.
The sale of Shares of the Fund is a taxable event and may result in a capital
gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or a withdrawal under the
Automatic Withdrawal Plan. Any loss incurred on sale or exchange of the Fund's
Shares, held for six months or less, will be treated as long-term capital loss
to the extent of capital gain dividends received with respect to such Shares.
Ordinary income distributions may be eligible for the 70% dividends received
deduction for corporate shareholders. The amount qualifying for the deduction is
generally limited to such shareholders' proportionate share of the aggregate
dividends received from domestic corporations by the Fund. Distributions and the
proceeds of redemptions may, in certain limited circumstances, be subject to
back up withholding at the rate of 31%.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions of interest income and capital gains. Distributions from
certain types of U.S. government securities may be exempt from state personal
income taxes.
- 21 -
<PAGE>
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INFORMATION ABOUT WSMC
Wall Street Management Corporation ("WSMC"), the Fund's investment adviser (and
principal underwriter), with principal offices at 230 Park Avenue, New York, NY
10169 is a Massachusetts corporation organized on September 15, 1954. It has
served as the Fund's investment adviser since its organization.
WSMC has 6,520 shares of capital stock outstanding. 100% of which are owned by
Morse, Williams & Co., Inc. ("MWC"). Morse Williams Holding Co., Inc.
("Holding"), a Delaware corporation, owns all of the issued and outstanding
shares of capital stock of MWC. Robert P. Morse is the sole director of Holding
and owns 100% of the outstanding Common Stock of Holding and 100% of the
Preferred A Voting Stock of Holding. Such ownership of the Preferred A Voting
Stock gives Mr. Morse sole management control of Holding. The principal business
address of Holding and Robert P. Morse is 230 Park Ave., New York, NY 10169. Mr.
Morse is the President and sole Director of WSMC and Holding and also is
President and a Director of MWC and the Fund. Mr. Morse has been responsible for
the day-to-day management of the Fund's portfolio since 1984.
THE ADVISORY AGREEMENT
WSMC furnishes investment advisory research, statistical and managerial services
and provides the Fund with a continuous investment program pursuant to an
Investment Advisory Contract with the Fund dated April 26, 1990 and continued by
the Board on February 26, 1998 (the "Advisory Agreement").
Under the Advisory Agreement the Fund pays its own expenses including interest
charges; taxes; costs of purchasing and selling securities for its portfolio;
rent; expenses of redemption of shares; auditing and legal expenses; expenses
attributable to setting the type for and printing only such copies of
prospectuses as are filed with any federal or state agency, regulatory authority
or governmental department; directors' fees and expenses necessarily incurred by
directors in attendance at directors' meetings; expenses of administrative
personnel and administrative services; custodian fees; fees of the transfer
agent, the registrar and the dividend disbursing agent; cost of stock
certificates and corporate reports; all other printing expenses not
- 22 -
<PAGE>
specifically allocated to WSMC under the Agreement; costs in connection with
Board meetings and meetings of Stockholders, including proxy material
preparation and distribution, filing fees, dues, insurance premiums,
miscellaneous management and operating expenses and expenses of an extraordinary
and nonrecurring nature.
The Advisory Agreement provides that it shall continue in effect for a period of
two years from its effective date and that it may be continued from year to year
thereafter only if specifically approved at least annually by a vote of a
majority of the Board, or by the vote of a majority of the Fund's outstanding
voting securities. In either case, each continuance must be approved by a
majority vote of the directors who are not parties to such contract or
"interested persons" of any such party to such contract (other than as directors
of the Fund) cast in person at a meeting called for that purpose. The Advisory
Agreement will be effective through April 26, 1999.
The Advisory Agreement may be amended or modified only by the vote of a majority
of the Fund's outstanding voting securities and a majority of the Board,
including a majority of such directors who are not parties of the Agreement or
"interested persons" of any such party (other than as directors of the Fund).
The Advisory Agreement may be terminated, without penalty, on 60 days' written
notice to WSMC, by the Board or by the vote of a majority of the Fund's
outstanding voting securities. It automatically terminates upon its "assignment"
within the meaning of Section 2(a)(4) of the 1940 Act.
DESCRIPTION OF THE ADVISORY FEE
The Advisory Agreement provides for an advisory fee based upon a fixed
percentage of the Fund's net asset value. Such advisory fee is calculated and
paid monthly by applying the following monthly rates to the average daily net
asset value of the Fund during the preceding month:
Equivalent Average Daily
Monthly Rate Annual Rate Net Asset Value
1/16 of 1% 3/4 of 1% On the first $125 million
5/96 of 1% 5/8 of 1% On the next $75 million
1/24 of 1% 1/2 of 1% On amounts over $200 million
The advisory fees paid for 1997 as a percentage of the Fund's average net assets
was 0.75%.
- 23 -
<PAGE>
EXPENSE LIMITATION
The Advisory Agreement provides an overall limitation of the total expenses of
the Fund as follows: if the normal operating expenses of the Fund for any year,
including the advisory fee computed above (but excluding taxes, interest,
brokerage fees, and extraordinary legal , auditing or other expenses incurred in
connection with or as a result of any matter not in the ordinary course of
business of the Fund), exceed 2% of the first $10,000,000, 1.5% of the next
$20,000,000 and 1% of the balance, of the average daily net asset value, then
the excess of the expenses will be refunded by WSMC to the Fund. WSMC will waive
collection of any or all of its advisory fee to reflect any required expense
reimbursement.
The expenses of the Fund for 1997 as a percentage of net assets was 1.82%.
THE UNDERWRITING AGREEMENT
WSMC also acts as the principal underwriter for the Fund pursuant to an
Underwriting Agreement with the Fund most recently approved by the Board on
February 26, 1998 (the "Underwriting Agreement"), which Agreement provides that
WSMC shall use its best efforts to find purchasers for authorized but unissued
Shares, with WSMC paying all expenses in connection therewith.
The Underwriting Agreement provides that it shall continue in effect for a
period of more than two years from the date thereof only so long as such
continuance is specifically approved at least annually by the Board including
the vote of a majority of the directors who are not parties to such contract or
"interested persons" of any such party to the contract (other than as directors
of the Fund) cast in person at a meeting called for that purpose.
Either the Fund or WSMC may terminate the Underwriting Agreement on any date by
giving the other party at least six months' prior written notice of such
termination and the Fund may terminate the Underwriting Agreement at any time
upon any failure by WSMC to fulfill its obligations as underwriter under such
agreement. The Underwriting Agreement also provides that it shall automatically
terminate in the event of its assignment within the meaning of Section 2(a)(4)
of the Investment Company Act.
During the years 1997, 1996, and 1995, the total amount of underwriting
commissions paid or accrued to WSMC under the Underwriting Agreement were
$4,849, $4,957, and $538, respectively, after deducting dealer allowances
withheld of $49,806, $0, and $0, respectively. WSMC received net remuneration
(i.e. net advisory fees paid under the Advisory Agreement plus net underwriting
commissions) from the Fund in 1997, 1996, and 1995, of $123,325, $118,755, and
$80,227, respectively.
- 24 -
<PAGE>
ADMINISTRATOR
Pursuant to an Administrative Services Agreement with the Fund, American Data
Services, Inc. ("ADS") provides the Fund with the necessary office space,
communication facilities and personnel to perform certain services to the Fund,
including: monitoring services provided to the Fund by other service providers;
furnishing financial data and management reports; preparing all shareholder
financial statements; preparing the Fund's federal state and local tax returns;
preparing periodic reports to the SEC on Form N-SAR and amendments to the Fund's
registration statement; monitoring all regulatory restrictions for compliance;
and answering inquiries from Fund shareholders and broker-dealers. A principal
of ADS is the Secretary and Treasurer of the Fund.
For services rendered pursuant to the Administrative Services Agreement, the
Fund pays ADS, Inc. a monthly fee equal to the greater of (i) $2,083 or (ii)
1/12th of 0.1% of the first $75 million of average monthly net assets, plus
1/12th of 0.05% of the next $50 million of average monthly net assets, plus
1/12th of 0.04% of average monthly net assets in excess of $125 million.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
The Bank of New York, 110 Washington Street, New York, NY 10286 is custodian for
the Fund and it holds in safekeeping all of the portfolio securities and cash of
the Fund pursuant to the terms of a Custodian Agreement. The Custodian performs
no managerial or policy-making functions with or for the Fund. The services of
the custodian do not provide protection to Stockholders against possible
depreciation of assets. ADS serves as the Fund's Transfer Agent and Dividend
Disbursing Agent.
THE BOARD OF DIRECTORS
The property, business and affairs of the Fund are managed by a Board of
Directors that currently consists of four members.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, 1301 Avenue of the Americas,
New York, NY 10019, is the auditor for the Fund and audits its financial
statements yearly.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund was organized as a Maryland corporation on December 26, 1945. It has an
authorized capital of 5,000,000 Shares of Capital Stock, par
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<PAGE>
value $1 per share. Each Share has equal voting, dividend, redemption and
liquidation rights. There is no limitation on transferability, and no Share is
subject to further call by the Fund. The Shares have non-cumulative voting
rights, which means that the holders of more than 50 percent of the Shares
voting for the election of directors can elect 100 percent of the directors if
they choose to do so, and, in such event, the holders of the remaining Shares
voting for the election of directors will not be able to elect any person or
persons to the Board. In addition, directors of the Fund elected by the
shareholders serve until a successor is elected and assumes office. The Fund,
under applicable Maryland law, does not hold an annual meeting of shareholders
in any year in which such a meeting is not required under state law or the 1940
Act. The fiscal year of the Fund ends on December 31 of each year.
ADDITIONAL INFORMATION
The Fund may disseminate reports of its investment performance from time to
time. Investment performance is calculated on a total return basis; that is by
including all net investment income and any realized and unrealized net capital
gains or losses during the period for which investment performance is reported.
If dividends or capital gains distributions have been paid during the relevant
period the calculation of investment performance will include such dividends and
capital gains distributions as though reinvested in shares of the Fund. Standard
quotations of total return are computed in accordance with SEC Guidelines to
provide comparability to other investment companies. Performance data is based
on historical earnings and is not intended to indicate future performance. Rates
of return expressed on an annual basis will usually not equal the sum of returns
expressed for consecutive interim periods due to the compounding of the interim
yields. The Fund's annual report to shareholders for the fiscal year ended
December 31, 1997 contains performance information about the Fund. A copy of the
annual report is available upon request without charge and may be obtained by
calling the Fund at (800) 443-4693.
SHAREHOLDER INFORMATION AND REPORTS All shareholder inquiries regarding account
information of transactions should be directed to American Data Services,
Inc.,150 Motor Parkway, Suite 109, Hauppauge, NY 11788 or by telephone to (800)
443-4693. Shareholder inquiries about general Fund information should be
directed to the Fund's office at (212) 856-8250. Shareholders will be provided
semi-annual unaudited and annual audited reports, including a listing of
portfolio securities held.
- 26 -
<PAGE>
THE WALL STREET FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
230 Park Avenue, New York, New York 10169
Telephone: (212) 856-8250
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Prospectus of The Wall Street Fund, Inc. (the "Fund"),
dated May 1, 1998. The Prospectus may be obtained by writing to the above
address or by calling the above phone number.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS MAY 1, 1998.
B-1
<PAGE>
TABLE OF CONTENTS
Investment Objectives and Policies....................................... B-2
Management of the Fund................................................... B-3
Principal Holders of Securities.......................................... B-5
Brokerage Allocation..................................................... B-5
Tax Status............................................................... B-6
Underwriter.............................................................. B-7
Calculation of Performance Data.......................................... B-8
Financial Statements..................................................... B-10
INVESTMENT OBJECTIVES AND POLICIES
In order to achieve the "growth of capital" stated as the primary investment
objective in the Prospectus (under the heading "Investment Objectives"), the
management of the Fund looks for undervalued investments in economic areas
experiencing lasting growth, i.e., those that are inefficiently priced and have
outstanding characteristics relative to alternative investments. Further, the
companies whose stocks are purchased must, whether large or small, be quality
companies run by able and motivated management teams, have sustainable earnings
growth, appropriate dividend policies, minimal or moderate debt, and valuable
products or services. Also, such financial ratios as superior profit margins,
return on equity, and cash flow are essential criteria. Growth characteristics
of the Fund's portfolio of investments are vital to meet the Fund's primary
investment objective. So is the ability to control risk. Accordingly, prudent
portfolio diversification is stressed. Seldom is more than 3% of the Fund's net
asset value invested at cost in any one security.
B-2
<PAGE>
MANAGEMENT OF THE FUND
The Fund is managed by its directors and officers. Their names, ages, addresses
and information as to their principal business occupations during the last five
years is set forth below in alphabetical order.
<TABLE>
<CAPTION>
Principal Occupations
Positions for Last Five Years
Name and Address (AGE) Held With Fund and Other Directorships
- ------------------------------------------------------------------------------------
<S> <C> <C>
Michael R. Linburn (64) Vice President Director of Marketing, Morse,
230 Park Avenue Williams & Co., Inc. since 1992.
New York, NY 10169
Clifton H.W. Maloney (59) Director President, C.H.W. Maloney &
245 Park Avenue Co., Inc., an investment
New York, NY 10169 banking firm, since 1981.
Director, Chromium Industries,
Inc., and Liberty Business
Forms and Systems, Inc.
Michael Miola (45) Secretary/ President, American Data
150 Motor Parkway Treasurer Services, Inc., a mutual fund
Hauppauge, NY 11788 administrator since 1984.
Chairman, ADS Distributors, Inc.,
a brokerage firm since 1997.
Robert P. Morse* (52) Chairman, President and a Director, Morse
230 Park Avenue President and Williams & Co., Inc., investment
New York, NY 10169 Director counselors, since 1981;
President and sole Director of
Wall Street Management
Corporation ("WSMC") since
1984 and Morse Williams
Holding Co., Inc. since 1986.
Allen C. Post (54) Vice President Portfolio Manager, Morse,
230 Park Avenue Williams, & Co., Inc. since 1991.
New York, NY 10169
B-3
<PAGE>
Principal Occupations
Positions for Last Five Years
Name and Address (AGE) Held With Fund and Other Directorships
- ------------------------------------------------------------------------------------
Sharon A. Queeney (55) Director President, Queeney Enterprises
64 East 91st Street since 1988, a marketing/media
New York, NY 10128 production company.
Harlan K. Ullman, (57) Director Chairman, Killoven Group, a
Ph.D consulting firm; Senior Fellow,
1245 29th Street, N.W. The Center for Naval Analyses;
Washington, D.C. 20007 Senior Associate, of Center for
Strategic and International
Studies, since 1987.
</TABLE>
*Denotes a director who is an "interested person" as that term is defined in
Section 2(a)(19) of the Investment Company Act of 1940 (the "Investment Company
Act").
Set forth below is a Compensation Table listing, for each director, the
aggregate compensation received from the Fund for the calendar year ended
December 31, 1997. The Fund has no bonus, profit sharing, or retirement plans.
COMPENSATION TABLE
Total
Compensation
Received From
Director Fund
- -------------------------------------------------------------------
Clifton H.W. Maloney .............................. $6,000
Robert P. Morse ................................... $6,000
Sharon A. Queeney ................................. $6,000
Harlan K. Ullman .................................. $6,000
In addition, the Fund's Directors were reimbursed for expenses of $3,615 in
connection with the four Board Meetings held during the year. The Fund makes no
payments of salary to any officer in such capacity.
B-4
<PAGE>
As of April 9, 1998, all officers and directors of the Fund as a group owned
(according to information supplied by them) of record or beneficially a total of
656,363.049 Shares (or 28.08%) of the Fund.
PRINCIPAL HOLDERS OF SECURITIES
The following is the only person known to the Fund who, on April 9, 1998, owned
of record or beneficially more than five percent of the outstanding Shares:
Robert P. Morse as one of three trustees for seven trust accounts, as sole
trustee for one trust account and as custodian for three separate Uniform Gifts
to Minors Act accounts and personally, holding in the aggregate 649,160.064
Shares (27.78%) of record. WSMC, which is owned indirectly by Mr. Morse,
beneficially owns 3,302.806 Shares (or 0.14%) of the Fund.
BROKERAGE ALLOCATION
It is the policy of the Fund to select brokers on the basis of their ability to
effect transactions in portfolio securities in such a manner as to obtain the
best execution of orders at the most favorable prices. Brokerage business is
also allocated in order to obtain investment information and research, so that
WSMC may supplement its own analysis and research activities and may make
available to the Fund the recommendations, views and information of individuals
and research staffs of many different securities firms. Such investment
information and research is presently provided to WSMC at no cost to it, and to
the extent that such investment information and research is used by WSMC in
rendering investment advice to the Fund, it tends to reduce the expenses of
WSMC. Subject to the foregoing policies, brokers are chosen by the officers of
WSMC in accordance with their best judgment and the allocation of brokerage is
not made in accordance with any formula. In following the foregoing policies,
however, a broker may be paid a brokerage commission in excess of that which
another broker might have charged for effecting the same transaction, in
recognition of the value of such broker's ability to promptly execute the order
and/or
B-5
<PAGE>
provide research services. In allocating brokerage, the Fund does not favor or
disfavor any broker on the basis of sales of Shares made or expected to be made
by such broker.
During the years 1997, 1996 and 1995, the Fund paid brokerage commissions of
$51,851, $72,469, and $60,653, respectively, to brokerage firms in connection
with its purchases and sales of portfolio securities.
During the year 1997, the Fund paid commissions for securities transactions to
brokers that provided investment information and research services to WSMC of
$4,705 with respect to securities transactions valued at $1,236,306. Research
services furnished by brokers through whom securities transactions are effected
may be used by WSMC in servicing all of its accounts and not all such services
may be used by WSMC in connection with the Fund.
During the years 1997, 1996, and 1995 none of the brokers employed by the Fund
(i) was an "affiliated person" (as defined in Section 2(a)(3) of the Investment
Company Act) of the Fund; (ii) was an affiliated person of such an affiliated
person; or (iii) had an affiliated person who was also an affiliated person of
the Fund or WSMC.
WSMC may act as one of the Fund's brokers in the purchase and sale of portfolio
securities. It is the Fund's intention to use WSMC as a broker where, in the
judgment of Fund management, such firm would be able to obtain a price and
execution at least as favorable as other qualified brokers. In 1997 WSMC did not
act as an executing broker for any portfolio transactions of the Fund.
TAX STATUS
The following information supplements the information set forth in the
Prospectus under the heading "TAXATION".
The Fund intends to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, (the "Code") applicable to regulated
investment companies. The Fund intends to pay dividends representing its
investment company taxable
B-6
<PAGE>
income within certain time periods specified by the Code. By doing so and by
meeting certain diversification and other requirements, the Fund intends to
qualify as a regulated investment company under the Code. Since the Fund will
distribute its investment company taxable income, net capital gains, and capital
gain net income, it will not be subject to income or excise taxes otherwise
applicable to undistributed income of a regulated investment company. If the
Fund were to fail to distribute all of its income and gains, it would be subject
to income tax and, in certain circumstances, a 4% excise tax.
TAXATION OF SHAREHOLDERS. Distributions reflecting the Fund's own dividend
income will qualify for the 70% dividends received deduction available to
corporate shareholders if the Fund does not sell the underlying stock before
satisfying a 46-day holding period requirement (91 days for certain preferred
stock).
Individuals and other non-exempt payees will be subject to a 31% backup Federal
withholding tax on dividends and other distributions from the Fund, as well as
the proceeds of redemptions of Fund shares, if the Fund is not provided with the
shareholder's correct taxpayer identification number and certification that the
shareholder is not subject to such backup withholding. For most individuals, the
taxpayer identification number is the taxpayer's social security number.
UNDERWRITER
The following information supplements the information set forth in the
Prospectus under the subheading, "The Underwriting Agreement."
WSMC, the Fund's principal underwriter, offers Shares of the Fund on a
continuous basis, has entered into dealer agreements with various broker/dealer
firms located in jurisdictions where the Fund has registered its Shares for
public sale. The dealer agreements require dealers to act as agent for WSMC for
consideration, which is set forth in the Prospectus under the subheading,
"Purchase of Shares" in the column captioned
B-7
<PAGE>
"Allowance to Selected Dealers as Percentage of the Offering Price." The dealer
agreements also require that the dealers be registered as brokers and dealers
pursuant to Section 15 of the Securities Exchange Act of 1934 and that they be
members in good standing of the National Association of Securities Dealers, Inc.
Set forth below is a Table listing all commissions and other aggregate
compensation received by WSMC from the Fund for the calendar year ended December
31, 1997.
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wall Street
Management Corp. $4,849 None None $118,476 (1)
<FN>
(1) Other compensation is comprised of advisory fees earned by WSMC during the
calendar year ended December 31, 1997.
</FN>
</TABLE>
CALCULATION OF PERFORMANCE DATA
Following are quotations of the Fund's average annual total return for the
indicated periods using the standardized method of calculation required by the
Securities and Exchange Commission ("SEC"):
for the one-year period ended December 31, 1997: (6.25)%
for the five-year period ended December 31, 1997: 8.95%
for the ten-year period ended December 31, 1997: 11.25%
Average annual total return is calculated according to the following SEC
formula:
n
P(1+T) = ERV
where P= a hypothetical initial payment of $1,000; T= average annual total
return; n= number of years; and ERV= ending redeemable value of the hypothetical
initial payment of $1,000 made at the beginning of the 1,5, and 10-year periods
at the end of the 1,5 and 10-year periods. The maximum sales load was deducted
from the initial $1,000 investment and all dividends and distributions were
assumed to have been reinvested at the appropriate net asset value per share.
B-8
<PAGE>
THE
WALL
STREET
FUND INC.
ANNUAL REPORT
December 31, 1997
<PAGE>
THE WALL STREET FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
COMMON STOCKS AND WARRANTS - 93.19%
MARKET
SHARES VALUE
------ -----
BASIC MATERIALS - 2.60%
10,000 +Arqule Inc. ............................ $ 230,312
135,000 +International Precious Metals Corp...... 175,078
---------
405,390
---------
CAPITAL GOODS - 7.49%
75,000 +Flow Intl. Corp. ....................... 714,844
2,500 Hewlett Packard Co. .................... 156,250
6,000 Telxon Corp. ........................... 144,000
8,000 +Zygo Corp. ............................. 152,000
---------
1,167,094
---------
CONSUMER - CYCLICAL - 6.98%
6,000 +Abercrombie & Fitch Co. ................ 187,500
3,500 Home Depot Inc. ........................ 206,062
5,500 +North Face Inc. ........................ 121,172
5,000 +Office Depot Inc. ...................... 119,687
6,000 +Pixar .................................. 130,875
5,000 +Play by Play Toys & Novelties Inc.. .... 90,000
5,000 +Polo Ralph Lauren Corp. - Class A ...... 121,563
12,000 +Zomax Optical Media .................... 110,250
---------
1,087,109
---------
CONSUMER NON-CYCLICAL - 19.16%
5,000 +Alza Corp. ............................. 159,062
7,000 +Biochem Pharma. Inc. ................... 146,125
5,000 +Biogen Inc. ............................ 182,187
8,000 +Centocor Inc. .......................... 267,000
7,000 +Chiron Corp. ........................... 119,219
5,000 +Corixa Corp. ........................... 45,156
5,000 +Genzyme Corp. .......................... 138,437
5,000 +Genzyme Tissue Repair .................. 34,063
5,000 +Healthcare Compare Corp. ............... 256,875
5,000 +Healthsouth Rehabilitation Corp. ....... 138,750
8,000 +Incyte Pharmaceutics Inc. .............. 357,000
10,000 +ISIS Pharmaceuticals ................... 124,375
15,000 +Ligand Pharmaceuticals - Class B ....... 194,063
4,000 +Liposome Co. Inc. ...................... 18,625
5,000 +Martek Biosciences Corp. ............... 40,938
15,000 +Perclose Inc. .......................... 288,750
4,000 Pfizer Inc. ............................ 298,250
5,000 +Transkaryotic Therapies Inc. ........... 175,313
---------
2,984,188
---------
DIVERSIFIED - 0.27%
500,000 +International UNP Holdings Ltd. ........ 41,928
---------
ENERGY - 1.27%
20,000 +Gulf Canada Resources .................. 140,000
1,500 Unocal Corp ............................ 58,219
---------
198,219
---------
FINANCIAL 3.82%
8,000 Allmerica Financial Corp. .............. 399,500
10,000 +CCC Information Services Group ......... 195,625
---------
595,125
---------
REAL ESTATE 0.82%
5,000 New Plan Realty Trust .................. 127,500
---------
COMMON STOCKS AND WARRANTS (continued)
MARKET
SHARES VALUE
------ -----
SERVICES - 16.16%
10,000 +At Home Corp. .......................... $ 250,625
6,500 +Cendant Corp. .......................... 223,438
6,000 Cintas Corp. ........................... 234,375
15,000 +Electronic Processing .................. 174,375
100,000 +Executone Information Systems .......... 220,312
10,000 +Faxsav Inc. ............................ 25,312
6,000 First Data Corp. ....................... 175,500
20,000 +Flexinternational Software ............. 315,000
5,000 +Lernout & Hauspie Speech ............... 230,625
16,000 +Network Solutions ...................... 210,500
5,000 Ogden Corp. ............................ 140,938
15,000 +Spacehab Inc. .......................... 158,438
4,000 +USA Waste Services Inc. ................ 157,000
---------
2,516,438
---------
TECHNOLOGY - 34.62%
5,500 +Adaptec Inc. ........................... 204,531
8,000 +Analog Devices Inc. .................... 221,500
5,000 +Ascend Communications Inc. ............. 122,969
8,000 +Celeritek Inc. ......................... 111,500
5,000 +Ciena Corp. ............................ 306,250
7,000 +Cybermedia Inc. ........................ 104,781
15,000 +Excite Inc. ............................ 450,469
8,500 +Harbinger Corp. ........................ 239,062
3,000 Intel Corp. ............................ 210,656
4,000 +Manugistics Group Inc. ................. 177,750
10,000 +Metacreations Corp. .................... 110,625
8,050 Netscape Communications Corp. .......... 195,716
15,000 +Network Imagaing Corp. ................. 13,828
45,000 +Object Design Inc. ..................... 381,094
3,500 +Peoplesoft Inc. ........................ 136,062
7,000 +Qualcomm Inc. .......................... 353,719
20,000 +Rogue Wave Software Inc. ............... 221,250
7,000 +Sawtek Inc. ............................ 184,187
30,000 +Select Software Tools Ltd. Sponsored ADR 172,500
5,000 +Sequent Computer Systems Inc. .......... 100,313
2,000 +Tellabs Inc. ........................... 105,563
4,000 +The Registry Inc. ...................... 185,000
5,000 +Vantive Corp. .......................... 125,625
10,000 +Vitesse Semi-Conductor Corp. ........... 380,625
7,500 +Worldcom Inc. .......................... 227,109
10,000 +Xilinx Inc. ............................ 350,000
---------
5,392,684
---------
WARRANTS - 0.00%
875 +American Satellite Network
Inc. Warrants ........................ 0
---------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $13,068,457) 14,515,675
----------
See notes to financial statements.
Page 1
<PAGE>
THE WALL STREET FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997
BONDS - 5.56%
PRINCIPAL MARKET
VALUE VALUE
----- -----
CONVERTIBLE BONDS - 5.56%
100,000 Alza Corp., Subordinated Debentures, 5.00%
05/01/2006 ............................. $ 105,875
150,000 +^Bonneville Pacific Corp., Subordinated
Debentures, 7.75% 08/15/2009 .......... 216,000
500,000 Executone Information Systems 7.50% 03/15 442,500
100,000 VLSI Technology Inc., Subordinated Notes,
8.25% 10/01/2005 ....................... 101,875
----------
TOTAL BONDS
(Cost $360,266) ........................ 866,250
----------
TOTAL INVESTMENTS
(Cost $13,428,723) 98.75% .. 15,381,925
OTHER ASSETS LESS LIABILITIES 1.25% .. 194,902
-----------
TOTAL NET ASSETS 100.00% ..$15,576,827
===========
(1) Federal Tax Information: At December 31, 1997 the net unrealized
appreciation based on cost for Federal Income tax purposes of $13,442,893 was as
follows:
Aggregate gross unrealized appreciation for all investments in
which there was an excess of value over cost ........ $ 3,491,719
-----------
Aggregate gross unrealized depreciation for all investments in
which there was an excess of cost over value ............. (1,552,687)
-----------
Net unrealized appreciation .............................. $ 1,939,032
===========
+ Non-income producing security.
^ Priced at fair value as determined by the Board of Directors.
THE WALL STREET FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
ASSETS:
Investments in securities, at value
(cost $13,428,723) (Note 1) ... $ 15,381,925
Receivables:
Investment securities sold ...... $ 324,273
Receivable from custodian ....... 35,000
Fund shares sold ................ 4,076
Interest and dividends .......... 21,528
------
384,877
Other assets ...................... 4,837
------------
Total Assets .................... 15,771,639
LIABILITIES:
Cash Overdraft .................... 84,398
Payables:
Investment securities purchased . 79,844
Investment adviser fee .......... 22,562
Other payables and accrued
expenses .................... 8,008
-------
110,414
------------
Total Liabilities ........... 194,812
------------
Net Assets ................ $ 15,576,827
============
Net Assets Consist of:
Capital stock at par value ...... $ 2,122,796
Additional paid in capital ...... 11,513,674
Unrealized appreciation on
investments ................. 1,953,202
Accumulated net realized loss
on investments .............. (12,845)
Net Assets ................ $ 15,576,827
============
Net asset value and
redemption price per share
($15,576,827/2,122,796 shares
of capital stock outstanding)
(Note 4) ........................ $ 7.34
============
Maximum offering price per share
(100/96 of $7.34) ............... $ 7.65
============
See notes to financial statements.
Page 2
<PAGE>
THE WALL STREET FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
INVESTMENT INCOME:
Income:
Dividends ..................... $ 40,143
Interest ...................... 95,207
-----------
Total income ..................... 135,350
Expenses:
Investment adviser fees
(Note 3) .................... 118,476
Transfer agent fees and
dividend paying expenses ... 23,501
Custodian fees ................ 14,650
Accounting services ........... 49,000
Reports to shareholders ....... 13,075
Professional fees ............. 20,247
Directors fees and expenses ... 27,615
Registration fees ............. 8,500
Miscellaneous ................. 11,720
-----------
Total Expenses ................... 286,784
-----------
Net investment loss ........... (151,434)
-----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 1)
Net realized gains from
investment transactions ....... 868,636
Net decrease in unrealized
appreciation of investments ... (1,054,196)
-----------
Net realized and unrealized losses
on investments ................ (185,560)
-----------
Net decrease in net assets
resulting from operations ..... $ (336,994)
===========
THE WALL STREET FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
---- ----
Net investment loss ................... $ (151,434) $ (105,420)
Net realized gains from
investment transactions ........... 868,636 2,067,893
Net decrease in unrealized
appreciation of investments ....... (1,054,196) (333,671)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ......... (336,994) 1,628,802
Distributions to shareholders
from:
Net realized gains from
investment transactions
($0.41 and $1.15 per share,
respectively) ..................... (834,155) (2,009,946)
Net capital share transactions
(Note 4) .......................... 808,663 1,937,669
------------ ------------
Total increase (decrease) in net assets (362,486) 1,556,525
NET ASSETS:
Beginning of year ..................... 15,939,313 14,382,788
------------ ------------
End of year ........................... $ 15,576,827 $ 15,939,313
============ ============
See notes to financial statements Page 3
<PAGE>
THE WALL STREET FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(A) SECURITIES VALUATIONS - The value of investments is based on the published
last sale prices on national securities exchanges, or, in the absence of
recorded sales, at the mean between the closing bid and asked prices on such
exchanges or over-the-counter. At December 31, 1997, the Fund held a security
for which a market quotation was not readily available and which was valued in
good faith by the Board of Directors. This security had a value of $216,000
representing 1.39% of the Fund's net assets.
(B) FEDERAL INCOME TAXES - No provision for federal income taxes has been made
in the accompanying financial statements, since the Fund intends to continue to
comply with the provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute to its shareholders substantially all of
its net investment income and net realized gains on investments.
(C) OTHER - Security transactions are accounted for on the date securities are
purchased or sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. The net realized gains and losses are
determined on the identified cost basis. The Fund may periodically make
reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gains distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles. During the year ended December
31, 1997, the Fund decreased additional paid-in-capital by $151,581, decreased
accumulated net investment loss by $151,434 and decreased accumulated net
realized loss by $147.
(2) PURCHASES AND SALES OF SECURITIES:
Purchases and sales of investment securities, during the year ended
December 31, 1997 aggregated $18,842,238 and $19,098,540, respectively.
(3) INVESTMENT ADVISORY FEES AND OTHER:
The advisory agreement provides for advisory fees of 1/16 of 1% monthly
(equivalent to 3/4 of 1% per annum) of the first $125,000,000 of average net
assets of the Fund. The present advisory agreement also provides for the adviser
to reimburse the Fund for any expenses (including the advisory fee but excluding
taxes, interest and brokerage fees and extraordinary expenses incurred in
connection with any matter not in the ordinary course of business of the Fund)
over 2% of the first $10,00,000, 1 1/2% of the next $20,000,000 and 1% of any
balance of the average daily net asset value.
For the year ended December 31, 1997, Wall Street Management Corporation
(WSMC) earned investment advisory fees of $118,476 with no reimbursement to the
Fund for expenses.
The adviser also serves as the Fund's principal underwriter. For the year
ended December 31, 1997, WSMC received $4,084 as its portion of the sales charge
on sales of shares of the Fund. Certain of the officers and directors of the
Fund are officers and directors of WSMC.
The Fund has arranged for American Data Services, Inc., of which the Fund's
Secretary and Treasurer is a principal, to prepare the accounting records and
perform administrative and transfer agent services for the Fund. Costs incurred
totalled $72,501 for the year ended December 31, 1997.
Morse, Williams & Co., Inc. (MWC), 100% owner of WSMC, performs
administrative services for the Fund. This includes costs of shared office
expenses, rent, telephone charges and supply expenses. For the year ended
December 31, 1997, no remuneration was paid by the Fund to MWC.
(4) CAPITAL STOCK:
At December 31, 1997 there were 5,000,000 shares of $1 par value capital stock
authorized. Transactions in capital stock during the year ended December 31,
1997 and the year ended December 31, 1996 were as follows:
1997 1996
-------------------- ---------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .......... 293,230 $ 2,360,707 78,951 $ 698,614
Shares issued for
reinvestment of
distribution from
realized gains .... 100,096 705,679 243,015 1,905,236
Shares redeemed ...... (273,575) (2,257,723) (76,029) (666,181)
------- ----------- ------- ----------
Net increase ......... 119,751 $ 808,663 245,937 $1,937,669
======= =========== ======= ==========
Page 4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR)
Year Ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..................... $ 7.96 $ 8.19 $ 7.42 $ 8.03 $ 7.60 $ 7.27 $ 5.54
--------- --------- -------- -------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) ........................... (0.08) (0.06) (0.03) (0.02) (0.02) 0.01 0.03
Net realized and unrealized gains (losses)
on investments ...................................... (0.13) 0.98 2.60 (0.38) 1.00 0.54 2.95
--------- --------- -------- -------- -------- -------- ---------
Total from investment operations ....................... (0.21) 0.92 2.57 (0.40) 0.98 0.55 2.98
--------- --------- -------- -------- -------- -------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income ................... 0.00 0.00 0.00 0.00 0.00 (0.01) (0.03)
Distribution from realized gains
from security transactions .......................... (0.41) (1.15) (1.80) (0.21) (0.55) (0.21) (1.21)
Return of capital distribution ......................... 0.00 0.00 0.00 0.00 0.00 0.00 (0.01)
--------- --------- -------- -------- -------- -------- ---------
Total distributions .................................... (0.41) (1.15) (1.80) (0.21) (0.55) (0.22) (1.25)
--------- --------- -------- -------- -------- -------- ---------
Net asset value, end of year ........................... $ 7.34 $ 7.96 $ 8.19 $ 7.42 $ 8.03 $ 7.60 $ 7.27
========= ========= ======== ======== ======== ======== =========
Total return** ......................................... (2.37%) 11.45% 36.50% (4.86%) 13.17% 7.61% 54.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) ..................... 15,577 15,939 14,383 11,080 11,561 11,202 11,032
Ratio of expenses to average net assets ................ 1.82% 1.84% 2.02% 2.12% 2.04% 2.15% 2.10%
Ratio of expenses to average net assets,
net of reimbursement ................................ 1.82% 1.82% 1.90% 1.96% 1.96% 1.97% 1.98%
Ratio of net investment income (loss)
to average net assets . ............................. (0.96%) (0.70%) (0.50%) (0.47%) (0.31%) (0.08%) 0.30%
Ratio of net investment income (loss)
to average net assets, net of reimbursement ......... (0.96%) (0.68%) (0.38%) (0.31%) (0.23%) 0.09% 0.43%
Portfolio turnover rate ................................ 121.12% 142.11 143.27% 89.01% 107.22% 112.47% 159.52
Average commission rate paid+ .......................... .0513 .0666 -- -- -- -- --
<FN>
** Excluding sales charge.
+ For fiscal years beginning on or after September 1, 1996, a fund is required
to disclose its average commission rate per share for trades on which a
commission is charged.
</FN>
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors of
The Wall Street Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Wall Street Fund, Inc., including the schedule of investments, as of December
31, 1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the seven years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Wall Street Fund, Inc. as of December 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the seven
years in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 20, 1998
Page 5
<PAGE>
PRINCIPAL INVESTMENT CHANGES
For the year ended December 31, 1997
NEW POSITIONS
Advanced Digital Information Corp., Abercrombie & Fitch Co., Arqule, Inc., At
Home Corp., CCC Information Services Group, Cendant Corp., Ciena Corp.,
Crescendo Pharmaceuticals, Corixa Corp., Cybermedia Inc., Electronic Processing,
Faxsav Inc., Flexinternational Software Inc., Healthsouth Rehabilitation Corp.,
Network Imaging, Incyte Pharmaceutics Inc., Ligand Pharmaceuticals, Lernout &
Hauspie Speech, Manugistics Group Inc., Network Solutions, Object Design Inc.,
Play by Play Toys & Novelties, Perclose Inc., Peoplesoft Inc., Qualcomm Inc.,
The Registry Inc., Polo Ralph Lauren Corp., Spacehab Inc., USA Waste Services
Inc., Vantive Inc.
ELIMINATIONS
Alpha-Beta Technology Inc., Barrick Gold Corp., Adobe Systems Inc., Advanced
Digital Information Corp., Amway Japan Ltd ADR, Altera Corp., Amgen Inc., Apac
Teleservices, Anadarko Petroleum Corporation, Astea International Inc., Avant
Corporation, Boeing Co., Crescendo Pharmaceuticals, Cellpro Inc., Comp USA Inc.,
Cisco Systems Inc., Digital Equipment Corp., Dresser Industries, Delia*s, Inc.,
Electronics For Imaging Inc., ESS Technology, Executive Telecard Ltd.,
Federation Resources, Federal National Mortgage Assoc., Fusion Systems Corp.,
Gap Inc., GTE Corp., ICC Technologies Inc., Idexx Laboratories Inc., IMC Global
Inc., Jilin Chemical Ind., Johnson & Johnson, Kasten Chase Applied Research,
McDonalds Corp., Millicom Int'l. Cellular S.A., Metromedia International Group,
Minnesota Mining & Manufacturing Co., Motorola Inc., Merck & Co., Nematron
Corp., Nucor, Octel Communications Corp., On Technology Corp., Oracle Systems
Corporation, Paging Network Inc., Premis Corporation, Parametric Technologies,
Qualmark Corporation, Raptor Systems Inc., Rational Software Corp., Retirement
Care Associates Inc., Renaissance Solutions Inc., Structural Dynamics, Seagate
Technology, Search Financial Services Inc., Stevens International CL A Warrants,
Saks Holdings Inc., Synopsys Inc., Sport-Haley Inc., Strategic Distribution
Inc., Stevens Graphics Series A, Tiffany & Co., U-Ship Inc., Vencor Inc.,
Wisconsin Central Trans, Zoltek Companies Inc. Convertible Bonds: Air & Water
Technologies 8.00%, 05/15/2015.
This report is not to be construed as an offering for the sale of The Wall
Street Fund, Inc., or as a solicitation of an offer to buy any such shares,
unless accompanied by an effective prospectus setting forth details of the Fund
including the sales charge and other material information.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN++
AVERAGE ANNUAL TOTAL RETURN
After Sales Charge at the Beginning of each period
including Reinvestment of Dividends.
1 YEAR: (6.25%) 5 YEAR: 8.95% 10 YEAR: 11.25%
[Graph omitted here]
Graph depicts the performance of an initial investment of $10,000 in the Wall
Street Fund versus the Russell 2000 Index for the periods 1987 through 1997.
Wall Street Russell 2000
Fund Index
---- -----
Initial
Investment 1987 $10,000.00 $10,000.00
1988 11,230.77 12,237.22
1989 13,722.41 13,976.97
1990 10,928.29 10,978.28
1991 16,869.28 15,773.19
1992 18,152.30 18,353.33
1993 20,642.21 21,474.09
1994 19,543.94 20,790.65
1995 26,681.27 26,239.10
1996 29,735.78 30,112.22
1997 29,032.18 36,291.45
The maximum initial sales charge payable on an investment in the Fund was 5.50%
at December 31, 1987. At public offering price of $10,000, the net investment in
the Fund would be $9,450, assuming no waiver or reduction of sales charges.
Currently, the maximum sales charge is 4.0%. The performance information shown
represents past performance and should not be interpreted as indicative of the
Fund's future performance. Return and share price will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
++ Not covered by report of independent accountants.
- --------------------------------------------------------------------------------
MANAGEMENTS DISCUSSION OF
FUND PERFORMANCE
The Fund's broad diversification policy combined with Fund Management's
stock selection were significant factors contributing to Fund performance in
1997. Management's strategy of investing in companies selected from a variety of
broad industry groups and investing in a large number of different companies
with strong fundamental growth characteristics provides protection from long
term fundamental portfolio risk. Fund Management's analytical emphasis on a
company's future sustainable earnings growth and the quality of corporate
management are also important to Fund performance.
Market prices for your Fund's investments generally increase due to strong
corporate earnings and the perception of future earnings. The very high inflow
of new funds into the US market increased the prices of large capitalization
businesses as investors bought these names and ignored many excellent smaller
and medium capitalization issues. Events in Asia changed market perceptions
concerning future growth during the last quarter of 1997. Your fund includes
small, medium as well as large capitalization issues but is weighted in the
faster growing smaller companies.
Page 6
<PAGE>
February 20, 1998
Dear Shareholders:
The perception of financial events across Asia, an area the world had come
to anticipate as a major geographic area of present and future growth, had an
impact on the funds performance. The impact of these events on most of your
stocks was unwarranted with the "baby being thrown out with the bath water".
The positive return we had through September was taken away by an external
event, the Asian financial crisis. The subsequent rebound we are experiencing in
1998 attests to the markets short term misperception that impacted our
investments. Despite this difficulty your fund has enjoyed an average return of
15% per annum since the end of 1990. To date in 1998 the Fund is up 10% as
compared with the Russell 2000 index, which is up 4%.
While we are constructive on the equity market for the next several years it
has become apparent that money flows last year went into larger capitalization
stocks and index related securities. This created an anomaly in 1997 where the
overvalued stocks became more overvalued and the undervalued stocks more
undervalued. The basic law of investments, that money flows to the higher rates
of return, has been delayed during this period of intense money flows and, in
our opinion, will reassert itself in 1998. Funds will, at this point, begin to
seek the higher earnings potential investments such as those in the fund's
portfolio.
While we may have been "early" in some of the investment selections, we
strongly believe in our methodology and perceptions of dynamic, persistent
future growth. We have exceptionally good, high growth opportunities in the
information, telecommunications, and high technology areas - drivers of
productivity increases. Life science investments in biotechnology and health
care are, additionally, solid opportunities. In fact, the biotechnology
companies are now being called "biopharmas" as more and more effective products
are coming to market. Selected investments in the services area with dynamic and
proven managements are taking advantage of this aspect of economic growth, from
outsourcing to internet companies. These businesses are where the real growth is
and will be experienced. Sooner or later the vast amounts of funds in the
markets will turn to these high earnings potential investments to provide above
average returns. The trigger points are likely to be the recognition that the
Asian issues are perceived soluble and, more importantly, that the investments
deliver their earnings. We expect this to occur in 1998.
The overall economy in the U.S. is strong and likely to continue at a real
GDP growth of 3%. The Asian impact is anticipated to have minimum consequences
to our growth rate as the European recovery is taking up any slack in demand.
The Federal Reserve's purchases of U.S. debt from overseas holders has created
an above average growth rate in the U.S. monetary base, which ensures above
average liquidity and is stimulative to economic activity.
In the past when your investments have had a lagging performance due to
external events, such as during the Kuwait Desert Storm period, the rebound has
been impressive. We look forward to higher portfolio values this year and over
the visible horizon. Please don't hesitate to contact me if you have any
questions.
Sincerely,
/s/ Robert P. Morse
Robert P. Morse
President
Page 7
<PAGE>
DIRECTORS
Clifton H.W. Maloney
Robert P. Morse, Chairman
Sharon A. Queeney
Harlan K. Ullman
ADVISORY BOARD
Peter Bruno
OFFICERS
Robert P. Morse, President
Michael R. Linburn, Vice President
Allen C. Post, Vice President
Michael Miola, Secretary, Treasurer
INVESTMENT ADVISER
WALL STREET MANAGEMENT CORPORATION
230 Park Avenue
New York,
New York 10169
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street, 11th Floor
New York, New York 10286
TRANSFER AGENT
AMERICAN DATA SERVICES
150 Motor Parkway
Hauppauge, New York 11788
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York 10019
<PAGE>
PART C. OTHER INFORMATION
Item 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part B of the Registration Statement:
Report of Independent Accountants dated February 20, 1998
Statement of Assets and Liabilities at December 31, 1997
Statement of Operations of the Year Ended December 31, 1997
Statement of changes in Net Assets for the years ended
December 31, 1997 and 1996
Investments, December 31, 1997
Notes to Financial Statements.
(b) Exhibits:
(1) The Articles of Incorporation of Registrant and all
amendments thereto to date, filed as Exhibits to
Post-Effective Amendment No. 37 to Registrant's Registration
Statement filed with Commission April 23, 1980.
(1)(a) Articles of Amendment and Restatement of Articles of
Incorporation of Registrant, as filed with the State
Department of Assessments and Taxation of Maryland on March
29, 1966, which was filed as Exhibit (1)(f) to
Post-Effective Amendment No. 37.
(1)(b) Articles of Amendment of Articles of Incorporation of
Registrant, as filed on May 23, 1969, which was filed as
Exhibit (1)(g) to Post-Effective Amendment No. 37.
(1)(c) Articles of Amendment of Articles of Incorporation of
Registration, as filed on October 1, 1969, which was filed
as Exhibit (1)(h) to Post-Effective Amendment No. 37.
(1)(d) Articles of Amendment of Articles of Incorporation of
Registrant, as filed on April 19, 1971, which was filed as
Exhibit (10(i) to Post-Effective Amendment No. 37.
(1)(e) Articles of Amendment of Articles of Incorporation of
Registrant, as filed on May 26, 1978, which was
C-1
<PAGE>
filed as Exhibit (1)(j) to Post-Effective Amendment No. 37.
(2) By-Laws of Registrant and all amendments thereto date, as
amended February 22, 1996 filed as exhibit 2 to Post
Effective Amendment No. 51.
(3) Not Applicable.
(4) Specimen Certificate of Capital Stock of Registrant filed as
Exhibit to Post-Effective Amendment No. 45 to Registrant's
Registration Statement filed March 1, 1988.
(5) Investment Advisory Contract voted upon and ratified by the
shareholders April 26, 1990 between Registrant and Wall
Street Management Corporation, filed as Exhibit 5 to
Post-Effective Amendment 47 to Registrant's Registration
Statement filed March 3, 1992.
(6) Underwriting Agreement and Form of Dealer Agreement,
effective April 23, 1987, filed as Exhibit to a
Post-Effective Amendment filed on approximately May 1, 1987.
(7) Not Applicable.
(8) The below listed Custodian Agreement and letter setting
forth schedule of remuneration, filed as Exhibits numbered
and lettered same as below to Post-Effective Amendment No.
37 to Registrant's Registration Statement, filed with the
Commission May 1, 1980.
(8)(a) Custodian Agreement dated April 22, 1966, between
Registrant and The Bank of New York.
(8)(b) Letter dated September 14, 1978, from The Bank of New York
to Registrant setting forth fee schedule for the period
after January 1, 1979.
(8)(c) Fee schedule from the Bank of New York setting forth fees
for global custody filed as Exhibit to Post-Effective
Amendment No. 48 to Registrant's Registration Statement
filed April 25, 1994.
(9)(a) Administration Agreement with American Data Services, Inc.
dated June 21, 1993.
(9)(b) Fund Accounting Service Agreement with American Data
Services, Inc. dated June 21, 1993.
C-2
<PAGE>
(9)(c) Shareholder Servicing Agent Agreement with American Data
Services, Inc. dated June 21, 1993
(10) Opinion and Consent of Counsel dated April 22, 1998
(11) Consent of Independent Certified Public Accountants dated
April 24, 1998.
(12) Not Applicable.
(13) Not Applicable.
(14)(a) Individual Retirement Account Application, disclosure
statement and custodial account form.
(14)(b) Roth IRA Account Application, disclosure statement and
custodial account form.
(15) Not Applicable.
(16) Schedule of computation of average annual total return for
the 1, 5 and 10 year periods ended December 31, 1997.
(17) Financial Data Schedule.
(18) Not. Applicable.
Item 25: Persons Controlled by or Under Common Control with Registrant
Not Applicable.
Item 26: Number of Holders of Securities.
As of April 9, 1998:
(1) (2)
Title of Number of Record
Class Holders
Capital Stock 1,436
(Par Value $1/share)
C-3
<PAGE>
Item 27: Indemnification
Item 4 of Part II of Post-Effective Amendment No. 37 to Registrant's
Registration Statement, filed with the Commission on May 28, 1981, is
hereby incorporated by reference.
Item 28: Business and other Connections of Investment Adviser.
See captions "Information About WSMC" in the Prospectus and
"Management of the Fund" in the Statement of Additional Information.
<TABLE>
Item 29: Principal Underwriters
(a) None
<S> <C> <C>
(b) Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter With Registrant
Robert P. Morse President; Director President; Director
230 Park Avenue
New York, New York 10169
Michael R. Linburn Vice President
230 Park Avenue
New York, New York 10169
Allen C. Post Vice President
230 Park Avenue
New York, New York 10169
Michael Miola Secretary/Treasurer
150 Motor Parkway
Hauppauge, New York 11788
</TABLE>
(c) Not applicable.
Item 30: Location of Accounts and Records
With the exception of the items required by Rule
31a-1(b)(2)(i)(a)-(c), which are maintained by The Bank of New York,
90 Washington Street, New York, New York 10015, all other current
records presently required to be maintained by the Registrant are
located in its offices at 230 Park Avenue, New York, New York 10169
and at American Data Services, Inc., 150 Motor Parkway, Hauppauge, New
York 11788. Non-current records are located at 96 Cove Road, Oyster
Bay, New York 11771.
Item 31: Management services.
Not applicable.
C-4
<PAGE>
Item 32: Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the latest annual report
to shareholders, upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York, on the 16th day of
April, 1998.
THE WALL STREET FUND, INC.
Registrant
BY: ________________________
Robert P. Morse
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
- -------------------------------------------- ---------------
Robert P. Morse, President & Director
- -------------------------------------------- ---------------
Michael Miola, Secretary/Treasurer
- -------------------------------------------- ---------------
Clifton H.W. Maloney, Director
- -------------------------------------------- ---------------
Sharon A. Queeney, Director
- -------------------------------------------- ---------------
Harlan K. Ullman, Director
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT PAGE NO.
- --------------------------------------------------------------------------------
(9)(a) Administration Agreement with American Data Services,
Inc. dated June 21, 1993.
(9)(b) Fund Accounting Service Agreement with American Data
Services, Inc. dated June 21, 1993.
(9)(c) Shareholder Servicing Agent Agreement with American Data
Services, Inc. dated June 21, 1993
(10) Opinion and Consent of Counsel
(11) Consent of Coopers & Lybrand L.L.P.
(14)(a) Individual Retirement Account Application,
disclosure statement and custodial account form.
(14)(b) Roth IRA Account Application, disclosure
statement and custodial account form
(16) Schedule of computation of average annual
total return for the 1, 5 and 10 year
periods ended December 31, 1997.
(27) Financial Data Schedule.
EXHIBIT (9)(A)
ADMINISTRATION AGREEMENT WITH AMERICAN DATA SERVICES, INC. DATED JUNE 21, 1993
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated June 21, 1993 by and between The WALL STREET FUND, INC., A
Maryland corporation (the "Fund"), and AMERICAN DATA SERVICES, INC., a New York
corporation (the "Administrator").
BACKGROUND
WHEREAS, the Fund is a diversified open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator is a corporation experienced in providing
administrative services to mutual funds and possesses facilities sufficient to
provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of the Administrator and to have the Administrator perform for the
Fund certain services appropriate to the operations of the Fund and the
Administrator is willing to furnish such services in accordance with the terms
hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and the Administrator hereby agree to the
following:
1. DUTIES OF THE ADMINISTRATOR.
The Administrator will provide the Fund with the necessary office space,
communication facilities and personnel to perform the following services for the
Fund:
(a) Monitor all regulatory (1940 Act and IRS) and prospectus restrictions
for compliance;
(b) Prepare and coordinate the printing of all share holder financial
statements;
(c) Prepare selected management reports for performance and compliance
analyses as agreed upon by the Fund and Administrator from time to
time;
(d) Prepare selected financial data required for directors' meetings as
agreed upon by the Fund and the Administrator from time to time and
coordinate directors meeting agendas with legal counsel to the Fund;
(e) Determine income and capital gains available for distribution and
calculate distributions required to meet regulatory, income, and excise
tax requirements, to be reviewed by the Fund's independent public
accountants;
(f) Prepare the Fund's federal, state, and local tax returns to be reviewed
by the Fund's independent public accountants;
- 1 -
<PAGE>
(g) Prepare and maintain the Fund's operating expense budget to determine
proper expense accruals to be charged to the Fund in order to calculate
it's daily net asset value;
(h) 1940 ACT filings -
- Prepare the Fund's Form N-SAR reports;
- Update all financial sections of the Fund's
Statement Of Additional Information and
coordinate its completion;
- Update all financial sections of the Fund's
prospectus and coordinate its completion;
- Update all financial sections of the Fund's
proxy statement and coordinate its completion;
- Prepare an annual update to Fund's 24f-2
filing (if applicable);
(i) Monitor services provided by the Fund's custodian bank as well as any
other service providers to the Fund;
(j) Answer inquiries from shareholders and broker/dealers on all Fund
queries other than investment decisions, and maintain courtesy mailing
lists;
(k) Provide appropriate financial schedules (as requested by the Fund's
independent public accountants or SEC examiners), coordinate the Fund's
annual or SEC audit, and provide office facilities as may be required;
(l) Attend management and board of directors meetings as requested; and
(m) The preparation and filing (filing fee to be paid by the Fund) of
applications and reports as necessary to register or maintain the Funds
registration under the securities or "Blue Sky" laws of the various
states selected by the Fund's Distributor. The Administrator shall, for
all purposes herein, be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
2. COMPENSATION OF THE ADMINISTRATOR.
In consideration of the services to be performed by the Administrator as
set forth herein, the Administrator shall be entitled to receive compensation
and reimbursement for all reasonable out-of-pocket expenses as may be agreed
upon in writ ing from time to time between the Administrator and the Fund. The
Fund agrees to pay the Administrator a fee as set out in the fee schedule
attached to the FUND ACCOUNTING SERVICES AGREEMENT (executed in conjunction with
this Agreement) as Schedule A.
- 2 -
<PAGE>
3. RESPONSIBILITY AND INDEMNIFICATION.
(a) The Administrator shall be held to the exercise of reasonable care in
carrying out the provisions of the Agreement, but shall be without
liability to the Fund for any action taken or omitted by it in good
faith without negligence, bad faith, willful misconduct or reckless
disregard of its duties hereunder. It shall be entitled to rely upon
and may act upon the accounting records and reports generated by the
Fund, advice of the Fund, or of counsel for the Fund and upon
statements of the Fund's independent accountants, and shall be without
liability for any action reasonably taken or omitted pursuant to such
records and reports or advice, provided that such action is not, to the
knowledge of the Administrator, in violation of applicable federal or
state laws or regulations, and provided further that such action is
taken without negligence, bad faith, willful misconduct or reckless
disregard of its duties.
(b) The Administrator shall not be liable to the Fund for any error of
judgment or mistake of law or for any loss arising out of any act or
omission by the Administrator in the performance of its duties
hereunder except as hereinafter set forth. Nothing herein contained
shall be construed to protect the Administrator against any liability
to the Fund or its security holders to which the Administrator shall
otherwise be subject by reason of willful misfeasance, bad faith,
negligence in the performance of its duties on behalf of the Fund,
reckless disregard of the Administrator's obligations and duties
under this Agreement or the willful violation of any applicable law.
(c) Except as may otherwise be provided by applicable law, neither the
Administrator nor its stockholders, officers, directors, employees or
agents shall be subject to, and the Fund shall indemnify and hold such
persons harmless from and against, any liability for and any damages,
expenses or losses incurred by reason of the inaccuracy of information
furnished to the Administrator by the Fund or its authorized agents or
in connection with any error in judgment or mistake of law or any act
or omission in the course of, connected with or arising out of any
services to be rendered hereunder, except by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
by reason of reckless disregard of the Administrator's obligations and
duties under this Agreement or the willful violation of any applicable
law.
4. REPORTS.
(a) The Fund shall provide to the Administrator on a quarterly basis a
report of a duly authorized officer of the Fund representing that all
information furnished to the Administrator during the preceding quarter
was true, complete and correct to the best of its knowledge. The
Administrator shall not be responsible for the accuracy of any
information furnished to it by the Fund, and the Fund shall hold the
Administrator harmless in regard to any liability incurred by reason of
the inaccuracy of such information.
- 3 -
<PAGE>
(b) The Administrator shall provide to the Board of Directors of the Fund,
on a quarterly basis, a report, in such a form as the Administrator and
the Fund shall from time to time agree, representing that, to its
knowledge, the Fund was in compliance with all requirements of
applicable federal and state law, including without limitation, the
rules and regulations of the Securities and Exchange Commission and the
Internal Revenue Service, or specifying any instances in which the Fund
was not so in compliance. Whenever, in the course of performing its
duties under this Agreement, the Administrator determines, on the basis
of information supplied to the Administrator by the Fund, that a
violation of applicable law has occurred, or that, to its knowledge, a
possible violation of applicable law may have occurred or, with the
passage of time, could occur, the Administrator shall promptly notify
the Fund and its counsel of such violation.
5. ACTIVITIES OF THE ADMINISTRATOR.
The Administrator shall be free to render similar services to others so
long as its services here-in-under are not impaired thereby.
6. RECORDS.
The records maintained by the Administrator shall be the property of the
Fund, and shall be made available to the Fund promptly upon request by the Fund
in the form in which such records have been maintained or preserved. The
Administrator shall upon approval of the Fund assist the Fund's independent
auditors, or, any regulatory body, in any requested review of the Fund's
accounts and records. The Administrator shall preserve the records in its
possession (at the expense of the Fund) as required by Rule 31a-1 of the 1940
Act.
7. CONFIDENTIALITY.
The Administrator agrees that it will, on behalf of itself and its officers
and employees, treat all transactions contemplated by this Agreement, and all
other information germane thereto, as confidential and such information shall
not be disclosed to any person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THE AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, without
penalty, upon ninety (90) days prior written notice.
Upon termination of this Agreement in accordance with the foregoing, the
Administrator shall deliver to the Fund (at the expense of the Fund) all records
and other documents made or accumulated in the performance of its duties for the
Fund hereunder.
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding
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<PAGE>
upon the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without the
prior written consent of the Administrator, or by the Administrator without the
prior written consent of the Fund.
10. GOVERNING LAW.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such amendment
is in writing and signed by both parties.
12. NOTICES.
All notices and other communications hereunder shall be in writing, shall
be deemed to have been given when delivered in person or by certified mail,
return receipt request ed, and shall be given to the following addresses (or
such other addresses as to which notice is given):
To the Fund: To the Administrator:
Mr. Robert P Morse Mr. Michael Miola
President President
The Wall Street Fund, Inc. American Data Services, Inc.
230 Park Avenue 755 New York Avenue
New York, New York 10169 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
THE WALL STREET FUND, INC. AMERICAN DATA SERVICES, INC.
Robert P. Morse Michael Miola
President President
EXHIBIT (9)(B)
FUND ACCOUNTING SERVICE AGREEMENT WITH AMERICAN DATA SERVICES, INC.
DATED JUNE 21, 1993
<PAGE>
FUND ACCOUNTING SERVICE AGREEMENT
AGREEMENT made the 21st day of June, 1993 by and between The WALL STREET
FUND, INC., a Maryland Corporation (the "Fund") and AMERICAN DATA SERVICES, INC.
a New York corporation ("ADS").
BACKGROUND
WHEREAS, the Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting services
to mutual funds and possesses facilities sufficient to provide such services;
and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. DUTIES OF ADS.ADS will provide the Fund with the necessary office
space, communication facilities and personnel to perform the following services
for the Fund:
(a) Timely calculate and transmit to NASDAQ the Fund's daily net asset
value and communicate such value to the Fund and its transfer agent;
(b) Maintain and keep current all books and records of the Fund as required
by Rule 31a-1 under the 1940 Act, as such rule or any successor rule may be
amended from time to time ("Rule 31a-1"), that are applicable to the fulfillment
of ADS's duties hereunder, as well as any other documents necessary or advisable
for compliance with applicable regulations as may be mutually agreed to between
the Fund and ADS. Without limiting the generality of the foregoing, ADS will
prepare and maintain the following records upon receipt of information in proper
form from the Fund or its authorized agents:
(i) Cash receipts journal
(ii) Cash disbursements journal
(iii) Dividend record
(iv) Purchase and sales - portfolio securities journals
(v) Subscription and redemption journals
(vi) Security ledgers
(vii) Broker ledger
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<PAGE>
(viii) General ledger
(ix) Daily expense accruals
(x) Daily income accruals
(xi) Securities and monies borrowed or loaned and collateral therefore
(xii) Foreign currency journals
(xiii) Trial balances
(c) Provide the Fund and its investment adviser with daily portfolio valuation,
net asset value calculation and other standard operational reports as requested
from time to time.
(d) Provide the Fund and its investment adviser with camera ready copies of
the semi-annual and annual financial statements to be furnished to shareholders,
and all raw financial data available from the PAIRS mutual fund accounting
system, for the timely preparation of tax returns, Form N-SAR, prospectus
updates and proxy statements.
(e) Provide facilities to accommodate annual audit and any audits or
examinations conducted by the Securities and Exchange Commission or any other
governmental or quasi-governmental entities with jurisdiction. ADS shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein, ADS shall be entitled to receive compensation and reimbursement for all
reasonable out-of-pocket expenses as may be agreed upon in writing from time to
time between ADS and the Fund. The Fund agrees to pay ADS a fee as set out in
the fee schedule attached hereto as Schedule A.
3. LIMITATION OF LIABILITY OF ADS.
(a) ADS may rely upon the advice of the Fund, or of counsel for the Fund
and upon statements of the Fund's independent accountants, brokers and other
persons reasonably believed by it in good faith to be expert in the matters upon
which they are consulted and, for any actions reasonably taken in good faith
reliance upon such statements and without negligence or willful misconduct, ADS
shall not be liable to anyone.
(b) ADS shall not be liable to the Fund for any error of judgment or
mistake of law or for any loss arising out of any act of omission by ADS in the
performance of its duties hereunder except as hereinafter set forth. Nothing
herein contained shall be construed to protect ADS against any liability to the
Fund or
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<PAGE>
its security holders to which ADS shall otherwise be subject by reason
of willful misfeasance, bad faith, negligence in the performance of its duties
on behalf of the Fund, reckless disregard of ADS's obligations and duties under
this Agreement or the willful violation of any applicable law.
(c) Except as may otherwise be provided by applicable law, neither ADS nor
its shareholders, officers, directors, employees or agents shall be subject to,
and the Fund shall indemnify and hold such persons harmless from and against,
any liability for and any damages, expenses or losses incurred by reason of the
inaccuracy of information furnished to ADS by the Fund or its authorized agents
or in connection with any error in judgment or mistake of law or any act or
omission in the course of, connected with or arising out of any services to be
rendered hereunder, except by reason of willful misfeasance, bad faith or
negligence in the performance of ADS's duties, by reason of reckless disregard
of ADS's obligations and duties under this Agreement or the willful violation of
any applicable law.
4. REPORTS.
(a) The Fund shall provide to ADS on a quarterly basis a report of a duly
authorized officer of the Fund representing that all information furnished to
ADS during the preceding quarter was true, complete and correct in all material
respects. ADS shall not be responsible for the accuracy of any information
furnished to it by the Fund or its authorized agents, and the Fund shall hold
ADS harmless in regard to any liability incurred by reason of the inaccuracy of
such information.
(b) Whenever, in the course of performing its duties under this Agreement,
ADS determines, on the basis of information supplied to ADS by the Fund or its
authorized agents, that a violation of applicable law has occurred or that, to
its knowledge, a possible violation of applicable law may haveoccurred or, with
the passage of time, would occur, ADS shall promptly notify the Fund and its
counsel of such violation.
5. ACTIVITIES OF ADS.
The services of ADS under this Agreement are not to be deemed exclusive,
and ADS shall be free to render similar services to others so long as its
services hereunder are not impaired thereby.
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by ADS shall be the property of the Fund,
and shall be surrendered to the Fund promptly upon request by the Fund in the
form in which such accounts and records have been maintained or preserved. ADS
agrees to maintain a back-up set of accounts and records of the Fund (which
back-up set shall be updated on at least a weekly basis) at a location other
than that where the original accounts and records are stored. ADS shall assist
the Fund's independent auditors, or, upon approval of the Fund, any regulatory
body, in
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<PAGE>
any requested review of the Fund's accounts and records. ADS shall
preserve the accounts and records as they are required to be maintained and
preserved by Rule 31a-1.
7. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all other
information germane thereto, as confidential and not to be disclosed to any
person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, without
penalty, upon ninety (90) days prior written notice.
Upon termination of this Agreement in accordance with the foregoing, ADS
shall deliver to the Fund (at the expense of the Fund) all records and other
documents made or accumulated in the performance of its duties for the Fund
hereunder.
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties hereto
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of ADS, or by ADS without the prior written consent of the Fund.
10. GOVERNING LAW.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such amendment is in
writing and signed by both parties.
12. NOTICES.
All notices and other communications hereunder shall be in writing, shall
be deemed to have been given when received or when sent by telex or facsimile,
and shall be given to the following addresses (or such other addresses as to
which notice is given):
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<PAGE>
To the Fund: To the Administrator:
Mr. Robert P. Morse Mr. Michael Miola
President President
The Wall Street Fund, Inc. American Data Services, Inc.
230 Park Avenue 755 New York Avenue
New York, New York 10169 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
THE WALL STREET FUND, INC. AMERICAN DATA SERVICES, INC.
By: Robert P. Morse By: Michael Miola
President President
SCHEDULE A
(a) FUND ACCOUNTING SERVICE FEE:
(b) For the services rendered by ADS in its capacity as fund ac counting
agent and administrator the Fund shall pay ADS, within ten (10) days after
receipt of an invoice from ADS at the begin ning of each month, a fee equal to
the greater of:
(1) Fund Accounting ......... $2,000.00 per month; plus,
Administration .......... 2,083.33 per month;
OR,
(2) 1/12th of 0.1% of the first $75 million of average monthly
net assets, plus;
1/12th of 0.05% on the next $50 million of average monthly
net assets, plus;
1/12th of 0.4% on the excess over $125 million of average
monthly net assets.
On each annual anniversary date of this Agreement, the fees enumerated
above will be increased by the change in the Consumer Price Index for the
Northeast region (CPI) for the twelve month period ending with the month
preceding such annual anniversary date.
(b) EXPENSES. The Fund shall reimburse ADS for any out-of-pocket expenses ,
exclusive of salaries, advanced by ADS in connection with but not limited to the
printing or filing of documents for the Fund, travel, telephone, quotation
services, facsimile transmissions, stationery and supplies, record storage,
postage, telex, and courier charges, incurred in connection with the performance
of its duties hereunder. ADS shall provide the Fund with a monthly invoice of
such expenses and the Fund shall reimburse ADS within fifteen (15) days after
receipt thereof.
(c) SPECIAL REPORTS. All reports and /or analyses requested by the Fund that
are not in the normal course of fund accounting activities as specified in
Section 1 of this Agreement shall be subject to an additional charge, agreed
upon in advance, based upon the following rates:
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<PAGE>
Labor:
Senior staff - $100.00/hr.
Junior staff - $ 50.00/hr.
Computer time - $45.00/hr.
(d) SECURITY DEPOSIT. The Fund will remit to ADS upon execution of this
Agreement a security deposit equal to one (1) month's minimum fee under this
Agreement, computed in accordance with the number of portfolios listed in
Schedule B of this Agree ment. The Fund will have the option to have the
security deposit applied to the last month's service fee, or applied to any new
contract between the Fund and ADS.
SCHEDULE B
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
THE WALL STREET FUND, INC.
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EXHIBIT (9)(C)
SHAREHOLDER SERVICING AGENT AGREEMENT WITH AMERICAN DATA SERVICES, INC.
DATED JUNE 21, 1993
<PAGE>
SHAREHOLDER SERVICING AGENT AGREEMENT
AGREEMENT made the 21st day of June, 1993 by and between The WALL STREET
FUND, INC., a Maryland corporation (the "Fund") and AMERICAN DATA SERVICES, INC.
a New York corporation ("ADS").
BACKGROUND
WHEREAS, the Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation registered as a transfer agent under the
Securities and Exchange Act of 1934, experienced in providing transfer and
dividend disbursing agent functions to mutual funds and possesses facilities
sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. Employment. The Fund hereby employs ADS to act as Shareholder Servicing
Agent for the Fund. The portfolios to be covered by this Agreement are listed on
Schedule B annexed to this Agreement. ADS shall, at its own expense, render the
services and assume the obligations herein set forth subject to being
compensated therefore as herein provided.
2. Authority of ADS. ADS is hereby authorized by the Fund to receive all
cash which may from time to time be delivered to it by or for the account of the
Fund and to deposit such cash into accounts maintained by the Fund's custodian
bank in the name of or for the benefit of the Fund; to issue confirmations
and/or certificates for shares of capital stock of the Fund upon receipt of
payment; to redeem or repurchase on behalf of the Funds' shares of capital stock
of the Fund upon receipt of certificates properly endorsed or properly executed
written requests as de scribed in the Prospectus of the Fund; and to act as
dividend disbursing agent for the Fund.
3. Duties of ADS:
ADS hereby agrees to:
A. Process new accounts.
B. Process purchases, both initial and subsequent, in accordance with the
conditions set forth in the Funds' prospectuses, as mutually agreed by
the Fund and ADS.
- 1 -
<PAGE>
C. Transfer shares of capital stock to an existing account or to a new
account upon receipt of required documentation in good order.
D. Redeem uncertificated and/or certificated shares upon receipt of
required documentation in good order.
E. Issue and/or cancel certificates as instructed; replace lost, stolen or
destroyed certificates upon receipt of satisfactory indemnification or
bond.
F. Distribute dividends and/or capital gain distributions. This includes
disbursement as cash or rein vestment and changing the disbursement
option at the request of shareholders.
G. Process exchanges between funds (process and direct purchase/redemption
and initiate new account or process to new account.
H. Make miscellaneous changes to records, including but not necessarily
limited to address changes, and changes in plans (i.e., systematic
withdrawal, dividend reinvestment, etc.).
I. Prepare and mail a year to date confirmation and statement as each
transaction is recorded in a shareholder account, with the original sent
to the shareholder. Duplicate confirmations to be available on request
within current year.
J. Handle telephone calls and correspondence in reply to shareholder
requests.
K. Reports to Fund:
Daily - transaction journal with analysis of accounts.
Monthly - analysis of transactions and accounts by types.
L. Daily control and reconciliation of Fund shares with ADS's records and
the Fund's office records.
M. Prepare and mail annual form 1099, form W2-P and 5498 to shareholders to
whom dividends or distributions are paid, with a copy to the IRS.
N. Provide readily obtainable data, which may from time to time be
requested for audit purposes.
O. Replace lost or destroyed checks.
P. Continuously maintain all records for active and closed accounts.
Q. Furnish shareholder data information for the current calendar year in
connection with IRSs (including 5498s and qualified Keogh plans in a
format suitable for mailing to shareholders.
4. Compensation of ADS. In consideration of the services to be performed by
ADS as set forth herein, ADS shall be entitled to receive compensation and
reimbursement for all reasonable out-of-pocket expenses as may be agreed upon
in writing from time to time between ADS and the Fund. The Fund agrees to pay
ADS a fee as set out in the fee schedule attached hereto as Schedule A.
5. Rights and Powers of ADS. ADS's rights and powers with respect to acting
for and on behalf of the Fund, including rights
- 2 -
<PAGE>
and powers of ADS's officers and directors, shall be as follows:
A. No order, direction, approval, contract or obligation on behalf of the
Fund with or in any way affecting ADS shall be deemed binding unless
made in writing and signed on behalf of the Fund by an officer or
officers of the Fund who has been duly authorized to so act on behalf of
the Fund by its Board of Trustees.
B. The services of ADS to the Fund are not to be deemed exclusive and ADS
shall be free to render similar services to others as long as its
services for others does not in any manner or way hinder, preclude or
prevent ADS from performing its duties and obligations under this
Agreement.
C. The Fund will indemnify ADS and hold it harmless from and against all
costs, losses and expenses which may be incurred by it, and all claims
and liabilities which may be asserted or assessed against it as a result
of any action taken by it without negligence and in good faith, and for
any act, omission, delay or refusal made by ADS in connection with this
agency in reliance upon or in accordance with any instruction or advice
of any duly authorized officer of the Fund.
6. Duration and Termination of Agreement. This Agreement shall become
effective as of the date hereof and shall remain in force for a period of three
(3) years, provided however, that both parties to this Agreement have the option
to terminate the Agreement, without penalty, upon ninety (90) days prior written
notice.
Upon termination of this Agreement in accordance with the foregoing, ADS
shall deliver to the Fund (at the expense of the Fund) all records and other
documents made or accumulated in the performance of its duties for the Fund
hereunder.
7. Accounts and Records. The accounts and records maintained by ADS shall
be the property of the Fund, and shall be surren dered to the Fund promptly upon
request by the Fund in the form in which such accounts and records have been
maintained or pre served. ADS agrees to maintain a back-up set of accounts and
records of the Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts and records are
stored. ADS shall assist the Fund's independent auditors, or, upon approval of
the Fund, any regulatory body, in any requested review of the Fund's accounts
and records. ADS shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
8. Confidentiality. ADS agrees that it will, on behalf of itself and its
officers and employees, treat all transactions contemplated by this Agreement,
and all other information germane thereto, as confidential and not to be
disclosed to any person except as may be authorized by the Fund.
- 3 -
<PAGE>
9. Amendment. This Agreement may be amended by mutual writ ten consent of
the parties. If, at any time during the existence of this Agreement, the Fund
deems it necessary or advisable in the best interests of the Fund that any
amendment of this Agree ment be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or state regulatory
agencies or other governmental authority, or to obtain any advantage under state
or federal laws, and shall notify ADS of the form of amendment which it deems
necessary or advisable and the reasons therefore, and if ADS declines to assent
to such amendment, the Fund may terminate this Agreement forthwith.
10. Agreement Binding Only on Fund Property. ADS understands that the
obligations of this Agreement are not binding upon any shareholder to the trust
personally, but bind only upon the trust's property. ADS represents that it has
notice of the provisions of the trust's declaration of trust disclaiming
shareholder liability for acts or obligations of the trust.
11. Assignment. This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without the
prior written consent of ADS, or by ADS without the prior written consent of the
Fund.
12. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
13. Notices. All notices and other communications hereunder shall be in
writing, shall be deemed to have been given when received or when sent by telex
or facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To ADS:
Mr. Robert P Morse Mr. Michael Miola
President President
The Wall Street Fund, Inc. American Data Services, Inc.
230 Park Avenue 755 New York Avenue
New York, New York 10169 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
THE WALL STREET FUND, INC. AMERICAN DATA SERVICES, INC.
By: Robert P. Morse By: Michael Miola
President President
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<PAGE>
SCHEDULE A
(a) SHAREHOLDER SERVICE FEE:
For the services rendered by ADS in its capacity as transfer agent, the
Fund shall pay ADS, within ten (10) days after receipt of an invoice from ADS at
the beginning of each month, a fee equal to the greater of:
(1) $1,666.67 per portfolio serviced in the group;
OR,
(2) Based upon the total of all open accounts in the group: **
$0.667 per account
** All accounts closed during a calendar year will be con-sidered as open
accounts for billing purposes until theend of that calendar year.
On each anniversary date of this Agreement the fees enumerated above will
be increased by the change in the Consumer Price Index for the Northeast region
(CPI) for the twelve month period ending with the month preceding such annual
anniversary date.
(b) EXPENSES. The Fund shall reimburse ADS for any out-of-pocket expenses ,
exclusive of salaries, advanced by ADS in connection with but not limited to the
printing of confirmation forms and statements, proxy expenses, travel,
telephone, facsimile transmissions, stationery and supplies, record storage,
postage, telex and courier charges, incurred in connection with the performance
of its duties hereunder. ADS shall provide the Fund with a monthly invoice of
such expenses and the Fund shall reimburse ADS within fifteen (15) days after
receipt thereof.
(c) SPECIAL REPORTS. All reports and/or analyses requested by the Fund that
are not included in the fee schedule, shall be subject to an additional charge,
agreed upon in advance, based upon the following rates:
Labor:
Senior staff - $100.00/hr.
Junior staff - $ 50.00/hr.
Computer time - $45.00/hr.
SCHEDULE B
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
THE WALL STREET FUND, INC.
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EXHIBIT 10
OPINION AND CONSENT OF COUNSEL
<PAGE>
Law Offices
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8074
April 22, 1998
The Wall Street Fund, Inc.
230 Park Avenue
New York, New York 10169
Re: LEGAL OPINION-SECURITIES ACT OF 1933
Ladies and Gentlemen:
We have examined the Articles of Incorporation (the "Articles") of The Wall
Street Fund, Inc. (the "Fund"), a series corporation organized under Maryland
law, the By-Laws of the Fund, the resolutions adopted by the Fund's Board of
Directors organizing the business of the Fund, and its proposed form of Share
Certificates (if any), all as amended to date, and the various pertinent
corporate proceedings we deem material. We have also examined the Notification
of Registration and the Registration Statements filed under the Investment
Company Act of 1940 (the "Investment Company Act") and the Securities Act of
1933 (the "Securities Act"), all as amended to date, as well as other items we
deem material to this opinion. The Fund is authorized by the Articles to issue
five million (5,000,000) shares of common stock at a par value of $1.00.
The Fund has filed with the U.S. Securities and Exchange Commission, a
registration statement under the Securities Act, which registration statement is
deemed to register an indefinite number of shares of the Fund pursuant to the
provisions of Rule 24f-2 under the Investment Company Act. You have further
advised us that the Fund has filed, and each year hereafter will timely file, a
Notice pursuant to Rule 24f-2 perfecting the registration of the shares sold by
the Fund during each fiscal year during which such registration of an indefinite
number of shares remains in effect.
You have also informed us that the shares of the Fund have been, and will
continue to be, sold in accordance with the Fund's usual method of distributing
its registered shares, under which prospectuses are made available for delivery
to offerees and purchasers of such shares in accordance with Section 5(b) of the
Securities Act.
- 1 -
<PAGE>
Based upon the foregoing information and examination, so long as the Fund
remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Articles and the laws of
the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any other, as an
exhibit to the Registration Statement of the Fund, along with any amendments
thereto, covering the registration of the shares of the Fund under the
Securities Act and the applications, registration statements or notice filings,
and amendments thereto, filed in accordance with the securities laws of the
several states in which shares of the Fund are offered, and we further consent
to reference in the registration statement of the Fund to the fact that this
opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: _______________________________________
Steven M. Felsenstein
- 2 -
EXHIBIT 11
CONSENT OF COOPERS & LYBRAND L.L.P.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 52 to the
Registration Statement of The Wall Street Fund, Inc., on Form N-1A (File Nos.
2-10822 and 811-515) of our report dated February 20, 1998, on our audit of the
financial statements and financial highlights of The Wall Street Fund, Inc. as
of December 31, 1997, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1997.
We consent to the reference to our firm under the caption "Financial
Highlights" in the prospectus.
Coopers & Lybrand L.L.P.
New York, New York
April 24, 1998
EXHIBIT (14)(A)
INDIVIDUAL RETIREMENT ACCOUNT
APPLICATION, DISCLOSURE STATEMENT AND CUSTODIAL ACCOUNT FORM.
<PAGE>
IRA
A Retirement Plan
for Individuals
<PAGE>
INSTRUCTIONS FOR OPENING YOUR
MUTUAL FUND IRA
I. Included in this booklet is:
1) An IRA Application (mail to your Mutual Fund at the address on the
bottom).
2) The IRA Disclosure and Plan Agreement.
3) A Transfer or Direct Rollover Request form. You may use this form to
request your current custodian, trustee, or employer to directly
transfer your plan assets to your Mutual Fund IRA.
II. To Open Your Mutual Fund IRA
Step 1 Complete the IRA Application. See Designation of Beneficiary
explanation below.
Step 2 If you are requesting a transfer or direct rollover of current
plan assets (held elsewhere) to your Mutual Fund IRA, complete
the Transfer or Direct Rollover Request form. You should complete
this form in addition to the IRA Application.
Step 3 Separate the form(s) at the perforation and send it back to your
Mutual Fund.
Step 4 Include a check for the amount of your IRA contribution made
payable to the Mutual Fund in which you are making this
contribution.
Step 5 Retain the IRA Plan Agreement and Disclosure.
III. Designation of Beneficiary
You may designate a beneficiary to receive the IRA funds upon your death.
The space provided is to name primary and contingent beneficiaries. If
more space is needed, you may attach a supplementary sheet. If you wish a
more complicated type of designation of beneficiary, you should consult
an attorney. Some state's laws require married individuals to name their
spouse as beneficiary. Married individuals should consult with their tax
advisers prior to designating someone other than their spouse. You may
change your beneficiary at any time by writing to the Custodian. If any
of your beneficiaries die before you, the deceased beneficiary's share
will be reallocated among the surviving beneficiaries on a pro rata basis.
If none of your beneficiaries survive you, or if the Custodian cannot
locate your beneficiary after a reasonable search, any balance in the
IRA will be paid to your estate.
FEE INFORMATION
Annual Account Maintenance Fee: $15 per account
Incoming Transfer Fee: $12 per account
Distribution Fee: $15 per account
Refund of Excess Contribution: $15 per account
Outgoing Transfer Fee: $15 per account
Automatic Periodic Distributions: $15 per year, per account
REVOCATION INFORMATION
You have the right to revoke this Individual Retirement Account (IRA)
within seven days of receiving your disclosure statement. To revoke your
IRA account, simply notify:
(Fund Name) ______________________
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
You may notify your Mutual Fund in person, in writing, or by telephone. Written
notice must be sent by first-class mail at the address listed above and will be
accepted as of the date your notice is postmarked.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
IRA Application
Fund Name ..........................
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
1. IRA OWNER INFORMATION
Name.................... Date of Birth ...........Soc. Sec. No. ................
Street Address................... City ................ State ...... ZIP.......
State of Residence..............................................................
Citizen or permanent resident of USA? [ ] yes [ ] no
If no, country of residence....................................
Daytime Phone (...)................. Evening Phone (...).....................
Employer's Name..................................
2. CONTRIBUTION INFORMATION
Name of Fund.........................................
INITIAL CONTRIBUTION TYPE
Type: Amount: Tax Year
(if applicable):
[ ] Regular/Spousal IRA $.................... .......
[ ] SEP IRA $.................... .......
[ ] Rollover from IRA $.................... .......
[ ] Transfer from IRA $.................... .......
[ ] Rollover from SIMPLE IRA (SRA)* $.................... .......
[ ] Transfer from SIMPLE IRA (SRA)* $.................... .......
[ ] Rollover from QP or TSA $.................... .......
[ ] Direct Rollover from QP or TSA $.................... .......
ACCOUNT TYPE:
[ ] Regular/Spousal [ ] Conduit
[ ] SEP IRA
[ ] Rollover
[ ] Transfer
*Note: SIMPLE IRA (SRA) funds cannot be combined with regular IRA funds during
the first two years of the initial participation in the SIMPLE IRA (SRA).
Date ...........................................
3. DESIGNATION OF BENEFICIARY
In the event of my death, pay my IRA balance to the following primary
beneficiary(ies): (See the Instructions for additional conditions.)
Name SSN or TIN Relationship Date of Birth Address (optional) %*
................................................................................
................................................................................
................................................................................
................................................................................
Total 100
============
If all of the primary beneficiaries die before me pay my IRA balance to the
following contingent beneficiaries:
................................................................................
................................................................................
................................................................................
................................................................................
*If no percentage rate is indicated, the beneficiaries will share equally.
Total 100
============
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
4. SIGNATURES AND CERTIFICATIONS
I certify under the penalty of perjury that my social security number stated
above is correct, that I am of legal age in my state of residence and I agree
that the designation of the tax year for my contribution and my election to
treat a contribution as a rollover (if applicable) are irrevocable. By signing
this application, I hereby authorize and appoint Star Bank N.A. to act as
Custodian of my account. I indemnify Star Bank N.A. and American Data Services
Inc. when making distributions in accordance with my beneficiary designation on
file or in accordance with the Custodial Account Agreement absent any such
designation. I acknowledge that I have received the IRA Disclosure Statement and
the IRA Custodial Account Agreement at least seven days prior to the date I
signed this application. I have read both, which are incorporated in this
application by reference, and I accept and agree to be bound by the terms and
conditions contained in the IRA Custodial Account Agreement. I also certify that
I have received and read the current Prospectus and understand that mutual fund
shares are not obligations of or guaranteed by a bank, nor are they insured by
the FDIC.
..................................... ...........
IRA Owner's Signature Date
..................................... ...........
Star Bank N.A. Date
Star Bank N.A. accepts this application and agrees to act as Custodian
of the account.
A confirmation will be sent to you regarding the above transaction(s)
and will serve as notification of the Custodian's acceptance.
COMPLETE ONLY IF REQUIRED BY STATE LAW.
Spousal Consent: I am the spouse of the IRA Owner and I approve and consent to
the naming of a beneficiary other than myself. I transmute (transfer) any
community property interest I have in this IRA into the separate property of my
spouse.
..................................... ...........
Spouse's Signature Date
5. DEALER INFORMATION (If Applicable)
................................................................................
Name of Dealer Name of Representative Rep ID No.
................................................................................
Address of Rep's Branch Branch ID No.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
IRA DISCLOSURE STATEMENT
1. Right to Revoke the Account. You have the right to revoke this Individual
Retirement Account (IRA) within seven days of receiving this Disclosure
Statement. To revoke your IRA account, simply contact the person designated in
the booklet instructions. You must notify us in writing unless we designate
otherwise. Written notice must be sent by first-class mail at the address listed
on the application and will be accepted as of the date such notice is
postmarked. If you revoke your IRA account, we will refund your entire IRA
contribution. If you do not use this right within seven days of the date you
receive this Disclosure Statement, you have accepted the terms and conditions of
the IRA agreement and may no longer revoke the IRA account.
2. Definitions. In this Disclosure Statement the terms "you," "your," or "IRA
Owner" means the person who established the IRA. The terms "Custodian," "our,"
"us," or "we" shall mean the financial organization acting as the Custodian of
your IRA. The term "IRS" shall refer to the Internal Revenue Service. The term
"IRA" shall mean Individual Retirement Account within the meaning of section 408
of the Code and shall also refer to your Custodial Account. The term "Roth IRA"
shall mean a Roth Individual Retirement Account within the meaning of section
408A of the Code. The term "SIMPLE IRA" shall mean SIMPLE Retirement Account
within the meaning of section 408(p) of the Code. The term "Code" shall mean the
Internal Revenue Code.
3. Account Growth. Your IRA is self-directed, we will not take any action except
at your written direction. Earnings and capital appreciation on investments
chosen by you will depend on overall economic conditions and the success of that
particular investment. Earnings on these investments are not guaranteed by the
Custodian and may or may not be reasonably projected. For example, if the
initial investment is a passbook, time deposit or money market account, the
account projection can be made based on the current rate of earnings paid. On
the other hand, if the initial investment is an investment security (stocks,
bonds, or mutual funds), the rate of growth of the earnings on these types of
investments cannot be reasonably projected.
4. Eligibility for IRAs. This part of the disclosure explains your eligibility
to establish and contribute to an IRA. This disclosure statement does not
address your eligibility for other types of IRAs (Roth IRA, Education IRA, or
SIMPLE IRA).
A. Regular Contributions. You must be under the age 70-1/2 and have
"compensation" in order to contribute to an IRA. For tax years during or
after which you reach the age 70-1/2 you are not allowed to contribute to
an IRA. "Compensation" includes wages, tips, bonuses, taxable alimony, as
well as other compensation received for personal services. (If you are
self-employed, compensation is your net earnings from your trade or
business reduced by your deduction for contributions made on your behalf to
retirement plans and the deduction allowed for one-half of your
self-employment taxes.) If you meet the above eligibility requirements, you
may contribute up to 100% of your compensation or $2,000, whichever is
less. (Caution: Contribution limit is coordinated with Roth IRA limit--see
below). Regular and spousal IRA contributions must be made by your tax
filing due date excluding extensions. Please consult your tax adviser if
you need additional assistance.
B. Spousal Contributions. You may make a contribution into your spouse's
IRA if you meet the special spousal IRA rules. You must be married, file a
joint federal income tax return, the receiving spouse must be under age
70-1/2, and the receiving spouse must earn less in compensation than the
spouse making the contribution. The total combined contribution a couple
can make each year to both IRAs is the smaller of $4,000 or their combined
compensation for the year. You can divide your total IRA contribution in
any manner you choose, provided you do not contribute more than $2,000 to
either IRA. Your combined compensation equals the lesser compensated
spouse's compensation plus the higher compensated spouse's compensation
(reduced by any IRA deduction). (Caution: Contribution limit is coordinated
with Roth IRA limit--see below).
C. Coordination with Roth IRA. The amount you are eligible to contribute to
your IRA is coordinated with the amount you may contribute to your Roth
IRA. The maximum you are allowed to contribute to both your IRA and your
Roth IRA is $2,000. Accordingly, if you make a Roth IRA contribution, that
will reduce or eliminate your eligibility to make an IRA contribution.
D. Rollover, Transfer, SEP, and SIMPLE Contributions. You may be eligible
to roll over, directly roll over, or transfer your existing IRA, SIMPLE
IRA, or qualified plan assets. The rules covering rollovers and transfers
are discussed later in this disclosure statement. Simplified Employee
Pension (SEP) plan contributions may also be made to this IRA. Your
employer is responsible for verifying the SEP eligibility requirements and
determining the contribution amount. SIMPLE contributions may not be made
to this IRA, but instead must be contributed into a SIMPLE IRA. The IRS or
your employer can provide additional information concerning SEP and SIMPLE
eligibility.
5. Deductibility. You may or may not be
allowed to deduct your IRA contribution on your income tax return. Whether or
not you may deduct your contribution depends upon whether you or your spouse are
active participants in an employer-maintained retirement plan, your income
level, your income tax filing status, and the tax year for which you are making
the contribution--please see the charts that follow:
A. Active Participant. You are an "active participant" for a year if you
are covered by a retirement plan. For example, if you are covered under a
profit sharing plan, a 401(k) plan, a tax-sheltered annuity plan (403(b)),
certain government plans, an SEP plan, a SIMPLE arrangement, or a plan
which promises you a retirement benefit which is based upon the number of
years of service you have with the employer, you are likely to be an active
participant. The W-2, Wage and Tax Statement, includes a box (the "Pension
Plan" box) to indicate whether or not you are covered for the plan year. If
you are not certain whether or not you are covered (an "active
participant") you should ask your employer or tax adviser. Caution: For the
1997 tax year, you are also considered an active participant if your spouse
is an active participant. If you are an active participant, your ability to
deduct your IRA contribution begins to be phased out when your income
exceeds certain levels.
B. MAGI. Your modified adjusted gross income (MAGI) is your adjusted gross
income from your federal income tax return figured without taking into
account any IRA deduction or any foreign earned income exclusion and
foreign housing exclusion (deduction), or any Series EE bond interest from
IRS Form 8815.
C. Single Filers. If you are single and are not an active participant, you
may fully deduct your IRA contribution regardless of your income level. If
you are an active participant, then your ability to deduct your
contribution begins to be phased out at certain income levels. Please see
the MAGI Phaseout Ranges chart. If your income is the same as or less than
the "Low End" number for the applicable tax year, you may fully deduct your
IRA contribution. If your income is the same as or above the "High End"
then you are not entitled to deduct any amount of an IRA contribution. If
your income falls within the ranges stated then consult the Deduction
Calculation chart to calculate the amount you may deduct.
D. Married Filers. If you are married, your ability to make a deductible
contribution depends upon both your and your spouse's "active
participation" status as well as your income level, and income tax filing
status.
(1) Neither You Nor Your Spouse Are Active Participants. If neither you nor
your spouse are active participants, you may fully deduct your IRA
contribution regardless of your income.
(2) You Are an Active Participant. If you are an active participant, your
ability to deduct your IRA contribution begins to be phased out at
certain income levels and also depends upon whether you file jointly or
separately. See the MAGI Phaseout Ranges chart below. This rule applies
regardless of whether or not your spouse is an active participant. If
your income is the same as or less than the "Low End" number for the
applicable tax year, you may fully deduct your IRA contribution. If
your income is the same as or above the "High End" then you are not
entitled to deduct any amount of an IRA contribution. If your income
falls within the ranges stated then see the Deduction Calculation chart
to calculate the amount you may deduct.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
(3) You Are Not an Active Participant But Your Spouse Is. If you are not an
active participant, but your spouse is an active participant, then your
ability to deduct your IRA contribution begins to be phased out at
$150,000 if you file a joint return. See the chart below. *Caution: for
the 1997 tax year, you are considered an active participant if your
spouse is an active participant. If you fall within this category but
file a separate return, consult with your tax adviser to determine the
amount you may deduct.
<TABLE>
<CAPTION>
MAGI PHASEOUT RANGES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Married, Married, Married, Filing Jointly,
Single, Filing Jointly, Filing Separately, Not An Active Participant,
Tax Active Participant Active Participant Active Participant but Spouse Is
Year Low End High End Low End High End Low End High End Low End High End
1997 $25,000 $35,000 $40,000 $50,000 $0 $10,000 $40,000 $50,000
1998 $30,000 $40,000 $50,000 $60,000 $0 $10,000 $150,000 $160,000
1999 $31,000 $41,000 $51,000 $61,000 $0 $10,000 $150,000 $160,000
2000 $32,000 $42,000 $52,000 $62,000 $0 $10,000 $150,000 $160,000
2001 $33,000 $43,000 $53,000 $63,000 $0 $10,000 $150,000 $160,000
2002 $34,000 $44,000 $54,000 $64,000 $0 $10,000 $150,000 $160,000
2003 $40,000 $50,000 $60,000 $70,000 $0 $10,000 $150,000 $160,000
2004 $45,000 $55,000 $65,000 $75,000 $0 $10,000 $150,000 $160,000
2005 $50,000 $60,000 $70,000 $80,000 $0 $10,000 $150,000 $160,000
2006 $50,000 $60,000 $75,000 $85,000 $0 $10,000 $150,000 $160,000
2007 $50,000 $60,000 $80,000 $100,000 $0 $10,000 $150,000 $160,000
</TABLE>
E. Phaseout Calculation. If your income falls within the phaseout limits
from the previous chart, you can determine your deductible amount according
to the deduction formula below. You are still allowed to contribute up to
the lesser of $2,000 or 100% of your earned income (coordinated with Roth
IRA); however, if your contribution exceeds your maximum deductible amount,
the remainder will be treated as a nondeductible contribution.
DEDUCTION CALCULATION
A. Insert MAGI "High End" number from chart above
for the corresponding tax year and filing status $ ...............
B. Your MAGI (From IRS Form 1040 or 1040A) $ ...............
C. Subtract B from A $ ...............
(Line C multiplied by .2 equals the amount x .2 **
you may deduct.*)
Deductible Amount*** $ ...............
EXAMPLE
Jim wants to make a 1998 deductible IRA contribution. Jim is married, an active
participant, files jointly, and has MAGI of $55,000.
A. $ 60,000
--------
B. $ 55,000
--------
C. $ 5,000
--------
.2
$ 1,000
--------
* If the adjusted dollar deduction limit is not a multiple of ten, it is
rounded up to the next highest $10 increment. If your partial deduction
is less than $200 but greater than $0, you are allowed to claim an IRA
deduction of $200.
** For married couples filing jointly, replace the .2 with .1 starting in
the tax year 2007.
*** This assumes that you are eligible to contribute that amount (the amount
may need to be reduced if you made a Roth IRA contribution).
Note: Qualifying married couples, filing separately may use the "Single"
category.
6. Rollovers, Transfers, and Direct Rollovers. Distributions from IRAs, SIMPLE
IRAs, qualified plans or tax-sheltered annuity programs may be eligible for a
tax-free rollover or transfer into an IRA. Transfer and rollover contributions
are not deductible and will not be applied against the annual contribution
limits mentioned above. See Rollover Review Explanation on the inside of the
front cover for more information. A. Rollovers and Transfers from IRAs. Assets
in IRAs may be directly transferred or rolled over to another IRA. A rollover
occurs when you take a distribution of the assets and roll them into an IRA
within 60 calendar days from the date of receipt. If you retain the assets for
any period of time beyond the 60 days, the rollover is no longer allowed. An
additional restriction on rollovers is that you are only allowed one rollover
for each 12-month period. The 60 day period is extended to 120 days in the case
of a first-time homebuyer distribution where a delay or cancellation in purchase
or construction occurs and the one rollover per twelve month rule does not
apply.
B. Rollovers or Transfers from SIMPLE IRAs. A SIMPLE IRA is an IRA that can
only accept contributions pursuant to a SIMPLE arrangement set up through
your employer. SIMPLE IRAs must remain separate from IRAs for a two-year
period. After the two years, you may roll over or transfer your SIMPLE IRA
into an IRA.
C. Rollovers and Direct Rollovers from Qualified Plans. An eligible
rollover distribution from a qualified retirement plan or tax-sheltered
annuity program may be rolled over or directly rolled over to an IRA.
Generally, an eligible rollover distribution is any distribution except:
(1) one of a series of substantially equal periodic payments over the
single or joint life expectancy of the employee and beneficiary or for a
specific period of ten years or more, (2) a nontaxable distribution, (3) a
required distribution for an employee age 70-1/2 or older, or (4) at the
time of this writing Congress was considering preventing rollovers of
hardship distributions. To complete a direct rollover you would instruct
your employer to deliver the funds directly to the IRA Custodian. To
complete a rollover, you would take control of the assets and would have 60
calendar days from the date of receipt to roll over the taxable portion of
the distribution to an IRA.
7. Conversion or Rollover Into Roth IRA. Starting in 1998, you may be eligible
to convert or roll over your IRA into a Roth IRA. Your modified adjusted gross
income must be less than $100,000 in the year you convert or roll over in order
to be eligible. The conversion or rollover is a taxable event, however, you will
not be subject to the IRS 10% premature distribution penalty. If you complete
the rollover or conversion in 1998, you pay your taxes ratably over a four-year
period. After 1998, all conversions or rollovers into Roth IRAs will be fully
taxed in the year of the conversion or rollover.
8. Required Distributions After Age 70-1/2. After you reach age 70-1/2, the
rules require you to take minimum distributions from your IRA each year. The
distribution for your first year, the year in which you reach age 70-1/2, must
be made no later than April 1 of the following year. Distributions for
subsequent years must be taken by December 31 of each year.
You must elect a method to receive your distributions in a manner which
distributes the funds at least as rapidly as the minimum required distributions.
Unless you elect otherwise, the minimum required distribution for each year is
determined by dividing your ending account balance for the previous year
(adjusted by any outstanding rollovers) by your joint life expectancy with the
appropriate beneficiary. If no beneficiary exists or a beneficiary other than a
natural person is named (except certain trusts), your single life expectancy
must be used for this calculation.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
For years after the first distribution year, you may elect to annually
recalculate your life expectancy and/or your spouse's life expectancy. If you do
not choose a method, it is presumed that recalculation is elected. If
recalculation is elected, a new life expectancy factor is determined each year
based upon the ages of you and/or your spouse as of your birthdays during the
year. If the person whose life is being recalculated dies, the life expectancy
for that individual becomes zero. If recalculation is not chosen, the life
expectancy is calculated by determining the life expectancy at the end of the
first distribution year and subtracting 1 for each year which has elapsed since.
If no recalculation is elected, the death of the IRA Owner or the beneficiary is
disregarded.
The joint life expectancy of you and a beneficiary other than your spouse is
limited by the Minimum Distribution Incidental Benefit (MDIB) tables. The tables
give life expectancies for the IRA Owner and a beneficiary ten years younger. If
this factor is less than your joint life expectancy with the applicable
beneficiary, the factor from the MDIB table must be used to calculate the
minimum distribution.
If you have more than one IRA at the same or different financial
organization(s), the minimum distribution must be calculated separately for each
IRA. However, the minimum distribution from each IRA can be withdrawn from any
one or more of your IRAs.
9. Distributions After Death.
A. Death After the Required Beginning Date. If you die after the date when
payments must have begun (April 1 of the year after you reach age 70-1/2),
the payments to your beneficiary or estate must continue so that the funds
will be distributed at least as rapidly as they would have been distributed
if the death had not occurred. A spouse beneficiary may elect to roll over
a distribution (other than a required minimum distribution) into his or her
own IRA.
B. Death Before the Required Beginning Date. If you die before the required
beginning date, your beneficiary has the following options:
(1) Five Year Option. The beneficiary may withdraw the entire account
balance in any manner so that the IRA is depleted by December 31 of the
fifth year following the year of death.
(2) Life Expectancy Option. The beneficiary may withdraw the funds in a
series of payments over a period which does not exceed the
beneficiary's life expectancy. These payments must begin by December 31
of the year following the year of death if the beneficiary is not your
spouse, or December 31 of the year you would have been age 70-1/2 (if
later), if the beneficiary is your spouse.
(3) Spouse Treat as Own Option. A spouse beneficiary may elect to roll over
a distribution into his/her own account or to treat the IRA as his/her
own.
If you die before your required beginning date, your spouse beneficiary must
make his/her election of payment by the earlier of December 31 of the fifth year
after the year of your death or December 31 of the year you would have attained
age 70-1/2. If you die before your required beginning date, your nonspouse
beneficiary must make his/her election of payment no later than December 31 of
the year following the year of your death.
10. Income Tax Status of Distributions. IRA distributions are generally fully
taxable as ordinary income. IRAs are not eligible for the special tax treatment
(five and ten year tax averaging and capital gains treatment) available to
certain distributions from pension and profit sharing plans. See item 5 for the
tax treatment of rollovers.
A. Nondeductible Contributions. If you have made nondeductible
contributions to an IRA, a certain percentage of your distributions will be
nontaxable. The nontaxable portion of your distributions is calculated as
follows:
Total Nondeductible Contributions
Less Previous Nontaxable Distributions
Nontaxable --------------------------------------- Distributions
Distributions = Total Account Balance of all IRAs X During the Year
at Year End Plus Total Distributions
During the Year
B. Estate Tax Status of Distributions. All funds held within your IRA will
be included in your gross estate for estate tax purposes, regardless of the
named beneficiary or manner of distribution. There is no specific estate
tax exclusion for funds held within an IRA.
C. Gift Tax Status of IRA Contributions and Distributions. For gift tax
purposes, irrevocable beneficiary designations will not be treated as
gifts.
11. Federal Penalties. In addition to the taxes imposed on IRAs,
distributions from IRAs are also potentially subject to a wide variety of
penalties (excise taxes).
A. Penalty for Premature Distribution. Generally, if you take a
distribution from your IRA before you reach the age 59-1/2 you will owe, in
addition to regular income taxes, a 10% excise tax on the taxable amount of
the distribution. Exceptions to the 10% excise tax exist in the case of
disability, death, a first home, qualified higher education expenses,
distributions for health care expenses exceeding 7.5% of your adjusted
gross income, distributions used to pay for health care insurance if you
are unemployed, or if you agree to take a series of substantially equal
periodic payments made over your life expectancy or the joint life
expectancy of yourself and your designated beneficiary.
B. Penalty for Excess Contributions. If you contribute more to your IRA
than allowed it is called an "excess contribution" and you may be
penalized. The government imposes a 6% penalty (excise tax) per year for
any excess amount you allow to remain in your IRA. You must pay the penalty
by filing a special IRS form along with your income tax return. You can
avoid the 6% penalty by removing your excess contribution plus any earnings
on the excess amount prior to the due date for filing your Federal income
tax return for the year, plus extensions. Due to the complications involved
in excesses, we recommend you talk to your legal or tax adviser when an
excess occurs.
C. Penalty for Insufficient or Late Distribution. You will owe a penalty of
50% of the amount of any minimum distribution you fail to take. As
discussed above, minimum distributions are required when you reach age
70-1/2 and in some cases for beneficiaries. You are responsible for paying
this tax and reporting it on your income tax return. This 50% penalty is in
addition to any regular income tax.
D. Penalty for Prohibited Transactions. If you engage in a prohibited
transaction, the IRA loses its tax exemption as of the first day of the
year. You must include the Fair Market Value of the IRA in your gross
income for the year during which the prohibited transaction occurred and
pay all applicable taxes and penalties.
E. Penalty for Pledging the Account as Security. If you pledge your IRA as
security for a loan, the portion pledged is treated as a distribution to
you in that year. The portion pledged is fully taxable and subject to all
penalties.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
12. Miscellaneous Provisions.
A. Your Custodian. Your Custodian must be a bank, savings and loan
association, credit union, or other entity that is permitted to accept IRA
contributions.
B. Cash Contributions. All contributions to your IRA must be in cash except
for rollover and transfer contributions.
C. Contribution Limit. You are not allowed to contribute more than $2,000
as a regular contribution and no more than $4,000 in the case when you are
making a contribution both to your IRA and to the IRA of your spouse under
the spousal IRA rules. Your contribution limit must also be coordinated
with any Roth IRA contributions you make.
D. Life Insurance. You may not invest your IRA in life insurance contracts.
E. Nonforfeitable. Your interest in your IRA balance is nonforfeitable.
F. No Commingling. The assets of the IRA will not be commingled with other
property except in a common trust or investment fund.
G. Collectibles. No part of the funds can be invested in collectibles,
including any work of art, rug or antique, metal or gem, stamp or coin,
alcoholic beverage, or any other tangible property specified by the IRS.
The acquisition of certain U.S. government-issued gold, silver, and
platinum coins, certain state-issued coins, and certain gold, silver,
platinum, or palladium bullion meeting specific requirements are permitted
investments under the law.
13. IRS Approval of Forms. The Custodial Agreement used to establish this IRA is
the IRS Model Custodial Agreement (Form 5305-A). This agreement has been
approved as to form by the Internal Revenue Service. You are responsible to
ensure you follow the terms and conditions of this agreement. This approval is
not an endorsement of the investment instruments used by the Custodian.
14. Provisions Regarding Amendments to the Plan. The Custodian of this IRA may
amend the IRA at any time. The Custodian shall furnish copies of any such
amendments to the IRA Owner within 30 days of the date the amendments are to
become effective.
15. Fees. The Custodian may charge service fees for the administration of the
IRA. If a fee is charged at the time the IRA is first opened, the IRA Owner will
be notified of the amount charged, either on the IRA Application. If fees will
be charged in the future, the Custodian will furnish the IRA Owner with a
written notice stating the nature and amount of such fees at least 30 days
before charging any fees.
16. Annual Statements. Each year the Custodian will furnish you and the IRS with
statements reflecting the activity in your IRA. You and the IRS will receive a
Form 5498 (or a substitute form), which will indicate your Fair Market Value of
the account as of the end of the previous calendar year. This form will give the
amount of your contribution to the IRA and will indicate any rollovers into the
account. Another statement, the IRS Form 1099-R, will reflect your distributions
for the year.
17. Other IRS Forms. You may be required to file other IRS forms. IRS Form 5329
is required when you are assessed certain penalties. If you only owe the 10%
premature distribution penalty, you may be able to pay the penalty on your
income tax return alone. You must also file IRS Form 8606 for each taxable year
you make nondeductible contributions or receive nontaxable distributions.
FOR FURTHER INFORMATION REGARDING INDIVIDUAL RETIREMENT ACCOUNTS CAN BE OBTAINED
FROM ANY DISTRICT OFFICE OF THE IRS OR FROM IRS PUBLICATION 590.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
Form 5305-A (Rev. January 1998)
Department of the Treasury Internal Revenue Service
DO NOT File with Internal Revenue Service
[ ] Amendment
The Depositor and the Custodian make the following agreement:
- --------------------------------------------------------------------------------
Article I
The custodian may accept additional cash contributions on behalf of the
depositor for a tax year of the depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
Article II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold, silver, and platinum coins, coins
issued under the laws of any state, and certain bullion.
Article IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The depositor's entire interest in the custodial account must be, or begin to
be, distributed by the depositor's required beginning date, (April 1 following
the calendar year end in which the depositor reaches age 70-1/2). By that date,
the depositor may elect, in a manner acceptable to the custodian, to have the
balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the depositor and his or her designated beneficiary.
4. If the depositor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(a) If the depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
depositor or, if the depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the depositor's death. If, however, the beneficiary is the
depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
depositor would have reached age 70-1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the depositor's entire interest in the custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
depositor (or the joint life and last survivor expectancy of the depositor and
the depositor's designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under paragraph 3,
determine the initial life expectancy (or joint life and last survivor
expectancy) using the attained ages of the depositor and designated beneficiary
as of their birthdays in the year the depositor reaches age 70-1/2. In the case
of a distribution in accordance with paragraph 4(b)(ii), determine life
expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
Article V
1. The depositor agrees to provide the custodian with information necessary for
the custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The custodian agrees to submit reports to the Internal Revenue Service and
the depositor prescribed by the Internal Revenue Service.
Article VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
Article VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
Article VIII Definitions.
8.1 "Code." The term "Code" shall mean the Internal Revenue Code.
8.2 "Custodial Account." Your IRA shall be referred to as the "custodial
account" or "account."
8.3 "IRA." IRA shall mean Individual Retirement Account within the meaning of
Section 408 of the Code.
8.4 "IRS." The term "IRS" shall mean the Internal Revenue Service.
8.5 "We." The IRS selected the term "Custodian" to describe us, your financial
organization. In other parts of this agreement, the "Custodian" will be referred
to as "us," "we," "our," or the "Custodian."
8.6 "You." The IRS selected the term "Depositor" to describe "you," the IRA
Owner. In other parts of this agreement, you will be referred to as "you,"
"your," or "IRA Owner."
8.7 "Fund(s)." The "Fund(s)" shall mean the mutual fund(s) identified in the IRA
Application used to establish this IRA.
Article IX Fees and Expenses.
9.1 Fees. You agree to pay any fees we establish pursuant to the Application or
a separate fee schedule which we will publish from time to time. Such fees may
include, without limitation, establishment fees, annual administration fees,
termination fees, transfer fees, transaction fees, legal fees, investment
commissions, and such other fees as we determine applicable. You agree to pay
such fees either by a separate billing or direct deduction from the custodial
account; the method of payment is at our discretion. Some fees, such as
brokerage commissions, must be deducted from the custodial account. The
custodian shall have the right to liquidate sufficient shares in the custodial
account to pay such fees. In the case of a third party receiving payments, such
as brokerage fees and commissions, we may receive a portion of these fees in
return for services provided in completing these transactions. We agree to give
you at least 30 days prior written notice prior to changing a fee or imposing a
new fee.
9.2 Expenses. You agree to pay any income, transfer, and other taxes of any kind
that may be levied or assessed upon the custodial account, and all other
administrative expenses reasonably incurred by us in the performance of our
duties. These expenses may include legal, or other professionals hired by us in
connection with your custodial account. You agree to reimburse us for any
reasonable expenses incurred in the administration of the account. The custodian
shall have the right to liquidate sufficient shares in the custodial account to
pay such expenses.
Article X Amendments. We may amend your custodial account at any time to comply
with necessary laws and regulations or for any other reason. Amendments may be
made retroactively when required to meet a law or regulatory change. You are
deemed to have automatically consented to any amendment 30 days after we mail
you a copy of the amendment. Your actual written or verbal consent is not
required to amend. We shall send you a copy of such amendment within 30 days of
the amendment's effective date.
Article XI Limited Liability.
11.1 Hold Harmless. You agree to hold us harmless, to indemnify, and to defend
us against any and all claims arising from and liabilities incurred by reason of
any action taken by us, except to the extent such liability arises from the
willful misconduct or gross negligence of the custodian.
11.2 No Investment Discretion. You agree that all contributions shall be
invested according to your sole discretion in whole or fractional shares of the
Fund(s) identified in the IRA Application. All dividends and capital gain
distributions received on shares of the Fund(s) shall be reinvested in the
shares of the same Fund(s) which shall be credited to the custodial account. We
shall not be responsible or liable for any investment decisions or
recommendations with respect to the investment, reinvestment, or sale of assets
in the custodial account. We shall not be responsible for reviewing any assets
held in the custodial account and shall not be responsible for questioning any
of your investment decisions. We shall not be responsible for any loss resulting
from any failure to act because of the absence of directions from you. In the
event we determine your investment instructions are unclear, then we shall act
as soon as practical to obtain clarification of such instructions. Pending
clarification, we shall hold without investing all or any portion of the
contribution, without liability for loss of income or appreciation and without
liability for interest of dividends.
11.3 Transaction Responsibility. We are not responsible for inquiring into the
nature or amount of any contribution made by you, nor into the amount or timing
of any distribution requested. This includes, without limitation, that you are
solely responsible for all your required minimum distributions. We have no
responsibility to notify you of any required minimum distribution nor do we have
any responsibility to determine the correct minimum amount for you. You shall
have full responsibility for determining your required minimum distributions as
well as for any tax or investment consequences of all contributions to and
distributions from the custodial account. We shall not be bound to take any
action on behalf of you, except upon receipt of written instructions from you.
We shall have no obligation to inquire into the genuineness of any such written
instruction without liability for any action taken pursuant thereto, so long as
we act in good faith. You shall bear sole responsibility for assuring the
deductibility of any deposits to the custodial account.
11.4 No Assumed Responsibilities. We assume no responsibilities and agree only
to provide the administrative and custodial services required under IRC section
408 and applicable regulations.
Article XII Default Provisions (70-1/2 and Death).
12.1 70-1/2 Distributions. If you fail to make a written election of payment by
your required beginning date, the minimum required distribution will be
calculated using the joint life expectancy of you and your designated
beneficiary. If no beneficiary exists or a beneficiary other than a natural
person is named (except certain trusts), your single life expectancy will be
used for this calculation. See section 11.3 above. The recalculation method will
be used to the extent allowed.
12.2 Death Distributions. If you die before your required beginning date, then
your designated beneficiary must elect a method of distribution under Article
IV-4(b)(i) and (b)(ii) by the earlier of December 31 of the calendar year in
which the life expectancy distributions must begin under Article IV-4(b)(ii) or
December 31 of the calendar year which contains the fifth anniversary of the
date of your death. If you use the designation of beneficiary form provided in
the Application then the following rules apply (i) the designation in the
Application revokes all previously made designations, (ii) if any of the
beneficiaries dies before you, the deceased beneficiary's share will be
reallocated to the surviving beneficiaries on a pro rata basis, and (iii) if
none of the beneficiaries survive you, or if the custodian cannot locate your
beneficiary(ies) after a reasonable search, any balance in your IRA will be paid
to your estate. The custodian may refuse to accept a designation not made on its
standard form. You agree to release the custodian from and indemnify it for any
and all claims arising from the custodian's actions under your designation of
beneficiary.
Article XIII Reports and Records. We shall keep accurate and detailed records of
all contributions, receipts, investments, distributions, disbursements, and
other transactions relating to the custodial account. We shall provide reports
to the IRS and to you as required by law and regulations. Unless you file a
written statement with us within 60 days after you receive a statement, we shall
be relieved and discharged from all liability to you (including any of your
beneficiaries) with respect to all matters set forth in such report.
Article XIV Powers. We shall have the right to hire attorneys or other
professionals if we deem it necessary for the proper administration of your
custodial account. This includes the right to have a party affiliated with the
Fund(s) to perform administrative duties. We shall also have the power to
request a judicial settlement of your account or to enter into a lawsuit for
your account. We shall also have the power to do whatever else we determine
necessary for the proper administration of your account.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
Article XV Resignation or Removal of Us as Custodian. We may resign as custodian
without your consent and you may remove us as custodian without our consent. We
must provide notice to you of any resignation 30 days prior to the effective
date of the resignation. In the event of resignation by us, you shall appoint a
qualified successor custodian. Upon our receipt of a written acceptance of such
appointment by the successor custodian, we shall transfer and pay over the
assets of the custodial account to the successor custodian. If after 30 days
from notice of resignation, you have not appointed a successor custodian or we
have not received a written acceptance of such appointment by the successor
custodian, we shall have the right to transfer the assets remaining in the
custodial account to a successor custodian that we choose in our sole discretion
or we may liquidate the assets and distribute the cash proceeds, or we may make
an in-kind distribution, or we may otherwise distribute to you the assets
remaining in the custodial account. We are authorized, however, to reserve such
funds as we deem advisable for payment of any liabilities constituting a charge
against the assets of the custodial account or against us, with any balance of
such reserve remaining after payment of all such items to be paid over the
successor custodian.
Article XVI Termination. In the event the balance of the custodial account is
less than the minimum value prescribed from time to time by the appropriate
Fund(s), we may liquidate the custodial account by making a distribution in cash
or in-kind of the assets in the account less any fees owing. If we terminate for
any reason, we shall not be liable for any loss or penalty incurred upon
termination and liquidation of the custodial account. Upon liquidation of the
custodial account this Agreement shall terminate and we shall be relieved of all
further duties and any liability relative to this Agreement, the custodial
account, and the assets distributed hereunder.
Article XVII Custodian's Responsibilities. We shall act as an agent for you, we
shall receive funds and invest them at your direction and in accordance with
this Agreement. All shares of the Fund(s) shall be held in our name as custodian
or our nominee's name. The parties do not intend to confer any fiduciary
responsibilities upon the custodian and none shall be implied. We shall deliver,
or cause to be executed or delivered to you all notices, prospectuses, financial
statements, proxies and proxy solicitation materials relative to shares of the
appropriate Fund(s) held in the custodial account. The custodian shall vote such
shares only in accordance with your written instructions.
Article XVIII Contributions. The custodian is under no duty to compel you to
make any contributions and shall have no duty to assure that such contributions
are appropriate in amount. You have sole responsibility for assuring the
deductibility of any contributions. We may request additional information in the
case of rollovers and direct rollovers. We may request a Transfer Form, or other
forms prior to a transfer.
Article XIX Miscellaneous
19.1 Notice. Any notice, payment, report, or other material mailed to you shall
be deemed delivered and effective three days after the date mailed by us to you.
We shall send such material to your last address you provided and we shall
assume no obligation to ascertain the actual address or whereabouts of you. Any
notice you send us shall be deemed delivered when actually received by us.
Except as otherwise permitted by us, all instructions to us must be in writing.
19.2 Headings. The headings and articles of this agreement are for convenience
of reference only, and shall have no substantive effect on provisions of this
agreement.
19.3 Singular Form. Throughout this agreement, the singular form includes the
plural where applicable.
19.4 State Law. This agreement shall be construed and interpreted in
accordance with the laws of the state in which our principal office is located,
except to the extent superseded by federal law.
19.5 Disqualifying Provision. Any provision of this agreement which would
disqualify the custodial account as an IRA shall be disregarded to the extent
necessary to make the custodial account an IRA.
19.6 Interpretation. If any question arises as to the meaning of any provision
of this agreement, then we shall be authorized to interpret any such provision,
and our interpretation shall be binding upon all parties.
19.7 Additional Provisions. Additional provisions to this agreement may be
attached on a separate sheet.
- --------------------------------------------------------------------------------
General Instructions
(Section references are to the Internal Revenue Code unless otherwise noted.)
Purpose of Form Note: Users of the October 1992 revision of Form 5305-A are not
required to use the January 1998 revision of the form.
Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is fully executed by both
the individual (depositor) and the custodian and must be completed no later than
the due date of the individual's income tax return for the tax year (without
regard to extensions). This account must be created in the United States for the
exclusive benefit of the depositor or his or her beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the extent
specified in those regulations. Do not file Form 5305-A with the IRS, instead,
keep it for your records.
For more information on IRAs, including the required disclosures the custodian
must give the depositor, see Pub. 590, Individual Retirement Arrangements
(IRAs).
Definitions
Custodian.- The custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
Depositor.- The depositor is the person who establishes the custodial account.
Identifying Number
The depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number (EIN) is required only for
an IRA for which a return is filed to report unrelated business taxable income.
An EIN is required for a common fund created for IRAs.
IRA for Nonworking Spouse
Form 5305-A may be used to establish the IRA custodial account for a nonworking
spouse.
Contributions to an IRA custodial account for a nonworking spouse must be made
to a separate IRA custodial account established by the nonworking spouse.
Specific Instructions
Article IV.- Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the depositor reaches age 70-1/2 to ensure that the
requirements of section 408(a)(6) have been met.
Article VIII.- Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
Note: Form 5305-A may be reproduced and reduced in size.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
IRA Transfer or
Direct Rollover Request Form
Please print.
Fund Name ..........................
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
1. GENERAL INFORMATION
Name.................... Date of Birth ...........Soc. Sec. No. ................
Street Address................... City ................ State ...... ZIP.......
Daytime Phone ......................... Evening Phone .........................
Account No ....................................................
2. TRANSFER/DIRECT ROLLOVER REQUEST
(enter Name of Fund here) .....................................
I have established an IRA with Mutual Fund IRA of which Star Bank N.A. serves
as custodian.
I request that my retirement funds be:
(check one) [ ] Transferred from another IRA.
[ ] Directly rolled over from my employer-sponsored
retirement plan.
[ ] Transferred from a SIMPLE IRA (SRA).*
I authorize my present Custodian/Trustee of my IRA, or my present employer of
my retirement plan, to directly send the assets indicated in Section 3 below to
my IRA with enter (Name of Fund here) ..........................................
Name of present Custodian, Trustee or Employer..................................
Street Address................... City ................ State ...... ZIP.......
*Note: SIMPLE IRA (SRA) funds cannot be combined with regular IRA funds within
two years of initial participation in the SIMPLE IRA (SRA).
If you choose to wire-transfer your funds, contact your financial organization
for information regarding any incoming or outgoing wire-transfer fees that
may apply.
3. PAYMENT INFORMATION
Payment Schedule. I authorize and direct you to send my assets as follows:
(1) [ ] Immediately liquidate all assets and send the cash proceeds.
(2) [ ] Send cash proceeds of all investments at maturity.
(3) [ ] Send the assets received at maturity for each of the investments
listed below.
Investment Maturity Date
(if applies)
.................................. ..................
.................................. ..................
(4) [ ] Immediately send all assets "in kind."
(5) [ ] Other.......................................
............................................
............................................
............................................
............................................
............................................
............................................
Conduit IRA. Do you want these funds kept in a separate IRA?
[ ] yes [ ] no
Source of funds [ ] IRA [ ] SIMPLE IRA (SRA) [ ] QP/TSA
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
<PAGE>
4. AGE 70-1/2 INFORMATION
Check one of the following:
[ ] I am under age 70-1/2 and do not turn age 70-1/2 at anytime during the
calendar year.
[ ] I am age 70-1/2 or older and understand that no part of my required
distribution is eligible for transfer or rollover. I further understand
that there may be significant tax penalties resulting if I do transfer or
roll over any part of my required distribution.
5. SIGNATURES AND CERTIFICATIONS
I certify that I have established an IRA with Mutual Fund IRA, of which Star
Bank N.A. is the Custodian. I agree to contact my present Custodian that I am
transferring from to determine if specific documentation or a signature
guarantee is required. I understand that I am responsible for determining my
eligibility for all transfers or direct rollovers. I agree to hold the Custodian
harmless against any and all situations arising from an ineligible transfer or
direct rollover. I acknowledge that the Custodian cannot provide legal advice
and I agree to consult with my own tax professional for advice.
................................... ..............
Signature of Individual Date
................................... ..............
Signature of Custodian Date
(You may wish to retain a copy of this form for your records.)
TO BE COMPLETED BY A STAR BANK N.A. REPRESENTATIVE (For office use only) Star
Bank N.A. hereby confirms that it has accepted its appointment as Custodian of
the Mutual Fund IRA.
Make check payable to:
Mutual Fund IRA, FBO....................
Title................................................. Date ...............
Mail check to: (Name of Fund)
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-CUS-DMC 11/1/97
EXHIBIT (14)(B)
ROTH INDIVIDUAL RETIREMENT ACCOUNT
APPLICATION, DISCLOSURE STATEMENT AND CUSTODIAL ACCOUNT FORM.
<PAGE>
ROTH
IRA
A Retirement Plan
for Individuals
<PAGE>
INSTRUCTIONS FOR OPENING YOUR MUTUAL FUND ROTH IRA
I. Included in this booklet is:
1) A Roth IRA Disclosure and Plan Agreement.
2) A Roth IRA Application (mail to your Mutual Fund at the address on the
bottom of this page under Revocation Information).
3) A Request for Transfer or Conversion to a Roth IRA form. You may use
this form to request your current custodian or trustee, to transfer, or
convert, your plan assets to your Mutual Fund Roth IRA.
II. To Open Your Mutual Fund Roth IRA
Step 1 Complete the Roth IRA Application. See Designation of Beneficiary
explanation below.
Step 2 If you are requesting a transfer or conversion of current IRA
assets (held elsewhere) to your Mutual Fund Roth IRA, complete the
Request for Transfer or Conversion to a Roth IRA form. You should
complete this form in addition to the Roth IRA Application.
Step 3 Separate the form(s) at the perforation and send it back to your
Mutual Fund.
Step 4 Include a check for the amount of your Roth IRA contribution made
payable to the Mutual Fund in which you are making this
contribution.
Step 5 Retain the Roth IRA Plan Agreement and Disclosure.
III. Designation of Beneficiary
You may designate a beneficiary to receive the Roth IRA funds upon your
death. The space provided is to name primary and contingent beneficiaries.
If you wish a more complicated type of designation of beneficiary, you
should consult an attorney. Some state's laws require married individuals
to name their spouse as beneficiary. Married individuals should consult
with their tax advisers prior to designating someone other than their
spouse. You may change your beneficiary at any time by writing to the
Custodian in a format that is acceptable to the Custodian. If any of your
beneficiaries die before you, the deceased beneficiary's share will be
reallocated among the surviving beneficiaries on a pro rata basis. If none
of your beneficiaries survive you any balance in the Roth IRA will be paid
to your estate.
FEE INFORMATION
Annual Account Maintenance Fee: $15 per account
Incoming Transfer Fee: $12 per account
Distribution Fee: $15 per account
Refund of Excess Contribution: $15 per account
Outgoing Transfer Fee: $15 per account
Automatic Periodic Distributions: $15 per year, per account
REVOCATION INFORMATION
You have the right to revoke this Roth Individual Retirement Account (Roth IRA)
within seven days of receiving your disclosure statement. To revoke your Roth
IRA account, simply notify:
(Fund Name) .............................
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge,
NY 11788-0132
You may notify your Mutual Fund in person, in writing, or by telephone. Written
notice must be sent by first-class mail at the address listed above and will be
accepted as of the date your notice is postmarked.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
Roth IRA Application
Fund Name ..........................
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
Please print or type.
1. ROTH IRA OWNER INFORMATION
Name.................... Date of Birth ...........Soc. Sec. No. ................
Street Address................... City ................ State ...... ZIP.......
State of Residence..............................................................
Citizen or permanent resident of USA? [ ] yes [ ] no
If no, country of residence....................................
Daytime Phone (...)................. Evening Phone (...).....................
Employer's Name..................................
2. CONTRIBUTION INFORMATION
Name of Fund: ....................................
INITIAL CONTRIBUTION TYPE
Type: Tax Year
Amount: (if applicable):
[ ] Regular/Spousal Roth IRA $................. .........
[ ] Rollover from Roth IRA $................. .........
[ ] Transfer from Roth IRA $................. .........
[ ] Conversion (Rollover) from
Traditional IRA* $................. .........
Date .................
5-Year Holding Period Starting Year ..................
3. DESIGNATION OF BENEFICIARY
In the event of my death, pay my Roth IRA balance to the following primary
beneficiary(ies): (See the Instructions for additional conditions.)
Name SSN or TIN Relationship Date of Birth Address (optional) %*
................................................................................
................................................................................
................................................................................
................................................................................
Total 100
============
If all of the primary beneficiaries die before me pay my Roth IRA balance to the
following contingent beneficiaries:
................................................................................
................................................................................
................................................................................
................................................................................
*If no percentage rate is indicated, the beneficiaries will share equally.
Total 100
============
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
4. SIGNATURES AND CERTIFICATIONS
I certify under the penalty of perjury that my social security number stated
above is correct, that I am of legal age in my state of residence and I agree
that the designation of the tax year for my contribution (if applicable) is
irrevocable. By signing this application, I hereby authorize and appoint Star
Bank N.A. to act as Custodian of my account. I indemnify Star Bank N.A. and
American Data Services Inc. when making distributions in accordance with my
beneficiary designation on file or in accordance with the Custodial Account
Agreement absent any such designation. I acknowledge that I have received the
Roth IRA Disclosure Statement and the Roth IRA Custodial Account Agreement at
least seven days prior to the date I signed this application. I have read both,
which are incorporated in this application by reference, and I accept and agree
to be bound by the terms and conditions contained in the Roth IRA Custodial
Account Agreement. I also certify that I have received and read the current
Prospectus and understand that mutual fund shares are not obligations of or
guaranteed by a bank, nor are they insured by the FDIC.
................................. ..............
Roth IRA Owner's Signature Date
................................. ..............
Star Bank N.A. Date
Star Bank N.A. accepts this application and agrees to act as
Custodian of the account.
A confirmation will be sent to you regarding the above transaction(s) and will
serve as notification of the Custodian's acceptance.
COMPLETE ONLY IF REQUIRED BY STATE LAW.
Spousal Consent: I am the spouse of the Roth IRA Owner and I approve and consent
to the naming of a beneficiary other than myself. I transmute (transfer) any
community property interest I have in this Roth IRA into the separate property
of my spouse.
..................................... ...........
Spouse's Signature Date
5. DEALER INFORMATION (If Applicable)
................................................................................
Name of Dealer Name of Representative Rep ID No.
................................................................................
Address of Rep's Branch Branch ID No.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
ROTH IRA DISCLOSURE STATEMENT
1. Right to Revoke the Account. You have the right to revoke this Roth
Individual Retirement Account (Roth IRA) within seven days of receiving this
Disclosure Statement. To revoke your Roth IRA account, simply contact the person
designated in the booklet instructions. You must notify us in writing. Written
notice must be sent by first-class mail at the address listed on the application
and will be accepted as of the date such notice is postmarked. If you revoke
your Roth IRA account, we will refund your entire Roth IRA contribution.
2. Definitions. In this Disclosure Statement the terms "you," "your," or "Roth
IRA Owner" means the person who established the Roth IRA. The terms "Custodian,"
"our," "us," or "we" shall mean the financial organization acting as the
Custodian of your Roth IRA. The term "IRS" shall refer to the Internal Revenue
Service. The term "Roth IRA" shall mean Roth Individual Retirement Account
within the meaning of section 408A of the Code and shall also refer to your
Custodial Account. The term "IRA" or "traditional IRA" shall mean Individual
Retirement Account or Individual Retirement Annuity within the meaning of
section 408 of the Code. The term "Code" shall mean the Internal Revenue Code.
3. Overview. The Roth IRA is a nondeductible back-ended IRA. This means that the
tax benefits of a Roth IRA occur at the time of distribution, not at the time of
contribution. You are not allowed to deduct your Roth IRA contribution on your
income tax return. The tax benefits of the Roth IRA include tax-deferred growth
of the earnings and potentially a tax-free distribution (if distributed in a
qualified distribution). Roth IRAs are authorized under federal law and grant
federal tax benefits. Your state may also grant tax benefits for Roth IRAs.
Please consult with your tax adviser concerning any state law questions you may
have.
4. Account Growth. Your IRA is self-directed, we will not take any action except
at your written direction. Earnings and capital appreciation on investments
chosen by you will depend on overall economic conditions and the success of that
particular investment. Earnings on these investments are not guaranteed by the
Custodian and may or may not be reasonably projected. For example, if the
initial investment is a passbook, time deposit or money market account, the
account projection can be made based on the current rate of earnings paid. On
the other hand, if the initial investment is an investment security (stocks,
bonds, or mutual funds), the rate of growth of the earnings on these types of
investments cannot be reasonably projected.
5. Eligibility for Roth IRAs.
A. Regular Roth IRA Contributions. You must have "earned income" and your
income cannot exceed certain income levels in order to contribute to a
Roth IRA.
(1) Earned Income. Earned income includes compensation received as
wages, tips, bonuses, as well as other compensation received for
personal services. Compensation also includes taxable alimony. (If
you are self-employed, compensation is your net earnings from your
trade or business reduced by your deduction for contributions made
on your behalf to retirement plans and the deduction allowed for
one-half of your self-employment taxes.)
(2) Income Limits. Whether or not you are eligible to make a Roth IRA
contribution depends upon your income level and your tax filing
status. Your participation in another retirement plan, "your active
participation status," does not affect your ability to make a Roth
IRA contribution. Married joint filers with modified adjusted gross
incomes (MAGI) of $150,000 or less and single filers with MAGIs of
$95,000 or less are entitled to make up to a full $2,000 Roth IRA
contribution. Individuals earning more than the limits are slowly
phased out of the ability to make Roth IRA contributions. Married
joint filers lose the ability to make any contribution when their
MAGI reaches $160,000 and single filers when their MAGI reaches
$110,000. Married persons filing separately are subject to a
phaseout range starting with their first dollar of MAGI. The charts
below are designed to aid you in determining your eligibility to
make a contribution to a Roth IRA. You should consult with your tax
or legal adviser concerning questions.
B. MAGI. Your modified adjusted gross income (MAGI) is your adjusted gross
income from your federal income tax return figured without taking into
account any foreign earned income exclusion and housing exclusion
(deduction) or any Series EE bond interest from IRS Form 8815. See your
tax adviser.
<TABLE>
CONTRIBUTION CHART
This is a quick reference guide to determine whether or not you meet the income
thresholds for the Roth IRA. If your income places you in a phaseout range,
see the phaseout calculation chart below.
<CAPTION>
Modified AGI Married, Filing Married, Filing
(MAGI) Single Jointly Separately**
<S> <C> <C> <C>
Less than $10,000 Full Contribution Full Contribution Phaseout
$ 10,000 - $ 95,000 Full Contribution Full Contribution No Contribution
$ 95,001 - $109,999 Phaseout Full Contribution No Contribution
$110,000 - $150,000 No Contribution Full Contribution No Contribution
$150,001 - $159,999 No Contribution Phaseout No Contribution
$160,000 or over No Contribution No Contribution No Contribution
</TABLE>
PHASEOUT CALCULATION
If your income falls within the phaseout limits this chart helps determine your
maximum contribution amount.
FILING STATUS
Married, Filing Married, Filing
Single Jointly Separately***
A. Modified Adjusted Gross Income
(MAGI) limit $110,000 $160,000 $10,000
B. Your MAGI (From IRS Form 1040
or 1040A) $....... $....... $......
C. Subtract B from A
(Multiply line C by
given factor) x.1333** x.2** x.2**
Contribution Amount* $....... $....... $......
* CAUTION: The amount of your contribution must be coordinated with the amount
of your traditional IRA contribution. You are only allowed to contribute
$2,000 maximum to both your Roth IRA and your traditional IRA. If the
adjusted dollar contribution limit is not a multiple of ten, it is rounded
up to the next highest $10 increment. If your partial contribution is less
than $200 but greater than $0, you are allowed to claim a contribution
of $200.
** The IRS has not released guidance concerning how to determine your partial
contribution amount, however, the factors provide a method to determine the
amount pending IRS guidelines.
*** Assumes passage of the Tax Technical Corrections Act of 1997. At the time
of this writing, Congress was close to passing the bill which provides for
the numbers indicated above. If the bill does not pass, the $10,000 should
be $15,000 and the .2 number should be .1333. Please check with your tax
professional concerning the status of the technical corrections bill.
C. Spousal Roth IRA Contributions. You may make a contribution into your
spouse's Roth IRA if you meet the special spousal rules. You must be
married, file a joint federal income tax return, and the receiving
spouse must earn less in compensation (or have no compensation) than
the spouse making the contribution. The total combined contribution a
couple can make each year to both of their Roth IRAs is the smaller of
$4,000 or their combined compensation for the year. You can
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
divide your total Roth IRA contribution in any manner you choose,
provided you do not contribute more than $2,000 to either Roth IRA.
Your combined compensation equals the lesser compensated spouse's
compensation plus the higher compensated spouse's compensation (reduced
by any Roth IRA contribution and any traditional IRA contribution).
Please consult your tax adviser if you need additional assistance.
D. Contribution Amount. If you meet the above eligibility requirements,
you may contribute up to 100% of your compensation or $2,000, whichever
is less. Regular and spousal Roth IRA contributions must be made by
your tax filing due date, excluding extensions. The amount you are
allowed to contribute to a Roth IRA also depends upon the amount you
contribute to a traditional IRA. The maximum amount you are allowed to
contribute to your Roth IRA is $2,000 reduced by the amount you
contribute to a traditional IRA.
E. Rollover from another Roth IRA. You are allowed to roll over the assets
from one Roth IRA into this Roth IRA. The rollover contribution does
not affect your ability to make a regular Roth IRA contribution in an
amount of up to $2,000 according to the rules outlined above. You must
complete the rollover within 60 days and you are only allowed one
rollover per 12-month period. The 60-day period is extended to 120 days
in the case of a first-time homebuyer distribution where a delay or
cancellation in purchase or construction occurs and the one rollover
per 12-month rule does not apply.
F. Rollover or Conversion from a traditional IRA into this Roth IRA. You
may be eligible to roll over or convert a traditional IRA into a Roth
IRA.
(1) Qualified Rollover or Conversion Contribution. In order to be eligible
to roll or convert your traditional IRA assets into a Roth IRA, you
must meet certain eligibility requirements.
a. Traditional IRA Assets. The assets you are intending to roll over
or convert to this Roth IRA must have been initially covered under
an Individual Retirement Account or Individual Retirement Annuity.
b. 60 Days. In the case of rollovers, you must complete the rollover
within 60 days of receipt.
c. Income Restrictions. You are not allowed to roll over or convert a
traditional IRA into a Roth IRA if your modified adjusted gross
income exceeds $100,000.
d. May Not File Separate Return. If you are married and file a
separate income tax return, you are not allowed to roll over or
convert your traditional IRA into a Roth IRA.
e. Other Issues. If you are in your age 70-1/2 year or beyond you may
not be allowed to roll the amount of your required minimum
distribution into a traditional IRA. The conservative approach is
to remove the amount of your required minimum distribution and only
roll over or convert the remaining assets.
(2) Tax Consequences. This disclosure covers only the basic tax issues
governing rollovers or conversions of traditional IRAs to Roth IRAs.
a. Taxable Distribution. The rollover or conversion from a traditional
IRA into a Roth IRA is a taxable event. You will be subject to
taxation for completing the rollover or conversion. The law,
however, allows for special tax treatment if you complete the
rollover or conversion in 1998. The distribution amount rolled over
must be included in taxable income ratable over the four taxable
year period beginning with the taxable year in which the payment or
distribution is made. If you complete the rollover or conversion in
1999 or thereafter, then the amount rolled over or converted is
fully subject to taxation in the year of rollover or conversion.
b. Amount Rolled Over or Converted Not Subject to 10 Percent Premature
Distribution Penalty. A qualified rollover or conversion
contribution from a traditional IRA into a Roth IRA is not subject
to the 10% premature distribution penalty.
c. Not Subject to the One Rollover Per 12-Months Rule. A rollover from
a traditional IRA into a Roth IRA does not count as an IRA Owner's
one rollover per twelve months.
6. Deductibility. You are not allowed to deduct your Roth IRA contribution.
7. Qualified Distributions. Distributions from your Roth IRA are federal income
tax free and IRS penalty free in certain circumstances. To qualify for a tax and
IRS penalty-free distribution you must take a "qualified distribution" which
requires you to satisfy a five-year holding period for your contributions and
also requires you to take the distribution for one of the qualified distribution
reasons listed below.
A. Five Years. You must keep your contribution in the Roth IRA account for
five years in order to avoid taxes on the earnings portion of your
distribution.
(1) Regular Roth IRAs. For the purpose of calculating the five years
for regular Roth IRAs, the distribution must not be within the five
taxable year period beginning with the first taxable year for which
the individual made a contribution to a Roth IRA (or such
individual's spouse made a contribution to a Roth IRA established
for such individual). We anticipate future guidance from the IRS on
exactly how the five years will be calculated.
(2) Rollover or Conversion Roth IRAs. In the case of a rollover or
conversion from a traditional IRA into a Roth IRA, the five taxable
year period begins in the taxable year in which the rollover or
conversion occurred. At the time of this writing, Congress was
working on a technical corrections bill that would require the
five-year holding period to start with the most recent rollover or
conversion in the case where the assets from rollovers or
conversions occurring in different years were mixed together.
Please check with your tax adviser concerning the five-year holding
period for rollovers and conversions from traditional IRAs into
Roth IRAs.
B. Qualified Distribution Reasons. In addition to meeting the five-year
holding period to meet the "qualified distribution" requirement, you
are only allowed to take a distribution for certain reasons. You will
not be subject to federal income taxation or to the 10% premature
distribution penalty if you meet the five-year holding period and take
a distribution for one of the following reasons: (1) if you are age
59-1/2 or older, (2) your beneficiary after your death takes a
distribution, (3) if you are disabled within the meaning of Code
Section 72(m), or (4) you meet the first-time homebuyer exception.
8. Premature Distribution Penalties. The IRS imposes a 10% premature
distribution penalty on certain distributions from Roth IRAs. There may also be
an additional 10% penalty on certain distributions from Roth IRAs containing
amounts converted or rolled from a traditional IRA in 1998. Review the
categories below to determine your IRS penalty situation.
A. Qualified Tax-Free Distributions. To meet the "qualified distribution"
requirements for tax-free distributions from a Roth IRA, you must meet
both the "five-year holding period" requirement and take the
distribution for one of the qualified reasons discussed above. (See
item 6 Qualified Distributions.) This rule applies to both regular Roth
IRAs and conversion Roth
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
IRAs. All nonqualified distributions are subject to taxation of the
earnings. (Note: Tax-free refers to federal income taxes. State, local
or other taxes may still apply.)
B. Regular Roth Contributions. If your Roth IRA contains only regular
contributions (i.e. annual contributions of up to $2,000), the
following rules apply.
(1) Return of Contributions. You will avoid the 10% premature
distribution penalty if you take a distribution containing only
your contributions and not any earnings. If you take a nonqualified
distribution, the distribution amount shall be treated as if made
from contributions to the extent that the distribution, when added
to all previous distributions, does not exceed the aggregate amount
of contributions to the Roth IRA. This is significant because only
your earnings are taxable and penalized when withdrawn for
nonqualified reasons, not the return of your contributions. In
other words, you can withdraw your original contribution amount tax
free and IRS penalty free at any time and for any reason. Only when
you begin to take out your earnings do you need to consider whether
the distribution is taxable and penalized.
(2) More Exceptions to the 10% Penalty. Regardless of whether or not
you meet the five-year holding period, you avoid the 10% IRS
penalty on distributions for the following reasons: a first-time
homebuyer distribution, qualified higher education expenses, death,
disability, attainment of the age 59-1/2, medical expenses
exceeding 7.5% of your adjusted gross income, health insurance
premiums if you are unemployed, and substantially equal periodic
payments. The distribution, however, will be subject to taxation of
the earnings if it is not a qualified distribution.
(3) Other Nonqualified Distributions. If you fail to meet the five-year
holding period, fail to meet any of the exceptions to the 10% IRS
penalty, and take a distribution containing earnings then you will
be subject to the taxation and the 10% penalty on the earnings
withdrawn.
C. Roth IRAs Resulting from Traditional IRAs. If you converted or rolled
your traditional IRA into a Roth IRA special rules and penalties may
apply to you. At the time of this writing, Congress was close to
passing the Tax Technical Corrections Act of 1997 that would create new
rules for you. This section explains the proposed rules. Please check
with your tax adviser concerning the status and content of the bill.
The five-year period under the bill would start with the most recent
rollover or conversion from a traditional IRA. Accordingly, if you mix
your rollover and conversion amounts together from different years, you
will be extending the five-year period for the amount you rolled or
converted first. Additionally, if you mix amounts rolled or converted
from traditional IRAs with regular Roth IRAs special rules may apply.
To avoid these issues, you may open a Roth Conversion IRA.
(1) 10% Penalty. If passed, the new law would impose the 10% premature
(under age 59-1/2) distribution penalty on amounts distributed from
a Roth IRA not meeting the five-year holding period as if they were
taxable distributions (assuming the amount converted or rolled over
from the traditional IRA was taxable). This is different from
regular Roth IRAs where the nontaxable amount (contributions) are
always returned first--tax free and IRS penalty free.
(2) Additional 10% Penalty for 1998 Rollovers and Conversions. In
addition to the 10% penalty discussed above, if passed, the law
would impose an additional 10% if you completed a rollover or
conversion of a traditional IRA into a Roth IRA in 1998 and take a
distribution within five years.
9. Tax-Deferred Earnings. The earnings on your Roth IRA grow tax-deferred while
in the Roth IRA.
10. Other Federal Penalties. In addition to the taxes imposed on Roth IRAs and
the 10% premature distribution penalty, distributions from Roth IRAs are also
potentially subject to a wide variety of other penalties (excise taxes).
A. Penalty for Excess Contributions. Contributing more to your Roth IRA
and traditional IRA than allowed creates an "excess contribution" and
you may be penalized. An excess is determined by considering your
contributions to both your traditional IRA and your Roth IRA. The
government imposes a six-percent penalty (excise tax) per year for any
excess amount you allow to remain in your traditional IRA or Roth IRA.
You must pay the penalty by filing a special IRS form along with your
income tax return. You can avoid the six percent penalty by removing
your excess contribution plus any earnings on the excess amount prior
to the due date for filing your federal income tax return for the year,
plus extensions. Please consult with your tax professional in cases
involving excesses.
B. Penalty for Prohibited Transactions. If you engage in a prohibited
trans-action, the Roth IRA loses its tax exemption as of the first day
of the year.
C. Penalty for Pledging the Account as Security. If you pledge your Roth
IRA as security for a loan, the portion pledged is treated as a
distribution to you in that year.
11. Distributions After Death. Your beneficiary's options include:
A. Five-Year Option. The beneficiary may withdraw the entire account
balance in any manner so that the Roth IRA is depleted by December 31
of the fifth year following the year of death.
B. Life Expectancy Option. The beneficiary may withdraw the funds in a
series of payments over a period of years which does not exceed the
beneficiary's single life expectancy.
C. Spouse Treat as Own Option. A spouse beneficiary may elect to treat the
Roth IRA as his or her own.
12. Miscellaneous Provisions.
A. Custodian. Your Custodian must be a bank, savings and loan association,
credit union, or other entity permitted to accept Roth IRA
contributions.
B. Cash Contributions. All contributions to your Roth IRA must be in cash
except for rollover and conversion contributions.
C. Life Insurance. You may not invest your Roth IRA in life insurance
contracts.
D. Nonforfeitable. Your interest in your Roth IRA balance is
nonforfeitable.
E. No Commingling. The assets of the Roth IRA will not be commingled with
other property except in a common trust or investment fund.
F. Collectibles. No part of the funds can be invested in collectibles,
including any work of art, rug or antique, metal or gem, stamp, coin,
alcoholic beverage, or any other tangible property specified by the
IRS. The acquisition of certain U.S. government-issued gold, silver and
platinum coins and certain state-issued coins are permitted as
investments in a Roth IRA under the law. Additionally, any gold,
silver, platinum, or palladium bullion meeting certain fineness
standards are permitted investments under the law.
G. No 70-1/2 Distribution. Roth IRA Owners will not be required to take a
minimum distribution each year after reaching age 70-1/2.
13. IRS Approval of Forms. The Custodial Agreement used to establish this Roth
IRA is the IRS model Roth Individual Retirement Custodial Account (Form
5305-RA). This agreement has been approved as to form by the IRS. You are
responsible to ensure you follow the terms and
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
conditions of this agreement. This approval is not an endorsement of the
investment instruments used by the Custodian.
14. Provisions Regarding Amendments to the Plan. The Custodian of this Roth IRA
may amend (change or terminate) the Roth IRA at any time. The Custodian shall
furnish copies of any such amendments to the Roth IRA Owner within 30 days of
the date the amendments are to become effective.
15. Fees. The Custodian may charge service fees for the administration of the
Roth IRA. If a fee is charged at the time the Roth IRA is first opened, the Roth
IRA Owner will be notified of the amount charged, either on the Roth IRA
Application or otherwise. If fees will be charged in the future, the Custodian
will furnish the Roth IRA Owner with a notice stating the nature and amount of
such fees at least 30 days before charging any fees.
16. Annual Statements. Each year the Custodian will furnish you and the IRS with
statements reflecting the activity in your Roth IRA. You will receive an annual
report, which will indicate your Fair Market Value of the account as of the end
of the previous calendar year. This report or another report will give the
amount of your contribution to the Roth IRA and will indicate any rollovers into
the account. Another statement will reflect your distributions for the year.
Your Custodian will also send some of this information to the IRS, as required.
17. Other IRS Forms. You may be required to file other IRS Forms.
FOR FURTHER INFORMATION REGARDING INDIVIDUAL RETIREMENT ACCOUNTS CAN BE OBTAINED
FROM ANY DISTRICT OFFICE OF THE IRS OR FROM IRS PUBLICATION 590.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
Request for Transfer or
Conversion to a Roth IRA
Fund Name ..........................
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
1. GENERAL INFORMATION
Name ................................ Social Security Number ..................
Street Address................... City ................ State ...... ZIP.......
Date of Birth .......... Daytime Phone ............. Home Phone ..............
2. TRANSFER REQUEST (complete only for a transfer from another Roth IRA)
I authorize and direct you, the present Custodian/Trustee of my Roth IRA, to
send as a transfer the assets indicated in Section 4 below to the Custodian/
Trustee named in the upper right corner of this form.
Present Custodian/Trustee's Name ......................... Phone ...............
Street Address................... City ................ State ...... ZIP.......
Account Number ............... Five-Year Holding Period Starting Year .........
3. CONVERSION REQUEST (complete only for a conversion from a traditional IRA)
I authorize and direct you, the Present Custodian/Trustee of my traditional IRA,
to convert assets in my traditional IRA to a Roth IRA as indicated in Section 4
below to the Custodian/Trustee named in the upper right corner of this form. I
understand that a conversion is a taxable event and that the amount I convert
will be reported as a taxable distribution to the Internal Revenue Service.
A. Custodian/Trustee Information. Please complete the following:
Custodian/Trustee's Name ................ Traditional IRA Account # ...........
Address ................................................ Phone ................
B. IRS Reporting. For IRS reporting purposes I am (check one):
[ ] Less than age 59-1/2 [ ] Age 59-1/2 or older
Caution: If you are age 70-1/2 or older, it is recommended that you do not
convert your required minimum distribution for the year.
Attention: Conversions must be reported to the IRS. The Custodian/Trustee
sending the funds will report the distribution and the Custodian/Trustee
receiving the assets will report the subsequent Roth IRA contribution.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
4. PAYMENT INFORMATION
A. New Roth IRA Account Number .....................................
B. Payment Schedule. I authorize and direct you to send my assets as follows:
(1) [ ] Immediately liquidate all assets and send the cash proceeds.
(2) [ ] Send cash proceeds of all investments at maturity.
(3) [ ] Send the assets at maturity for the investments listed below.
Investment Maturity Date
(if applies)
............................... ............
............................... ............
(4) [ ] Immediately send all assets "in kind."
(5) [ ] Other
......................................
......................................
......................................
......................................
C. Payment Method. I authorize and direct you to send my assets to the
Custodian/Trustee named above as follows:
(1) [ ] By check. Please make check payable to .............................
as (check one) [ ] Custodian or [ ] Trustee for .................'s
Roth IRA. Roth IRA Account # .......................................
(2) [ ] Other...............................................................
D. Roth Conversion IRA. I intend to keep these funds on a separate account as
a Roth Conversion IRA.
[ ] Yes [ ] No
(Note: A separate Roth Conversion IRA should be established for conversion
amounts received in different years.)
5. SIGNATURES AND CERTIFICATIONS
I certify that I have or will establish a Roth IRA with my mutual fund. I agree
to the terms of this form. I understand that I am responsible for determining my
eligibility for all transfers or conversions and I agree to indemnify and to
hold the Custodian harmless against any and all situations arising from an
ineligible transfer or conversion. I acknowledge that the Custodian cannot
provide legal advice and I agree to consult with my own tax professional for
advice.
The Custodian agrees to accept these funds as a transfer or conversion.
........................................ ..............
Signature of Roth IRA Owner Date
........................................ ..............
Signature of Guarantee Date
(You may wish to retain a copy of this form for your records)
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
ROTH INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
Form 5305-RA (January 1998)
Department of the Treasury Internal Revenue Service
DO NOT File with Internal Revenue Service
[ ] Amendment
The Depositor and the Custodian make the following agreement:
- --------------------------------------------------------------------------------
Article I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in section 408A(e), the
custodian will accept only cash contributions and only up to a maximum amount of
$2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same tax
year will be accepted.
Article II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married depositor who files separately, between $0 and $10,000. In the
case of a conversion, the custodian will not accept IRA Conversion Contributions
in a tax year if the depositor's AGI for that tax year exceeds $100,000 or if
the depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
Article III
The depositor's interest in the balance in the custodial account is
nonforfeitable.
Article IV
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3), which provides an exception of certain gold, silver , and platinum
coins, coins issued under the laws of any state, and certain bullion.
Article V
1. If the depositor dies before his or her entire interest is distributed
to him or her and the depositor's surviving spouse is not the sole beneficiary,
the entire remaining interest will, at the election of the depositor or, if the
depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of the
depositor's death. If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the minimum
annual payment for each year, divide the depositor's entire interest in the
trust as of the close of business on December 31 of the preceding year by the
life expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the depositor's
date of death, such spouse will then be treated as the depositor.
Article VI
1. The depositor agrees to provide the custodian with information necessary
for the custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E). Regulations sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal Revenue Service
and the depositor prescribed by the Internal Revenue Service.
Article VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid. Article VIII This
agreement will be amended from time to time to comply with the provisions of the
Code, related regulations, and other published guidance. Other amendments may be
made with the consent of the persons whose signatures appear below.
Article IX Definitions.
9.1 "Code." The term "Code" shall mean the Internal Revenue Code.
9.2 "Custodial Account." Your Roth IRA shall be referred to as the
"custodial account" or "account."
9.3 "IRA." IRA shall mean Individual Retirement Account within the meaning
of Section 408 of the Code.
9.4 "Roth IRA." Roth IRA shall mean Roth Individual Retirement Account
within the meaning of Section 408A of the Code.
9.5 "IRS." The term "IRS" shall mean the Internal Revenue Service.
9.6 "We." The IRS selected the term "Custodian" to describe us, your
financial organization. In other parts of this agreement, the "Custodian" will
be referred to as "us," "we," "our," or the "Custodian."
9.7 "You." The IRS selected the term "Depositor" to describe "you," the
Roth IRA Owner. In other parts of this agreement, you will be referred to as
"you," "your," or "Roth IRA Owner."
9.8 "Fund(s)." The "Fund(s)" shall mean the mutual fund(s) identified in
the IRA Application used to establish this IRA.
Article X Fees and Expenses.
10.1 Fees. You agree to pay any fees we establish pursuant to the
Application or a separate fee schedule which we will publish from time to time.
Such fees may include, without limitation, establishment fees, annual
administration fees, termination fees, transfer fees, transaction fees, legal
fees, investment commissions, and such other fees as we determine applicable.
You agree to pay such fees either by a separate billing or direct deduction from
the custodial account; the method of
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
payment is at our discretion. Some fees, such as brokerage commissions, must be
deducted from the custodial account. The Custodian shall have the right to
liquidate sufficient shares in the custodial account to pay such fees. In the
case of a third party receiving payments, such as brokerage fees and
commissions, we may receive a portion of these fees in return for services
provided in completing these transactions. We agree to give you at least 30 days
advance notice prior to changing a fee or imposing a new fee.
10.2 Expenses. You agree to pay any income, transfer, and other taxes of
any kind that may be levied or assessed upon the custodial account, and all
other administrative expenses reasonably incurred by us in the performance of
our duties. These expenses may include legal, or other professionals hired by us
in connection with your custodial account. You agree to reimburse us for any
reasonable expenses incurred in the administration of the account. The Custodian
shall have the right to liquidate sufficient shares in the custodial account to
pay such expenses.
10.3 Small Accounts. We may establish a minimum account balance and
automatically close accounts when the assets in your Roth IRA drop below the
minimum balance established. We shall publish the minimum account balance on a
separate fee schedule which we will publish from time to time or otherwise make
available.
Article XI Amendments. We may amend your custodial account at any time to
comply with necessary laws and regulations or for any other reason. Amendments
may be made retroactively when required to meet a law or regulatory change. You
are deemed to have automatically consented to any amendment 30 days after we
mail you a copy of the amendment. Your actual written or verbal consent is not
required to amend. We shall send you a copy of such amendment within 30 days of
the amendment's effective date.
Article XII Limited Liability.
12.1 Hold Harmless. You agree to hold us harmless, to indemnify, and to
defend us against any and all claims arising from and liabilities incurred by
reason of any action taken by us, except to the extent such liability arises
from the willful misconduct or gross negligence of the Custodian.
12.2 No Investment Discretion. You agree that all contributions shall be
invested according to your sole discretion in whole or fractional shares of the
Fund(s) identified in the IRA Application. All dividends and capital gain
distributions received on shares of the Fund(s) shall be reinvested in the
shares of the same Fund(s) which shall be credited to the custodial account. We
shall not be responsible or liable for any investment decisions or
recommendations with respect to the investment, reinvestment, or sale of assets
in the custodial account. We shall not be responsible for reviewing any assets
held in the custodial account and shall not be responsible for questioning any
of your investment decisions. We shall not be responsible for any loss resulting
from any failure to act because of the absence of directions from you. In the
event we determine your investment instructions are unclear, then we shall act
as soon as practical to obtain clarification of such instructions. Pending
clarification, we shall hold without investing all or any portion of the
contribution, without liability for loss of income or appreciation and without
liability for interest or dividends.
12.3 Transaction Responsibility. Unless required by law, we are not
responsible for inquiring into the nature or amount of any contribution made by
you, nor into the amount or timing of any distribution requested. You shall have
full responsibility for determining any tax or investment consequences of all
contributions to and distributions from the custodial account. We shall not be
bound to take any action on behalf of you, except upon receipt of written
instructions from you. We shall have no obligation to inquire into the
genuineness of any such written instruction without liability for any action
taken pursuant thereto, so long as we act in good faith. You shall bear sole
responsibility for assuring the deductibility of any deposits to the custodial
account.
12.4 No Assumed Responsibilities. We assume no responsibilities and agree
only to provide the administrative and custodial services required under IRC
section 408, 408A and applicable regulations.
Article XIII Beneficiary Provisions. Notwithstanding Article V, a spouse
beneficiary shall be permitted all the beneficiary options allowed under law or
applicable regulations. If you use the designation of beneficiary form provided
in the Application then the following rules apply (i) the designation in the
Application revokes all previously made designations, (ii) if any of the
beneficiaries dies before you, the deceased beneficiary's share will be
reallocated to the surviving beneficiaries on a pro rata basis, and (iii) if
none of the beneficiaries survive you, any balance in your Roth IRA will be paid
to your estate. The Custodian may refuse to accept a designation not made on its
standard form. You agree to release the Custodian from and indemnify it for any
and all claims arising from the Custodian's actions under your designation of
beneficiary.
Article XIV Reports and Records. We shall keep accurate and detailed
records of all contributions, receipts, investments, distributions,
disbursements, and other transactions relating to the custodial account. We
shall provide reports to the IRS and to you as required by law and regulations.
Unless you file a written statement with us within 60 days after you receive a
statement, we shall be relieved and discharged from all liability to you
(including any of your beneficiaries) with respect to all matters set forth in
such report.
Article XV Powers. We shall have the right to hire attorneys or other
professionals if we deem it necessary for the proper administration of your
custodial account. This includes the right to have a party affiliated with the
Fund(s) to perform administrative duties. We shall also have the power to
request a judicial settlement of your account or to enter into a lawsuit for
your account. We shall also have the power to do whatever else we determine
necessary for the proper administration of your account.
Article XVI Resignation or Removal of Us as Custodian. We may resign as
Custodian without your consent and you may remove us as Custodian without our
consent. We must provide notice to you of any resignation 30 days prior to the
effective date of the resignation. In the event of resignation by us, we may
either assign a qualified custodian to replace us or we may request you to
appoint a qualified successor Custodian. If we assign a qualified custodian to
replace us we will transfer and pay over the assets of the custodial account to
the successor custodian. If we ask you to appoint a successor custodian and
after 30 days from notice of resignation, you have not appointed a successor
Custodian or we have not received a written acceptance of such appointment by
the successor Custodian, we shall have the right to transfer the assets
remaining in the custodial account to a successor Custodian that we choose in
our sole discretion or we may liquidate the assets and distribute the cash
proceeds, or we may make an in-kind distribution, or we may otherwise distribute
to you the assets remaining in the custodial account. We are authorized,
however, to reserve such funds as we deem advisable for payment of any
liabilities
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
constituting a charge against the assets of the custodial account or against
us, with any balance of such reserve remaining after payment of all such items
to be paid over to the successor Custodian.
Article XVII Termination. In the event the balance of the custodial account
is less than the minimum value prescribed from time to time by the appropriate
Fund(s), we may liquidate the custodial account by making a distribution in cash
or in-kind of the assets in the account less any fees owing. If we terminate for
any reason, we shall not be liable for any loss or penalty incurred upon
termination and liquidation of the custodial account. Upon liquidation of the
custodial account this Agreement shall terminate and we shall be relieved of all
further duties and any liability relative to this Agreement, the custodial
account, and the assets distributed hereunder.
Article XVIII Custodian's Responsibilities. We shall act as an agent for
you, we shall receive funds and invest them at your direction and in accordance
with this Agreement. All shares of the Fund(s) shall be held in our name as
Custodian or our nominee's name. The parties do not intend to confer any
fiduciary responsibilities upon the Custodian and none shall be implied. We
shall deliver, or cause to be executed or delivered to you all notices,
prospectuses, financial statements, proxies and proxy solicitation materials
relative to shares of the appropriate Fund(s) held in the custodial account. The
Custodian shall vote such shares only in accordance with your written
instructions.
Article XIX Contributions. The Custodian is under no duty to compel you to
make any contributions and shall have no duty to assure that such contributions
are appropriate in amount. You have sole responsibility for assuring the
deductibility of any contributions. We may request additional information in the
case of rollovers and direct rollovers. We may request a Transfer Form, or other
forms prior to a transfer.
Article XX Miscellaneous
20.1 Notice. Any notice, payment, report, or other material mailed to you
shall be deemed delivered and effective three days after the date mailed by us
to you. We shall send such material to the last address you provided and we
shall assume no obligation to ascertain the actual address or whereabouts of
you. Any notice you send us shall be deemed delivered when actually received by
us. Except as otherwise permitted by us, all instructions to us must be in
writing.
20.2 Headings. The headings and articles of this agreement are for
convenience of reference only, and shall have no substantive effect on
provisions of this agreement.
20.3 Singular Form. Throughout this agreement, the singular form includes
the plural where applicable.
20.4 State Law. This agreement shall be construed and interpreted in
accordance with the laws of the state in which our principal office is located,
except to the extent superseded by federal law.
20.5 Disqualifying Provision. Any provision of this agreement which would
disqualify the custodial account as a Roth IRA shall be disregarded to the
extent necessary to make the custodial account a Roth IRA.
20.6 Interpretation. If any question arises as to the meaning of any
provision of this agreement, then we shall be authorized to interpret any such
provision, and our interpretation shall be binding upon all parties.
20.7 Additional Provisions. Additional provisions to this agreement may be
attached on a separate sheet.
- --------------------------------------------------------------------------------
General Instructions
(Section references are to the Internal Revenue Code unless otherwise noted.)
Purpose of Form
Form 5305-RA is a model custodial account agreement that meets the requirements
of section 408A and has been automatically approved by the IRS. A Roth
individual retirement account (Roth IRA) is established after the form is fully
executed by both the individual (depositor) and the custodian. This account must
be created in the United States for the exclusive benefit of the depositor or
his or her beneficiaries.
Do not file Form 5305-RA with the IRS. Instead, keep it for your records.
Unlike contributions to traditional individual retirement arrangements,
contributions to a Roth IRA are not deductible from the depositor's gross
income; and distributions after 5 years that are made when the depositor is
59-1/2 years of age or older or on account of death, disability, or the purchase
of a home by a first-time homebuyer (limited to $10,000), are not includible in
gross income. For more information on Roth IRAs, including the required
disclosure the depositor can get from the custodian, get Pub. 590, Individual
Retirement Arrangements (IRAs).
This Roth IRA can be used by a depositor to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth IRA, and
annual cash contributions of up to $2,000 from the depositor; or (2) if
designated as a Roth Conversion IRA (by checking the box on page 1), only IRA
Conversion Contributions for the same tax year.
To simply the identification of funds distributed from Roth IRAs, depositors are
encouraged to maintain IRA Conversion Contributions for each tax year in a
separate Roth IRA.
Definitions
Roth Conversion IRA. A Roth Conversion IRA is a Roth IRA that accepts only IRA
Conversion Contributions made during the same tax year. IRA Conversion
Contributions. IRA Conversion Contributions are amounts rolled over,
transferred, or considered transferred from a nonRoth IRA to a Roth IRA. A
nonRoth IRA is an individual retirement account or annuity described in section
408(a) or 408(b), other than a Roth IRA.
Custodian.- The custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
Depositor.- The depositor is the person who establishes the custodial account.
Specific Instructions
Article I. The depositor may be subject to a 6 percent tax on excess
contributions if (1) contributions to other individual retirement arrangements
of the depositor have been made for the same tax year, (2) the depositor's
adjusted gross income exceeds the applicable limits in Article II for the tax
year, or (3) the depositor's and spouse's compensation does not exceed the
amount contributed for them for the tax year. The depositor should see the
disclosure statement or Pub. 590 for more information.
Article IX.
Article IX and any that follow it may incorporate additional provisions that are
agreed to by the depositor and custodian to complete the agreement. They may
include, for example, definitions, investment powers, voting rights, exculpatory
provisions, amendment and termination, removal of the custodian, custodian's
fees, state law requirements, beginning date of distributions, accepting only
cash, treatment of excess contributions, prohibited transactions with the
depositor, etc. Use additional pages if necessary and attach them to this form.
Note: Form 5305-RA may be reproduced and reduced in size for adoption to
passbook purposes.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
EXPLANATION OF ROLLOVER AND CONVERSION RULES
This form provides you, the Roth IRA owner, with an explanation of the complex
rules governing rollovers and conversions. The review highlights the most common
reasons that prevent a rollover or conversion from occurring and gives you a
systematic method to check if any of these rules apply to you. This explanation
is designed for your benefit to ensure that you meet your responsibility to only
roll over or convert eligible funds. The IRA Custodian/Trustee has and assumes
no responsibility for verifying your rollover eligibility.
Rollover from another Roth IRA to this Roth IRA.
A. 60-Days Rule. A rollover occurs when you take a distribution of your
Roth IRA assets and roll them over into another Roth IRA within 60
calendar days from the date of receipt. If you retain the assets for
any period of time beyond the 60 days, the rollover is no longer
allowed. The 60-day period is extended to 120 days in the case of a
first-time homebuyer distribution where a delay or cancellation of the
purchase or construction occurs.
B. One Rollover Per 12-Months Rule. An additional restriction on rollovers
is that you are only allowed one rollover per account per 12-month
period. You are not subject to taxes on the amount you roll over from
one Roth IRA into another Roth IRA. The one rollover per 12-months rule
does not apply to the case of a first-time homebuyer distribution where
a delay or cancellation of the purchase or construction occurs.
Other rules may also apply. For instance, nonspouse beneficiaries are
not allowed to roll over Roth IRA assets received as a beneficiary into
their own Roth IRAs.
Conversion (or Rollover) from a Traditional IRA to this Roth IRA.
At the time of this writing it was not clear whether "rollover" and "conversion"
mean the same thing or something slightly different. One likely distinction is
that instead of taking a distribution of your traditional IRA assets and then
rolling over the amount distributed, you may direct your IRA Custodian/Trustee
to "convert" the traditional IRA into a Roth IRA directly without you taking
physical possession of the assets. The tax results of conversion are identical
to an actual rollover. If your traditional IRA is held by another
Custodian/Trustee, we may request that the funds be sent directly to us to
complete a conversion. You are allowed to roll over or convert existing
traditional IRA assets into a Roth IRA based on the following rules.
A. Qualified Conversion or Rollover Contribution. In order to be eligible
to convert or roll over your traditional IRA assets into a Roth IRA,
you must meet the following eligibility requirements.
(1) Traditional IRA Assets. The assets that you are intending to
convert or roll over to this Roth IRA must have been covered under
an Individual Retirement Account or Individual Retirement Annuity.
(2) 60 days. If you are moving the money as a rollover, you must
complete the rollover within 60 days.
(3) Income Restrictions. You are not allowed to convert or roll over a
traditional IRA into a Roth IRA if your modified adjusted gross
income exceeds $100,000.
(4) May Not File Separate Return. If you are married and file a
separate income tax return, you are not allowed to convert or roll
over your traditional IRA into a Roth IRA.
(5) Other Issues. You must complete the conversion or rollover from
your traditional IRA into a Roth IRA before January 1, 1999, in
order to receive the special tax treatment discussed under the next
section of this review, Tax Consequences. Additionally, if you have
reached your age 70-1/2 year (or beyond) you may not be allowed to
convert or roll over the amount of your required minimum
distribution into a Roth IRA. The conservative approach is to
remove the amount of your required minimum distribution and only
convert or roll over the remaining assets.
B. Tax Consequences. Before completing a conversion or rollover from a
traditional IRA to a Roth IRA you should carefully consider the tax
consequences. Consultation with your tax professional is particularly
recommended for a traditional IRA to Roth IRA conversion or rollover
given the dramatic tax consequences.
(1) Taxable Distribution. The conversion or rollover from a traditional
IRA to a Roth IRA is a taxable event. You will be subject to
taxation upon receiving a distribution and completing the
conversion or rollover. (Exception: Any nondeductible amounts you
convert or roll over will not be subject to taxation.) The law,
however, allows for special tax treatment if you complete the
conversion or rollover in 1998. The distribution amount converted
(or rolled over) must be included in your taxable income ratably
over the four taxable year period beginning with the taxable year
in which the payment or distribution is made, assuming you complete
the conversion (or rollover) before January 1, 1999. Conversions
(or rollovers) occurring in 1999 or thereafter will be fully
subject to taxation in the year of conversion (or rollover).
(2) Amount Converted (or Rolled Over) Not Subject to 10% Premature
Distribution Penalty. A qualified conversion or rollover
contribution from a traditional IRA into a Roth IRA is not subject
to the 10% premature distribution penalty normally associated with
IRA distributions. See IRS Publication 590 or the Disclosure
Statement of this booklet for a more complete discussion on the 10%
premature distribution penalty.
(3) Not Subject to the One Rollover Per 12-Months Rule. A rollover from
a traditional IRA into a Roth IRA does not count as a traditional
IRA Owner's one rollover per 12 months.
(4) Five-Year Holding Period Commences Upon Rollover Contribution. For
new accounts, the five taxable year
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
<PAGE>
holding period for Roth IRAs commences in the taxable year of the
conversion or rollover contribution from the traditional IRA. In
other words, you will not receive credit towards the five-year
holding period for the period of time the assets were held in your
traditional IRA.
(5) Custodian/Trustee Report. The Custodian/Trustee of your traditional
IRA or Roth IRA will be required to provide a report to the IRS to
ensure that amounts required to be included in your gross income
are included.
C. Roth Conversion IRA Designation. If you converted or rolled over your
traditional IRA into a Roth IRA, special rules may apply to you. At the
time of this writing, Congress was close to passing the Tax Technical
Corrections Act of 1997 that would create new rules for you. Please
check with your tax adviser concerning the status and content of the
bill. The five-year period under the bill would start with the most
recent conversion or rollover from a traditional IRA. Accordingly, if
you mix your conversion and rollover amounts together from different
years, you will be extending the five-year period for the amount you
converted or rolled over first. Additionally, if you mix amounts
converted or rolled over from traditional IRAs with regular Roth IRAs
special rules may apply. To avoid these pitfalls, you may open a Roth
Conversion IRA.
(1) 10% Penalty. If passed, the new law would impose the 10% premature
distribution penalty (less than age 59-1/2, no exceptions apply) on
amounts distributed from a Roth IRA not meeting the five-year
holding period as if they were taxable distributions (assuming the
amount converted or rolled over from the traditional IRA was
taxable). This is different from regular Roth IRAs where the
nontaxable amount (contributions) are always returned first--tax
free and IRS penalty free.
(2) Additional 10% Penalty for 1998 Conversions and Rollovers. In
addition to the 10% penalty discussed above, if passed, the law
would impose an additional 10% if you completed a conversion or
rollover of a traditional IRA into a Roth IRA in 1998 and take a
distribution within five years.
(c) Bankers Systems, Inc., St. Cloud, MN Form AMDS-ROTH 1/1/98
EXHIBIT 16
SCHEDULE OF COMPUTATION OF AVERAGE ANNUAL TOTAL RETURN FOR
THE 1, 5 AND 10 YEAR PERIODS ENDED DECEMBER 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
THE WALL STREET FUND, INC.
12/31/97
PERFORMANCE DATA
ENDING REDEEMABLE VALUE (ERV)
DATE OF INVESTMENT 12/31/96
INITIAL INVESTMENT (P) 10,000.00
SALES LOAD PERCENTAGE 4.00
NAV@ PURCHASE DATE 7.96
SHARES PURCHASED 1,206.273
<S> <C> <C> <C> <C> <C> <C>
DOLLAR REINVESTMENT ADDITIONAL TOTAL SHARES
DIVIDENDS DATE RATE VALUE PRICE SHARES OWNED
12/15/97 0.4146 500.12 7.05 70.939 1,277.212
</TABLE>
ENDING DATE 12/31/97
ENDING SHARES OWNED 1,277.212
ENDING NAV 7.34
ENDING REDEEMABLE VALUE 9,374.73
AVERAGE ANNUAL TOTAL RETURN PURSUANT TO SEC RULES
ACTIVE DATES:
BEGINNING = 31-Dec-96 P = 10,000.00
ENDING = 31-Dec-97 ERV = 9,374.73
N = 1.0000
TOTAL RETURN = -6.2527%
ERV PROOF = 9,374.73
<TABLE>
<CAPTION>
WALL STREET FUND,INC.
12/31/97
PERFORMANCE DATA
ENDING REDEEMABLE VALUE (ERV)
5 YEAR TOTAL RETURN
DATE OF INVESTMENT 12/31/92
INITIAL INVESTMENT (P) 10,000.00
SALES LOAD PERCENTAGE 4.00
NAV@ PURCHASE DATE 7.60
SHARES PURCHASED 1,262.626
<S> <C> <C> <C> <C> <C> <C>
DOLLAR REINVESTMENT ADDITIONAL TOTAL SHARES
DIVIDENDS DATE RATE VALUE PRICE SHARES OWNED
12/93 0.55 694.44 7.74 89.722 1,352.348
12/94 0.21 283.99 7.09 40.055 1,392.403
12/95 1.80 2,506.33 7.60 329.780 1,722.183
12/96 1.15 1,980.51 7.84 252.616 1,974.799
12/97 0.4146 818.75 7.05 116.135 2,090.934
</TABLE>
ENDING DATE 12/31/97
ENDING SHARES OWNED 2,090.934
ENDING NAV 7.34
ENDING ERV 15,347.46
AVERAGE ANNUAL TOTAL RETURN PURSUANT TO SEC RULES
ACTIVE DATES:
BEGINNING = 31-Dec-92 P = 10,000.00
ENDING = 31-Dec-97 ERV = 15,347.46
N = 5.00
TOTAL RETURN = 8.9450%
ERV PROOF = 15,347.46
<TABLE>
<CAPTION>
WALL STREET FUND,INC.
12/31/97
PERFORMANCE DATA
ENDING REDEEMABLE VALUE (ERV)
10 YEAR TOTAL RETURN
DATE OF INVESTMENT 12/31/87
INITIAL INVESTMENT (P) 10,000.00
SALES LOAD PERCENTAGE 5.50
NAV@ PURCHASE DATE 5.53
SHARES PURCHASED 1,709.402
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DOLLAR REINVESTMENT ADDITIONAL TOTAL SHARES YEAR END DOLLAR
DIVIDENDS DATE RATE VALUE PRICE SHARES OWNED N.A.V. AMOUNT
12/88 0.00 0.00 6.73 0.000 1,709.402 6.57 11,230.77
12/89 0.89 1,521.37 6.73 226.058 1,935.459 7.09 13,722.41
12/90 0.11 212.90 5.73 37.155 1,972.615 5.54 10,928.29
12/91 1.25 2,465.77 7.09 347.781 2,320.396 7.27 16,869.28
12/92 0.22 510.49 7.50 68.065 2,388.461 7.60 18,152.30
12/93 0.55 1,313.65 7.74 169.723 2,558.183 8.03 20,542.21
12/94 0.21 537.22 7.09 75.771 2,633.955 7.42 19,543.94
12/95 1.80 4,741.12 7.60 623.831 3,257.786 8.19 26,681.27
12/96 1.15 3,746.45 7.84 477.864 3,735.650 7.96 29,735.78
12/97 0.4146 1,548.80 7.05 219.688 3,955.338 7.34 29,032.18
</TABLE>
ENDING DATE 12/31/97
ENDING SHARES OWNED 3,955.338
ENDING NAV 7.34
ENDING REDEEMABLE VALUE 29,032.18
AVERAGE ANNUAL TOTAL RETURN PURSUANT TO SEC RULES
ACTIVE DATES:
BEGINNING = 31-Dec-87 P = 10,000.00
ENDING = 31-Dec-97 ERV = 29,032.18
N = 10.00
TOTAL RETURN = 11.2469%
ERV PROOF = 29,032.18
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 13,428,723
<INVESTMENTS-AT-VALUE> 15,381,925
<RECEIVABLES> 384,877
<ASSETS-OTHER> 4,837
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,771,639
<PAYABLE-FOR-SECURITIES> 79,844
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 114,968
<TOTAL-LIABILITIES> 194,812
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,636,470
<SHARES-COMMON-STOCK> 2,122,796
<SHARES-COMMON-PRIOR> 2,003,045
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (12,845)
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<REALIZED-GAINS-CURRENT> 868,636
<APPREC-INCREASE-CURRENT> (1,054,196)
<NET-CHANGE-FROM-OPS> 336,994
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<DISTRIBUTIONS-OF-GAINS> 834,155
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<NUMBER-OF-SHARES-REDEEMED> 273,575
<SHARES-REINVESTED> 100,096
<NET-CHANGE-IN-ASSETS> (362,486)
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NII> (0.08)
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</TABLE>
