UNITED STATES
Securities and Exchange Commission
Washington, DC. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 4
and
THE INVESTMENT COMPANY ACT OF 1940 5
The O/Higgins Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
1375 Anthony Wayne Dr. Wayne, PA 19087
(Address of Principal Executive Offices)
610-688-6839
(Registrants Telephone Number)
Bernard B. Klawans 1375 Anthony Wayne Dr Wayne PA. 19087
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering ON 03/14/00
pursuant to rule 485 pparagraph (b) POS
Calculation of Registration Fee Under the Securities Act of 1933
Title of Securities Amount Being Proposed Max Proposed Max Amount of
being Registered Registered Offering Aggregate Registra-
Price Offering Price tion Fee
None being requested at this time.
[Outside front cover]
THE O'HIGGINS FUND
Prospectus
March 21, 2000
Like all mutual funds, the Securities
and Exchange Commission has not ap-
proved or disapproved of these secur-
ities offered in the Prospectus and
has not passed upon the accuracy or
adequacy of this Prospectus. Any re-
presentation to the contrary is a
criminal offense.
<PAGE>
RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
Fund Investment Objectives/Goals
The Fund seeks to provide appreciation through application of a proprietary 28
year back tested asset allocation model.
Principal Investment Strategies of the Fund
The strategy used in managing the Fund's portfolio generally follows that given
in detail in Mr. Michael O'Higgins book "Beating The Dow - With Bonds". It is
summarized in the next paragraph.
Portfolio Management: The Asset Class selection worksheet follows
1. Standard & Poor's Industrial Index Earnings Yield ____________%
2. 10-year U.S. Government T-bond Yield to Maturity ____________%
3. Adjustment Factor + 0.30%
4. Estimated 10 Year AAA Corporate Bond Yield _____________%
5. Item 1 -Item 4 (the difference in yield) _____________%
If the answer in Item 5 is positive, the Fund purchases 20 of
the lowest dollar priced securities of the 100 highest yield-
ing stocks in the S&P Industrial Index. If the answer is ne-
gative, you continue with this table.
6. Last Week Gold Price Per Troy Ounce $______
7. Year-Ago Gold Price Per troy Ounce $______
8. Item 6- Item 7 (1 year change in the price of gold) $______
If the answer in Item 8 is positive, the Fund purchases US
Treasury bills that mature within a year. If the answer is
negative, the Fund invests in the highest yielding US Gov-
erment zero Coupon Bonds that mature in twenty years or more.
The Fund's strategy differs slighty from the book's methology. It must meet the
diversification requirement of no more than 5% of any one security at the time
of purchase when it is in securities to be eligible for exemption from paying
corporate income taxes under Subchapter M of the Internal Revenue Service Code.
That is why the Fund purchases 20 S&P Industrial Index Stocks instead of 5 Dow
Jones Industrial Stocks. Another difference entails periodic use of the work-
sheet used to determine the optimum asset class selection rather than waiting an
entire year. The third difference is maintainence of a sufficient cash position
to be able to meet redemption requirements in a timely fashion. These variances
are believed to have no significant effects on the methology perfrmance. Use of
this model results in almost 100% investments either in 20 of the lowest dollar
priced securities of the 100 highest yielding stocks in the S&P Industrial Index
or short-term US Treasury Notes or long-term US zero Coupon Bonds.
Principal Risks of Investing in the Fund
Narrative Risk Disclosure: Risks associated with the Fund's performance will be
those due to broad market declines and business risks from difficulties which
occur to particular companies while in the Fund's portfolio or the effect of in-
terest rates on our debt security holdings. The Fund's approach of either being
in stocks or short-term US Treasury Notes or long-term US zero Coupon Bonds
could impact total returns or principal by being in the wrong type of security
at the wrong time. Also, the methodology to be used that has worked well in
theory in past markets is untried in future markets. It, therefore, must be
realized that there is no assurance the method will be successful. Loss of mon-
ey is a risk of investing in this Fund (See Footnote).
Footnote: Bonds increase in price as interest rates decline and decrease
in price as rates increase. The effect on short-term Treasury
notes is about directly proportional to the change. However,
the price movement is exaggerated in the case of long-term zero
Coupon Bonds because no interest is paid until maturity.
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<PAGE>
Non-diversification Policy: The Fund is non-diversified which means that it may
invest a relatively high percentage of its assets in a limited number of securi-
ties. As a result, the Fund may be more susceptible to a single negative eco-
nomic, political or regulatory occurrence. The Fund seeks only enough diversi-
fication in its security selections to maintain its federal non-taxable status
under Subchapter M of the Internal Revenue Code.
Risk/Return Bar Chart and Table: The bar chart and table below provide an in-
dication of the risk of investing in the Fund by comparing its performance since
inception with that of a broad based mnarket index, the S&P 500. Please keep in
mind that the Fund's presented performamce does not indiate how it may perform
in the future.
Since inception, January 30, 1998, the highest return for a calendar quarter was
12.23% (quarter ended September 1998) and the lowest return was -10.23% (quart-
er ended March 1999).
Bar Chart Since Inception
1 Year (01/30/98)
Average Annual Total Returns: The O'Higgins Fund -20.45% -2.28%
S&P 500 Index 19.50% 22.80%
RISK/RETURN SUMMARY: FEE TABLE
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge(Load) Imposed on Purchases: None
Maximun Deferred Sales Charge (Load): None
Maximun Sales Charge (Load) on Reinvested Dividends: None
Redemption Fee: None
Exchange Fee: None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees: 1.00%
Distribution [and/or Service] (12b-1) Fees: None
Other Expenses: 0.40%
Total Annual Fund Operating Expenses: 1.40%
Example: This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then re-
deem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the Funds operating ex-
penses remain the same. Although your actual costs may be lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
$ 150 $ 474 $ 818 $ 1,810
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED RISKS
Investment Objectives
The Fund seeks to provide appreciation through application of a proprietary 28
year back tested asset allocation model. Use of this model results in almost
100% investments either in 20 of the lowest dollar priced securities of the 100
highest yielding stocks in the S&P Industrial Index or short-term US Treasury
Notes or long-term US zero Coupon Bonds. It must be realized, as is true of al-
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<PAGE>
most all securities, there can be no assurance that the Fund will obtain its
ongoing objective of capital appreciation.
Principal Investment Strategies
Security Selection Criteria: As stated in the section Principal Investment Stra-
tegies of the Fund on page 2, Asset Allocations and Security Selections recom-
mended by our Investment Adviser follows the methodology described in detail in
the book "Beating The Dow - With Bonds".
Portfolio Turnover Policy: Portfolio turnover depends upon directions indicated
by the publicly available indicator we use. Research indicated that asset
changes more often than yearly do not tend to improve performance. Accordingly,
the turnover rate should not exceed 100% wherein turnover is computed by divid-
ing the lesser of the Fund's total purchases or sales of securities within the
year by the average monthly portfolio value of the Fund during the year. If
this occurs, brokerage expenses and the effect of capital gains taxes on share-
holder dividends could be higher than those expected from a mutual fund with
lower turnover which could have a negative affect on the Funds relative perfor-
mance. Turnover of the Fund's portfolio of securities was 0% in 1999 and 10% in
1998. The Fund was 99.9% in 30 year US zero Coupon Bonds at the end of 1999.
Risks
As said under Narrative Risk Disclosure on page 2, the Fund's total return, like
stock prices generally, will go up and down such that an investor may lose money
over short and even long periods of time. The Fund's approach of either being
in stocks or US Treasury Notes or US zero Coupon Bonds could impact total re-
turns or principal by being in the wrong type of security at the wrong time.
Also, the methodology to be used that has worked well in theory in past markets
is untried in future markets. It therefore must be realized that there is no
assurance the method will approximate past calculated favorable performance.
MANAGEMENTS DISCUSSION OF FUND PERFORMANCE
The market continuing advance to new historic levels has reduced the earning
yields of stocks in turn to historic lows. This, in turn, may skew the results
obtained with the Asset Allocation Model the Fund employs. Notwithstanding,
market anomalies have always corrected themselves in the past and, although
there is no assurance, it may be expected to continue to do so. A bar chart
comparing the Fund's performance since inception, January 30, 1998 with the S&P
500 Index performance over the same period appears as:
Bar Chart
1998 1999
O'Higgins Fund 11,590 9,220
S&P 500 Index 12,631 15,094
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
Management
Investment Adviser: The Valley Forge Management Corp. (VFMC) is a Pennsylvania
corporation that acts as an Investment Adviser to the Fund. Its address and
phone numbers are the same as the Fund. Mr. Bernard Klawans is the owner, di-
rector and officer of the Investment Adviser and also president of the Fund.
On January 1, 1998 shareholders of the Fund approved a management and advisory
contract with VFMC which was unanimously renewed by the Directors August 17,
1999. This Agreement will continue on a year to year basis provided that ap-
proval is voted at least annually by specific approval of the Board of Direct-
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<PAGE>
ors of the Fund or by vote of the holders of a majority of the outstanding vot-
ing securities of the Fund. In either event, it must also be approved by a
majority of the directors of the Fund who are neither parties to the agreement
nor interested persons as defined in the Investment Company Act of 1940 at a
meeting called for the purpose of voting on such approval.
Under the Agreement, VFMC will furnish investment advice to the Directors of
the Fund on the basis of a continuous review of the portfolio and recommend to
the Fund when and to what extent securities should be purchased or disposed.
The Agreement may be terminated at any time, without payment of a penalty, by
the Board of Directors or by vote of a majority of the outstanding voting secur-
ities of the Fund on not more than 60 days written notice to VFMC. In the event
of its assignment, the Agreement will terminate automatically. Ultimate decis-
ions as to the investment policy and as to individual purchases and sales of se-
curities are made by the Fund's officers and directors. For these services, the
Fund has agreed to pay a fee of 1% per year on the net assets of the Fund. This
fee is computed on the average daily closing net asset value of the Fund, is
payable monthly and is higher than the fee paid by most other funds. VFMC would
forgo sufficient fees to hold the total expenses of the Fund to less than 1.5%
of the total assets. All fees and expenses of the Fund incurred in 1999 were
1.40% of its averaged assets for the year.
VFMC has a contract with the Fund wherein it is required to follow the pro-
prietary allocation model in managing the portfolio and to pay the salaries of
those of the Funds employees who may be officers or directors or employees of
the Investment Advisor. Fees, if any, of the custodian, registrar or transfer
agents shall be paid by the Fund. The Fund also pays all other expenses, in-
cluding fees and expenses of directors not affiliated with the Advisor; legal
and accounting fees; interest, taxes and brokerage commissions, recordkeeping
and the expense of operating its offices. VFMC has paid the initial organiza-
tional costs of the Fund and will reimburse the Fund for any and all losses in-
curred because of purchase reneges. It received $27,848 in management fees in
1999 and $0 in 1998.
Portfolio Manager: Mr. Klawans has been the portfolio manager of The O'Higgins
Fund since the Fund's inception on January 30, 1998 and of the Valley Forge Fund
since its inception in 1971. Although he manages the day to day operations of
the Fund, his only remuneration comes from receipt of the management fee earned
by VFMC for portfolio investment advice.
Legal Proceedings: As of the date of this Prospectus, there was no pending or
threatened litigation involving the Fund in any capacity whatsoever.
Capital Stock
Description of Common Stock: The authorized capitalization of the Fund consists
of 100,000,000 shares of common stock of $0.001 par value per share. Each share
has equal dividend, distribution and liquidation rights. There are no conver-
sion or preemptive rights applicable to any shares of the Fund. All shares
issued are fully paid and non-accessible.
Voting Rights: Each holder of common stocks has one vote for each share held.
Voting rights are non-cumulative. Therefore the holders of a majority of shares
of common stock can elect all directors of the Fund if they so choose, and the
holders of the remaining shares cannot elect any person as a director.
SHAREHOLDER INFORMATION
Who should invest: Investors who desire increases in net asset value & are will-
ing to accept significant (both down and up) fluctations in share values in the
pursuit of capital gains.
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<PAGE>
Who should not invest: Anyone who must live on unearned income and cannot
replace eroded capital.
Pricing of Fund Shares
When and How do We Price: The net asset value of the Fund's shares is determin-
ed as of the close of each business day the New York Stock Exchange is open
(presently 4:00 p.m.) Monday through Friday exclusive of Presidents Day,
Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving, Christmas & New
Year's Day. The price is determined by dividing the value of its securities,
plus any cash and other assets less all liabilities, excluding capital surplus,
by the number of shares outstanding.
Market Value of Securities: The market value of securities held
by the Fund that are listed on a national exchange is determined to be the last
recent sales price on such exchange. Listed securities that have not recently
traded are valued at the last bid price in such market. US Government
Treasury Notes and zero Coupon Bonds are priced at their bid price published in
the Wall Street Journal.
Purchase of Fund Shares
The offering price of the shares offered by the Fund is at the net asset value
per share next determined after receipt of the purchase order by the Fund and is
computed in the manner described in the above Section "Pricing of Fund Shares"
The Fund reserves the right at its sole discretion to terminate the offering of
its shares made by this Prospectus at any time and to reject purchase applica-
tions when, in the judgment of management such termination or rejection is in
the best interests of the Fund.
Initial Investments: Initial purchase of shares of the Fund may be made only by
application submitted to the Fund. For the convenience of investors, a Share
Purchase Application Form is included in every request for a Prospectus. The
minimum initial purchase of shares is $1,000 which is due and payable 3 busi-
ness days after the purchase date. Less may be accepted under especial circum-
stances.
Subsequent Purchases: Subsequent purchases may be made by mail or by phone and
are due and payable three business days after the purchase date. The minimum is
$100, but less may be accepted under especial circumstances.
Fractional Shares: Fractional shares to four decimal places are offered by the
Fund.
Redemption of Fund Shares
Endorsement Requirements: The Fund will redeem all or any part of the shares of
any shareholder who tenders a request for redemption (if certificates have not
been issued) or certificates with respect to shares for which certificates have
been issued. In either case, proper endorsements guaranteed either by a nation-
al bank or a member firm of the New York Stock Exchange will be required unless
the shareholder is known to management.
Redemption Price: The redemption price is the net asset value per share next de-
termined after notice is received by the Fund for redemption of shares. The
proceeds received by the shareholder may be more or less than his cost of such
shares, depending upon the net asset value per share at the time of redemption
and the difference should be treated by the shareholder as a capital gain or
loss for federal income tax purposes.
Redemption Payment: Payment by the Fund will ordinarily be made within three
business days after tender. The Fund may suspend the right of redemption or
postpone the date of payment if: The New York Stock Exchange is closed for other
than customary weekend or holiday closings, or when trading on the New York
Stock Exchange is restricted as determined by the Securities and Exchange Com-
- 6 -
<PAGE>
mission or when the Securities and Exchange Commission has determined that an
emergency exists, making disposal of fund securities or valuation of net assets
not reasonably practicable. The Fund intends to make payments in cash, however,
the Fund reserves the right to make payments in kind.
Dividends and Distributions
Re-Investments: The Fund will automatically use the taxable dividend and capi-
tal gains distributions for purchase of additional shares for the shareholder
at net asset value as of the close of business on the distribution date.
Cash Payouts: A shareholder may, at any time, by letter or forms supplied by the
Fund direct the Fund to pay dividend and/or capital gains distributions, if any,
to such shareholder in cash.
Tax Consequences
Under provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as amend-
ed, the Fund, by paying out substantially all of its investment income and rea-
lized capital gains, has been and intends to continue to be relieved of federal
income tax on the amounts distributed to shareholders. In order to qualify as
a "regulated investment company" under Sub-Chapter M, at least 90% of the Fund's
income must be derived from dividends, interest and gains from securities trans-
actions, and no more than 50% of the Fund's assets may be in security holdings
that exceed 5% of the total assets of the Fund at the time of purchase.
Tax Distributions: Distribution of any net long term capital gains realized by
the Fund in 2000 will be taxable to the shareholder as long term capital gains,
regardless of the length of time Fund shares have been held by the investor.
All income realized by the Fund, including short term capital gains, will be
taxable to the shareholder as ordinary income. Dividends from net income will
be made annually or more frequently at the discretion of the Fund's Board of
Directors. Dividends received shortly after purchase of shares by an investor
will have the effect of reducing the per share net asset value of his shares by
the amount of such dividends or distributions and, although in effect a return
of capital, are subject to federal income taxes.
Federal Withholding: The Fund is required by federal law to withhold 31% of
reportable payments (which may include dividends, capital gains, distributions
and redemptions) paid to shareholders who have not complied with IRS regula-
tions. In order to avoid this withholding requirement, you must certify on a
W-9 tax form supplied by the Fund that your Social Security or Taxpayer Identi-
fication Number provided is correct and that you are not currently subject to
back-up withholding, or that you are exempt from back-up withholding.
DISTRIBUTION ARRANGEMENTS
The Fund is a truly no-load fund in that there are NO purchase or sales fees and
no 12b-1 fees and no account maintenance fees whatsoever.
FINANCIAL HIGHLIGHTS INFORMATION
Financial Highlights: The financial highlights table is intended to help you un-
derstand the Fund's financial performance since inception om January 30, 1998.
Certain information reflects financial results for a single Fund share. The to-
tal returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fumd (assuming reinvestment of all dividends
and distributions). This informations has been audited by Mathieson Aitken
Jemison, LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Statement of Additional Information, which is available upon re-
quest.
- 7 -
<PAGE>
Years Ended December 31
1999 1998
Net asset value, beginning $11.05 $ 9.81
Investment operations income:
Net investment income 0.43 $ 0.32
Realized & unrealozed cap gains (2.69) 1.24
----- ------
Investment operations totals 8.34 11.37
Less distributions:
Dividends (from net investment inc) 0.43 0.32
Dividend from capital gains 0.00 0.00
------ ------
Net asset value Dec. 31st $ 8.36 $11.05
====== ======
Total return (annualized) (20.49)% 15.90%
Net assets Dec 31st in (000)'s $2,823 $1,700
====== ======
Ratios to Average Net Assets:
Expenses 1.40% 0.00%
Net investment income (annualized) 4.60% 5.80%
Portfolio turnover rate 0% 10%
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<PAGE>
[outside back cover]
WHERE TO GO FOR MORE INFORMATION
You will find more information about THE O'HIGGINS FUND in the following
documents:
Statement of Additional Information (SAI) - The Statement of Additional Infor-
mation cntains additional and more detailed information about the Fund, and is
considered to be a part of this Prospectus.
Annual and Semi-annual Reports - Our annual and semi-annual reports give current
holdings and detailed financial statements of the Fund as of the end of the per-
iod presented. In addition, market conditions and Fund strategies that signifi-
cantly affected the Fund's performance are discussed.
THERE ARE TWO WAYS TO GET A COPY OF ONE OR MORE OF THESE DOCUMENTS
1. Call or write for one, and a copy will be sent without charge.
THE O'HIGGINS FUND
1375 Anthony Wayne Dr.
Wayne, PA. 19087
1-800-548-1942
2. You may also obtain information about the Fund (including the Statement of
Additional Information and other reports) from the Securities and Exchange
Commission on their Internet site at http://www.sec.gov or at their Public
Reference Room in Washington, D.C. Call the Securities and Exchange Com-
mission at 1-800-SEC-0330 for room hours and operation. You may also obtain
Fund information by sending a written request and duplicating fee to the Pub-
lic Reference Section of the SEC, Washington, D.C. 20549-6609.
Please contact the Fund at the above address if you wish to
request other information and/or make shareholder inquires.
WHY YOU SHOULD READ THIS PROSPECTUS
Every attempt has been made to present the objectives, risks and strategy of the
Fund in plain and, hopefully, easily understandable language. The Prospectus is
designed to aid you in deciding whether this is one of the right investments for
you. We suggest that you keep it for future reference.
THE O'HIGGINS FUND - SEC file number 811-08465
<PAGE>
THE O'HIGGINS FUND
1375 Anthony Wayne Drive
Wayne, PA. 19087
Telephone Numbers
610-688-6839 800-548-1942
Part B
STATEMENT OF ADDITIONAL INFORMATION
March 21, 2000
This Statement is not a prospectus, but should be read in conjunction with the
Fund's current Prospectus dated March 21, 2000. To obtain the Prospectus, you
may write the Fund or call either of the telephone numbers that are shown above.
TABLE OF CONTENTS
FUND HISTORY .................................................. 1
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
Classification .............................................. 1
Investment Strategies and Risks.... ......................... 1
Fund Policies ............................................... 1
Temporary Defensive Position and Portfolio Turnover ......... 2
Portfolio Turnover .......................................... 2
MANAGEMENT OF THE FUND
Board of Directors .......................................... 2
Management Information ...................................... 2
Compensation and Sales Loads ................................ 2
CONTRON PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons ............................................. 2
Principal Holders ........................................... 3
Management Ownership ........................................ 3
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser .......................................... 3
Principal Underwriter........................................ 3
Services Provided by Investment Adviser ..................... 3
Third Party Payments and Service Agreements ................. 3
Other Investment Advice ..................................... 3
Dealer Reallowances and Other Services ...................... 3
BROKERAGE ALLOWANCES AND OTHER PRACTICES
Brokerage Transactions ...................................... 3
Commissions ................................................. 3
Brokerage Selection ......................................... 3
Directed Brokerage and Regular Broker Dealers ............... 4
CAPITAL STOCK AND OTHER SECURITIES
Capital Stock and Other Securities .......................... 4
PURCHASE, REDEMPTION, AND PRICING OF SHARES
Purchase of Shares .......................................... 4
Fund Reorganizations ........................................ 4
Offering Price and Redemption in Kind ....................... 4
Redemption in Kind .......................................... 4
TAXATION OF THE FUND .......................................... 4
UNDERWRITERS .................................................. 4
CALCULATION OF PERFORMANCE DATA ............................... 4
FINANCIAL STATEMENTS
Auditors Report ............................................. 5
Schedule of Investments in Securities - Dec. 31, 1999 ....... 6
Statement of Assets & Liabilities - Dec. 31, 1999 ........... 7
Statement of Operations, Year Ended Dec. 31, 1999 ........... 7
Statement of Changes in Net Assets Yr Ended Dec 31 99 & 98... 8
Notes to Financial Statements ............................... 8
Financial Highlights on a Per Share Basis and Ratio Data ....10
<PAGE>
FUND HISTORY
THE O'HIGGINS FUND (also referred to as the "Fund") was incorporated in
Pennsylvania on January 1, 1998. The Fund's registered office is in Wayne PA.
Mail may be addressed to 1375 Anthony Wayne Dr Wayne PA 19087.
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
Classification
The Fund is an open-end, totally no-load, non-diversified management investment
company.
Investment Strategies and Risks
All investment strategies and risks were thoroughly discussed in the Prospectus.
No additional strategies and risks exist to be discussed here.
Fund Policies
Investment Restrictions: Investment restrictions were selected to aid in main-
taining the conservative nature of the Fund. These may not be changed except by
the approval of a majority of the outstanding shares; i.e. a) 67% or more of the
voting securities present at a duly called meeting, if the holders of more than
50% of the outstanding voting securities are present or represented by proxy, or
b) of more than 50% of the outstanding voting securities, whichever is less:
a) Sell senior securities
b) Borrow money or purchase securities on margin, but may obtain such short term
credit as may be necessary for clearance of purchases and sales of securities
for temporary or emergency purposes in an amount not exceeding 5% of the val-
ue of its total assets.
c) Act as underwriter for securities of other issuers except insofar as the Fund
Fund may be deemed an underwriter in selling its own portfolio securities.
d) Invest over 25% of its assets at the time of purchase in any one industry.
e) Make investments in commodities, commodity contracts or real estate although
the Fund may purchase and sell securities of companies which deal in real
estate or interests therein.
f) Make loans. The purchase of a portion of a readily marketable issue of pub-
licly distributed bonds, debentures or other debt securities will not be con-
sidered the making of a loan.
g) Sell securities short.
h) Invest in securities of other investment companies except as part of a mer-
ger, consolidation, or purchase of assets approved by the Fund's sharehold-
ers or by purchases with no more than 10% of the Fund's assets in the open
market involving only customary brokers commissions.
i) Acquire more than 10% of the securities of any class of another issuer,
treating all preferred securities of an issuer as a single class and all debt
securities as a single class, or acquire more than 10% of the voting securi-
ties of another issuer.
j) Invest in companies for the purpose of acquiring control.
k) The Fund may not purchase or retain securities of any issuer if those offi-
cers and directors of the Fund or its Investment Advisor owning individually
more than 1/2 of 1% of any class of security or collectively own more than
5% of such class of securities of such issuer.
l) Pledge, mortgage or hypothecate any of its assets.
m) Invest in securities which may be subject to registration under the Securi-
ties Act of 1933 prior to sale to the public or which are not at the time of
purchase readily salable.
n) Invest more than 5% of the total Fund assets, taken at market value at the
time of purchase, in securities of companies with less than three years con-
tinuous operation, including the operations of any predecessor.
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<PAGE>
Temporary Defensive Position & Portfolio Turnover
The Fund follows the portfolio management methodology with no exceptions other
than the ones considered to be minor that were discussed in the section Princi-
ple Investment Strategies of the Fund on page 2 of the Prospectus.
MANAGEMENT OF THE FUND
Board of Directors
Shareholders meet annually to elect all members of the Board of Directors, se-
lect an independent auditor, and vote on any other items deemed pertinent by the
incumbent Board. The Directors are in turn responsible for determining that the
Fund operates in accordance with its stated objectives, policies, and investment
restrictions. The Board appoints officers to run the Fund and selects an In-
vestment Adviser to provide investment advice (See Investment Adviser, pg 4 of
the Prospectus). It meets six times a year to review Fund progress and status.
ManagementInformation
Officers and Directors of the Fund: Their addresses and principal occupations
during the past five years are:
Name and Address Position Principal Occupation Past 5 Yrs
Bernard B. Klawans President President
1375 Anthony Wayne Dr. Interested Director Valley Forge Fund, Inc.
Wayne, PA. Age 79 Valley Forge, PA.
Dr. Gerd H. Dahl Secretary Ag. Chem Research Retired
679 Jefferson Rd. Interested Director Elf Atochem
Bryn Mawr, PA. Age 68 Philadelphia, PA.
Victor J. Belanger Non-Interested VP & Chief Financial Officer
P.O. Box #96, Director Linearizer Technologies Inc.
Princeton Jct., NJ. Age 57 Robbinsville, NJ.
Dr. James P. King Non-Interested President
904 Breezwood Lane Director Desilube Technology In c.
Lansdale, PA. Age 67 Lansdale, PA.
Donald A. Peterson Non-Interested Project Manager
3741 Worthington Rd. Director Lockeed Martin
Collegeville, PA. Age 58 King of Prussia, PA.
William A. Texter Non-Interested Manager Corp. Nuclear Quality
551 Red Coat Lane Director PECO Energy Co.
Phoenixville, PA. Age 52 Philadelphia, PA.
Sandra K. Texter Treasurer Computer Programmer
551 Red Coat Lane Wife of William Texter Lockleed Martin
Phoenixville, PA. Age 49 King of Prussia, PA.
Compensation and Sales Load: The officers and directors received $2,376 in 1999
to cover expenses involved in travel to each Directors meeting held six times a
year in 1999. The Fund does not compensate officers and directors that are af-
filiated with the Investment Adviser except as they may benefit through payment
of the Advisory fee.
There are no sales loads whatsoever on either purchases or redemptions.
- 2 -
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
There are no companies or persons that control the Fund. The Fund is controled
by its Board of Directors and run by its elected officers.
Principal Holders
Major Shareholders: There are six accounts that hold more than 5% of the Fund
shares as of 12/31/99.
THESE ARE:
Shareholder Street Address City and State %
Bernard B. Klawans 1375 Anthony Wayne Dr Wayne PA. 8.8
Regional Phys Ther PSP 132 Adrienne Lane Wynnewood PA. 8.4
Thomas A. Kane 132 Adrienne Lane Wynnewood PA. 8.4
Ann C. Wall 7130 E.Berneil Lane Paradise Valley CA. 7.3
Thomas F. Burke 717 Via Airosa Santa Barbara CA. 7.1
William R. Radford 3570 Main Highway Coconut Grove FL. 5.1
All are independent investors except Mr Klawans who is president of the Fund,
Portfolio Manager and owner of the Investment Adviser. He may be reached at
the Fund's address.
Management Ownership
All officers and directors own 9.33% of the outstanding shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
Mr. Bernard B. Klawans owns the Investment Adviser and acts as the Portfolio Ad-
viser.
Principal Underwriter
The Fund acts as its own underwriter, performing all shareholder services func-
tions.
Services Provided by the Investment Adviser
The Investment Adviser is responsible for furnishing investment direction advice
to the Directors of the Fund on the basis of a continuous review of the port-
folio based upon the investment methodology discussed in the section Principal
Investment Strategies of the Fund on page 1 of the Prospectus. It then recom-
mends to the Fund what and when securities should be purchased or sold. The
Adviser charges a fee of one percent of the averaged net asset values for these
services and has agreed to waive managemet fees and reimburse the Fund for all
Fund expenses exceeding 1.49% of the averaged assets.
Third-Party Payments and Service Agreements
A contract agreement has been agreed upon between the Valley Forge Management
Corp. & FTC Limited, a company wholly owned by Mr. O'Higgins for use of his me-
thodology to maintain the portfolio. The contract gives FTC Limited 50% of all
management fees paid by the Fund in the form of a royalty and may be terminated
only by mutual agreement of both parties. Neither O'Higgins nor FTC Limited
will be associated with the Fund or the Investment Adviser in any way except
through promotional marketing efforts. He is in the process of patenting this
methodology described in detail in his book "Beating the Dow - with Bonds".
Other Investment Advice
There is no individual or organization that receives renumeration from the In-
vestment Adviser or the Fund for providing investment advice except brokers that
- 3 -
<PAGE>
receive competetive commissions on the purchase and sale of the Fund's securi-
ties.
Dealer Reallowances and Other Services
There are no dealer reallowances, Rule 12b-1 plans, paid advertising, compensa-
tion to underwriters or broker dealers, sales personnel or interest, carring or
other finance charges. The Fund does send Prospectuses when it receives unsoli-
cited requests and pays Delaware Charter and Gurantee to allow the Management
Company to act in their name as IRA trustee for Fund shareholders.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokerage Transactions
The Fund requires all brokers to effect transactions in portfolio securities in
such a manner as to get prompt execution of the orders at the most favorable
price.
Commissions
Other than set forth above, the Fund has no fixed policy, formula, method, or
criteria which it uses in allocating brokerage business to brokers furnishing
these materials and services. In 1999 and in 1998, the
Fund paid no brokerage commissions. All US zero Coupon Bonds were purchased
flat. This means that the price quoted as the asked price was the price paid for
the Bond. The Board of Directors evaluates and reviews the reasonableness of
brokerage commissions paid semiannually.
Brokerage Selection
The Fund will place all orders for purchase & sale of its portfolio securities
through the Fund's President who is answerable to the Fund's Board of Directors.
He may select brokers who, in addition to meeting primary requirements of exe-
cution and price, may furnish statistical or other factual information and ser-
vices, which, in the opinion of management, are helpful or necessary to the
Fund's normal operations. Information or services may include economic studies,
industry studies, statistical analyses, corporate reports, or other forms of as-
sistance to the Fund or its Adviser. No effort is made to determine the value
of these services or the amount they might have reduced expenses of the Adviser.
Directed Brokerage and Regular Broker-Dealers
The Fund and Investment Adviser receives unsolicited solicitations and litera-
ture from many brokers. It is impossible to evaluate the usefullness of the
information received, particulary in view of the portfolio managenment method-
ology used by the Fund. It selects brokers based on competive commission
rates and transaction services rendered. The Fund does not hold securities of
any broker-dealer.
CAPITAL STOCK AND OTHER SECURITIES
Capital stock and other securities are discussed at length in our Prospectus un-
der the section, Capital Stock on Page 5.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
Purchase of Shares
Purchase of Fund shares is discussed at length in the section entitled Purchase
of Fund Shares on page 6 of our Prospectus
- 4 -
<PAGE>
Fund Reorganizations
There have been no Fund reorganization efforts to date of any kind.
Offering Price and Redemption in Kind
The Fund always trades at the net asset value. That means that the offering and
redemption prices are always the same. Details about the offering price are
given in the section entitled Pricing of Fund shares on page 5 of our
Prospectus. Redemption in kind is discussed in the section Redemption
Payment on page 6 of our Prospectus.
TAXATION OF THE FUND
Taxation of the Fund is discussed in the section Tax Consequences on page 7 of
our Prospectus.
UNDERWRITERS OF THE FUND
The Fund handles all Fund share purchases and redemptions. There are no direct
shareholder charges for these services. Stock certificates will not be issued
because of the chance of loss and the accompaning costs of reissue indemnfica-
tion. All shareholder holdings are maintained in book form.
CALCULATION OF PERFORMANCE DATA
Average Annual Total Return Quotation: The average ending redeemable values of
a hypothetical $10,000 investment made at the Fund's inception on January 30,
1998 would have been $9,220 on December 31, 1999 and $11,590 on December 31,
1998.
- 5 -
<PAGE>
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT
Mathieson Aitken Jemison, LLP
Certified Public Accountants
16 Sentry Park West Suite 310
Blue Bell, PA 19422-2240
215-643-3900
Fax 215-643-4030
To the Shareholders and Board of Directors
The O'Higgins Fund, Inc.
Valley Forge, Pennsylvania
We have audited the accompanying statement of assets and liabilities of The
O'Higgins Fund, Inc., including the schedule of investments in securities as of
December 31, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets and the financial highlights and
related ratios/supplemental data for the initial period from January 30, 1998
(date of inception) to December 31, 1998 and the year then ended December 31,
1999. These financial statements and financial highlights and related ratios/-
suplemental data are the responsibility of the Fund's Management. Our respons-
ibility is to express an opinion on these financial statements and financial
highlights and related ratios/supplemental data based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights and
related ratios/supplemmental data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements. Our procedures included confirmation of
securities owned as of Decembeer 31, 1999, verified by examination and by cor-
respondence with brokers and the application of alternate auditing procedures
for unsettled security transactions. An audit also includes assessing the ac-
counting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the selected per share data and
ratios referred to above present fairly, in all material respects, the finan-
cial position of The O'Higgins Fund, Inc. as of December 31, 1999, the results
of its operations, the changes in its net assets and the selected per share ra-
tios for the initial period and year then ended, in conformity with generally
accepted accounting principles.
Mathieson Aitken Jemison, LLP
January 12, 2000
- 6 -
<PAGE>
THE O'HIGGINS FUND, INC.
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1999
ASSETS:
Investments, at value (cost $3,579,239) $2,822,604
Receivables, interest 161
----------
TOTAL ASSETS 2,822,765
----------
NET ASSETS (equivalent to $ 8.36/sh based on 337,559 sh of cap-
ital stock outstanding, 100,000,000 authorized, $.001 par value) $2,822,765
==========
COMPOSITION OF NET ASSETS: Shares of common stock $ 338
Paid in capital 3,578,700
Accumulated net investment income 362
Net unrealized depreciation of investments (756,635)
----------
NET ASSETS, December 31, 1999 $2,822,765
==========
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
INVESTMENT INCOME: Amortization of zero coupon bonds $ 170,264
Interest earned 8,880
Other income 402
----------
TOTAL INVESTMENT INCOME 179,546
EXPENSES: Audit fee 2,800
Management fee 27,848
Officer and director expense 2,376
Office expense 5,998
Registration and filing fees 1,760
----------
TOTAL EXPENSES 40,782
----------
INVESTMENT INCOME, NET 138,764
NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS (823,822)
----------
NET LOSS ON INVESTMENTS: (823,822)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (685,058)
==========
See accompaning notes to financial statements
- 6 -
<PAGE>
THE O'HIGGINS FUND, INC.
SCHEDULE OF INVESTMENTS
Year Ended December 31, 1999
Face
Amount Value
___________ ___________
U.S. GOVERNMENT OBLIGATIONS, 99.93%
U.S. Treasury Bonds, stripped principal, due 2/15/27 $16,264,000 $ 2,820,788
-----------
TOTAL BONDS (Cost $3,577,423) $ 2,820,788
-----------
SHORT TERM INVESTMENT: 0.06%
Royal Bank Money Market 3.70% 1,816 1,816
-----------
TOTAL SHORT TERM INVESTMENT (Cost $ 1,816) $ 1,816
-----------
TOTAL INVESTMENTS $ 1,822,604
===========
STATEMENT OF CHANGES IN NET ASSETS
Period from January 30, 1998 (Date of Inception) to December 31, 1998
and Year Ended December 31, 1999
1999 1998
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Investment income net $ 138,754 $ 43,891
Realized loss on investments (588)
Net change in unrealized appreciation (depreciation) (823,822) 67,187
----------- ----------
NET INC (DEC) IN NET ASSETS RESULTING FROM OPERATIONS (685,058) 110,490
Distributions to shareholders from investment inc, net (138,402) (43,303)
Net capital share transactions 1,946,510 1,632,528
----------- -----------
NET INCREASE IN NET ASSETS 1,123,050 1,699,715
NET ASSETS, BEGINNING OF YEAR 1,699,715
----------- -----------
NET ASSETS, END OF YEAR $ 2,822,765 $ 1,699,715
=========== ===========
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY - SIGNIFICANT ACCOUNTING POLICIES: NATURE OF OPERATIONS - The O'-
Higgins Fund, Inc. ("the Fund") is registered under the Investment Company Act
of 1940 as a non-diversified, open-end management investment company. The fol-
lowing is a summary of the significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles.
SECURITY VALUATIONS - The Fund values its securities, where market quotations
are readily available, at market value based on the last recorded sales price as
reported by the principal securities exchange on which the security is traded,
- 7 -
<PAGE>
or if the security is not traded on an exchange, market value is based on the
latest bid price. Short term investments are valued at cost.
FEDERAL INCOME TAXES - The Fund's policy is to comply with the requirements of
the Internal Revenue Code that are applicable to regulated investment companies
and to distribute all its taxable income to its shareholders. Therefore no fed-
eral income tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS - The Fund intends to distribute to shareholders
substantially all of its net investment income and net realized long-term capi-
tal gains at year end.
ESTIMATES - The preparation of financial statements in conformity with generally
accepted acccounting principles requires management to make estimates and as-
sumptions that affect the reported amount of assets and liabilities and dis-
closure of contingent assets and liabilities at the date of the financial state-
ments and the reported amounts of income and expense during the reporting per-
iod. Actual results could differ from these estimates.
OTHER - The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining
gains or losses for financial statements and income tax purposes. Dividend in-
come is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Zero coupon bonds are amortized to investment income by the in-
terest method. The amortization is included in the cost of investments in de-
termining the net change in unrealized appreciation/depreciation on investments.
NOTE 2 CAPITAL SHARE TRANSACTIONS - As of December 31, 1999, the total par val-
ue and paid in capital totaled $3,579,038.
Transactions in capital stock were as follows:
Year Ended Period Jan. 30 to
December 31, 1999 December 31, 1998
Shares Amount Shares Amount
--------- ----------- --------- -----------
Shares sold 286,319 $2,941,925 187,331 $ 2,006,993
Shares issued in reinvest of div 15,692 132,600 3,657 40,405
Shares redeemed (118,291) (1,128,015) ( 37,150) ( 414,870)
-------- ---------- --------- -----------
Net increase 183,720 $1,946,510 153,838 $ 1,632,528
======== ========== ========= ===========
NOTE 3 INVESTMENTS - For the year ended December 31, 1999, purchases and sales
of investment securities, U.S. Treasury Bonds, aggregated $1,971,470 and $0 re-
spectively. The gross unrealized appreciation for all securities totaled $0 and
the gross unrealized depreciation for all securities totaled $823,822 or a net
unrealized depreciation of $823,822. The aggregate cost of securities for fed-
eral income tax purposes at December 31, 1999 was $3,577,423.
The Fund had no realized transactions on investments for the year.
NOTE 4 INVESTMENT ADVISORY AGREEMENT AND OTHER RELATED TRANSACTIONS - The Fund
has an investment advisory agreement with the Valley Forge Management Corp.,
(VFMC). The Fund has agreed to pay VFMC a fee of 1% per year on the net assets
of the Fund. All fees are computed on the average daily closing net asset value
of the Fund and are payable monthly. For the year ended December 31, 1999, VFMC
received $27,848 in investment advisory fees. Mr. Bernard Klawans is the sole
owner, director and officer of VFMC and is also the president of the Fund.
VFMC has entered into a contract with FTC Limited, a company wholly owned by
Michael B. O'Higgins, for use of his methodology to establish and maintain the
Fund's investment portfolio. The contract gives FTC limited 50% of all manage-
ment fees paid by the Fund in the form of a royalty and may be terminated only
by mutual agreement by both parties.
NOTE 5 DISTRIBUTION TO SHAREHOLDERS - On December 31, 1999, a distribution of
$.43 per share aggregating $138,402 was paid to shareholders of record on Decem-
ber 31, 1999 from net investment income.
- 8 -
<PAGE>
FORM N-1A
PART C - OTHER INFORMATION
Contents Page #
1. Financial Statements & Exhibits 1
2. Control Persons 1
3. Number of Shareholders 1
4. Indemnification 1
5. Activities of Investment Adviser 1
6. Principal Underwriters 1
7. Location of Accounts & Records 1
8. Management Services 1
9. Distribution Expenses 1
10. Undertakings 1
11. Auditor's Consent 2
12. Signatures 3
- i -
<PAGE>
1. a. Financial Statements - Performance comparisons with the S&P 500 Index and
financial information on a per share basis is presented in Part A for 1999.
All other financial statements are presented in Part B including:
STATEMENT OF ASSETS & LIABILITIES DECEMBER 31, 1999
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
STATEMENT OF CHANGES IN NET ASSETS FOR 1998 & 1999 DECEMBER 31, 1999
SCHEDULE OF INVESTMENTS IN SECURITIES DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
b. Exhibits
(3.i) Articles of Incorporation
(3.ii) By-Laws
(10.i) Investment Advisory Contract
(10.ii) Reimbursement Agreements with Officers and/or Directors
(99.1) Opinion of Counsel concerning Fund securities.
All exhibits are incorporated by reference to The O'Higgins Fund pre-ef-
fective amendment number 2 of the Securities Act of 1933 except exhibit
(10ii) which is attached.
The Consent of Independent Certified Public Accountants is included in
this Section, Part C - Other Information, page 2.
2. Control Persons - Not applicable.
3. Number of Shareholders - There were one hundred thirty-six shareholders in
The O'Higgins Fund as of December 31, 1999.
4. Indemnification - The Fund has been advised that, in the opinion of the Se-
curities and Exchange Commission, indemnification for liability arising un-
der the Securities Act of 1933 to directors, officers and cotrolling persons
of the Fund is against public policy as expressed in the Act and is there-
fore, unenforceable. In the event that claims for indemnification against
such liabilities (other than payment by the Fund of expenses incurred or
paid by a director, officer or controlling person of the Fund in the suc-
cessful defense of any action, suit or proceeding) is asserted by such di-
rector, officer or controlling person in connection with the securities be-
ing registered, the Fund will, unless in the opinion of its counsel the mat-
ter has been settled by controlling precedent, submit to a court of appro-
priate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
5. Activities of Investment Adviser - The Valley Forge Management Corporation's
activity at the present time is performance on its Investment Advisory Con-
tract currently effective with The O'Higgins Fund and the Valley Forge Fund,
Inc. Mr Bernard B. Klawans; owner, officer and director of the Valley Forge
Management Corp. is also President of the Bookkeeper Corp. Wayne, PA that
provides software services and manages rental real estate.
6. Principal Underwriter - The Fund acts as its own underwriter.
7. Location of Accounts and Records - All Fund records are held at corporate
headquarters, 1375 Anthony Wayne Drive, Wayne PA 19087. Scurity certifi-
cates are held in a safe deposit box at the Royal Bank of Pennsylvania,
Route 202, King of Prussia, PA.
8. Management services - Not applicable
9. Distribution Expenses - The Fund currently bears no distribution expenses.
10.This filing is essentially unchanged as Amendment 4 under the 40 Act except
that financial statements are presented that represent the Fund's status as
of December 31, 1999.
- 1 -
<PAGE>
Nathieson Aitken Jemison, LLP
Certified Public Accountants
16 Sentry Park West - Suite 310
Blue Bell, PA 19422-2240
215-643-3900
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion by reference to the Post Effective Amendment No. 5
on Form N-1A of The O'Higgins Fund, Inc. of our report dated January 12, 2000
on our examination of the financial statements of such Company. We also consent
to the reference to our firm in such Registration Statement.
Mathieson Aitken Jemison, LLP
March 3, 2000
- 2 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Invest-
ment Company Act of 1940, The O'Higgins Fund certifies that it meets all of
the requirements for effectiveness of this Registration Statement and has
duly caused this amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Wayne and State of Pennsylvania, on the 21st day of March, 2000.
The O'Higgins Fund
Bernard B. Klawans
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
Bernard B. Klawans President, CEO and Director 03/21/00
Gerd H. Dahl Secretary and Director 03/21/00
Sandra K. Texter Treasurer 03/21/00
Victor J. Belanger Director 03/21/00
Dr. James P. King Director 03/21/00
Donald A. Peterson Director 03/21/00
William A. Texter Director 03/21/00
- 3 -
Exhibit - 10 ii
Reimbursement Agreements
The O'Higgins Fund reimburses officers and directors not affiliated with the
Investment Adviser to compensate for travel expenses associated with performance
of their duties. A total of $2,376 was paid in this regard in 1999. As the
Fund grows in total assets, the Board of Directors may authorize salaries com-
mensurate with their duties.
The Fund does not now, and has no plans to compensate officers, employes and
directors who are affiliated with the Investment Adviser except indirectly
through payment of the management fee.
