SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-8A
NOTIFICATION OF REGISTRATION
FILED PURSUANT TO SECTION 8(a) OF THE
INVESTMENT COMPANY ACT OF 1940
The undersigned investment company hereby notifies the Securities and
Exchange Commission that it registers under and pursuant to the provisions of
Section 8(a) of the Investment Company Act of 1940 and in connection with such
notification of registration submits the following information:
Name: TANAKA Funds, Inc.
Address of Principal Business Office (No. & Street, City, State
Zip Code):
1500 Forest Avenue, Suite 223, Richmond, VA 23229
Telephone Number (including area code): (804) 285-8211
Name and address of agent for service of process:
Graham Y. Tanaka, Chairman, TANAKA Funds, Inc.,
230 Park Avenue, New York, NY 10169
Check Appropriate Box:
Registrant is filing a Registration Statement pursuant to
Section 8(b) of the Investment Company Act of 1940 concurrently
with the filing of Form N-8A: YES [X] NO [ ]
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
registrant has caused this notification of registration to be duly signed on its
behalf in the City of New York, and State of New York on the _____ day of
January, 1998.
Signature: TANAKA Funds, Inc.
(Name of Registrant)
(SEAL)
ATTEST: BY:
Carlos Gonzalez Graham Y. Tanaka
Secretary President
SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/
Pre-Effective Amendment No.
/_/
Post-Effective Amendment No.
/ /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/X/
Amendment No.
(Check appropriate box or boxes)
TANAKA FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1500 Forest Avenue, Suite 223, Richmond, VA 23229
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (804) 285-8211
John Pasco, III, 1500 Forest Ave., Suite 223, Richmond, VA 23229
(Name and Address of Agent for Service)
Please send copies of communications to
Steven M. Felsenstein, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Approximate Date of Proposed Public Offering: Upon effectiveness
of this registration statement.
Registrant hereby elects to register an indefinite number of shares pursuant to
Rule 24f-2. The fee required to be paid in connection with such election by Rule
24f-2 has been transmitted to the Commission in accordance with applicable
rules.
Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance
with section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
Commission acting pursuant to said section 8(a) may determine.
CROSS-REFERENCE SHEET
<PAGE>
Prospectus for TANAKA Funds, Inc.
PART A
Item No. Information Required in a Prospectus
1. Cover Page. Cover Page.
2. Synopsis. Prospectus Summary; Fund Expenses.
3. Condensed Financial Financial Highlights.
Information.
4. General Description Prospectus Summary; Cover Page; General
of Registrant. Information About the Company; the Fund's
Investments and Policies;
Additional Information on
Policies and Investments;
Special risk
Considerations; Investment
Restrictions.
5. Management of the Prospectus Summary; The Company's Management;
Fund General Information About the Company; To
Obtain More Information.
6. Management's 1996 Performance.
Discussion of Fund
Performance
7. Capital Stock and Prospectus Summary; Taxes; Dividends and
Other Securities. Capital Gains Distributions; General
Information About the Company; To Obtain More
Information.
8. Purchase of Prospectus Summary; How to Invest; How Net
Securities Being Asset Value is Determined; Special
Offered. Shareholder Services; How to Transfer Shares.
9. Redemption or How to Redeem Shares; Special Shareholder
Repurchase. Services; How to Transfer Shares.
10. Legal Proceedings. Not Applicable.
<PAGE>
Statement of Additional Information for
TANAKA Funds, Inc.
Part B
Item No. Information Required in a Statement of
Additional Information
11. Cover Page. Cover Page.
12. Table of Contents. Table of Contents.
13. General Information Not Applicable
and History.
14. Investment TANAKA Funds, Inc.; Investment Policies;
Objectives and Special Investment Considerations for the
Policies. Funds; Investment Restrictions.
15. Management of the Directors and Officers.
Registrant.
16. Control Persons and Directors and Officers.
Principal Holders of
Securities.
17. Investment Advisory Investment Advisor; Transfer Agent;
and Other Services. Administrator; Distribution.
18. Brokerage Allocation Portfolio Transactions.
and Other Practices.
19. Capital Stock and General Information and History; Dividends
Other Securities. and Distributions.
20. Purchases, Redemption Special Shareholder Services; Valuation
and Pricing of and Calculation of Net Asset Value.
Securities Being
Offered.
21. Tax Status. Taxes.
22. Underwriters. Distribution.
23. Calculation of Performance.
Performance Data.
24. Financial Statements.Financial Statements.
<PAGE>
Other Information.
Part C
Item No.
24. Financial Statements and Exhibits.
25. Persons Controlled By Or Under Common Control With Registrant.
26. Number of Holders of Securities.
27. Indemnification.
28. Business and Other Connections of Investment Advisor.
29. Principal Underwriters.
30. Location of Accounts and Records.
31. Management Services.
32. Undertakings.
<PAGE>
PART A
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TANAKA GROWTH FUND
A "SERIES" OF TANAKA FUNDS, INC.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
1-800-TANAKA0 (1-800-826-2520) (Toll Free)
PROSPECTUS
Dated March _____1998
This Prospectus offers shares of the TANAKA Growth Fund (the "Fund"), a
diversified series of TANAKA Funds, Inc. (the "Company"), an open-end management
investment company commonly known as a "mutual fund." The Company is currently
composed of one series, TANAKA Growth Fund, which currently offers one class of
shares, Class B shares.
This Prospectus sets forth concisely information about the Fund which a
prospective investor should know before investing. It should be read and
retained for future reference. More information about the Fund has been filed
with the Securities and Exchange Commission and is contained in the "Statement
of Additional Information," dated March 1998, which is available at no charge
upon written request to the Fund. The Fund's Statement of Additional Information
is incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.................................................
FUND EXPENSES......................................................
TANAKA FUNDS, INC..................................................
INVESTMENT OBJECTIVE AND POLICIES.................................
WHY INVEST IN THE FUND?..........................................
ADDITIONAL INFORMATION ON INVESTMENTS, POLICIES AND RISKS........
PERFORMANCE TERMS AND COMPUTATIONS..............................
THE FUND'S MANAGEMENT...........................................
DISTRIBUTION PLAN ...........................................
HOW TO INVEST...................................................
HOW TO REDEEM SHARES.............................................
HOW TO TRANSFER SHARES........................................
ACCOUNT STATEMENTS AND SHAREHOLDER REPORTS.......................
SPECIAL SHAREHOLDER SERVICES.....................................
HOW NET ASSET VALUE IS DETERMINED................................
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.......................
TAXES............................................................
GENERAL INFORMATION ABOUT THE FUND................................
TO OBTAIN MORE INFORMATION........................................
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TANAKA FUND
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
Investment Objective: The investment objective of the TANAKA Growth Fund (the
"Fund") is growth of capital. It invests primarily in common stocks and other
equity securities. These securities are subject to the risk of price fluctuation
reflecting both market evaluations of the business involved and general changes
in the equity markets. It may invest in foreign securities and attempt to reduce
currency fluctuation risks by engaging in related hedging transactions. These
investments involve special risk factors. See "Investment Objectives and
Policies". As with any mutual fund, there is no assurance that the Fund will
achieve its objective. See "Investment Objective" on Page .
Investment Adviser: Tanaka Fund Advisers, LLC (the "Investment Adviser")
is the investment adviser of the Fund. See "The Fund's Management" on Page
.
Distributions/Dividends: Paid annually from available capital gains and
income. See "Dividends and Capital Gains Distributions" on Page .
Reinvestment: Distributions may be reinvested automatically without a
sales charge. See "Dividends and Capital Gains Distributions" on Page .
Initial Purchase: $2,000 minimum (may be waived under certain
circumstances.) See "How to Invest" on Page .
Subsequent Purchases: $500 minimum. See "How to Invest" on Page .
Net Asset Value: The net asset value per share of the Fund is calculated on each
day that the New York Stock Exchange is open for trading. You may obtain the net
asset value per share of the Fund by calling 1-800-826-2520.
See "How Net Asset Value is Determined" on Page .
Sales Charge or Redemption Fees: Class B shares are offered at net asset value
without a front-end sales charge. The Company imposes a deferred sales charge on
Class B shares of 5.0% on shares redeemed during the first year after purchase,
4.0% on shares redeemed during the second or third year after purchase, 2% on
shares redeemed during the fourth or fifth year after purchase and 1% on shares
redeemed during the sixth year after purchase. Class B shares may be redeemed
without a sales charge during or after the seventh year following the purchase.
Principal Risk Factors: The Fund invests in equity securities of companies that
have large, medium and small market capitalizations. Securities of medium and
small capitalization companies are subject to greater price fluctuations than
securities of large capitalization companies. The Fund invests in different
types of securities issued in the United States and abroad. Its performance will
be influenced by various factors, including market and economic conditions,
company-specific developments and the skill of the Investment Adviser in
allocating investments among stocks and other investment. See "Policies" on page
__.
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FUND EXPENSES - Class B Shares
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested None
Dividends
Maximum Contingent Deferred Sales 5.0%
Charge(1)
(as a percentage of the lesser of
the net asset
value of shares redeemed or their
original cost)
Redemption Fees(2) None
Exchange Fees None
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(1) The deferred sales charge is 5.0% on shares redeemed during the first year
after purchase, 4.0% on shares redeemed during the second and third years
after purchase, 2% on shares redeemed during the fourth and fifth years
after purchase, 1% on shares redeemed during the sixth year after purchase
and 0% on shares redeemed during the seventh or subsequent year after
purchase.
(2) A shareholder placing a telephone redemption request will be charged $10
for each such service.
Estimated Annual Fund Operating Expenses (as % of average daily net assets)
Management Fee 1.00%
12b-1 Fees(3) 1.00%
Other Operating Expenses 0.49
Total Fund Operating Expenses 2.49%
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
The purpose of this table is to assist investors in understanding the various
costs and expenses of the Fund's Class B shares that they will bear directly or
indirectly. The expenses and fees in the table are the estimated annualized
expenses that are expected to be incurred by the Fund for the fiscal period
ending December 31, 1998 and are based on the Fund's estimated amounts.
Example of Expenses
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return, and (2) redemption at the end of each time period. As noted in the table
above, the Fund charges no redemption fees (apart from small per transaction
charges for wire and/or telephone redemption services as noted above.)
1 Year 3 Years
$-- $--
These examples should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
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TANAKA FUNDS, INC.
The Fund is a series of TANAKA Funds, Inc. (the "Company"), an open-end,
diversified management investment company incorporated in Maryland in 1997. The
Company currently consists of one series, and the Board of Directors of the
Company may elect to add more series in the future. A minimum initial investment
of $2,000 is required to open a shareholder account in the Fund, and each
subsequent investment must be $500 or more.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of TANAKA Growth Fund is growth of capital. It invests
primarily in common stocks and other equity securities such as securities
convertible into common stock. Generally, it invests in equity securities of
companies that are diversified across a variety of industries and may be
expected to have large and medium, as well as small market capitalizations. Such
investments will usually consist of issues which the Adviser believes have
capital growth potential due to factors such as rapid growth in demand in
existing markets, expansion into new markets, new product introductions, reduced
competitive pressures, cost reduction programs, changes in management, and other
fundamental changes which may result in improved earnings growth or increased
asset values.
The investment objective of the Fund may not be changed without the approval of
shareholders. Unless specifically stated otherwise, each of the Fund's other
investment policies may be changed by the Board of Directors, without
shareholder approval. There is no assurance that the investment objective can be
achieved.
Because the value of the securities in which the Fund may invest may fluctuate
from day-to-day, the value of an investment in the Fund will vary based upon the
Fund's investment performance. When you sell your shares of the Fund, they may
be worth more or less than their cost to you.
WHY INVEST IN THE FUND?
The Fund is designed for investors seeking maximum total return through a
professionally managed portfolio that provides a mix of predominantly domestic
equities and some foreign equities and other securities, including short term
investments. The purpose of an investment in the Fund should be to participate
in a portfolio of equity securities selected by an experienced portfolio
management organization with an emphasis on research.
The Fund provides an easy and efficient way of investing in a carefully
selected, continuously managed and diversified portfolio of equity securities.
Equity Securities consist of common stocks as well as warrants, rights, and
securities which are convertible into common stocks, such as convertible bonds.
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<PAGE>
The Investment Adviser relies on management meetings and industry contacts to
identify companies with above average long term earnings growth potential that
could exceed market expectations. The Investment Adviser also identifies
industries that are positioned to participate in strong demographic, societal or
economic trends and looks for companies within those industries that have a
particular competitive advantage or niche. The Investment Adviser invests in
equity securities of companies that are diversified across a variety of
industries and having large, medium as well as small market capitalizations.
Stocks and other equity securities are subject to the risk that specific stocks,
industry groups, or the prices of equity securities in general will decline in
value over short or even extended periods of time.
Short Term Investments are obligations denominated in U.S. or foreign currencies
consisting of bank deposits, bankers' acceptances, certificates of deposit,
commercial paper, short-term government, government agency, supranational agency
and corporate obligations, and repurchase agreements. Depending on the
Investment Adviser's assessment of the prospects, a portion of the Fund's assets
may be invested in high quality short-term investments or cash to protect
against adverse market movements or to provide liquidity.
ADDITIONAL INFORMATION ON INVESTMENTS, POLICIES AND RISKS
Diversification: The Fund is required under normal circumstances to
invest at least 75% of its total assets in cash, U.S. Government securities,
securities of other investment companies, and securities of issuers in which it
has not invested more than 5% of the Fund's total assets. The remaining 25% of
the Fund's total assets may be invested without regard to this 5% limitation.
This may involve greater risk than if the 5% limitation is applied to all
assets. For the purpose of this test, investments in repurchase agreements
secured by U.S. Government Securities may be treated as U.S. Government
securities for purposes of applicable securities laws.
Concentration: The Fund will not make any investment which would
cause more than 25% of its total assets to be invested in any one industry.
This limitation does not apply to investments in U.S. Government
securities.
Temporary Investments of Funds: The Funds may temporarily invest in
high grade money market instruments, repurchase agreements or may hold cash or
cash equivalents for defensive purposes or to accommodate inflows of cash
awaiting more permanent investment.
Foreign Securities and Depositary Receipts
Investing in foreign securities may involve special risks, such as:
Social or Political Risk. Social or political instability,
limitations on the removal of funds from foreign countries,
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<PAGE>
expropriation, repudiation by a foreign government of its debt, or
confiscatory taxes could adversely affect the value of the Fund's
foreign investments.
Currency Risk. The U.S. dollar value of a foreign security could
decrease when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and could increase when
the U.S. dollar falls against that currency.
Market Risk. Foreign securities may be less liquid and show greater
price volatility than domestic securities.
Regulatory Risk. Foreign issuers of securities are not generally
subject to the regulatory controls or the accounting and financial
reporting standards imposed on U.S. issuers. There is generally less
publicly available information about foreign securities than about
domestic securities. Also, judgments may be more difficult to enforce
abroad.
The foreign securities the Fund purchases may be bought directly in their
principal markets abroad or they may be acquired through the use of depositary
receipts. The Fund may invest in both sponsored and unsponsored American
Depositary Receipts ("ADRs"), and other similar depositary receipts. ADRs are
issued by an American bank or trust company and evidence ownership of underlying
securities of a foreign company. Unsponsored ADRs are organized without the
participation of the issuer of the underlying securities. As a result,
information concerning the issuer may not be as current as for sponsored ADRs.
Convertible Securities
The Fund may invest in convertible securities. A convertible security is a
fixed-income security (a bond or preferred stock) that 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. Through their conversion
feature, convertible securities provide an opportunity to participate in capital
appreciation resulting from an increase in the value of a convertible security's
underlying common stock. The value of a convertible security is influenced by
the market value of the underlying common stock and tends to increase as the
market value of the underlying stock rises, and tends to decrease as the market
value of the underlying stock declines. For purposes of considering convertible
securities for purchase by the Fund, the Investment Adviser evaluates
convertible securities by standards applicable to equity securities and not by
debt securities ratings.
Repurchase Agreements
As a means of earning income for periods as short as overnight, the Fund may,
without limit, enter into repurchase agreements with selected banks and
broker/dealers if such repurchase agreements are collateralized by U.S.
Government securities. Under a repurchase agreement, the Fund acquires
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<PAGE>
securities subject to the seller's agreement to repurchase the securities at a
specified time and price. The Fund requires the party obligated to repurchase
the securities to provide it with collateral for that obligation.
If the seller under a repurchase agreement becomes insolvent, the Fund will seek
to liquidate the collateral held by it, but the Fund's right to dispose of the
securities may be restricted. In the event bankruptcy proceedings occur with
respect to the seller of the securities before that seller repurchases the
securities, the Fund may encounter delay and incur costs before being able to
sell the securities. Also, the value of such securities may decline before the
Fund is able to dispose of them. For federal tax diversification purposes,
repurchase agreements are treated as securities issued by the seller and not
cash, cash items or receivables or U.S. Government securities.
Illiquid Securities
Normally, the Fund will not invest more than 5% of its net assets in securities
which are illiquid or not readily marketable; however, the Fund is permitted to
invest up to 15% of its net assets in illiquid securities.
Fundamental Limitations
The Fund has adopted certain fundamental limitations which may not be changed
without a shareholder vote and which are designed to reduce its investment risk.
Some of these limitations are that the Fund may not:
* purchase the securities of any issuer (other than obligations
issued or guaranteed as to principal and interest by the
Government of the United States or any agency or instrumentality
thereof, or securities of other investment companies) if, as a
result of such purchase, more than 5% of its total assets would
be invested in the securities of such issuer, unless 75% of the
Fund's total assets are invested in cash or cash equivalents,
U.S. Government securities, securities of other investment
companies, and securities of issuers in which the Fund has not
invested 5% or more of its assets;
* purchase stock or securities of an issuer (other than
obligations issued or guaranteed as to principal and interest
by the Government of the United States or any agency or
instrumentality thereof) if such purchase would cause the Fund
to own more than 10% of any class of the outstanding stock or
securities or more than 10% of any class of voting securities
of such issuer;
* borrow money, except through reverse repurchase agreements or
from banks for temporary or emergency purposes to meet
redemption, and then only in an amount not in excess of 33% of
the value of the Fund's net assets at the time the borrowing
is made; or
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<PAGE>
* purchase the securities of any issuer (other than obligations
issued or guaranteed by the Government of the United States or
any agency or instrumentality thereof) if, as a result of such
purchase, more than 25% of the Fund's total assets would be
invested in any one industry.
These limitations apply at the time the Fund purchases securities for the
portfolio. See the Statement of Additional Information for other investment
limitations applicable to the Fund.
PERFORMANCE TERMS AND COMPUTATIONS
From time to time, the Fund may advertise information regarding its performance.
All performance figures are historical, show the performance of a hypothetical
investment and are not intended to indicate future performance. Advertising may
include the following performance measurements.
"Yield" is the ratio of income per share derived from the portfolio investments
to the current maximum offering price expressed in terms of a percentage.
"Total return" is the total of all income and capital gains paid to
shareholders, assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a percentage of the
purchase price.
"Average annual total return" refers to the average annual compound rate of
return of an investment in the Fund assuming that the investment has been held
for one year and the life of the Fund.
"Cumulative total return" represents the cumulative change in value of an
investment in the Fund for various periods. These calculations assume that
dividends and capital gains distributions were reinvested.
"Capital change" measures return from capital, including reinvestment of any
capital gains distributions but not reinvestment of dividends.
Performance will vary based upon, among other things, changes in market
conditions and the level of the Fund's expenses. Please refer to the Statement
of Additional Information for more information on performance.
THE FUND'S MANAGEMENT
The Company's Board of Directors is responsible for the supervision of the
general business of the Company and the Fund. The Directors act as fiduciaries
for shareholders under the laws of the State of Maryland. The Board appointed
Graham Tanaka, CFA to serve as Chairman, President and Chief Executive Officer
of the Company. The Fund employs the following entities to provide it with
investment advice and to conduct its on-going business:
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<PAGE>
Directors and Officers
The following is a list of the Company's Directors and Officers, their
dates of birth and a brief statement of their present positions and principal
occupations during the past five years. The address of each Director and Officer
is c/o Tanaka Capital Management, Inc., 230 Park Avenue, Suite 1432, New York,
New York 10169, except for Mr. Pasco whose address is 1500 Forest Avenue, Suite
223, Richmond, Virginia, 23229.
*Graham Y. Tanaka (02-23/48)
Chairman, Chief Executive Officer and President of the Company
Mr. Tanaka is currently the President of Tanaka Capital Management
Inc., having founded the firm in December 1986. From 1973 until 1978 Mr. Tanaka
was a research analyst at Morgan Guaranty Trust. He then worked at Fiduciary
Trust Company of New York as Vice President from 1978-1980. Prior to launching
Tanaka Capital Management, Mr. Tanaka served as Chairman at Milbank Tanaka &
Associates from 1980 to 1986. He is a member of The Electronic Analyst Group and
also a member of the Healthcare Analyst Association. Mr. Tanaka currently serves
on the Boards of TransAct Technologies and Tridex Corporation.
Charles Dill (11/29/39)
Director
Mr. Dill is a General Partner of Gateway Associates, a St. Louis-based
venture capital firm. From 1991 until 1995, Mr. Dill served as President,
Chief Executive Officer and Director of Bridge Information Systems. From
1988 to 1991, Mr. Dill was President, Chief Operating Officer and Director
of AVX Corporation. Prior to 1988, Mr. Dill was Senior Vice President and
a member of the Office of the Chief Executive of Emerson Electric. Mr.
Dill serves on the Boards of Stifel Financial Corp., Zoltek, TransAct
Technologies, Pinnacle Automation and DT Industries, as well as the boards
of several private companies.
Thomas R. Schwarz (6/1/36)
Director
Mr. Schwarz was President and Chief Operating Officer of Dunkin Donuts
Inc. (1966-1989); Chairman of the Board and Chief Executive Officer of
Grossmans Inc. (1989-1994) and retired in 1994. Mr. Schwarz currently sits
on the following boards: Transact Technologies, Inc., Tridex Corporation,
A&W Restaurants, Lebhar-Friedman Publishing and Foilmark Inc.
Michael Seely (6/7/45)
Director
Mr. Seely is the founder and President of Investor Access Corporation.
Before establishing IAC in 1978, he served as an officer of Avco
Corporation, a conglomerate subsequently acquired by Textron. Mr. Seely
has served as a director of various mutual funds including the "fund of
funds' Fund trust Group and the Republic National Bank mutual funds where
he participated in the selection and performance evaluation of scores of
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prominent U.S. and foreign money managers. Seely is also the General
Partner of Global Multi-Manager Partners, a U.S. investment relationship
operating in non U.S. investments.
Scott D. Stooker (6/16/54)
Director
Mr. Stooker is currently the owner and President of 1st Team
Communications Inc., in Wilmington, Delaware. He has served as a member on the
board of directors of The Advertising Club of Delaware, Big Brothers/Little
Sisters of Delaware, and currently serves on the board of Saint Anthony's
COmmunity Center.
*John Pasco, III (4/10/45)
Vice President and Chief Financial Officer
Mr. Pasco is Treasurer and Director of Commonwealth Shareholder
Services, Inc., the Company's Administrator, since 1985. Mr. Pasco is a
Director, President and Treasurer of Commonwealth Capital Management, Inc.
(a registered investment advisor) since 1983. Mr. Pasco is a Director and
shareholder of Fund Services, Inc., the Company's Transfer and Dividend
Disbursing Agent, since 1987, and shareholder of Commonwealth Fund
Accounting, Inc. which provides bookkeeping services to Star Bank. Mr.
Pasco is also a Certified Public Accountant.
* Persons deemed to be "interested" persons of the Company under the 1940
Act.
Investment Adviser
Tanaka Fund Advisers, LLC (the "Investment Adviser"), a registered investment
adviser, manages the investments of the Fund pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"), dated March ____, 1998. The Advisory
Agreement is effective for an initial term of two years and thereafter may be
renewed annually by the Board of Directors of the Fund.
The Investment Adviser is a privately held corporation. In addition to the
assets of the Fund, Mr. Tanaka manages other assets of approximately $300
million as of the date of this Prospectus. Mr. Tanaka has approximately 11 years
of experience managing a mutual fund portfolio, and has approximately 17 years
of experience managing investment portfolios for private clients.
Mr. Tanaka is the portfolio manager and President of the Fund, and owns all
of the stock of the Investment Adviser.
Pursuant to the Advisory Agreement, the Investment Adviser provides the Fund
with investment management services, subject to the supervision of the Company's
Board of Directors, and with office space, and pays the ordinary and necessary
office and clerical expenses relating to investment research, statistical
analysis, supervision of its portfolio and certain other costs.
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The Investment Adviser also bears the cost of fees, salaries and other
remuneration of the Company's Directors, officers or employees who are officers,
Directors, or employees of the Investment Adviser. The Fund is responsible for
all other costs and expenses, such as, but not limited to, brokerage fees and
commissions in connection with the purchase and sale of securities, legal,
auditing, bookkeeping and record keeping services, custodian and transfer agency
fees and other costs and fees of registration of, or filing of notice of, its
shares for sale under various state and Federal securities laws.
The Investment Adviser shall be paid a fee to be accrued daily at an annual rate
of 1.00% of the average daily net assets of the Fund which are not in excess of
$300,000,000; 0.90% of the assets of the Fund over $300,000,000 and not in
excess of $500,000,000; 0.80% of the assets of the Fund over $500,000,000 and
not in excess of $1,000,000,000 and 0.75% of the assets of the Fund over
$1,000,000,000. Such fee shall be paid monthly, within ten (10) business days
after the end of the month. All expenses not specifically assumed by the
Investment Adviser are assumed by the Fund. The address of the Investment
Adviser is 230 Park Avenue, Suite 1432, New York, New York 10169.
The Advisory Agreement contemplates the authority of the Investment Adviser to
place orders pursuant to its investment determinations for the Fund either
directly with the issuer or with any broker or dealer. In placing orders with
brokers or dealers, the Investment Adviser will attempt to obtain the best price
and execution for the Fund's orders. The Investment Adviser may purchase and
sell securities to and from brokers and dealers who provide the Investment
Adviser with research advice or statistical services, and may be authorized to
pay a commission for such transactions which is higher than the commission which
would be charged by another broker. From time to time, and subject to the
Investment Adviser obtaining the best price and execution for the Fund, the
Board of Directors may authorize the Investment Adviser to allocate brokerage
transactions to a broker in consideration of: (1) payment of an obligation
otherwise payable by the Fund or (2) in consideration of the sale of Fund
shares.
Administrator
Commonwealth Shareholder Services, Inc. ("CSS"), serves as administrator to the
Fund pursuant to an Administrative Services Agreement, dated March_____, 1998.
CSS provides certain recordkeeping, administrative and shareholder servicing
functions required of registered investment companies. CSS may furnish personnel
to act as the Fund's officers to conduct the Fund's business subject to the
supervision and instructions of the Board of Directors of the Company.
The Administrative Services Agreement provides that CSS will be paid monthly:
(1) the greater of .20% of the average daily net assets of the Fund or $30,000
per year (reduced to $15,000 per year during the Fund's first twelve months of
operation) for administration (which includes regulatory matters, backup of the
pricing of the Fund, administrative duties in connection with the execution of
portfolio trades, and certain
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services in connection with fund accounting); (2) certain out-of-pocket
expenses; and (3) an hourly fee for shareholder servicing and blue sky matters.
The address of CSS is 1500 Forest Avenue, Suite 223, Richmond, VA 23229.
Custodian and Accounting Services Agent
Star Bank (the "Custodian"), located in Cincinnati, Ohio, is the custodian and
accounting services agent for the Fund. The Custodian collects income when due
and holds all of the Fund's portfolio securities and cash. The Custodian is
authorized to appoint other entities to act as sub-custodians to provide for the
custody of foreign securities which may be acquired and held by the Fund outside
the U.S. Such appointments are subject to appropriate review by the Company's
Board of Directors.
Star Bank, as the accounting service agent, maintains and keeps current the
books, accounts, records, journals or other records of original entry relating
to the Fund's business. The address of Star Bank is 425 Walnut Street, P.O. Box
1118, Cincinnati, Ohio 45201-1118.
Transfer and Dividend Disbursing Agent
Fund Services, Inc. (the "Transfer Agent" or "FSI") is the Fund's transfer and
dividend disbursing agent. John Pasco, III, President of CSS and First Dominion
Capital Corp. (the "Distributor") owns one third of the stock of FSI, and,
therefore, FSI may be deemed to be an affiliate of the Fund. FSI provides all
the necessary facilities, equipment and personnel to perform the usual and
ordinary services of transfer and dividend disbursing agent, including:
receiving and processing orders and payments for purchases of the Fund's shares,
opening shareholder accounts, preparing shareholder meeting lists, mailing proxy
material, receiving and tabulating proxies, mailing shareholder reports and
prospectuses, withholding certain taxes on non-resident alien accounts,
disbursing income dividends and capital distributions, preparing and filing U.S.
Treasury Department Form 1099 (or equivalent) for all shareholders, preparing
and mailing confirmation forms to shareholders for all purchases and redemptions
of shares and all other confirmable transactions in shareholders' accounts, and
recording reinvestment of dividends and distributions of the Company's shares.
Under an Agreement between the Company and FSI, dated March_____, 1998, FSI is
compensated pursuant to a schedule of fees for its services, and by
reimbursement for out-of-pocket expenses. The schedule calls for a minimum
payment by the Fund of $16,500 per year, which is reduced to $12,000 per year
during the Fund's first twelve months of operation. The address of the Transfer
Agent is P.O. Box 26305, Richmond, VA 23260.
Principal Underwriter/Distributor
First Dominion Capital Corp. (the "Distributor") acts as the principal
underwriter for the Company pursuant to an agreement dated March ___, 1998.
Mr. John Pasco, III, who is President, Director and Treasurer of the
Distributor, owns 100% of the stock of the Distributor. The address of the
Distributor is 1500 Forest Avenue, Suite 223, Richmond, VA 23229.
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DISTRIBUTION PLAN
The Fund bears some of the costs of selling its Class B shares under a
Distribution Plan it has adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940. This rule regulates the manner in which a mutual fund may
assume costs of distributing and promoting the sale of its shares.
Payments under the Class B Distribution Plan are limited to an annual rate of 1%
of the average daily net asset value of the Class B shares. In accordance with
current applicable rules, such payments are also limited to 6.25% of gross sales
of Class B shares plus interest at 1% over the prime rate on any unpaid amounts.
Up to 0.75% of the average daily net assets is used to pay the Distributor a 4%
commission on new sales of Class B shares. Most or all of such commissions are
reallowed to firms and to the salespersons responsible for such sales. No
commissions are paid by the Company with respect to sales by the Distributor to
officers, directors and full-time employees of the Company, the Adviser, the
Distributor or the Adviser's General Partner, or to certain other affiliates and
clients of the Adviser. Up to 0.25% of average net assets is used to reimburse
the Distributor for the payment of service and maintenance fees to its
salespersons and to other firms for shareholder servicing and maintenance of
shareholder accounts.
If amounts payable to the Company under the Distribution Plan are not sufficient
for the Distributor to pay obligations, such as the 4% commission on new sales
of Class B shares, the Distributor and the Investment Adviser have agreed,
pursuant to a Distribution Financing Agreement, that the Investment Adviser
shall arrange for a suitable extension of credit which may be drawn upon by the
Distributor in amounts sufficient to advance to the Distributor the commissions
and other amounts payable by the Distributor to firms and salespersons for sale
of Class B shares, or shall otherwise advance such amounts. With respect to
sales of Fund shares (including shares for which the Distributor is the selling
dealer of record), although the Distributor is entitled to receive the
applicable fees and commissions, during the Fund's initial period of operations,
the Distributor will not seek advancements to cover such fees or commissions.
However, the Distributor retains the right to receive such underwriter's fees
and commissions from future payments made by the Company under the Distribution
Plan when all advancements, whether by the Investment Adviser or at its
direction, have been repaid. The Distributor shall be obligated to repay the
advancements it receives pursuant to the Distribution Financing Agreement out of
any future payments that it receives from the Company. The Company is not
obligated to make such payments; the amount (if any), timing and conditions of
any such payments are solely within the discretion of the directors of the
Company who are not interested persons of the Distributor and have no direct or
indirect financial interest in the Class B Distribution Plan (the "Independent
Directors"). If the Class B Distribution Plan is terminated, the Distributor
will ask the Independent Directors to take whatever action they deem appropriate
with regard to the payment of any excess amounts.
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The Distribution Plan may be terminated at any time by a vote of a majority of
the Independent Directors or by vote of a majority of the outstanding voting
shares. Payments pursuant to a Distribution Plan are included in the operating
expenses.
HOW TO INVEST
Shares of the Fund may be purchased directly from the Distributor or through
members of the National Association of Securities Dealers, Inc. who are
registered, if required, in the state where the purchase is made and who have a
sales agreement with the Distributor. After a shareholder account is established
and the investment dealer is recorded, subsequent orders for shares may be
mailed directly to the Transfer Agent. Such purchases of shares are made at the
then current public offering price, as described below. A minimum initial
investment of $2,000 is required to open a shareholder account, and each
subsequent investment must be $500 or more.
Class B shares are offered at net asset value, without a front-end sales charge.
With certain exceptions described below, the Company imposes a deferred sales
charge on Class B shares. The charge is 5.0% on shares redeemed during the first
year after purchase, 4.0% on shares redeemed during the second or third year
after purchase, 2% on shares redeemed during the fourth or fifth year after
purchase, 1% on shares redeemed during the sixth year after purchase and 0% on
shares redeemed during or after the seventh year after purchase. Class B shares
will be subject to a maximum Rule 12b-1 fee at the annual rate of 1% of the
class average daily net asset value.
Class B shares that have been outstanding for eight years will automatically
convert to Class A shares without imposition of a front-end sales charge or
exchange fee. The Class B shares so converted will no longer be subject to the
higher expenses borne by Class B shares. Because the net asset value per share
of the Class A shares may be higher or lower than that of the Class B shares at
the time of conversion, although the dollar value will be the same, a
shareholder may receive more or less Class A shares than the number of Class B
shares converted. In the event that this ceases to be the case, the Board of
Directors will consider what action, if any, is appropriate and in the best
interests of the Class B shareholders.
Any contingent deferred sales charge imposed upon the redemption of Class B
shares is a percentage of the lesser of (i) the net asset value of the shares
redeemed or (ii) the original cost of such shares. No contingent deferred sales
charge is imposed when you redeem amounts derived from (a) increases in the
value of shares redeemed above the original cost of such shares or (b) certain
shares with respect to which a Fund did not pay a commission on issuance,
including shares acquired through reinvestment of dividend income and capital
gains distributions. Upon request for redemption, shares not subject to the
contingent deferred sales charge will be redeemed first. Thereafter, shares held
the longest will be the first to be redeemed.
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The contingent deferred sales charge will be waived as follows: (1) on
redemptions following shareholder's death or disability, as defined in Section
72 (m)(7) of the Internal Revenue Code of 1986, as amended (the "Code"); (2) on
taxable periodic distributions from a qualified retirement plan or IRA upon
retirement or attainment of age 59-1/2 or distribution necessary to make a
tax-free return of contributions to avoid tax penalty; (3) on redemptions of
shares sold to directors,officers and employees of the Funds, the Adviser and
its clients, including former directors, officers and immediate family members
of all of the foregoing, and any employee benefit or payroll deduction plan
established by or for such persons; (4) on redemptions pursuant to the right of
a Fund to liquidate a shareholder's account if the aggregate net asset value of
the shares held in such account falls below an established minimum amount.
Notice of eligibility for waiver of the deferred sales charge should be given
when a redemption request qualifies for such a waiver.
The Distributor may from time to time offer incentive compensation to dealers
(which sell shares of the Fund subject to sales charges) allowing such dealers
to retain an additional portion of the sales load. A dealer who receives all of
the sales load may be considered an underwriter of the Fund's shares.
To facilitate the handling of transactions with shareholders, the Company uses
an open account plan. The Transfer Agent will automatically establish and
maintain an open account for the Fund's shareholders. Under the open account
plan, your shares are reflected in your open account. This service facilitates
the purchase, redemption or transfer of shares, and eliminates the need to
safeguard certificates and reduces time delays in executing transactions. Stock
certificates are not required and are not normally issued. Stock certificates
for full shares will be issued, however, by the Transfer Agent upon written
request but only after payment for the shares is collected by the Transfer
Agent.
Purchase by Mail
For initial purchases, the account application form (the "Account Application")
which accompanies this prospectus should be completed, signed, and mailed to the
Transfer Agent, together with your check or other negotiable bank draft drawn on
and payable by a U.S. Bank, made payable to the TANAKA Growth Fund. For
subsequent purchases, include with your check the tear-off stub from a prior
purchase confirmation, or otherwise identify the name(s) of the registered
owner(s) and the social security number(s).
Investing by Wire
You may purchase shares by requesting your bank to transmit "Federal Funds" by
wire directly to the Transfer Agent. To invest by wire please call the Transfer
Agent for instructions, then notify the Distributor by calling 1- 800-826-2520.
Your bank may charge you a small fee for this service. The Account Application
which accompanies this Prospectus should be completed and promptly forwarded to
the Transfer Agent. This application is required to complete the Fund's records
in order to allow you access to your shares.
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<PAGE>
Once your account is opened by mail or by wire, additional investments may be
made at any time through the wire procedure described above. Be sure to include
your name and account number in the wire instructions you provide your bank.
HOW TO REDEEM SHARES
Shares may be redeemed at any time by mail or telephone. For your protection,
the Transfer Agent will not redeem your shares until it has received all
information and documents necessary for your request to be in "proper order."
(See "Signature Guarantees.") You will be notified promptly by the Transfer
Agent if your redemption request is not in proper order.
The Fund's procedure is to redeem shares at the net asset value next determined
after receipt by the Transfer Agent of the redemption request in proper order as
described herein. Payment will be made promptly, but no later than the seventh
day following receipt of the request in proper order. Please note that the
Transfer Agent cannot accept redemption requests which specify a particular date
for redemption, or which specify any special conditions. If the shares you are
redeeming were purchased by you less than 15 days prior to the receipt of your
redemption request, the Transfer Agent must ascertain that your check in payment
of the shares you are redeeming has cleared prior to disbursing the redemption
proceeds. If you anticipate that you may need to redeem sooner than 15 days, you
should make your purchase by Federal Funds wire, or by a certified, treasurer's
or cashier's check. The Fund may suspend the right to redeem shares for any
period during which the New York Stock Exchange is closed or the Securities and
Exchange Commission determines that there is an emergency. In such circumstances
you may withdraw your redemption request or permit your request to be held for
processing at the net asset value per share next computed after the suspension
is terminated.
Redemption by Mail
To redeem shares by mail, send the following information to the Transfer Agent:
(1) a written request for redemption signed by the registered owner(s) of the
shares, exactly as the account is registered; (2) the stock certificates for the
shares you are redeeming, if any stock certificates were issued; (3) any
required signature guarantees (see "Signature Guarantees"); and (4) any
additional documents that might be required for redemption by corporations,
executors, administrators, trustees, guardians, etc. The Transfer Agent will
mail the proceeds to your currently registered address, payable to the
registered owner(s) unless you specify otherwise in your redemption request.
There is no charge to shareholders for redemptions by mail.
Redemption by Telephone
You may redeem your shares by telephone if you request this service on your
Account Application at the time you complete your initial Account Application.
If you do not request this service at that time, you must
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request approval of telephone redemption privileges in writing (sent to the
Fund's Transfer Agent) with a signature guarantee (see "Signature Guarantees")
before you can redeem shares by telephone. Once your telephone authorization is
in effect, you may redeem shares by calling the Transfer Agent at (800)
628-4077. By establishing this service, you authorize the Transfer Agent to act
upon any telephone instructions it believes to be genuine, to (1) redeem shares
from your account and (2) mail or wire redemption proceeds. There is no charge
for establishing this service, but the Transfer Agent will charge your account a
$10.00 service fee each time you make a telephone redemption. The amount of this
service charge may be changed at any time, without notice, by the Transfer
Agent.
You cannot redeem shares by telephone if you hold a stock certificate
representing the shares you are redeeming or if you paid for the shares with a
personal, corporate, or government check and your payment has been on the books
of the Fund for less than 15 days.
If it should become difficult to reach the Transfer Agent by telephone during
periods when market or economic conditions lead to an unusually large volume of
telephone requests, a shareholder may send a redemption request to the Transfer
Agent by overnight mail.
The Fund employs procedures reasonably designed to confirm the authenticity of
your instructions communicated by telephone and, if it does not, it may be
liable for any losses due to unauthorized or fraudulent transactions; however, a
shareholder authorizing telephone redemption bears the risk of loss which may
result from unauthorized or fraudulent transactions which the Fund believes to
be genuine. When you request a telephone redemption or transfer, you will be
asked to respond to certain questions designed to confirm your identity as a
shareholder of record. Your cooperation with these procedures will protect your
account and the Fund from unauthorized transactions.
Redemption by Wire
If you request by mail or telephone that your redemption proceeds be wired to
you, please call your bank for instructions prior to writing or calling the
Transfer Agent. Be sure to include your name, Fund account number, your account
number at your bank and wire information from your bank in your request to
redeem by wire.
Signature Guarantees
To help to protect you and the Fund (and its agents) from fraud, signature
guarantees are required for: (1) all redemptions ordered by mail if you require
that the check be payable to another person or that the check be mailed to an
address other than the one indicated on the account registration; (2) all
requests to transfer the registration of shares to another owner; and (3) all
authorizations to establish or change telephone redemption service, other than
through your initial Account Application.
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<PAGE>
In the case of redemption by mail, signature guarantees must appear either: (a)
on the written request for redemption; or (b) on a separate instrument of
assignment (usually referred to as a "stock power") specifying the total number
of shares being redeemed. The Fund may waive these requirements in certain
instances.
The following institutions are acceptable signature guarantors: (a) participants
in good standing of the Securities Transfer Agents Medallion Program ("STAMP");
(b) commercial banks which are members of the Federal Deposit Insurance
Corporation ("FDIC"); (c) trust companies; (d) firms which are members of a
domestic stock exchange; (e) eligible guarantor institutions qualifying under
Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, that are
authorized by charter to provide signature guarantees; and (f) foreign branches
of any of the above. In addition, the Fund will guarantee your signature if you
personally visit its offices at 1500 Forest Avenue, Suite 223, Richmond, VA
23229. The Transfer Agent cannot honor guarantees from notaries public, savings
and loan associations, or savings banks.
Small Accounts
Due to the relatively higher cost of maintaining small accounts, the Fund may
deduct $10.00 per year from accounts valued at less than $2,000 unless the
account value has dropped below $2,000 solely as a result of share value
depreciation. Shareholders will receive 60 days' written notice to increase the
account value above $2,000 before the fee is deducted.
HOW TO TRANSFER SHARES
If you wish to transfer shares to another owner, send a written request to the
Transfer Agent. Your request should include: (1) the name of the Fund and
existing account registration; (2) signature(s) of the registered owner(s); (3)
the new account registration, address, Social Security Number or taxpayer
identification number and how dividends and capital gains are to be distributed;
(4) any stock certificates which have been issued for the shares being
transferred; (5) signature guarantees (see "Signature Guarantees"); and (6) any
additional documents which are required for transfer by corporations,
administrators, executors, trustees, guardians, etc. If you have any questions
about transferring shares, call the Transfer Agent at (800) 628-4077.
ACCOUNT STATEMENTS AND SHAREHOLDER REPORTS
Each time you purchase, redeem or transfer shares of the Fund, you will receive
a written confirmation. You will also receive a year-end statement of your
account if any dividends or capital gains have been distributed, and the Fund's
annual and semi-annual reports to shareholders.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following four services for its shareholders: Regular
Account - allows shareholders to make voluntary additions and withdrawals
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to and from their account as often as they wish; Invest-A-Matic Account permits
automatic monthly investments into the Fund from your checking account on a
fixed or flexible schedule; Individual Retirement Accounts (IRA's); and Exchange
Privileges Account - allows the shareholder to exchange his or her shares for
shares of certain other funds having a different investment objective from the
Fund. More information on any of these services is available upon written
request to the Fund.
HOW NET ASSET VALUE IS DETERMINED
The net asset value ("NAV") of the Fund's shares is determined as of the close
of trading on the New York Stock Exchange (currently 4:00 p.m., Eastern Time) on
each business day from Monday to Friday or on each day (other than a day during
which no Fund share was tendered for redemption and no order to purchase or sell
a Fund share was received by the Fund) in which there is a sufficient degree of
trading in the portfolio securities of the Fund that the current NAV of the
shares might be materially affected by changes in the value of such portfolio
security. The Fund's NAV is calculated at the 4:00 p.m. time set by the Board of
Directors based upon the Board's determination that this is the most appropriate
time to price the securities.
NAV per share is determined by dividing the total value of the Fund's assets,
less its liabilities, by the total number of shares then outstanding. Generally,
securities owned by the Fund are valued at market value.
The Fund's management may compute the NAV per share more frequently in order to
protect shareholders' interests.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Dividends from net investment income, if any, are declared annually. The Fund
intends to distribute annually realized net capital gains, after utilization of
capital loss carryforwards, if any, to prevent application of a federal excise
tax. However, it may make an additional distribution any time prior to the due
date, including extensions, of filing its tax return, if necessary to accomplish
this result. Any dividends or net capital gain distributed pursuant to a
dividend declaration declared in October, November or December with a record
date in such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. Unless you elect otherwise, dividends and capital
gains distributions will be reinvested in additional shares of the Fund at no
charge. Changes in your election regarding receipt of dividends and
distributions must be sent to the Transfer Agent. Shareholders will be subject
to tax on all dividends and distributions whether paid to them or reinvested in
shares of the Fund. If an investment in Fund shares is made by a retirement
plan, all dividends and capital gains distributions must be reinvested into an
account of such plan.
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Generally, dividends from net investment income are taxable to investors as
ordinary income. Certain gains or losses on the sale or retirement of
international securities held by the Fund, to the extent attributable to
fluctuations in currency exchange rates, as well as certain other gains or
losses attributable to exchange rate fluctuations, must be treated as ordinary
income or loss. Such income or loss may increase or decrease (or possibly
eliminate) the income available for distribution to shareholders. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
income available for distribution is decreased or eliminated, all or a portion
of the dividends declared by the Fund may be treated for federal income tax
purposes as a return of capital, or in some circumstances, as capital gain.
Generally, a shareholder's tax basis in his/her Fund shares will be reduced to
the extent that an amount distributed to the shareholder is treated as a return
of capital.
Long-term capital gains distributions, if any, are taxable as net long-term
capital gains when distributed regardless of the length of time shareholders
have owned their shares. Net short- term capital gains and any other taxable
income distributions are taxable as ordinary income.
The Fund sends detailed tax information about the amount and type of its
distributions to its shareholders by January 31 of the year following the
distributions.
TAXES
The Fund is the successor by a reorganization to a series of another investment
company. The Fund will be treated as a separate corporation and will seek to
qualify and maintain its qualification as a regulated investment company under
Subchapter M of the Code. Provided it maintains its qualification as a regulated
investment company under the Code, the Fund will not be liable for federal
income taxes on income distributed as dividends to its shareholders or on net
capital gains that are distributed to its shareholders or imputed to them under
the Code, or for any excise tax, to the extent its earnings are distributed as
provided in the Code, and assuming it meets the tax diversification test, 90%
gross income test as required by the Code.
The Fund will act and invest so as to comply with the requirements of Subchapter
M which are described in the Statement of Additional Information. The
distribution to shareholders each year of investment income and capital gains
will represent taxable income to the shareholders, who will be advised of such
amounts by the Company.
The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the value of its assets at the close
of its taxable year consists of stock or securities in foreign corporations, it
may elect to pass through to its shareholders the amount of foreign withholding
taxes it paid. If this election is made, shareholders will be (i) required to
include in their gross income their pro rata share of foreign source income
(including any foreign taxes paid by the Fund), and (ii) entitled to either
deduct (as an itemized deduction
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in the case of individuals) their share of such foreign taxes in computing their
taxable income or to claim a credit for such taxes against their U.S. income
tax, subject to certain limitations under the Code. The Fund will notify its
shareholders of such election within 60 days of the close of its tax year, which
is December 31. Shareholders may decide whether to utilize such flow through
amount as either a deduction or a tax credit; individual shareholders will
usually find that the credit is more favorable. Tax exempt investors, such as
pension plans and individual retirement accounts, will not benefit from this
pass through, and therefore the Fund may not be a suitable investment for such
investors.
On the account application, the shareholder must provide the shareholder's
taxpayer identification number ("TIN"), certify that it is correct and certify
that the shareholder is not subject to backup withholding under Internal Revenue
Service ("IRS") rules. If the shareholder fails to provide a correct TIN or the
proper certifications, the Fund will withhold 31% of all distributions and
redemption proceeds payable to the shareholder. The Fund will also begin backup
withholding on a shareholder's Fund account if the IRS instructs the Fund to do
so. The Fund reserves the right not to open a shareholder's account or, if an
account is already opened, to redeem a shareholder's shares at the current NAV,
less any taxes withheld, if the shareholder fails to provide a correct TIN,
fails to provide the proper certifications, or the IRS advises the Fund to begin
backup withholding on the shareholder's Fund account.
GENERAL INFORMATION ABOUT THE FUND
The Company is authorized to issue up to 500,000,000 shares of common stock, par
value $0.01 per share, of which the Company has presently allocated 50,000,000
shares to the Fund. The Board of Directors can allocate the remaining authorized
but unissued shares to the Fund or may create additional series and allocate
shares to such series. A share of the Fund has priority in the assets of the
Fund in the event of a liquidation. The shares of the Fund will be fully paid
and nonassessable, will have no preference over other shares of the Fund as to
conversion, dividends or retirement, and will have no preemptive rights. Shares
of the Fund will be redeemable from the assets of the Fund at any time, as
described in "How to Redeem Shares" above.
Each outstanding share of the Company is entitled to one vote for each full
share of stock and a fractional vote for fractional shares of stock. All
shareholders vote on matters that concern the Company as a whole. The Company is
not required to hold a meeting of shareholders each year, and may elect not to
hold a meeting in years when no meeting is necessary. The shareholders of the
Fund shall vote separately on matters which affect only the interests of the
Fund. The Company's shares do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Directors can elect all of the Directors if they choose to do so. Shareholders
have the right to call a meeting to consider the removal of one or more of the
Directors and will be assisted in shareholder communications in such matter.
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Limitation on Use of Name - The Advisory Agreement for the Fund authorizes the
Company to utilize the name "TANAKA." The Company agrees that if the Advisory
Agreement is terminated it will promptly redesignate the name of TANAKA to
eliminate any reference to the name "TANAKA" or any derivation thereof unless
the Investment Adviser waives this requirement in writing.
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TO OBTAIN MORE INFORMATION
For further information on the TANAKA Growth Fund, please contact Commonwealth
Shareholder Services, Inc., P.O. Box 8687, Richmond, VA 23226, telephone: (800)
527-9525. Additional information may also be obtained by requesting a copy of
the Fund's Statement of Additional Information.
Investment Adviser: Tanaka Fund Advisers, LLC
230 Park Avenue, Suite 1432
New York, New York 10169
Distributor: First Dominion Capital Corp.
1500 Forest Avenue
Suite 223
Richmond, VA 23229
Counsel: Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
Independent Auditors: Tait, Weller & Baker, LLP
8 Penn Center Plaza
Suite 800
Philadelphia, PA 19103
General Information: For general information on the Fund and, call
the Distributor at (800) 776-5455 Toll Free.
Transfer Agent: For account information, wire purchases or
redemptions, call or write to the Fund's
Transfer Agent:
Fund Services, Inc.
P.O. Box 26305
Richmond, VA 23260-6305
(800) 628-4077 Toll Free
More Information: For 24-hour, 7-days-a-week price information,
call 1-800-________.
No dealer, sales representative or any other person has been authorized
to give any information or to make any representations, other than those
contained in this Prospectus, in connection with the offer made by this
Prospectus and, if given or made, such other information or representations must
not be relied upon as having been authorized by the Fund or the Distributor.
This Prospectus does not constitute an offer by the Fund or the Distributor to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
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PART B
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TANAKA FUNDS, INC.
TANAKA GROWTH FUND
Statement of Additional Information Dated March ___, 1998
TANAKA Funds, Inc. (the "Company") is an open-end management investment
company commonly known as a "mutual fund." This Statement of Additional
Information is not a Prospectus but supplements the information contained in the
Prospectus for the Class B shares of TANAKA Growth Fund (the "Fund"), dated
March ___, 1998. It should be read in conjunction with the Prospectus and has
been designed to provide you with further information which is not contained in
the Prospectus. A Prospectus of the Fund may be obtained at no charge upon
request to the Fund. Please retain this Statement of Additional Information for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS STATEMENT OF ADDITIONAL INFORMATION. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Investment Objective and Policies........................................
Special Investment Considerations.......................................
Depositary Receipts.............................................
Warrants .......................................................
Repurchase Agreements...........................................
Illiquid Securities.............................................
Restricted Securities..........................................
Investment Restrictions..................................................
Taxes ................................................................
Dividends and Distributions..............................................
Portfolio Transactions...................................................
Net Asset Value..........................................................
Directors and Officers...................................................
Investment Adviser.......................................................
Transfer Agent...........................................................
Administrator............................................................
Distribution............................................................
Expenses of the Fund.....................................................
Special Shareholder Services.............................................
General Information and History...........................................
Performance..............................................................
<PAGE>
TANAKA FUNDS, INC.
TANAKA GROWTH FUND
Statement of Additional Information
The Fund is a series of the Company, a Maryland corporation which is an
open-end, management investment company, commonly known as a "mutual fund." The
Fund is a diversified series of the Company.
Investment Objective and Policies
The Fund's investment objective is growth of capital.
The asset allocation and investment policies of the Fund are described
in the Fund's Prospectus. The following discussion supplements the information
in the Fund's Prospectus with respect to the types of securities in which the
Fund may invest and the investment techniques it may use in pursuit of its
investment objective.
Special Investment Considerations
Investors should recognize that the Fund may invest in both domestic
and foreign securities. Investing in foreign securities involves certain special
considerations, including those set forth below, which are not typically
associated with investing in United States securities and which may favorably or
unfavorably affect the performance of the Fund. As foreign companies are not
generally subject to the same uniform standards, practices and requirements with
respect to accounting, auditing and financial reporting as are domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Furthermore, foreign markets have
different clearance and settlement procedures and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of a fund are
uninvested and no return is earned thereon. Inability to dispose of portfolio
securities due to settlement problems either could result in losses to a fund
due to subsequent declines in value of the portfolio security or, if a fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. Fixed commissions on some foreign securities exchanges,
although the Fund will endeavor to achieve the most favorable net results on its
portfolio transactions. Further, a fund may encounter difficulties or be unable
to pursue legal remedies and obtain judgments in foreign courts. There is
generally less government supervision and regulation of business and industry
practices, securities exchanges, brokers and listed companies than in the United
States. Communications between the United States and foreign countries may be
less reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or
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confiscatory taxation, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position. Tanaka Fund Advisers, LLC (the "Investment Adviser") seeks
to mitigate the risks associated with the foregoing considerations through
continuous professional management.
Investments in foreign securities usually will involve currencies of
foreign countries. Because of the considerations discussed above, the value of
the assets of the Fund, as measured in U.S. dollars, may be affected favorably
or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the Fund may incur costs in connection with conversions
between various currencies. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a fund at one
rate, while offering a lesser rate of exchange should the fund desire to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. The Fund may, for hedging purposes,
purchase foreign currencies in the form of bank deposits.
Because the Fund may be invested in both U.S. and foreign securities
markets, changes in its share price may have a low correlation with movements in
the U.S. markets. The Fund's share price will reflect the movements of the
markets in which it is invested and of the currencies in which the investments
are denominated; the strength or weakness of the U.S. dollar against foreign
currencies may account for part of the Fund's investment performance. Foreign
securities such as those purchased by the Fund may be subject to foreign
government taxes which could reduce the yield on such securities, although a
shareholder of the Fund may, subject to certain limitations, be entitled to
claim a credit or deduction for U.S. federal income tax purposes for his or her
proportionate share of such foreign taxes paid by the Fund (see "Taxes"). U.S.
and foreign securities markets do not always move in step with each other and
the total returns from different markets may vary significantly.
The Fund cannot guarantee a gain or eliminate the risk of loss. The
Fund's net asset value per share will increase or decrease with changes in the
market price of the Fund's investments, and there is no assurance that the
Fund's investment objective will be achieved.
Depositary Receipts. The Fund may utilize depositary receipts, as
described in the Prospectus. For purposes of determining the country of origin,
depositary receipts and closed-end investment companies which invest primarily
in foreign securities will be deemed to be foreign securities.
Warrants. The Fund may invest up to 5% of its net assets in warrants,
provided that no more than 2% of its net assets may be invested in warrants
that are not listed on the New York Stock Exchange or the American Stock
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Exchange. A warrant is a long-term option issued by a corporation that generally
gives the investor the right of buying a specified number of shares of the
underlying common stock of the issuer at a specified exercise price at any time
on or before an expiration date. If the Fund does not exercise or dispose of a
warrant prior to its expiration, it will expire worthless.
Repurchase Agreements. The Fund may enter into repurchase agreements
(which enables it to employ its assets pending investment) during very short
periods of time. Ordinarily these agreements permit the Fund to maintain
liquidity and earn higher rates of return than would normally be available from
other short-term money-market instruments.
Under a repurchase agreement, a fund buys a money-market instrument and
obtains a simultaneous commitment from the seller to repurchase the investment
at a specified time and at an agreed upon yield to the fund. The seller is
required to pledge cash and/or collateral which is equal to at least 100 percent
of the value of the commitment to repurchase. The collateral is held by the
fund's custodian. The Fund will only enter into repurchase agreements involving
U.S. Government securities in which it may otherwise invest. Repurchase
agreements are considered securities issued by the seller for purposes of the
diversification test under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and not cash, a cash item or a U.S. Government security.
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Treasury, by various
agencies of the United States Government, and by various instrumentalities which
have been established or sponsored by the United States Government. U.S.
Treasury securities are backed by the "full faith and credit" of the United
States. Securities issued or guaranteed by Federal agencies and U.S. Government
sponsored instrumentalities may or may not be backed by the full faith and
credit of the United States. In the case of securities not backed by the full
faith and credit of the United States, the investor must look principally to the
agency or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its commitment.
An instrumentality of the U.S. Government is a government agency organized under
Federal charter with government supervision.
It is the Fund's practice to enter into repurchase agreements with
selected banks and securities dealers, depending upon the availability of the
most favorable yields. The Fund will always seek to perfect its security
interest in the collateral. If the seller of a repurchase agreement defaults,
the Fund may incur a loss if the value of the collateral securing the repurchase
agreement declines. The Investment Adviser monitors the value of the collateral
to ensure that its value always equals or exceeds the repurchase price and also
monitors the financial condition of the issuer of the repurchase agreement. If
the seller defaults, the Fund may incur disposition costs in connection with
liquidating the collateral of that seller. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
Fund may be delayed or limited.
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Illiquid Securities. Normally, the Fund will not invest more than 5% of
its net assets in securities which are illiquid or not readily marketable;
however, the Fund is permitted to invest up to 15% of its net assets in such
securities. Illiquid securities are securities that cannot be sold in the
ordinary course of business at approximately the prices at which they are
carried on the Fund's books. The Fund will treat as illiquid repurchase
agreements with maturities in excess of seven days. Illiquid securities do not
include those securities that meet the requirements of Rule 144A under the
Securities Act of 1933, and that have been determined to be liquid by the
Investment Adviser under the supervision of the Fund's Board of Directors.
Restricted Securities. The Fund may invest in restricted securities.
Generally, "restricted securities" are securities which have legal or
contractual restrictions on their resale. In some cases, these legal or
contractual restrictions may impair the liquidity of a restricted security; in
others, the legal or contractual restrictions may not have a negative effect on
the liquidity of the security. Restricted securities which are deemed by the
Investment Adviser to be illiquid will be included in the Fund's policy which
limits investments in illiquid securities.
Investment Restrictions
The policies set forth below are fundamental policies of the Fund and
may not be changed without approval of a majority of the outstanding voting
securities of the Fund. As used in this Statement of Additional Information a
"majority of the outstanding voting securities of the Fund" means the lesser of
(1) 67% or more of the voting securities present at such meeting, if the holders
of more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy; or (2) more than 50% of the outstanding voting securities
of the Fund.
As a matter of fundamental policy, the Fund may not:
1. as to 75% of its assets, purchase the securities of any issuer (other
than obligations issued or guaranteed as to principal and interest by
the Government of the United States or any agency or instrumentality
thereof) if, as a result of such purchase, more than 5% of its total
assets would be invested in the securities of such issuer;
2. purchase stock or securities of an issuer (other than obligations
issued or guaranteed as to principal and interest by the Government of
the United States or any agency or instrumentality thereof) if such
purchase would cause the Fund to own more than 10% of any class of the
outstanding stock or securities or more than 10% of any class of voting
securities of such issuer;
3. borrow money, except through reverse repurchase agreements or from
banks for temporary or emergency purposes, and then only in an amount
not in excess of 33% of the value of the Fund's net assets at the time
the borrowing is made (borrowings in excess of 5% will be subject to
300% asset coverage requirements of the 1940 Act), provided that the
Fund will not purchase portfolio securities when its borrowings exceed
5% of its total assets;
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4. purchase the securities of any issuer (other than obligations issued or
guaranteed by the Government of the United States or any agency or
instrumentality thereof) if, as a result of such purchase, more than
25% of the Fund's total assets would be invested in any one industry;
5. act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
6. make loans to other persons, except (a) loans of portfolio securities,
and (b) to the extent that the entry into repurchase agreements and
the purchase of debt securities in accordance with its investment
objective and investment policies may be deemed to be loans;
7. issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for shares of
the separate classes or series of the corporation of which the Fund
is a series; provided that the segregation of assets or other
collateral arrangements with respect to currency-related contracts,
futures contracts, options or other permitted investments, including
deposits of initial and variation margin, are not considered to be the
issuance of senior securities for purposes of this restriction, and
obligations for which the Fund segregates assets in accordance with
securities regulatory requirements will not be deemed to be senior
securities;
8. purchase or sell real estate (except that the Fund may invest in (i)
securities of companies which deal in real estate, or mortgages, and
(ii) securities secured by real estate or interests therein, and that
the Fund reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities) or purchase
or sell physical commodities or contracts relating to physical
commodities.
The Fund has voluntarily adopted certain policies and restrictions
which are observed in the conduct of its affairs. These represent intentions of
the Directors based upon current circumstances. They differ from fundamental
investment policies in that they may be changed or amended by action of the
Directors without requiring prior notice to or approval of shareholders.
The following policies are not fundamental policies and may be changed
without shareholder approval. The Fund does not currently intend to:
(a) purchase or sell futures contracts or options thereon;
(b) make short sales of securities;
(c) make loans of portfolio securities;
(d) purchase or sell real estate limited partnership interests;
(e) purchase or retain securities of any open-end investment
company; purchase securities of closed-end investment
companies except by purchase in the open market where no
commission or
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profit to a sponsor or dealer results from such purchase;
however, the Fund may acquire investment company securities in
connection with a plan of merger, consolidation,
reorganization or acquisition of assets; in any event, the
Fund may not purchase more than 3% of the outstanding voting
securities of another investment company, may not invest more
than 5% of its assets in another investment company, and may
not invest more than 10% of its assets in other investment
companies;
(f) borrow, pledge, mortgage or hypothecate its assets in excess,
together with permitted borrowings, of 1/3 of its total assets;
(g) purchase securities on margin, except that the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts, if
any, shall not constitute purchasing securities on margin.
(h) invest more than 15% of its net assets in securities which are
illiquid or not readily marketable, including repurchase
agreements which are not terminable within 7 days (normally,
no more than 5% of the Fund's net assets will be invested in
such securities).
*(i) purchase put options or write covered call options
if, as a result, more than 25% of the Fund's total
assets would be hedged with options;
*(j) write put options if, as a result, the Fund's total
obligations upon exercise of written put options
would exceed 25% of the Fund's total assets;
*(k) purchase call options if, as a result, the current
value of options premiums for call options purchased
by the Fund would exceed 5% of the Fund's total
assets;
(l) purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of the Fund's net assets; provided
that no more than 2% of the Fund's net assets may be warrants
that are not listed on the New York Stock Exchange or the
American Stock Exchange.
*NOTE: tems (i), (j) and (k) above do not apply to options
ttached to, or purchased as a part of, their underlying
securities.
If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies" above
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or the total cost of the Fund's assets will
not be considered a violation of the restriction.
Taxes
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<PAGE>
The Fund will seek to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification does not involve governmental supervision or management of
investment practices or policy.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax (assuming the Fund meets the 90%
gross income test and the tax diversification test of Subchapter M) to the
extent that it distributes annually its investment company taxable income and
net realized capital gains in the manner required under the Code. The Fund
intends to distribute at least annually all of its investment company taxable
income and net realized capital gains and therefore generally does not expect to
pay federal income taxes.
In order to meet the tax diversification test, at the close of each
quarter of its fiscal year, (i) at least 50% of the value of the Fund's total
assets must be represented by cash and cash items including receivables, U.S.
Government securities, and securities of other regulated investment companies,
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the value of its total assets, and to not more than 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and the securities of other
regulated investment companies.)
The Fund will meet the 90% of gross income test if 90% of its gross
income is derived from dividends, interest, payments with respect to certain
securities loans, and gain from the sale or disposition of stock or securities
or foreign currencies, or other income (including, but not limited to, gains
from options, futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but which are not distributed under a prescribed formula. The
formula requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over capital losses (adjusted
for certain ordinary losses prescribed by the Code) realized during the one-year
period ending October 31 during such year, and all ordinary income and capital
gains for prior years that were not previously distributed.
Investment company taxable income generally includes dividends,
interest, net short-term capital gains in excess of net long-term capital
losses, and net foreign currency gains, if any, less expenses. Realized net
capital gains for a fiscal year are computed by taking into account any capital
loss carryforward of the Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to
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<PAGE>
shareholders. As a result, each shareholder will report such capital gains as
long-term capital gains, will be able to claim his/her share of federal income
taxes paid by the Fund on such gains as a credit against his/her own federal
income tax liability, and will be entitled to increase the adjusted tax basis of
his/her Fund shares by the difference between his/her pro rata share of such
gains and his/her tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders as long-term capital gain,
regardless of the length of time the shares of the Fund have been held by such
shareholders. Such distributions are not eligible for a dividends-received
deduction for corporate investors.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and realized net
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another fund, may
result in tax consequences (gain or loss) to the shareholder and are also
subject to information reporting requirements.
An individual may make a deductible IRA contribution of up to $2,000
or, if less, the amount of the individual's earned income for any taxable year
if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,000 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,000 and
$50,000; $25,000 for a single individual, with a phase-out for adjusted gross
income between $25,000 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000, or 100% of taxable
compensation if less, to an IRA (up to $2,250 to IRAs for an individual and his
or her nonearning spouse, for years prior to 1997) for that year. Starting in
1997, even a spouse who does not earn compensation can contribute up to $2,000
per year to his or her own IRA. The deductibility of such contributions will be
determined under the same rules as for contributions made by individuals with
earned income. There are special rules for determining how withdrawals are to be
taxed if an IRA contains both deductible and nondeductible amounts. In general,
a proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions
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<PAGE>
will not be taxable. Also, annual contributions may be made to a spousal IRA
even if the spouse has earnings in a given year if the spouse elects to be
treated as having no earnings (for IRA contribution purposes) for the year.
Distributions by the Fund result in a reduction in the net asset value
of its shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though
it may constitute a partial return of capital. In particular, investors should
consider the tax implications of buying shares just prior to a distribution. The
price of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive a
partial return of their invested capital upon the distribution, which will
nevertheless be taxable to them.
The Fund intends to qualify for and may make the election permitted
under Section 853 of the Code so that shareholders may (subject to limitations)
be able to claim a credit or deduction on their federal income tax returns for,
and may be required to treat as part of the amounts distributed to them, their
pro rata portion of qualified taxes paid by the Fund to foreign countries (which
taxes relate primarily to investment income). The Fund may make an election
under Section 853 of the Code, provided that more than 50% of the value of the
total assets of the Fund at the close of the taxable year consists of securities
in foreign corporations. The foreign tax credit available to shareholders is
subject to certain limitations imposed by the Code.
If the Fund invests in stock of certain foreign investment companies,
the Fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the Fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the Fund at
the highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock. Any
amount of distribution or gain allocated to the taxable year of the distribution
or disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
The Fund may be able to make an election, in lieu of being taxable in
the manner described above, to include annually in income its pro rata share of
the ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in the Fund's investment company
taxable income and net capital gain which, to the extent distributed by the Fund
as ordinary or capital gain dividends, as the case may be, would not be taxable
to the Fund. In order to make this election, the Fund would be required to
obtain certain annual information from the foreign investment companies in which
it invests, which in many cases may be difficult to obtain. The Fund may make an
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election with respect to those foreign investment companies which provide the
Fund with the required information.
Certain forward foreign currency contracts, and all listed nonequity
options written or purchased by the Fund (including options on debt securities,
options on securities indices and options on broad-based stock indices) will be
governed by Section 1256 of the Code. Absent a tax election to the contrary,
gain or loss attributable to the lapse, exercise or closing out of any such
position generally will be treated as 60% long-term and 40% short-term capital
gain or loss, and on the last trading day of the Fund's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e., treated as if
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term capital
gain or loss. Under Section 988 of the Code, discussed below, foreign currency
gains or losses from foreign currency related forward contracts and similar
financial instruments entered into or acquired by the Fund will be treated as
ordinary income or loss.
Positions of the Fund which consist of at least one stock and at least
one stock option or other position with respect to a related security which
substantially diminishes a Fund's risk of loss with respect to such stock could
be treated as a "straddle" which is governed by Section 1092 of the Code, the
operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by the Fund.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one forward contract or nonequity option
governed by Section 1256 which substantially diminishes the Fund's risk of loss
with respect to such other position will be treated as a "mixed straddle."
Although mixed straddles are subject to the straddle rules of Section 1092 of
the Code, certain tax elections exist for them which reduce or eliminate the
operation of these rules. The Fund will monitor its transactions in options and
may make certain tax elections in connection with these investments.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency and the time the Fund actually collects such receivables, or pays such
liabilities, generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.
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The Fund will be required to report to the IRS all distributions of
investment company taxable income and capital gains as well as gross proceeds
from the redemption or exchange of Fund shares, except in the case of certain
exempt shareholders. Under the backup withholding provisions of Section 3406 of
the Code, distributions of investment company taxable income and capital gains
and proceeds from the redemption or exchange of the shares of a regulated
investment company may be subject to withholding of federal income tax at the
rate of 31% in the case of non-exempt shareholders who fail to furnish the
investment company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the Fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld. Amounts withheld
are applied against the shareholder's tax liability and a refund may be obtained
from the Internal Revenue Service, if withholding results in overpayment of
taxes. A shareholder should contact the Fund or the Transfer Agent if the
shareholder is uncertain whether a proper Taxpayer Identification Number is on
file with the series.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each investor should consult his or her own tax adviser as to the applicability
of these taxes.
In January of each year the Company's Transfer Agent issues to each
shareholder a statement of the federal income tax status of all distributions.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign
tax consequences of ownership of Fund shares. Each shareholder who is not
a U.S. person should also consider the U.S. estate tax implications of
holding Fund shares at death. The U.S. estate tax may apply to such
holdings if an investor dies while holding shares of a Fund. Each investor
should consult his or her own tax adviser about the applicability of these
taxes. Distributions of net investment income to non-resident aliens and
foreign corporations that are not engaged in a trade or business in the
U.S. to which the distribution is effectively connected, will be subject to
a withholding tax imposed at the rate of 30% upon the gross amount of the
distribution in the absence of a Tax Treaty providing for a reduced rate or
exemption from U.S. taxation. Distributions of net long-term capital gains
realized by the Fund are not subject to tax unless the distribution is
effectively connected with the conduct of the shareholder's trade or
business within the United States, or the foreign shareholder is a non-
resident alien individual who was physically present in the U.S. during the
tax year for more than 182 days.
The foregoing is a general abbreviated summary of present Federal
income taxes on dividends and distributions. Shareholders should consult
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their tax advisers about the application of the provisions of the tax law
described in this Statement of Additional Information in light of their
particular tax situations and about any state and local taxes applicable to
dividends and distributions.
Dividends and Distributions
As stated previously, it is the policy of the Fund to distribute
substantially all of its net investment income and net realized capital gains,
if any, shortly before the close of the fiscal year (December 31st).
All dividend and capital gains distributions, if any, will be
reinvested in full and fractional shares based on net asset value (without a
sales charge) as determined on the ex-dividend date for such distributions.
Shareholders may, however, elect to receive all such payments, or the dividend
or distribution portion thereof, in cash, by sending written notice to this
effect to the Transfer Agent. This written notice will be effective as to any
subsequent payment if received by the Transfer Agent prior to the record date
used for determining the shareholders' entitlement to such payment. Such an
election will remain in effect unless or until the Transfer Agent is notified by
the shareholder in writing to the contrary.
Portfolio Transactions
It is the policy of the Investment Adviser, in placing orders for the
purchase and sale of the Fund's securities, to seek to obtain the best price and
execution for securities transactions taking into account such factors as price,
commission, where applicable (which is negotiable in the case of U.S. national
securities exchange transactions but which is generally fixed in the case of
foreign exchange transactions), size of order, difficulty of execution and skill
required of the executing broker/dealer. After a purchase or sale decision is
made by the Investment Adviser, the Investment Adviser then arranges for
execution of the transaction in a manner deemed to provide the best price and
execution for the Fund.
The Fund has authorized the Investment Adviser to allocate a portion of
its brokerage commissions to persons or firms providing the Investment Adviser
with investment recommendations, statistical, research or similar services
useful to the Investment Adviser's investment decision making process for the
Fund or other clients. The term "investment recommendations, statistical,
research or similar services" means advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and
furnishing analysis and reports concerning issuers, industries, securities,
economic factors and trends, and portfolio strategy. Such services are one of
the many ways the Fund's Investment Adviser can keep abreast of the information
generally circulated among institutional investors by broker-dealers. While this
information is useful in varying degrees, its value is indeterminable. Such
services received on the basis of transactions for the Fund may be used by the
Investment Adviser for the benefit of other clients, and the Fund may
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benefit from such transactions effected for the benefit of other clients. While
there is no specific agreement or formula to do so, and subject to obtaining
best price and execution the Fund may consider sales of its shares as a factor
in the selection of brokers to execute portfolio transactions. The Investment
Adviser generally does not, when placing portfolio transactions for the Fund,
pay a brokerage commission in excess of that which another broker might have
charged for executing the same transaction on account of the receipt of
research, market or statistical information. Except for implementing the policy
stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
The Advisor has been instructed not to place transactions with a
broker-dealer with which it is affiliated unless that broker-dealer stands ready
to demonstrate to the Company that each Fund will receive (1) a price and
execution no less favorable than that available from unaffiliated persons, and
(2) a price and execution equivalent to that offered to unaffiliated persons by
that broker-dealer, in each case on transactions of a like size and nature. In
this regard, the Board of Directors of the Company has adopted policies and
procedures which govern such allocation of brokerage transactions, and the Board
reviews at its meetings details of all transactions which have been placed
pursuant to those policies.
When two or more accounts managed by the Investment Adviser are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated in a manner deemed equitable to each account. It is
recognized that in some cases the procedure could have a detrimental effect on
the price or volume of the security as far as the Fund is concerned. In other
cases, however, it is believed that the ability of the Fund to participate in
volume transactions will be beneficial for the Fund. It is the opinion of the
Board of Directors of the Company that these advantages, when combined with the
other benefits available because of the Investment Adviser's organization,
outweigh the disadvantages that may be said to exist from this treatment of
transactions.
Exchange-listed securities are generally traded on their principal
exchange unless another market offers a better result. Securities traded only in
the over-the-counter market may be executed on a principal basis with primary
market makers in such securities except for fixed price offerings and except
where the Fund may obtain better prices or executions on a commission basis or
by dealing with other than a primary market maker.
Average annual portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio securities
owned during the year, excluding from both the numerator and the denominator all
securities with maturities at the time of acquisition of one year or less. A
higher rate involves greater transaction expenses to a fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in the Investment Adviser's opinion, to meet the Fund's objective.
The Investment Adviser anticipates that the Fund's average annual portfolio rate
will be less than 100%.
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Net Asset Value
The Fund's net asset value ("NAV") per share is calculated daily from
Monday through Friday on each business day on which the New York Stock Exchange
(the "Exchange") is open. The Exchange is currently closed on weekends and on
the following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day and Christmas
Day, and the preceding Friday or subsequent Monday when any of these holidays
falls on a Saturday or Sunday, respectively. The Fund's NAV is calculated at the
time set by the Board of Directors based upon a determination of the most
appropriate time to price the Fund's securities.
The Board of Directors has determined that the Fund's NAV be calculated
as of the close of trading of the Exchange (currently 4:00 p.m., Eastern Time)
on each business day from Monday to Friday or on each day (other than a day
during which no security was tendered for redemption and no order to purchase or
sell such security was received by the Fund) in which there is a sufficient
degree of trading in the Fund's portfolio securities that the current NAV of the
Fund's shares might be materially affected by changes in the value of such
portfolio security.
NAV per share is determined by dividing the total value of the Fund's
securities and other assets, less liabilities (including proper accruals of
taxes and other expenses), by the total number of shares then outstanding, and
rounding the result to the nearer cent.
The Fund may compute its NAV per share more frequently if necessary to
protect shareholders' interests.
Generally, securities owned by the Fund are valued at market value. In
valuing the Fund's assets, portfolio securities, including ADRs and EDRs, which
are traded on the Exchange, will be valued at the last sale price prior to the
close of regular trading on the Exchange. Lacking any sales, the security will
be valued at the last bid price prior to the close of regular trading on the
Exchange. ADRs and EDRs for which such a value cannot be readily determined on
any day will be valued at the closing price of the underlying security adjusted
for the exchange rate. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated in accordance
with procedures approved by the Board of Directors of the Fund as the primary
market. Securities will be valued using quotations on the exchange and lacking
any sales, securities will be valued at the last reported bid price prior to the
Fund's valuation time, unless the Fund is aware of a material change in the
value prior to the time it values its securities.
Unlisted securities which are quoted on the NASD's National Market
System, for which there have been sales of such securities, shall be valued at
the last sale price reported on such system. If there are no such sales, the
value shall be the high or "inside" bid, which is the bid supplied by the NASD
on its NASDAQ Screen for such securities in the over-the-counter market. The
value of such securities quoted on the NASDAQ System, but not listed on the
NASD's National Market System, shall be valued at the high or "inside" bid.
Unlisted securities which are not quoted on the NASDAQ System and for which the
over-the-counter market
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quotations are readily available will be valued at the current bid prices for
such securities in the over-the-counter market. Other unlisted securities (and
listed securities subject to restriction on sale) may be valued at their fair
value as determined in good faith by the Board of Directors.
The value of a security traded or dealt in upon an exchange may be
valued at what the Company's pricing agent determines is fair market value on
the basis of all available information, including the last determined value, if
the pricing agent determines that the last bid does not represent the value of
the security, or if such information is not available. For example, the pricing
agent may determine that the price of a security listed on a foreign stock
exchange that was fixed by reason of a limit on the daily price change does not
represent the fair market value of the security. Similarly, the value of a
security not traded or dealt in upon an exchange may be valued at what the
pricing agent determines is fair market value if the pricing agent determines
that the last sale does not represent the value of the security, provided that
such amount is not higher than the current bid price.
Notwithstanding the foregoing, money market investments with a
remaining maturity of less than sixty days shall be valued by the amortized cost
method described below; debt securities are valued by appraising them at prices
supplied by a pricing agent approved by the Fund, which prices may reflect
broker-dealer supplied valuations and electronic data processing techniques and
are representative of market values at the close of the Exchange; options on
securities listed or admitted to trading on a national exchange shall be valued
at their last sale on such exchange prior to the time of determining net asset
value; or if no sales are reported on such exchange on that day, at the mean
between the most recent bid and asked price; and forward contracts shall be
valued at their last sale as reported by the Fund's pricing service, or lacking
a report by the service, at the value of the underlying currencies at the
prevailing currency rates.
The value of an illiquid security which is subject to legal or
contractual delays in or restrictions on resale by the Fund shall be taken to be
the fair value thereof as determined in accordance with procedures established
by the Fund's Board, on the basis of such relevant factors as the following: the
cost of such security to the Fund, the market price of unrestricted securities
of the same class at the time of purchase and subsequent changes in such market
price, potential expiration or release of the restrictions affecting such
security, the existence of any registration rights, the fact that the Fund may
have to bear part or all of the expense of registering such security, and any
potential sale of such security to another investor. The value of other property
owned by the Fund shall be determined in a manner which, in the discretion of
the pricing agent of the Fund, most fairly reflects fair market value of the
property on such date.
Following the calculation of security values in terms of currency in
which the market quotation used is expressed ("local currency"), the pricing
agent shall, prior to the next determination of the NAV of the Fund's shares,
calculate these values in terms of United States dollars on the basis of the
conversion of the local currencies (if other than U.S. dollars) into United
States dollars at the rates of exchange prevailing at the value time as
determined by the pricing agent.
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U.S. Treasury bills, and other short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, with
original or remaining maturities in excess of 60 days are valued at the mean of
representative quoted bid and asked prices for such securities or, if such
prices are not available, are valued at the mean of representative quoted bid
and asked prices for securities of comparable maturity, quality and type.
Short-term securities, with 60 days or less to maturity, are amortized to
maturity based on their cost if acquired within 60 days of maturity or, if
already held, on the 60th day, based on the value determined on the 61st day.
Any purchase order may be rejected by the Distributor or by the Fund.
The Company has reserved the right to redeem in-kind but does not
intend to do so under normal circumstances.
Directors and Officers
The following is a list of the Company's Directors and Officers, their
dates of birth and a brief statement of their present positions and principal
occupations during the past five years. The address of each Director and Officer
is c/o Tanaka Capital Management, Inc., 230 Park Avenue, Suite 1432, New York,
New York 10169, except for Mr. Pasco whose address is 1500 Forest Avenue, Suite
223, Richmond, Virginia, 23229.
*Graham Y. Tanaka (02/23/48)
Chairman, Chief Executive Officer and President of the Company
Mr. Tanaka is currently the President of Tanaka Capital Management
Inc., having founded the firm in December 1986. From 1973 until 1978, Mr. Tanaka
was a research analyst at Morgan Guaranty Trust. He then worked at Fiduciary
Trust Company of New York as Vice President from 1978-1980. Prior to launching
Tanaka Capital Management, Mr. Tanaka served as Chairman at Milbank Tanaka &
Associates from 1980 to 1986. He is a member of The Electronic Analyst Group and
also a member of the Healthcare Analyst Association. Mr. Tanaka currently serves
on the boards of TransAct Technologies and Tridex Corporation.
Charles A. Dill (11/29/39)
Director
Mr. Dill is a General Partner of Gateway Associates, a St. Louis-based
venture capital firm. From 1991 until 1995, Mr. Dill served as President,
Chief Executive Officer and Director of Bridge Information Systems. From
1988 to 1991, Mr. Dill was President, Chief Operating Officer and Director
of AVX Corporation. Prior to 1988, Mr. Dill was Senior Vice President and
a member of the Office of the Chief Executive of Emerson Electric. Mr.
Dill serves on the boards of Stifel Financial Corp, Zoltek, Transact
Technologies, Pinnacle Automation and DT Industries, as well as the boards
of several private companies.
Thomas R. Schwarz (6/1/36)
Director
Mr. Schwarz was President and Chief Operating Officer of Dunkin Donuts
Inc. (1966-1989); Chairman of the Board and Chief Executive Officer of
Grossmans Inc. (1989-1994) and retired in 1994. Mr. Schwarz currently sits
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on the following boards: Transact Technologies, Inc., Tridex Corporation,
A&W Restaurants, Lebhar-Friedman Publishing and Foilmark Inc.
Michael Seely (6/7/45)
Director
Mr. Seely is the founder and President of Investor Access Corporation.
Before establishing IAC in 1978, he served as an officer of Avco
Corporation, a conglomerate subsequently acquired by Textron. Mr. Seely
has served as a director of various mutual funds including the "fund of
funds" Fund Trust Group and the Republic National Bank mutual funds where
he participated in the selection and performance evaluation of scores of
prominent U.S. and foreign money managers. Mr. Seely is also the General
Partner of Global Multi-Manager Partners, a U.S. investment relationship
operating in non U.S. investments.
Scott D. Stooker (6/16/54)
Director
Mr. Stooker is currently the owner and President of 1st Team
Communications Inc., in Wilmington, Delaware. He has served as a member on the
board of directors of The Advertising Club of Delaware, Big Brothers/Little
Sisters of Delaware, and currently serves on the board of Saint Anthony's
Community Center.
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<PAGE>
*John Pasco, III (4/10/45)
Vice President and Chief Financial Officer
Mr. Pasco is Treasurer and Director of Commonwealth Shareholder
Services, Inc., the Company's Administrator, since 1985. Mr. Pasco is a
Director, President and Treasurer of Commonwealth Capital Management, Inc.
(a registered investment advisor) since 1983. Mr. Pasco is a Director and
shareholder of Fund Services, Inc., the Company's Transfer and Dividend
Disbursing Agent, since 1987, and shareholder of Commonwealth Fund
Accounting, Inc. which provides bookkeeping services to Star Bank. Mr.
Pasco is also a Certified Public Accountant.
*Carlos Gonzalez (9/7/51)
Secretary
Mr. Gonzalez is currently the Senior Portfolio Manager/Analyst at
Tanaka Capital Management. From 1972 until 1974, Mr. Gonzalez was a
Registered representative at Bache & Co. He then worked at Morgan Guaranty
Trust from 1976 to 1981. From 1981 to 1985, he worked as an Associate at
Mackay Shields Financial. From 1985 to 1996 he served as Senior Vice
President at Desai Capital Management. Mr. Gonzalez currently serves on
the boards of Pharmaceutical Marketing Systems, Inc., Empresas Caparra, and
Fountain House.
*Victoria M. McCann (6/8/67)
Vice President
Ms. McCann is currently the Head trader at Tanaka Capital. From 1988
to 1991 Ms. McCann served at Clover Capital Management as a Trader.
* Persons deemed to be "interested" persons of the Company under the 1940
Act.
With the exception of the $100,000 initial capital proceeds by Graham
Y. Tanaka, the Directors and Officers of the Company own less than 1% of the
Fund.
Investment Adviser
Tanaka Fund Advisers, LLC (the "Investment Adviser") manages the
investment of the assets of the Fund pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The Advisory Agreement will be effective
for a period of two years from _________, 1998 and may be renewed thereafter
only so long as such renewal and continuance is specifically approved at least
annually by the Company's Board of Directors or by vote of a majority of the
outstanding voting securities of the Fund, provided the continuance is also
approved by a majority of the Directors who are not "interested persons" of the
Company or the Investment Adviser by vote cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Agreement is terminable
without penalty on sixty days notice by the Company's Board of Directors or by
the Investment Adviser. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
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The Company has designated Graham Y. Tanaka, President and a Director
of the Investment Adviser, as the Chairman, President and Chief Executive
Officer of the Company.
The Investment Adviser shall be paid a fee to be accrued daily at an
annual rate of 1.00% of the average daily net assets of the Fund which are not
in excess of $300,000,000; 0.90% of the assets of the Fund over $300,000,000 and
not in excess of $500,000,000; 0.80% of the assets of the Fund over $500,000,000
and not in excess of $1,000,000,000 and 0.75% of the assets of the Fund over
$1,000,000,000. Such fee shall be paid monthly, within ten (10) business days
after the end of the month. All expenses not specifically assumed by the
Investment Adviser are assumed by the Fund. The address of the Investment
Adviser is 230 Park Avenue, Suite 1432, New York, New York 10169.
The Advisory Agreement contemplates the authority of the Investment
Adviser to place orders pursuant to its investment determinations for the Fund
either directly with the issuer or with any broker or dealer. In placing orders
with brokers or dealers, the Investment Adviser will attempt to obtain the best
price and execution of its orders. The Investment Adviser may purchase and sell
securities to and from brokers and dealers who provide the Fund with research
advice and other services, or who sell shares of the Fund. See "Portfolio
Transactions" above.
Transfer Agent
Fund Services, Inc. ("FSI") is the Company's Transfer and Disbursing
Agent, pursuant to a Transfer Agent Agreement. The Transfer Agent Agreement is
dated March____, 1998. John Pasco, III, an officer and shareholder of
Commonwealth Shareholder Services, Inc. (the Administrator of the Fund) owns one
third of the stock of FSI, and, therefore, FSI may be deemed to be an affiliate
of the Company and Commonwealth Shareholder Services Inc.
Pursuant to the Transfer Agent Agreement, the minimum annual fee for
the Fund is $16,500. Each series of the Company will receive a reduced minimum
fee of $12,000 for its first twelve months of operations.
Administrator
Commonwealth Shareholder Services, Inc. is the Company's Administrator
pursuant to an Administrative Services Agreement (the "Service Agreement"),
which is dated March ____, 1998. The Service Agreement is described in the
Fund's Prospectus. This agreement continues in effect from year to year for a
period of one year only if the Board of Directors, including a majority of the
directors who are not interested persons of the Company or the Administrator,
approve the extension at least annually.
Distribution
Shares of the Fund are sold at net asset value without a front-end
sales charge on a continuous basis. Class B shares of the Fund are subject to
asset-based charges pursuant to a Plan of Distribution adopted by the Fund, and
assess a deferred sales charge as described in the Prospectus under the section
headings "Distribution Plan" and "How To Invest." The
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Plan of Distribution is a "compensatory plan" under which payments are made to
the Distributor to finance distribution of shares.
First Dominion Capital Corp. (the "Distributor"), 1500 Forest Avenue,
Suite 223, Richmond, VA 23229, is the Company's principal underwriter pursuant
to a Distribution Agreement between the Company and the Distributor. John Pasco,
III, Chairman of the Board of CSS owns 100% of the stock of the Distributor, and
is its President, Treasurer and a Director.
Expenses of the Fund
The Fund will pay its expenses not assumed by the Investment Adviser,
including, but not limited to, the following: distribution, custodian; stock
transfer and dividend disbursing fees and expenses; taxes; expenses of the
issuance and redemption of Fund shares (including stock certificates,
registration and qualification fees and expenses); legal and auditing expenses;
and the cost of stationery and forms prepared exclusively for the Fund.
The allocation of the general expenses of the Fund is made on a basis
that the Company's Board of Directors deems fair and equitable, which may be
based on the relative net assets of the series of the Company or the nature of
the services performed and relative applicability to each series of the Company.
Investors should understand that the Fund's expense ratio can be
expected to be higher than investment companies investing in domestic securities
since the cost of maintaining the custody of foreign securities paid by the Fund
is higher.
Special Shareholder Services
As described briefly in the Prospectus, the Fund offers the following
shareholder services:
Regular Account: The regular account allows for voluntary investments
to be made at any time. Available to individuals, custodians, corporations,
trusts, estates, corporate retirement plans and others, investors are free to
make additions and withdrawals to or from their account as often as they wish.
Simply use the Account Application provided with the Prospectus to open your
account.
Telephone Transactions: You may redeem shares or transfer into another
fund by telephone if you request this service at the time you complete the
initial Account Application. If you do not elect this service at that time, you
may do so at a later date by putting your request in writing to the Transfer
Agent and having your signature guaranteed.
The Fund employs reasonable procedures designed to confirm the
authenticity of your instructions communicated by telephone and, if it does not,
it may be liable for any losses due to unauthorized or fraudulent transactions.
As a result of this policy, a shareholder authorizing telephone redemption bears
the risk of loss which may result from unauthorized or fraudulent transactions
which the Fund believes to be
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genuine. When you request a telephone redemption or transfer, you will be asked
to respond to certain questions designed to confirm your identity as a
shareholder of record. Your cooperation with these procedures will protect your
account and the Fund from unauthorized transactions.
Invest-A-Matic Account: Any shareholder may utilize this feature, which
provides for automatic monthly investments into your account. Upon your request,
the Transfer Agent will withdraw a fixed amount each month from your checking
account for investment into your account. This does not require you to make a
commitment for a fixed period of time. You may change the monthly investment,
skip a month or discontinue your Invest-A-Matic Plan as desired by notifying the
Transfer Agent. This feature requires a separate Plan application, in addition
to the Account Application. To obtain an application, or to receive more
information, please call the offices of the Company.
Individual Retirement Account (IRA) - All wage earners under 70-1/2,
even those who participate in a company sponsored or government retirement plan,
may establish their own IRA. You can contribute 100% of your earnings up to
$2,000 (or $2,250 with a spouse who is not a wage earner, for years prior to
1997). Starting in 1997, even a spouse who does not earn compensation can
contribute up to $2,000 per year to his or her own IRA. The deductibility of
such contributions will be determined under the same rules as for contributions
made by individuals with earned income. A special IRA program is available for
corporate employers under which the employers may establish IRA accounts for
their employees in lieu of establishing corporate retirement plans. Known as
SEP-IRA's (Simplified Employee Pension-IRA), they free the corporate employer of
many of the recordkeeping requirements of establishing and maintaining a
corporate retirement plan trust.
If you have received a lump sum distribution from another qualified
retirement plan, you may rollover all or part of that distribution into your
Fund IRA. Your rollover contribution is not subject to the limits on annual IRA
contributions. By acting within applicable time limits of the distribution you
can continue to defer Federal Income Taxes on your lump sum contribution and on
any income that is earned on that contribution.
How to Establish Retirement Accounts: Please call the Company to obtain
information regarding the establishment of individual retirement plan accounts.
The plan custodian charges nominal fees in connection with plan establishment
and maintenance. These fees are detailed in the plan documents. You may wish to
consult with your attorney or other tax advisor for specific advice concerning
your tax status and plans.
General Information and History
The Company is authorized to issue up to 500,000,000 shares of common
stock, par value $0.01 per share, of which it has presently allocated 50,000,000
shares to the Fund. The Board of Directors can allocate the remaining authorized
but unissued shares to the Fund, or may create additional series and allocate
shares to such series. Each series is required to have a suitable investment
objective, policies and restrictions, to maintain a separate portfolio of
securities suitable to
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its purposes, and to generally operate in the manner of a separate investment
company as required by the 1940 Act.
If additional series were to be formed, the rights of existing series
shareholders would not change, and the objective, policies and investments of
each series would not be changed. A share of any series would continue to have a
priority in the assets of that series in the event of a liquidation.
The shares of each series when issued will be fully paid and nonassessable,
will have no preference over other shares of the same series as to conversion,
dividends, or retirement, and will have no preemptive rights. The shares of any
series will be redeemable from the assets of that series at any time at a
shareholder's request at the current net asset value of that series determined
in accordance with the provisions of the 1940 Act and the rules thereunder. The
Company's general corporate expenses (including administrative expenses) will be
allocated among the series in proportion to net assets or as determined in good
faith by the Board.
The investment advisory fees payable to Tanaka Fund Advisers, LLC by the
Fund and the expense limitation guarantee formula of the Fund will be based upon
the assets of the Fund.
Voting and Control - Each outstanding share of the Company is entitled to
one vote for each full share of stock and a fractional share of stock. All
shareholders vote on matters which concern the corporation as a whole. Election
of Directors or ratification of the auditor are examples of matters to be voted
upon by all shareholders. The Company is not required to hold a meeting of
shareholders each year. The Company intends to hold annual meetings when it is
required to do so by the Maryland General Corporate Law or the 1940 Act. Each
series shall vote separately on matters (1) when required by the General
Corporation Law of Maryland, (2) when required by the 1940 Act and (3) when
matters affect only the interest of the particular series. An example of a
matter affecting only one series might be a proposed change in an investment
restriction of one series. The shares will not have cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of directors can elect all of the directors if they choose to do so.
Limitation on Use of Name - The Advisory Agreement for the Fund authorizes
the Company to utilize the name "TANAKA." The Company agrees that if the
Advisory Agreement is terminated it will promptly redesignate the name of the
TANAKA Growth Fund to eliminate any reference to the name "TANAKA" or any
derivation thereof unless the Investment Adviser waives this requirement in
writing.
Code of Ethics - The Company has adopted a Code of Ethics which imposes
certain restrictions on the authority of portfolio managers and certain other
personnel of the Fund and its advisors governing personal securities activities
and investments of those persons and has instituted procedures to its Code of
Ethics to require such investment personnel to report such activities to the
compliance officer. The Code is reviewed and updated annually.
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Performance
Current yield and total return are the two primary methods of measuring
investment performance. Occasionally, however, the Fund may include its
distribution rate in sales literature. Yield, in its simplest form, is the ratio
of income per share derived from the Fund's portfolio investments to the current
maximum offering price expressed in terms of percent. The yield is quoted on the
basis of earnings after expenses have been deducted. Total return, on the other
hand, is the total of all income and capital gains paid to shareholders,
assuming reinvestment of all distributions, plus (or minus) the change in the
value of the original investment, expressed as a percentage of the purchase
price. The distribution rate is the amount of distributions per share made by
the Fund over a twelve-month period divided by the current maximum offering
price.
Performance quotations by investment companies are subject to certain
rules adopted by the Securities and Exchange Commission (the "Commission").
These rules require the use of standardized performance quotations, or
alternatively, that every non-standardized performance quotation furnished by
the Fund be accompanied by certain standardized performance information computed
as required by the Commission. Current yield and total return quotations used by
the Fund are based on the standardized methods of computing performance mandated
by the Commission.
Yield. As indicated below, current yield is determined by dividing the
net investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the 30 day base period. According to the Commission formula:
6
Yield = 2 [(a-b + 1) -1]
cd
where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Total Return.
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes the maximum
-23-
<PAGE>
sales load is deducted from the initial $1,000 purchase order and that all
dividends and distributions are reinvested at the public offering price on the
reinvestment dates during the period. The quotation assumes the account was
completely redeemed at the end of each one-, five- and ten-year or since
inception period and the deduction of all applicable charges and fees. According
to the Commission formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods (or
fractional portion thereof).
Sales literature pertaining to the Fund may quote a distribution rate
in addition to the yield or total return. The distribution rate is the amount of
distributions per share made by the Fund over a twelve-month period divided by
the current maximum offering price. The distribution rate differs from the yield
because it measures what the Fund paid to shareholders rather than what the Fund
earned from investments. It also differs from the yield because it may include
dividends paid from premium income from option writing, if applicable, and
short-term capital gains in addition to dividends from investment income. Under
certain circumstances, such as when there has been a change in the amount of
dividend payout, or a fundamental change in investment policies, it might be
appropriate to annualize the distributions paid over the period such policies
were in effect, rather than using the distributions paid during the past twelve
months.
Occasionally, statistics may be used to specify the Fund's volatility
or risk. Measures of volatility or risk are generally used to compare the Fund's
net asset value or performance relative to a market index. One measure of
volatility is beta. Beta is the volatility of a fund relative to the total
market as represented by the Standard & Poor's 500 Stock Index. A beta of more
than 1.00 indicates volatility greater than the market, and a beta of less than
1.00 indicates volatility less than the market. Another measure of volatility or
risk is standard deviation. Standard deviation is used to measure variability of
net asset value or total return around an average, over a specified period of
time. The premise is that greater volatility connotes greater risk undertaken in
achieving performance.
Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to shareholders
only for the limited historical period used.
-24-
<PAGE>
Comparisons and Advertisements
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss yield, total return, or Fund volatility as reported by various financial
publications. Advertisements may also compare yield, total return, or volatility
(as calculated above) to yield, total return, or volatility as reported by other
investments, indices, and averages. The following publications, indices, and
averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment of
dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices -unmanaged
indices of all industrial, utilities, transportation, and finance stocks listed
on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index - represents the return on the market value of
all common equity securities for which daily pricing is available. Comparisons
of performance assume reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed Income Analysis,
and Lipper Mutual Fund Indices - measures total return and average current yield
for the mutual fund industry. Ranks individual mutual fund performance over
specified time periods assuming reinvestment of all distributions, exclusive of
sales charges.
(f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
(g) Mutual Fund Source Book and other material, published by Morningstar,
Inc. - provides proprietary ratings and analyzes price, yield, risk, and
total return for equity funds.
(h) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, and Money magazines - rate fund performance over
specified time periods.
(i) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the price
of goods and services, in major expenditure groups.
(j) Standard & Poor's 100 Stock Index - an unmanaged index based on the price of
100 blue-chip stocks, including 92 industrials, 1 utility, 2
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<PAGE>
transportation companies, and 5 financial institutions. The S&P 100 Stock Index
is a smaller more flexible index for option trading.
(k) Russell 2000 Stock Index - an unmanaged index based on the price of the 2000
smallest among the 3000 largest U.S. stocks compiled by Frank Russel & Co. This
is a commonly used index for smaller capitalized equities.
In assessing such comparisons of yield, total return, or volatility, an
investor should keep in mind that the composition of the investments in the
reported indices and averages in not identical to the Fund's portfolio, that the
averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Fund to calculate its figures. In addition there can be no assurance that the
Fund will continue this performance as compared to such other averages.
-26-
<PAGE>
Investment Adviser: Tanaka Fund Advisers, LLC
230 Park Avenue
New York, N.Y. 10169
Distributor: First Dominion Capital Corp.
1500 Forest Ave., Suite 223
Richmond, VA 23229
Counsel: Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
Independent Auditors: Tait, Weller & Baker, LLC
Eight Penn Center Plaza
Suite 800
Philadelphia, PA 19103
Transfer Agent: For account information, wire purchases or
redemptions, call or write to the Fund's Transfer
Agent:
Fund Services, Inc.
P.O. Box 26305
Richmond, VA 23260-6305
(800) 628-4077 Toll Free
More Information: For 24-hour, 7-days-a-week price information call
1-800-826-2520.
For information on the Fund, investment
plans, or other shareholder services, call
the Company at 1-800-527- 9525 during normal
business hours, or write the Company at 1500
Forest Avenue, Suite 223, Richmond, VA 23229
-27-
<PAGE>
PART C
-28-
<PAGE>
TANAKA FUNDS, INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
N/A
(b) Exhibits.
(1) Articles of Incorporation of Registrant
filed with the State of Maryland on November
__, 1997 are filed herewith as Exhibit A.
(2) By-Laws of Registrant are filed herewith as
Exhibit B.
(3) Not Applicable.
(4) Specimen of certificate of common stock for
the TANAKA GROWTH FUND series is filed
herewith as Exhibit C.
(5) The proposed form of Investment Advisory
Agreement between Tanaka Advisors, Inc. and
the Registrant on behalf of the TANAKA GROWTH
FUND is filed herewith as Exhibit D.
(6) The proposed form of Distribution Agreement
between First Dominion Capital Corp. and the
Registrant is filed herewith as Exhibit E.
(7) Not Applicable.
(8) Proposed form of Custodian Agreement between
Star Bank, N.A. and the Registrant on behalf
of the TANAKA GROWTH FUND is filed herewith
as Exhibit F.
(9) (a) Proposed form of Transfer Agency
Agreement between Fund Services,Inc.
and the Registrant is filed herewith
as Exhibit G.
(b) Proposed form of Administrative Services
Agreement between Commonwealth
Shareholder Services, Inc. and the
Registrant on behalf of the TANAKA
GROWTH FUND is filed herewith as
Exhibit H.
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<PAGE>
(c) Proposed form of Fund Accounting
Servicing Agreement between Star Bank,
N.A. and the Registrant on behalf of the
TANAKA GROWTH FUND series is filed
herewith as Exhibit I.
(d) Proposed form of Fund Expense Agreement
between Commonwealth Shareholder
Services, Inc. and the Registrant is
filed herewith as Exhibit J.
(10) Opinion of Counsel - to be filed by
Amendment.
(11) Report and Consent of Independent Accountants
to be filed by Amendment.
(12) Not applicable.
(13) Subscription Agreement to be filed by
Amendment.
(14) (a) Proposed form of IRA Service Agreement,
between Star Bank, N.A. and the
Registrant is filed herewith as Exhibit
K.
(15) Distribution Plan pursuant to Rule 12b-1 is
filed herewith as Exhibit L
(16) Not Applicable.
(17) Not Applicable.
(18) Multiple Class Plan pursuant to Rule 18f-3 is
filed herewith as Exhibit M.
(19) Powers-of-Attorney.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES: As of March __, 1998:
Number of
Title of Class Record Holders
TANAKA GROWTH FUND 0*
ITEM 27. INDEMNIFICATION.
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<PAGE>
The Registrant is incorporated under the General Corporation
Law (the "GCL") of the State of Maryland. The Registrant's
Articles of Incorporation provide for indemnification of
directors, officers and other agents of the corporation to the
fullest extent permitted under the GCL. The Articles limit
such indemnification so as to comply with the prohibition
against indemnifying such persons under Section 17 of the 1940
Act for certain conduct set forth in that section ("Disabling
Conduct"). Contracts between the Fund and various service
providers include provisions for indemnification, but also
forbid the Registrant to indemnify affiliates for Disabling
Conduct.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
TANAKA Advisors, Inc, the investment advisor to the TANAKA
GROWTH FUND series, provides investment advisory services
consisting of portfolio management for a variety of
individuals and institutions and as of December 31, 1996, had
approximately $235 million in assets under management.
For information as to any other business, profession, vocation
or employment of a substantial nature in which each director,
officer or partner of Tanaka Advisors, Inc. (the "Advisor") is
or has been, at any time during the past two fiscal years,
engaged for his own account or in the capacity of director,
officer, employee, partner or trustee, reference is made to
the Advisor's Form ADV (File #801-17601), currently on file
with the Commission as required by the Investment Advisors Act
of 1940, as amended.
ITEM 29. PRINCIPAL UNDERWRITER.
(a) The World Funds, Inc.
Vontobel Funds, Inc.
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<PAGE>
(b) Name and Principal Position & Position &
Business Addresses Offices With
Offices
With
Underwriter Registrant
John Pasco, III President, Chief Chairman &
1500 Forest Avenue Financial Officer, Treasurer &
Suite 223 Treasurer Director
Richmond, VA 23229
Mary T. Pasco Director Assistant
1500 Forest Avenue Secretary
Suite 223
Richmond, VA 23229
Lori J. Martin Vice President None
1500 Forest Avenue & Assistant
Suite 223 Secretary
Richmond, VA 23229
F. Byron Parker, Jr. Secretary Secretary
Mustian & Parker
8002 Discovery Drive
Suite 101
Richmond, VA 23229
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books or other documents of the Registrant
required to be maintained by ss.31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated
thereunder are kept in several locations:
(a) Shareholder account records (including share ledgers,
duplicate confirmations, duplicate account
statements, and applications forms) of the TANAKA
GROWTH FUND series of the Registrant are maintained
by its transfer agent, Fund Services, Inc., at 1500
Forest Avenue, Suite 111, Richmond, VA 23229.
(b) Investment records including research information,
records relating to the placement of brokerage
transactions, memorandums regarding investment
recommendations for supporting and/or authorizing the
purchase or sale of assets, information relating to
the placement of securities transactions, and certain
records concerning
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<PAGE>
investment recommendations of the TANAKA GROWTH FUND
series are maintained at the series' investment
advisor, Tanaka Advisors, Inc., at 230 Park Avenue,
Suite 1432 New York, N.Y. 10169.
(c) Accounts and records for portfolio securities and
other investment assets, including cash of the Tanaka
Fund series are maintained in the custody of the
Registrant's custodian bank, Star Bank N.A., 425
Walnut Street, P.O. Box 1118, Cincinnati, Ohio
45201-1118.
(d) Accounting records, including general ledgers,
supporting ledgers, pricing computations, etc. of
the Tanaka Fund series are maintained by the
Registrant's accounting services agent, Star Bank
N.A., 425 Walnut Street, P.O. Box 1118,
Cincinnati, Ohio 45201-1118
(e) Administrative records, including copies of the
charter, by-laws, minute books, agreements,
compliance records and reports, certain
shareholder communications, etc., are kept at the
Registrant's principal office, at 1500 Forest
Avenue, Suite 223, Richmond, VA 23229, by the
Registrant's Administrator, Commonwealth
Shareholder Services, Inc., whose address is the
same as Registrant's.
(f) Records relating to distribution of shares of the
Registrant are maintained by the Registrant's
distributor, First Dominion Capital Corp. at 1500
Forest Avenue, Suite 223, Richmond, VA 23229.
ITEM 31. MANAGEMENT SERVICES. There are no management-related
service contracts not discussed in Parts A or B of this
Form.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not
be certified, within four to six months from the
effective date of Registrant's
1933 Act Registration Statement.
(c) Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a
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<PAGE>
copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Richmond, and the Commonwealth of Virginia on the 2nd
day of March, 1998.
TANAKA FUNDS, INC.
Registrant
By /s/ John Pasco, III
John Pasco, III
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated below.
(Signature) (Title) (Date)
/s/ Graham Y. Tanaka Director March 2, 1998
- ---------------------
Graham Y. Tanaka
/s/ Charles A. Dill Director March 2, 1998
- -------------------
Charles A. Dill
/s/ Scott D. Stooker Director March 2, 1998
- ---------------------
Scott D. Stooker
/s/ Michael Seely Director March 2, 1998
Michael Seely
/s/ Thomas R. Schwarz Director March 2, 1998
- ---------------------
Thomas r. Schwarz
/s/ John Pasco, III
John Pasco, III
Attorney-In-Fact
EXHIBIT INDEX
C-6
<PAGE>
EXHIBIT DESCRIPTION
A. Articles of Incorporations as filed
with the State of Maryland on
November ____ , 1997.
B. Bylaws of the Registrant
C. Specimen of certificate of common
stock for the TANAKA GROWTH FUND
series.
D. Form of Investment Advisory
Agreement between Tanaka Advisors,
Inc. and the Registrant on behalf
of the TANAKA GROWTH FUND.
E. Form of Distribution Agreement
between First Dominion Capital
Corp. and the Registrant.
F. Form of Custodian Agreement between
Star Bank, N.A. and the Registrant
on behalf of the TANAKA GROWTH FUND.
G. Form of Transfer Agency Agreement
between Fund Services, Inc. and
the Registrant.
H. Form of Administrative Services
Agreement between Commonwealth
Shareholder Services, Inc. and the
Registrant on behalf of the TANAKA
GROWTH FUND.
I. Form of Fund Accounting Services
Agreement between Star Bank, N.A.
and the Registrant on behalf of
TANAKA GROWTH FUND.
EXHIBIT INDEX (continued)
EXHIBIT DESCRIPTION
C-7
<PAGE>
J. Form of Fund Expense Agreement
between Commonwealth Shareholder
Services, Inc. and the Registrant.
K. Form of IRA Service Agreement
between Star Bank, N.A. and the
Registrant.
L. Distribution Plan pursuant to Rule
12b-1.
M. Multiple Class Plan pursuant to
Rule 18f-3.
N. Powers-of-Attorney
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<PAGE>
ARTICLES OF INCORPORATION
OF
TANAKA FUNDS, INC.
FIRST: The undersigned, Steven M. Felsenstein, whose post office
address is One Commerce Square, Philadelphia, Pennsylvania 19103, and being at
least eighteen years of age, does hereby cause to be filed these Articles of
Incorporation for the purpose of forming a corporation under the General
Corporation Law of the
State of Maryland.
SECOND: The name of the corporation is TANAKA Funds, Inc.
THIRD: The purpose for which the corporation is formed is to operate as
an investment company and to exercise all of the powers and to do any and all of
the things as fully and to the same extent as any other corporation incorporated
under the laws of the State of Maryland, now or hereinafter in force, including,
without limitation, the following:
1. To purchase, hold, invest and reinvest in, sell, exchange, transfer,
mortgage, and otherwise acquire and dispose of securities of every kind,
character and description.
2. To exercise all rights, powers and privileges with reference to or
incident to ownership, use and enjoyment of any of such securities, including,
but without limitation, the right, power and privilege to own, vote, hold,
purchase, sell, negotiate, assign, exchange, transfer, mortgage, pledge or
otherwise deal with, dispose of, use, exercise or enjoy any rights, title,
interest, powers or privileges under or with reference to any of such
securities; and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value of any of such securities.
3. To purchase or otherwise acquire, own, hold, sell, exchange, assign,
transfer, mortgage, pledge or otherwise dispose of, property of all kinds.
4. To buy, sell, mortgage, encumber, hold, own, exchange, rent or
otherwise acquire and dispose of, and to develop, improve, manage, subdivide,
and generally to deal and trade in real property, improved and unimproved, and
wheresoever situated; and to build, erect, construct, alter and maintain
buildings, structures, and other improvements on real property.
5. To borrow or raise moneys for any of the purposes of
the corporation, and to mortgage or pledge the whole or any part
C-9
<PAGE>
of the property and franchises of the corporation, real, personal, and mixed,
tangible or intangible, and wheresoever situated.
6. To enter into, make and perform contracts and
undertakings of every kind for any lawful purpose, without limit
as to amount.
7. To issue, purchase, sell and transfer, reacquire, hold, trade and
deal in, to the extent permitted under the General Corporation law of the State
of Maryland, capital stock, bonds, debentures and other securities of the
corporation, from time to time, to such extent as the Board of Directors shall,
consistent with the provisions of these Articles of Incorporation, determine;
and to repurchase, re-acquire and redeem, to the extent permitted under the
General Corporation Law of the State of Maryland, from time to time, the shares
of its own capital stock, bonds, debentures and other securities.
The foregoing clauses shall each be construed as purposes,
objects and powers, and it is hereby expressly provided that the foregoing
enumeration of specific purposes, objects and powers shall not be held to limit
or restrict in any manner the powers of the corporation, and that they are in
furtherance of, and in addition to, and not in limitation of, the general powers
conferred upon the corporation by the laws of the State of Maryland or
otherwise; nor shall the enumeration of one thing be deemed to exclude another,
although it be of like nature, not expressed.
FOURTH: The Post office address of the principal office of
the corporation in the State of Maryland is:
c/o The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
The name and post office address of the initial
resident agent of the corporation in the State of Maryland is;
The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: The total number of shares of stock which the corporation shall
have authority to issue is Two Hundred and Fifty Million (250,000,000) shares of
stock, with a par value of One Cent ($.01) per share, to be known and designated
as Common Stock, such shares of Common Stock having an aggregate par value of
Two Million Five Hundred Thousand Dollars ($2,500,000).
C-10
<PAGE>
Subject to the provisions of these Articles of Incorporation,
the Board of Directors shall have the power to issue shares of Common Stock of
the corporation from time to time, at prices not less than the net asset value
or par value thereof, whichever is greater, for such consideration in such form
as may be fixed from time to time pursuant to the direction of the Board of
Directors.
Pursuant to Section 2-105 of the Maryland General Corporation
Law, the Board of Directors of the corporation shall have the power to designate
one or more series of shares of Common Stock and sub-series (classes) thereof,
and to classify or reclassify any unissued shares with respect to such series or
sub-series thereof, and such series and sub-series (subject to any applicable
rule, regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine, unless inconsistent with this Article FIFTH.
Subject to the aforesaid power of the Board of Directors, one
series of shares is hereby designated and classified as TANAKA Growth Fund and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share) are
hereby initially classified and allocated to such series. At any time when there
are no shares outstanding or subscribed for a particular series or sub-series
previously established and designated herein or by the Board of Directors, the
series or sub-series may be eliminated by the Board of Directors by the same
means.
Each share of a series shall have equal rights with each other
share of that series with respect to the assets of the corporation pertaining to
that series. The dividends payable to the holders of any sub-series (subject to
any applicable rules, regulation or order of the Securities and Exchange
Commission or any other applicable law or regulation) may be charged with any
pro rata portion of distribution expenses paid pursuant to a Plan of
Distribution adopted by such sub-series in accordance with Rule 12b-1 under the
Investment Company Act of 1940 (or any successor thereto), which dividend shall
be determined as directed by the Board and need not be individually declared,
but may be declared and paid in accordance with a formula adopted by the Board.
Except as otherwise provided herein, all references in these Articles of
Incorporation to Common Stock or series of stock shall apply without
discrimination to the shares of each series of stock.
The holder of each share of stock of the corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock then standing in his or her name in the books of the
corporation. On any matter submitted to a vote of shareholders, all shares of
the corporation then issued and outstanding and entitled to vote,
C-11
<PAGE>
irrespective of the series, shall be voted in the aggregate and not by series
except (1) when otherwise expressly provided by the Maryland General Corporation
Law; (2) when required by the Investment Company Act of 1940, as amended, shares
shall be voted by individual series, or sub-series; and (3) when the matter does
not affect any interest of any particular series or sub-series, then only
shareholders of affected series or sub-series shall be entitled to vote thereon.
Holders of shares of stock of the corporation shall not be entitled to
cumulative voting in the election of directors or on any other matter.
Each series of stock of the corporation shall have the
following powers, preferences and participating, voting, or other special rights
and the qualifications, restrictions, and limitations thereof shall be as
follows:
1. All consideration received by the corporation for the issue
or sale of stock of each series, together with all income, earnings, profits,
and proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to the
series of shares of stock with respect to which such assets, payments of funds
were received by the corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the corporation.
Such assets, income, earnings, profit and proceeds thereof, including any
proceeds derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets belonging to" such series.
2. The Board of Directors may from time to time
declare and pay dividends or distributions, in stock or in cash,
on any or all series of stock; provided, such dividends or
distributions on shares of any series
3. The Board of Directors shall have the power in its
discretion to distribute to the shareholders of the corporation or to the
shareholders of any series thereof in any fiscal year as dividends, including
dividends designated in whole or in part as capital gain distributions, amounts
sufficient, in the opinion of the Board of Directors, to enable the corporation
or any series thereof to qualify as a "regulated investment company" under the
Internal revenue Code of 1986, as amended, or any successor or comparable
statute thereof, and regulations promulgated thereunder (collectively, the
"IRC"), and to avoid liability of the corporation or any series thereof for
Federal income tax in respect of that year and to make other appropriate
adjustments in connection therewith.
C-12
<PAGE>
4. The Board of Directors shall have the power, in its
discretion, to make such elections as to the tax status of the corporation or
any series or class of the corporation as may be permitted or required under the
IRC as presently in effect or as amended, without the vote of shareholders of
the corporation or any series thereof.
5. In the event of the liquidation or dissolution of the
corporation, shareholders of each series shall be entitled to receive, as a
series, out of the assets of the corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
series of stock, the assets belonging to such series, and the assets so
distributable to the shareholders of any series shall be distributed among such
shareholders in proportion to the number of shares of such series held by them
and recorded on the books of the corporation. In the event that there are any
general assets not belonging to any particular series of stock and available for
distribution, such distribution shall be made to the holders of stock of all
series in proportion to the net asset value of the respective series determined
as hereinafter provided.
6. The assets belonging to any series of stock shall be
charged with the liabilities in respect to such series, and shall also be
charged with its share of the general liabilities of the corporation, in
proportion to the net asset value of the respective series determined as
hereinafter provided. The determination of the Board of Directors shall be
conclusive as to the amount of liabilities, including accrued expenses and
reserves, as to the allocation of the same as to a given series, and as to
whether the same or general assets of the corporation are allocable to one or
more series.
7. The Board of Directors may provide for a holder of any
series of stock of the corporation, who surrenders his certificate in good form
for transfer to the corporation or, if the shares in question are not
represented by certificates, who delivers to the corporation a request in good
order signed by the shareholder or otherwise authenticated in the manner
required by the corporation, to convert the shares in question on such basis as
the Board may provide, into shares of stock of any other series of the
corporation.
8. The holders of the shares of Common Stock or other
securities of the corporation shall have no preemptive rights to subscribe to
new or additional shares of its Common Stock or other securities.
SIXTH: The number of directors of the corporation shall be such number
as may from time to time be fixed by the By-Laws of the corporation or pursuant
to authorization contained in such By-Laws; provided, notwithstanding anything
herein to the contrary, the Board of Directors shall consist initially of three
directors until such time as the number of directors is fixed as
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stated above. The names of the directors who shall act as such
until successors are duly chosen and qualified are: Graham
Tanaka, Thomas R. Schwarz and Michael Seeley.
SEVENTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of
the corporation:
1. The Board of Directors shall have power to
fix an initial offering price for the shares of any series which shall yield to
the corporation not less than the par value thereof, at which price the shares
of the Common Stock of the corporation shall be offered for sale, and to
determine from time to time thereafter the offering price which shall yield to
the corporation not less than the par value thereof from sales of the shares of
its Common Stock; provided, however, that no shares of the Common Stock of the
corporation shall be issued or sold for a consideration which shall yield to the
corporation less than the net asst value of shares of such series determined as
hereinafter provided, as of the business day on which such shares are sold, or
at such other times set by the Board of Directors, except in the case of shares
of such Common Stock issued in payment of a dividend properly declared and
payable.
Notwithstanding anything in these Articles of
Incorporation to the contrary, the Board of Directors shall have power to
establish in their absolute discretion the basis or method for determining the
value of the assets belonging to any class or series, and the net asset value of
each share of any class or series of the corporation for purposes of sales,
redemptions, repurchases of shares or otherwise.
The net asset value of the property and
assets of the corporation shall be determined in accordance with the Investment
Company Act of 1940, as amended, and with generally accepted accounting
principles, and at such times as the Board of Directors may direct, by deducting
from the total market or appraised value of all of the property and assets of
the corporation, all debts, obligations and liabilities of the corporation
(including, but without limitation of the generality of any of the foregoing,
any or all debts, obligations, liabilities or claims of any and every kind and
nature, whether fixed, accrued, or unmatured, and any reserves or charges,
determined in accordance with generally accepted accounting principles, for any
or all thereof, whether for taxes, including estimated taxes or unrealized book
profits, expenses, contingencies or otherwise).
The net asset value per share of a series of
the Common Stock of the corporation shall be determined by adding the total
market or appraised value of the property and assets of the relevant series of
the corporation, subtracting the liabilities determined by the Board of
Directors to be applicable to that series, allocating any general assets and
general liabilities to that series, and dividing the net result by the
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total number of shares of its Common Stock then issued and outstanding for such
series, including any shares sold by the corporation up to and including the
date as of which such net asset value is to be determined whether or not
certificates therefor have actually been issued. In case the net asset value of
each share so determined shall include a fraction of one cent, such net asset
value of each share shall be adjusted to the nearest full cent.
2. To the extent permitted by law, and except in
the case of a national financial emergency, the corporation shall redeem shares
of its Common Stock from its stockholders upon request of the holder thereof
received by the corporation or its designated agent during business hours of any
business day, provided that such request must be accompanied by surrender of any
outstanding certificate or certificates for such shares in form for transfer,
together with such proof of the authenticity of signatures as may reasonably be
required on such shares (or, on such request in the event no certificate is
outstanding) by, or pursuant to the direction of the Board of Directors of the
corporation, and accompanied by proper stock transfer stamps, if any. Shares
redeemed upon any such request shall be purchased by the corporation at the net
asset value of such shares determined in the manner provided in Paragraph (1) of
this Article SEVENTH, and in accordance with the redemption procedures
prescribed in the then current Prospectus for the applicable series of shares of
the corporation.
Payments for shares of its Common Stock so
redeemed by the corporation shall be made from the assets of the applicable
series in cash, except payment for such shares may, at the option of the Board
of Directors, or such officer or officers as they may duly authorize for the
purpose in their complete discretion, be made from the assets of that series in
kind or partially in cash and partially in kind. In case of any payment in kind
the Board of Directors, or their delegate, shall have absolute discretion as to
what security or securities of such series shall be distributed in kind and the
amount of the same; and the securities shall be valued for purposes of
distribution at the value at which they were appraised in computing the current
net asset value of the series of the corporation's shares, provided that any
stockholder who cannot legally acquire securities so distributed in kind by
reason of the prohibitions of the Investment Company Act of 1940, as amended,
shall receive cash.
Payment for shares of its Common Stock so
redeemed by the corporation shall be made by the corporation as provided above
within seven days after the date which such shares are deposited in good order,
and after satisfactory compliance with applicable requirements; provided,
however, that if payment shall be made by delivery of assets of the corporation,
as provided above, any securities to be delivered as part of such payment shall
be delivered as promptly as any necessary transfers of such securities on the
books of the several corporations whose
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securities are to be delivered may be made, but not necessarily
within such seven day period.
The right of any holder of shares of the
Common Stock of the corporation to receive dividends thereon and all other
rights of such stockholder with respect to the shares so redeemed by the
corporation shall cease and determine from and after the time as of which the
purchase price of such shares shall be fixed, as provided above, except the
right of such stockholder to receive payment for such shares as provided for
herein.
For the purposes of these Articles of
Incorporation, a "national financial emergency" is defined as the whole or any
part of any period (i) during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, (ii) during which trading on the
New York Stock Exchange is restricted, (iii) during which an emergency exists as
a result of which disposal by the corporation of securities owned by such series
is not reasonably practicable or it is not reasonably practicable for the
corporation fairly to determine the value of the net assets of such series, or
(iv) during any other period when the Securities and Exchange Commission (or any
succeeding governmental authority) may for the protection of security holders of
the corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption; provided that applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in (ii), (iii), or (iv) exist. The Board of Directors may, in its
discretion, declare the suspension described in (iv) above at an end, and such
other suspension relating to a national financial emergency shall terminate as
the case may be on the first business day on which said Stock Exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired (as to
which in the absence of an official ruling by said Commission or succeeding
authority, the determination of the Board of Directors shall be conclusive).
3. The Board of Directors may, from time to
time, without the vote or consent of stockholders, establish uniform standards
with respect to the minimum net asset value of a stockholder account or a
minimum investment which may be made by a stockholder. The Board of Directors
may authorize the closing of those stockholder accounts not meeting the
specified minimum standards of net asset value by redeeming all of the shares in
such accounts, provided there is mailed to each affected stockholder account, at
least thirty (30) days prior to the planned redemption date, a notice setting
forth the minimum account size requirement and the date on which the account
will be closed if the minimum size requirement is not met prior to said closing
date.
EIGHTH: (a) To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
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General Corporation Law, no director or officer of the corporation shall have
any liability to the corporation or its stockholders for damages. This
limitation on liability applies to events occurring at the time a person serves
as a director or officer of the corporation whether or not such person is a
director or officer at the time of any proceeding in which liability is
asserted.
(b) No provision of this Article shall be
effective to protect or purport to protect any director or officer of the
corporation against any liability to the corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
(c) The fact that a director of the corporation
who is not an "interested person" of the corporation (as that term is defined in
the Investment Company Act of 1940, as amended) shall serve in a like capacity
on the board of directors of any other corporation or corporations registered
under such Investment Company Act shall not impair the independence of such
director to evaluate and determine the disposition of any matter affecting the
corporation, its business, or claims pertaining thereto.
(d) Reference to the Maryland General Corporation
Law in this Article are to the law as from time to time amended. No amendment to
the Articles of Incorporation of the corporation shall affect any right of any
person under this Article based on any event, omission or proceeding prior to
such amendment.
NINTH: Subject to the Investment Company Act of 1940, as amended, each
of the following actions, to the extent required to be approved by the
shareholders under Maryland General Corporation Law, shall be approved by a
majority of all votes entitled to be cast on the matter:
(i) Amendment or amendment and restatement of the
Articles;
(ii) Reduction of stated capital;
(iii)Consolidation, merger, share exchange or
transfer of assets;
(iv) Distribution in partial liquidation; or
(v) Voluntary dissolution.
TENTH: The corporation expressly reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation, and
all rights, contract and otherwise, conferred herein upon the stockholders are
granted subject to such reservation.
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ELEVENTH: The corporation expressly agrees and acknowledges that the
name "TANAKA Funds, Inc." is the sole property of Tanaka Fund Advisers, LLC
("TFA"), that similar names may be used by funds in the investment business
which are affiliated with TFA, and that the corporation's use of such name is
with permission of TFA. The corporation further expressly agrees and
acknowledges that its use of such name may be terminated by TFA if the
corporation ceases to use TFA as its Advisor (or to use affiliates of TFA for
such purposes). The corporation further expressly agrees and acknowledges that
in such event TFA may require the corporation to present to its shareholders, at
the next annual or special meeting of the corporation held after such request, a
proposal to change the name of the corporation to delete reference to the name
"TANAKA Funds." The corporation further expressly agrees and acknowledges in
such event to use its best efforts to comply promptly with such request to
change its name and that the Board of Directors of the corporation shall
recommend such a proposal to its shareholders. The corporation further expressly
acknowledges and agrees, upon shareholder approval of such a proposal, to make
and cause to be made such filings to effect the change of name as may be
necessary with the State of Maryland, the United States Securities and Exchanger
Commission, or other regulatory authorities.
IN WITNESS WHEREOF, the undersigned incorporator of TANAKA Funds, Inc.
who executed the foregoing Articles of Incorporation hereby acknowledges the
same to be his act and further acknowledges that, to the best of his knowledge
the matters and facts set forth therein are true to in all material respects,
under the penalties of perjury.
Dated the 4th day of November, 1997.
------------------------------
Steven M. Felsenstein
TANAKA FUNDS, INC
BY-LAWS
ARTICLE I
OFFICERS
Section 1. The principal office of the Corporation shall
be in the City of Richmond, Commonwealth of Virginia. The
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Corporation shall also have offices at such other places as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. To the extent authorized by the Board of Directors, a
stockholder of record may request a stock certificate representing the shares
owned by him. Stock certificates, if any, shall be in such form as may be
required by law and as the Board of Directors shall prescribe. Every stock
certificate shall be signed by the Chairman or the President or a Vice President
and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, and sealed with the corporate seal, which may be a facsimile, either
engraved or printed. Stock certificates may bear the facsimile signatures of the
officers authorized to sign such certificates.
Section 2. A share of capital stock of the Corporation shall be
transferable on the books of the Corporation only by the person(s) in whose
name(s) such share is registered, or by his duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Corporation or its duly authorized transfer agent.
In case of transfers by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Corporation or
its
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duly authorized transfer agent. No transfer shall be made unless and until the
certificate issued to the transferor, if any, shall be delivered to the
Corporation or its duly authorized transfer agent, properly endorsed.
Section 3. Any person desiring a certificate for shares of the capital
stock of the Corporation to be issued in lieu of one lost or destroyed shall
make an affidavit or affirmation setting forth the loss or destruction of such
stock certificate, and shall advertise such loss or destruction in such manner
as the Board of Directors may require, and shall, if the Board of Directors
shall so require, give the Corporation a bond or indemnity, in such form and
with such security as may be satisfactory to the Board, indemnifying the
Corporation against any loss that may result upon the issuance of a new stock
certificate. Upon receipt of such affidavit and proof of publication of the
advertisement of such loss or destruction, and the bond, if any, required by the
Board of Directors, a new stock certificate may be issued of the same tenor and
for the number of shares as the one alleged to have been lost or destroyed.
Section 4. The Corporation shall be entitled to treat the holder of
record of any share or shares of its capital stock as the owner thereof, and
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
the Corporation shall have express or other notice thereof.
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Section 5. In the event that the Corporation issues non-certificated
shares of its capital stock, the Board of Directors shall establish procedures
designed to comply with the requirements of the Maryland General Corporation
law.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. (a) The Corporation is not required to hold an Annual
Meeting in any year in which the Corporation is not required to elect directors
under the Investment Company Act of 1940. If the Corporation is required under
the Investment Company Act of 1940 to hold a stockholder meeting to elect
directors, the meeting may be designated an Annual Meeting of Stockholders for
that year for purposes of Maryland law.
(b) Annual Meetings, if held, shall be held
at such place and time as the Board of Directors may by resolution establish. In
the absence of any specific resolution, Annual Meetings of Stockholders shall be
held at the Corporation's principal office, or at such other place within or
without the State of Maryland as the Board of Directors may from time to time
prescribe. Meetings of stockholders for any other purpose may be held at such
place and time as shall be fixed by resolution of the Board of Directors and
stated in the Notice of the Meeting, or in a duly executed Waiver of Notice
thereof.
Section 2. Special meetings of the stockholders may be
called at any time by the Chairman, President or a majority of
the members of the Board of Directors, and except as otherwise
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required by the Investment Company Act of 1940, shall be called by the Secretary
upon the written request of the holders of at least fifty percent of the shares
of the capital stock of the Corporation issued and outstanding and entitled to
vote at such meeting. Upon receipt of a written request from such holders as are
entitled to call a special meeting, which shall state the purpose of the meeting
and the matter proposed to be acted on at it, the Secretary shall issue notice
of such meeting. The cost of preparing and mailing the notice of a special
meeting of stockholders shall be borne by the Corporation. Special meetings of
the stockholders shall be held at the principal office of the Corporation, or at
such other place within or without the State of Maryland as the Board of
Directors may from time to time direct, or at such place within or without the
State of Maryland as shall be specified in the notice of such meeting.
Section 3. Notice of the time and place of the annual or any special
meeting of the stockholders shall be given to each stockholder entitled to
notice of such meeting not less than ten days nor more than ninety days prior to
the date of such meeting. In the case of special meetings of the stockholders,
the notice shall specify the object or objects of such meeting, and no business
shall be transacted at such meeting other than that mentioned in the notice.
Section 4. The Board of Directors may close the stock
transfer books of the Corporation for a period not exceeding
twenty days preceding the date of any meeting of stockholders, or
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the date for payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go
into effect, or for a period of not exceeding twenty days in connection with the
obtaining of the consent of stockholders for any purpose; provided, however,
that in lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, not exceeding ninety days preceding the
date of any meeting of stockholders, or the date for payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect,or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend or to receive such allotment of rights or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 5. At all meetings of the stockholders a quorum
shall consist of the holders of a majority of the outstanding
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shares of the capital stock of the Corporation entitled to vote at such meeting.
In the absence of a quorum no business shall be transacted except that the
stockholders present in person or by proxy and entitled to vote at such meeting
shall have power to adjourn the meeting from time to time to a date not more
than one hundred twenty days after the original record date without further
notice other than announcement at the meeting. At any such adjourned meeting at
which a quorum shall be present any business may be transacted which might have
been transacted at the meeting on the date specified in the original notice. If
a quorum is present at any meeting, the holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote at
the meeting who shall be present in person or by proxy at such meeting shall
have power to approve any matter properly before the meeting, except as
otherwise provided in the Investment Company Act of 1940, and also except a
plurality of all votes cast at a meeting at which a quorum is present shall be
sufficient for the election of a director. The holders of such majority shall
also have power to adjourn the meeting to any specific time or times, and no
notice of any such adjourned meeting need be given to stockholders absent or
otherwise.
Section 6. At all meetings of the stockholders the following order of
business shall be substantially observed, as far as it is consistent with the
purpose of the meeting, except to the extent that the Board of Directors shall
otherwise provide:
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Election of Directors;
Ratification of Selection of Auditors; and
New business.
Section 7. At any meeting of the stockholders of the Corporation every
stockholder having the right to vote shall be entitled, in person or by proxy
appointed by an instrument in writing subscribed by such stockholder or by his
duly authorized attorney in fact and bearing a date not more than eleven months
prior to said meeting unless such instrument provides for a longer period, to
vote each full and fractional share of stock having voting power registered in
his name on the books of the Corporation.
ARTICLE IV
DIRECTORS
Section 1. The Board of Directors shall consist of not less than three
nor more than twelve members. The Board of Directors may by a vote of the entire
board increase or decrease the number of directors without a vote of the
stockholders; provided that any such decrease shall not affect the tenure of
office of any director. Directors need not hold any shares of the capital stock
of the Corporation.
Section 2. The directors shall be elected by the
stockholders of the Corporation at any annual meeting, if held,
or at a special meeting called for such purpose, and shall hold
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office until their successors shall be duly elected and shall
qualify.
Section 3. The Board of Directors shall have the control and management
of the business of the Corporation, and in addition to the powers and authority
expressly conferred upon them by these By-Laws, may exercise, subject to the
provisions of the laws of the State of Maryland and of the Articles of
Incorporation of the Corporation, all such powers of the Corporation and do all
such acts and things as are not required by law or by the Articles of
Incorporation to be exercised or done by the stockholders.
Section 4. The Board of Directors shall have power to fill vacancies
occurring on the Board, whether by death, resignation or otherwise. A vacancy on
the Board of Directors resulting from any cause except an increase in the number
of directors may be filled by a vote of the majority of the remaining members of
the Board, though less than a quorum. A vacancy on the Board of Directors
resulting from an increase in the number of directors may be filled by a
majority of the entire Board of Directors. A director elected by the Board of
Directors to fill a vacancy shall serve until the next annual meeting, whenever
held, or special meeting called for that purpose, and until his successor is
elected and qualifies.
Section 5. The Board of Directors shall have power to
appoint, and at its discretion to remove or suspend, any
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officers, managers, superintendents, subordinates, assistants, clerks, agents
and employees, permanently or temporarily, as the Board may think fit, and to
determine their duties and to fix, and from time to time to change, their
salaries or emoluments, and to require security in such instance and in such
amounts as it may deem proper.
Section 6. In case of the absence of an officer of the Corporation, or
for any other reason which may seem sufficient to the Board of Directors, the
Board may delegate his powers and duties for the time being to any other officer
of the Corporation or to any director.
Section 7. The Board of Directors may, by resolution or resolutions
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation which,
to the extent provided in such resolution or resolutions and by applicable law,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Any such committee shall keep
regular minutes of its proceedings, and shall report the same to the Board when
required.
Section 8. The Board of Directors may hold their
meetings and keep the books of the Corporation outside of the
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State of Maryland, at such place or places as it may from time to time
determine.
Section 9. The Board of Directors shall have power to fix, and from
time to time to change, the compensation, if any, of the directors off the
Corporation.
Section 10. Upon retirement of a Director, the Board may elect him or
her to the position of Director Emeritus. Said Director Emeritus shall serve for
one year and may be re-elected by the Board from year to year thereafter. Said
Director Emeritus shall not vote at meetings of Directors and shall not be held
responsible for actions of the Board but shall receive fees paid to Board
members for serving as such.
ARTICLE V
DIRECTORS MEETINGS
Section 1. The first regular meeting of the Board of Directors shall be
held each year as scheduled by the Board, and otherwise within seven business
days following the annual meeting of stockholders at which the Directors are
elected. Regular meetings of the Board of Directors shall also be held without
notice at such times and places as may be from time to time prescribed by the
Board.
Section 2. Special meetings of the Board of Directors
may be called at any time by the Chairman, and shall be called by
the Chairman upon the written request of a majority of the
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members of the Board of Directors. Unless notice is waived by all the members of
the Board of Directors, notice of any special meeting shall be given to each
director at least twenty-four hours prior to the time of such meeting, and such
notice shall provide the time and place of such special meeting, and the
purpose(s) for which it is called.
Section 3. One-third of the entire Board of Directors shall constitute
a quorum for the transaction of business at any meeting; except that if the
number of directors on the Board is less than six, two members shall constitute
a quorum for the transaction of business at any meeting. The act of a majority
of the directors present at any meeting where there is a quorum shall be the act
of the Board of Directors except as may be otherwise required by Maryland law or
the Investment Company Act of 1940.
Section 4. The order of business at meetings of the Board of Directors
shall be prescribed from time to time by the Board.
ARTICLE VI
OFFICERS AND AGENTS
Section 1. At the first meeting of the Board of Directors after the
election of Directors in each year, the Board shall elect a Chairman, a
President and Chief Executive Officer, one or more Vice Presidents, a Secretary
and a Treasurer. The Board may elect, or the Chief Executive Officer may
appoint, one
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or more Assistant Secretaries, one or more Assistant Treasurers, and such other
subordinate officers and agents as the Board may deem necessary and as the
business of the Corporation may require.
Section 2. The Chairman of the Board and the President shall be elected
from the membership of the Board of Directors, but other officers need not be
members of the Board of Directors. Any two or more offices may be held by the
same person except the offices of President and Vice President. All officers of
the Corporation shall serve for one year and until their successors shall have
been duly elected and shall have qualified; provided, however, that any officer
may be removed at any time, either with or without cause, by action by the Board
of Directors.
ARTICLE VII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The Corporation shall indemnify each officer and director
made party to a proceeding, by reason of service in such capacity, to the
fullest extent, and in the manner provided, under Section 2-418 of the Maryland
General Corporation law: (i) unless it is proved that the person seeking
indemnification did not meet the standard of conduct set forth in subsection
(b)(1) of such section; and (ii) provided, that the Corporation shall not
indemnify any officer or director for any liability to the Corporation or its
security holders arising from willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such person's
office.
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Section 2. The provisions of clause (i) of Section 1 of this Article
VII notwithstanding, the Corporation shall indemnify each officer and director
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which each such officer or director is a party by reason of
service in such capacity.
Section 3. The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each officer and director who is made party to
a proceeding by reason of service in such capacity the reasonable expenses
incurred by such person in connection therewith.
ARTICLE VIII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board shall preside at all meetings of
the stockholders and the Board of Directors and shall be a member ex officio of
all standing committees. He shall have those duties and responsibilities as
shall be assigned to him by the Board of Directors. In the absence, resignation,
disability or death of the President, the Chairman shall exercise all the powers
and perform all the duties of the President until his return, or until such
disability shall be removed or until a new President shall have been elected.
PRESIDENT
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Section 2. The President shall be the Chief Executive Officer and head
of the Corporation, and in the recess of the Board of Directors shall have the
general control and management of its business and affairs, subject, however, to
the regulations of the Board of Directors.
The President shall, in the absence of the
Chairman, preside at all meetings of the stockholders and the Board of
Directors. In the event of the absence, resignation, disability or death of the
Chairman, the President shall exercise all powers and perform all duties of the
Chairman until his return, or until such disability shall have been removed or
until a new Chairman shall have been elected.
VICE PRESIDENTS
Section 3. Vice Presidents shall have those duties and responsibilities
as shall be assigned to them by the Chairman or the President. In the event of
the absence, resignation, disability or death of the Chairman and President, the
Senior Vice President shall exercise all the powers and perform all the duties
of the President until his return, or until such disability shall be removed or
until a new President shall have been elected.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend all meetings of
the stockholders and shall record all the proceedings thereof in
a book to be kept for that purpose, and he shall be the custodian
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of the corporate seal of the Corporation. In the absence of the Secretary, an
Assistant Secretary or any other person appointed or elected by the Board of
Directors, as is elsewhere in these By-Laws provided, may exercise the rights
and perform the duties of the Secretary.
Section 5. The Assistant Secretary, or, if there be more than one
Assistant Secretary, then the Assistant Secretaries in the order of their
seniority, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary. Any Assistant Secretary elected
by the Board shall also perform such other duties and exercise such other powers
as the Board of Directors shall from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep full and correct accounts of the
receipts and expenditures of the Corporation in books belonging to the
Corporation, and shall deposit all monies and valuable effects in the name and
to the credit of the Corporation and in such depositories as may be designated
by the Board of Directors, and shall, if the Board shall so direct, give bond
with sufficient security and in such amount as may be required by the Board of
Directors for the faithful performance of his duties.
He shall disburse funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers
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for such disbursements, and shall render to the Prescient and Board of Directors
at the regular meetings of the Board, or whenever they may require it, an
account of all his transactions as the chief fiscal officer of the Corporation
and of the financial condition of the Corporation, and shall present each year
before the annual meeting of the stockholders a full financial report of the
preceding fiscal year.
Section 7. The Assistant Treasurer, or, if there be more than one
Assistant Treasurer, then the Assistant Treasurers in the order of their
seniority, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the Treasurer. Any Assistant Treasurer elected
by the Board shall also perform such duties and exercise such powers as the
Board of Directors shall from time to time prescribe.
ARTICLE IX
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the signature of such person or
persons as the Board of Directors may from time to time direct.
Section 2. All notes and other similar obligations and acceptances of
drafts by the Corporation shall be signed by such person or persons as the Board
of Directors may from time to time direct.
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Section 3. Any officer of the Corporation or any other employee, as the
Board of Directors may from time to time direct, shall have full power to
endorse for deposit all checks and all negotiable paper drawn payable to his or
their order or to the order of the Corporation.
ARTICLE X
CORPORATE SEAL
Section 1. The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization, and the words
"Corporate Seal, Maryland" Such seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
ARTICLE XI
DIVIDENDS
Section 1. Dividends upon the shares of the capital stock of the
Corporation may, subject to the provisions of the Articles of Incorporation of
the Corporation, if any, be declared by, or in accordance with instructions
established by, the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
capital stock of the Corporation.
Section 2. Before payment of any dividend there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors may, from time to time, in its absolute discretion, think
proper as a
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reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall deem to be for the best interests of the
Corporation, and the Board of Directors may abolish any such reserve in the
manner in which it was created.
ARTICLE XII
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall be
set by action of the Board of Directors.
ARTICLE XIII
NOTICES
Section 1. Whenever under the provisions of these ByLaws notice is
required to be given to any director or stockholder, such notice is deemed given
when it is personally delivered, left at the resident or usual place of business
of the director or stockholder, or mailed to such director or stockholder at
such address as shall appear on the books of the Corporation and such notice, if
mailed, shall be deemed to be given at the time it shall be so deposited in the
United States mail postage prepaid. In the case of directors, such notice may
also be given orally by telephone or by telegraph or cable.
Section 2. Any notice required to be given under these
By-Laws may be waived in writing, signed by the person or persons
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entitled to such notice, whether before or after the time stated
therein.
ARTICLE XIV
AMENDMENTS
Section 1. These By-Laws may be amended, altered or repealed by the
affirmative vote of the holders of a majority of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote thereon, or by a
majority of the Board of Directors, as the case may be.
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Below is the text of a sample of the Stock Certificate for TANAKA Growth Fund
Series of TANAKA Funds, Inc.
CAPITAL STOCK OF CUSIP
TANAKA FUNDS, INC.
TANAKA GROWTH FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
This Certifies that
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is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01
EACH OF THE CAPITAL STOCK OF
TANAKA FUNDS, INC. TANAKA GROWTH FUND
(hereinafter called the "Corporation") transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Certificate of Incorporation and the bylaws of the Corporation and all
amendments thereto, to all of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by the Transfer
Agent.
Witness the facsimile signatures of the duly authorized
officers of the Corporation
Dated Attest
By
Secretary Chairman
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INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") dated March ___, 1998
by and between TANAKA Funds, Inc., a Maryland corporation (herein called the
"Fund"), and Tanaka Fund Advisers, LLC, a Delaware limited liability company
(the "Advisor"), and a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several series of shares, each having its own investment policies;
and
WHEREAS, the Fund desires to retain the Advisor to furnish investment
advisory and management services to certain portfolios of the Fund, subject to
the control of the Fund's Board of Directors, and the Advisor is willing to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be bound, it is agreed between the parties
hereto as follows:
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1. Appointment. The Fund hereby appoints the Advisor to
act as the advisor to the TANAKA Growth Fund series of the Fund
(the "Portfolio") for the period and on the terms set forth in
this Agreement. The Advisor accepts such appointment and agrees
to furnish the services herein set forth, for the compensation
herein provided.
2. Duties of the Advisor. The Fund employs the Advisor to manage the
investments and reinvestment of the assets of the Portfolio, and to continuously
review, supervise, and administer the investment program of the Portfolio, to
determine in its discretion the securities to be purchased or sold, to provide
the Fund and Commonwealth Shareholder Services, Inc. (the "Administrator") with
records concerning the Advisor's activities which the Fund is required to
maintain, and to render regular reports to the Fund's Officers and Board of
Directors and to the Administrator concerning the Advisor's discharge of the
foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities
subject to the control of the Fund's Board of Directors and in compliance with
such policies as the Board may from time to time establish, and in compliance
with the objectives, policies, and limitations for the Portfolio as set forth in
its Prospectus and Statement of Additional Information, as amended from time to
time, and applicable laws and regulations. The Fund will instruct each of its
agents and
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contractors to co-operate in the conduct of the business of the
Portfolio.
The Advisor accepts such employment and agrees, at its own
expense, to render the services and to provide the office space, furnishings,
and equipment and the personnel required by it to perform the services on the
terms and for the compensation provided herein.
3. Portfolio Transactions. The Advisor is authorized to select the
brokers and dealers that will execute the purchases and sales of portfolio
securities for the Portfolio and is directed to use its best efforts to obtain
the best price and execution for the Portfolio's transactions in accordance with
the policies of the Fund as set forth from time to time in the Portfolio's
Prospectus and Statement of Additional Information. The Advisor will promptly
communicate to the Fund and to the Administrator such information relating to
portfolio transactions as they may reasonably request.
It is understood that the Advisor will not be deemed to have
acted unlawfully, or to have breached a fiduciary duty to the Fund or be in
breach of any obligation owing to the Fund under this Agreement, or otherwise,
by reason of its having directed a securities transaction on behalf of the Fund
to an unaffiliated broker-dealer in compliance with the provisions of Section
28(e) of the Securities Exchange Act of 1934 or as described from time to time
by the Portfolio's Prospectus and
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Statement of Additional Information. Subject to the foregoing, the Advisor may
direct any transaction of the Portfolio to a broker which is affiliated with the
Advisor in accordance with, and subject to, the policies and procedures approved
by the Board of Directors of the Fund pursuant to Rule 17e-1 under the 1940 Act.
Such brokerage services are not deemed to be provided under this Agreement.
4. Compensation of the Advisor. The Investment Advisor shall be paid a
fee to be accrued daily at an annual rate of 1.00% of the average daily net
assets of the Fund which are not in excess of 300,000,000; 0.90% of the assets
of the Fund over $300,000,000 and not in excess of $500,000,000; 0.80% of assets
of the Fund in excess of $500,000,000 and not in excess of $1,000,000,000; and
0.75% of the assets of the Fund over $1,000,000,000. Such fee shall be paid
monthly, within days after the end of the month. All expenses not specifically
assumed by the Investment Advisor are assumed by the Fund.
All rights of compensation under this Agreement for services
performed as of the termination date shall survive the termination of this
Agreement.
5. Expenses. During the term of this Agreement, the
Advisor will pay all expenses incurred by it in connection with
the management of the Fund. Notwithstanding the foregoing, the
Portfolio shall pay the expenses and costs of the Portfolio for
the following:
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( 1) Taxes;
( 2) Brokerage fees and commissions with regard to
portfolio transactions;
( 3) Interest charges, fees and expenses of the
custodian of the securities;
( 4) Fees and expenses of the Fund's transfer agent and
the Administrator;
( 5) Its proportionate share of auditing and legal
expenses;
( 6) Its proportionate share of the cost of maintenance
of corporate existence;
( 7) Its proportionate share of compensation of
directors of the Fund who are not interested
persons of the Advisor as that term is defined by
law;
( 8) Its proportionate share of the costs of corporate
meetings;
( 9) Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;
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(10) Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to
existing shareholders;
(11) The Advisory fee payable to the Advisor, as
provided in paragraph 4 herein;
(12) Costs of recordkeeping (other than investment
records required to be maintained by the Advisor),
and daily pricing;
(13) Distribution expenses in accordance with any
Distribution Plan as and if approved by the
shareholders of the Portfolio; and
(14) Expenses and taxes incident to the failure of the
Portfolio to qualify as a regulated investment
company under the provisions of the Internal Revenue
Code of 1986, as amended, unless such expenses and/or
taxes arise from the negligence of another party.
If the expenses projected to be borne by the Portfolio
(exclusive of interest, brokerage commissions, taxes and extraordinary items,
but inclusive of advisory fees) in any fiscal year are expected to exceed any
expense limitation commitment made to the Fund, the advisory fee payable by the
Portfolio to the Advisor shall be reduced on each day such fee is
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accrued to the extent of that day's portion of such excess expenses. Except as
provided by the agreement of the Advisor, the amount of such reduction shall not
exceed the actual amount of the advisory fee otherwise payable in such year.
Accruals of expenses and adjustments to advisory fees otherwise payable under
this Agreement, and the amounts payable monthly in accordance with this
Agreement, shall be adjusted as required from month to month.
6. Reports. The Fund and the Advisor agree to furnish to each other, if
applicable, current information required for the preparation by such parties of
prospectuses, statements of additional information, proxy statements, reports to
shareholders, certified copies of their financial statements, and to furnish to
each other such other information and documents with regard to their affairs as
each may reasonably request.
7. Status of the Advisor. The services of the Advisor to the Fund are
not to be deemed exclusive, and the Advisor shall be free to render similar
services to others so long as its services to the Fund are not impaired thereby.
Pursuant to comparable agreements, the Fund may also retain
the services of the Advisor to serve as the investment advisor of other series
of the Fund.
8. Books and Records. In compliance with the requirements
of the 1940 Act, the Advisor hereby agrees that all records which
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it maintains for the Fund are the property of the Fund, and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request. The
Advisor further agrees to preserve for the periods prescribed by the 1940 Act,
and the rules or orders thereunder, the records required to be maintained by the
1940 Act.
9. Limitation of Liability of Advisor. The duties of the Advisor shall
be confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Advisor hereunder. The Advisor shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Advisor in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. (As used in this Paragraph 9, the term
"Advisor" shall include directors, officers, employees and other corporate
agents of the Advisor as well as that corporation itself).
10. Permissible Interests. Directors, agents, and
shareholders of the Fund are or may be interested in the Advisor
(or any successor thereof) as directors, officers, or
shareholders, or otherwise; directors, officers, agents, and
shareholders of the Advisor are or may be interested in the Fund
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as directors, officers, shareholders or otherwise; and the Advisor (or any
successor) is or may be interested in the Fund as a shareholder or otherwise. In
addition, brokerage transactions for the Fund may be effected through affiliates
of the Advisor if approved by the Fund's Board of Directors, subject to the
rules and regulations of the Securities and Exchange Commission, and the
policies and procedures adopted by the Fund.
11. License of Advisor's Name. The Advisor hereby authorizes the Fund
to use the name "TANAKA" for the Portfolio. The Fund agrees that if this
Agreement is terminated it will take reasonable steps to redesignate the name of
the Portfolio to eliminate any reference to the name "TANAKA" or any derivation
thereof unless the Advisor waives this requirement in writing.
12. Duration and Termination. This Agreement shall become effective on
the date first above written subject to its approval by the shareholders of the
Portfolio and unless sooner terminated as provided herein, shall continue in
effect for two (2) years from that date. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually (a) by the vote of a majority of those members of
the Fund's Board of Directors who are not parties to this Agreement or
interested persons of any such party (as that term is defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by vote of either the Board of Directors or of a majority of the
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outstanding voting securities (as that term is defined in the 1940 Act) of the
Portfolio. Notwithstanding the foregoing, this Agreement may be terminated by
the Portfolio or by the Fund at any time on sixty (60) days written notice,
without the payment of any penalty, provided that termination must be authorized
either by vote of the Fund's Board of Directors or by vote of a majority of the
outstanding voting securities of the Portfolio or by the Advisor on sixty (60)
days written notice. This Agreement will automatically terminate in the event of
its assignment (as that term is defined in the 1940 Act).
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act).
14. Notice. Any notice required or permitted to be given
by either party to the other shall be deemed sufficient if sent
by registered or certified mail, postage prepaid, addressed by
the party giving notice to the other party at the address stated
below:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229
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(b) To the Advisor at: 230 Park Avenue
Suite 1432
New York, New York 10169
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
16. Applicable Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Maryland, and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the State
of Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
17. This Agreement may be executed in two or more counterparts, each of
which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
TANAKA FUND ADVISERS, LLC
BY:
GRAHAM Y. TANAKA
TANAKA FUNDS, INC.
BY:
JOHN PASCO. III
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this day of March, 1998, by and between
TANAKA Funds, Inc. a Maryland corporation (the "Fund") and First Dominion
Capital Corporation ("FDCC"), a Virginia corporation.
WITNESSETH:
1. DISTRIBUTION SERVICES
The Fund hereby engages FDCC as national distributor to assist the Fund
in promoting the sale and distribution to investors of shares of common stock of
each series of the Fund ("Shares"). In connection therewith, FDCC shall (i)
promote the sale of shares, (ii) act as principal underwriter of shares of
various series of the Fund, (iii) otherwise assist the Fund in the distribution
of shares directly to investors through dealers or otherwise. For this purpose
the Fund agrees to offer shares for sale at all times when, and in such places
as, such shares are to be made available for sale and may lawfully be offered
for sale and sold. As and when necessary in connection therewith FDCC will act
as principal for the sale of such shares.
2. SALE OF FUND SHARES
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Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively presumed
to have been accepted by the Fund if the Fund shall fail to notify FDCC
of the rejection of such offer or sale prior to the computation of the
net asset value of the Fund's shares next following receipt by the Fund
of notice of such offer or sale.
(b) No share of the Fund shall be sold for any consideration other than
cash or, except in instances otherwise provided for by the Fund's
currently effective Prospectus, for any amount less than the public
offering price per share, which shall be determined in accordance with
the Fund's currently effective Prospectus. No shares may be sold for
less than the net asset value thereof.
3. REGISTRATION OF SHARES
The Fund agrees to make prompt and reasonable efforts to effect and to
keep in effect the registration or qualification of its shares for sale in such
jurisdictions as the Fund may designate. FDCC may serve as dealer of record to
assist the Fund in connection with any such registration or qualification. The
Fund acknowledges that FDCC may incur expenses in connection with assisting in
the registration or qualification of Fund shares which are sold at net asset
value and the Fund will pay or
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reimburse expenses of FDCC which are incurred in connection with such
registration or qualification.
4. INFORMATION TO BE FURNISHED TO FDCC
The Fund agrees that it will furnish FDCC with such information with
respect to the affairs and accounts of the Fund as FDCC may from time to time
reasonably require, and further agrees that FDCC, at all reasonable times, shall
be permitted to inspect the books and records of the Fund.
5. ALLOCATION OF EXPENSES
During the period of this contract, the Fund shall pay or cause to be
paid all expenses, costs, and fees incurred by the Fund which are not assumed by
FDCC or any investment manager or investment advisor to the Fund. FDCC shall pay
advertising and promotional expenses incurred by FDCC in connection with the
distribution of the Fund's shares which are sold subject to: (i) the imposition
of a sales charge (whether front-end or back-end), including paying for
prospectuses for delivery to prospective shareholders, or (ii) the imposition of
a fee payable by the Fund to FDCC pursuant to a plan adopted under Investment
Company Act of 1940 Rule 12b-1.
6. COMPENSATION TO FDCC
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It is understood and agreed by the parties hereto that FDCC will
receive compensation for services it performs hereunder in accordance with
Schedule A hereto.
7. LIMITATION OF FDCC'S AUTHORITY
FDCC shall be deemed to be an independent contractor and, except as
specifically provided or authorized herein, shall have no authority to act for
or represent the Fund. In the performance of its duties hereunder, FDCC may
solicit and enter into selling dealer agreements with other broker-dealers in a
form approved by the Fund. Such selling dealer agreements shall provide for the
sale of shares of the Fund (or any series of the Fund) on terms consistent with
the registration statement of the Fund as then in effect. Unless otherwise
provided in a selling dealer agreement between FDCC and any selling dealer, any
selling dealer agreement of FDCC in effect as of the date of this agreement
shall be deemed to continue hereunder upon delivery to the selling dealer of any
amendment required by the terms of the Fund's action eliminating the sales load
on sales of affected Fund shares.
8. SUBSCRIPTION FOR SHARES - REFUND FOR CANCELED ORDERS
FDCC shall act as a principal, and not as agent, for sales
of Fund shares. FDCC shall subscribe for the shares of the Fund
only for the purpose of covering purchase orders already received
by it or for the purpose of investment for its own account. In
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the event that an order for the purchase of shares of the Fund is placed with
FDCC by a customer or dealer and subsequently canceled, FDCC shall forthwith
cancel the subscription for such shares entered on the books of the Fund, and,
if FDCC has paid the Fund for such shares, shall be entitled to receive from the
Fund in refund of such payments the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of
cancellation by FDCC.
9. INDEMNIFICATION OF THE FUND
FDCC agrees to indemnify the Fund against any and all litigation and
other legal proceedings of any kind or nature and against any liability,
judgment, cost, or penalty imposed as a result of such litigation or proceedings
in any way arising out of or in connection with the sale or distribution of the
shares of the Fund by FDCC. In the event of the threat or institution of any
such litigation or legal proceedings against the Fund, FDCC shall defend such
action on behalf of the Fund at its own expense, and shall pay any such
liability, judgment, cost, or penalty resulting therefrom, whether imposed by
legal authority on agreed upon by way of compromise and settlement; provided,
however, FDCC shall not be required to pay or reimburse the Fund for any
liability, judgment, cost, or penalty incurred as a result of information
supplied by, or as the result of the
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omission to supply information by, the Fund to FDCC or to FDCC by a director,
officer, or employee of the Fund who is not an interested person of FDCC, unless
the information so supplied or omitted was available to FDCC or the Fund's
investment adviser without recourse to the Fund or any such person referred to
above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
FDCC shall be free to render to others services of a nature either
similar to or different from those rendered under this contract, except such as
may impair its performance of the services and duties to be rendered by it
hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
The effective date of this Agreement shall be the date first set forth
above. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of the Fund (or of
any series of the Fund) shall mean the vote of 67% or more of the securities of
the Fund (or of any affected series of the Fund) if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of the securities of the Fund (or an affected series of the Fund) whichever
is the lesser.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect from year to year but only so
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long as such continuance is specifically approved at least annually by the Board
of Directors of the Fund, including the specific approval of a majority of the
directors who are not interested persons of FDCC as defined by the Investment
Company Act of 1940, as amended, cast in person at a meeting called for the
purpose of voting on such approval, or by the vote of the holders of a majority
of the outstanding voting securities of the Fund or an affected series of the
Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
FDCC, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment (as defined by the provisions of the Investment Company Act of 1940,
as amended).
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until
approved by FDCC and by the affirmative vote of a majority of the Board of
Directors of the Fund (including a majority of the directors who are not
interested persons of FDCC or any affiliate of FDCC).
13. NOTICES
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Any notice under this Agreement shall be in writing, addressed,
delivered, or mailed, postage prepaid, to the other party at such address as
such other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Fund and FDCC have caused this Agreement to be
executed by their duly authorized officers affixed hereto all as of the day and
year first above written.
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TANAKA FUNDS, INC.
By
Attested by
FIRST DOMINION CAPITAL CORP.
By
John Pasco, III
President
Attested by
228810.4
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SCHEDULE A
FDCC shall receive, as compensation for its services pursuant to this
Distribution Agreement:
(a) With respect to any shares of the Fund sold subject to a sales charge
collected at the time of the sale, FDCC shall be entitled to retain the
underwriter's portion of the sales charge for each investment in the Fund's
shares, computed as a percentage of the offering price determined in accordance
with the Fund's currently effective Prospectus and as otherwise provided in the
Fund's registration statement.
(b) With respect to sales of shares of the Fund sold subject to a sales charge
collected at the time of the sale for which FDCC is the selling dealer, FDCC
shall retain the dealer's sales charge for each investment in the Fund's shares,
computed as a percentage of the offering price determined in accordance with the
Fund's currently effective Prospectus and as otherwise provided in the Fund's
registration statement.
(c) With respect to sales of shares of the Fund sold subject to a plan of
distribution (a "Plan") providing for asset based payments to be made to FDCC,
FDCC shall retain from such payments, as appropriate, the underwriter's or
dealer's sales charge for each investment in the Fund's shares, computed as a
percentage of the offering price determined in accordance with
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the Fund's currently effective Prospectus and as otherwise
provided in the Fund's registration statement.
(d) With respect to any shares of the Fund sold at net asset value (without a
sales charge), FDCC shall receive from the Fund reimbursement at the rate of $30
per hour for the cost of personnel involved with assistance in the promotion of
sale of such shares and for out-of-pocket costs incurred by FDCC.
(e) When shares of the Fund are sold subject to a Plan providing for asset based
payments to be made to FDCC, and such shares are redeemed by the holder at a
time when they are subject to a contingent deferred sales charge, the Fund will
pay to FDCC the amount of such deferred sales charge required to be retained
from the proceeds of such redemption.
(f) Except to the extent required for the purposes set forth in this paragraph,
FDCC agrees to defer collection or retention of all portions of underwriter's
fees or selling dealer commissions otherwise accrued by it until such time as
all amounts payable to any personr which has provided funds for the advance of
expenditures under the Plan shall have been repaid. Notwithstanding the
foregoing, FDCC may retain or collect such underwriter's fees or commissions to
the extent such funds are applied by FDCC for the payment of actual
out-of-pocket expenditures paid or incurred, or scheduled to be paid or
incurred, in connection with the promotion or distribution of
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Fund shares, whether pursuant to the Distribution Agreement or in accordance
with the Plan.
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CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the _____ day of
March, 1998, by and between TANAKA Funds, Inc., (the "Fund"), an open-end
diversified investment business corporation organized under the laws of Maryland
and having its office at 1500 Forest Avenue, Suite 223, Richmond, Virginia,
23229 for the benefit of the TANAKA Growth Fund series (the "Series"), and Star
Bank, National Association, (the "Custodian"), a national banking association
having its principal office at 425 Walnut Street, Cincinnati, Ohio, 45202.
WHEREAS, the Fund and the Custodian desire to enter into this Agreement
to provide for the custody and safekeeping of the assets of the Series as
required by the Investment Company Act of 1940, as amended (the "Act").
WHEREAS, the Fund hereby appoints the Custodian as custodian of all the
Series' Securities and moneys at any time owned by the Series during the term of
this Agreement (the "Series Assets").
WHEREAS, the Custodian hereby accepts such appointment as Custodian and
agrees to perform the duties thereof as hereinafter set forth.
THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
Definitions
The following words and phrases, when used in this Agreement, unless
the context otherwise requires, shall have the following meanings:
Authorized Person - the Chairman, President, Secretary, Treasurer,
Controller, or Senior Vice President of the Fund, or any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors
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of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund, and listed in the Certificate annexed hereto as Appendix A, or such other
Certificate as may be received by the Custodian from time to time.
Book-Entry System - the Federal Reserve Bank book-entry system for
United States Treasury securities and federal agency securities.
Depository - The Depository Trust Company ("DTC"), a limited purpose
trust company its successor(s) and its nominee(s) or any other person or
clearing agent.
Dividend and Transfer Agent - the dividend and transfer agent
appointed, from time to time, pursuant to a written agreement between the
dividend and transfer agent and the Fund.
Foreign Securities - a) securities issued and sold primarily outside of
the United States by a foreign government, a national of any foreign country, or
a corporation or other organization incorporated or organized under the laws of
any foreign country or; b) securities issued or guaranteed by the government of
the United States, by any state, by any political subdivision or agency thereof,
or by any entity organized under the laws of the United States or of any state
thereof, which have been issued and sold primarily outside of the United States.
Money Market Security - debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including certificates
of deposit, bankers' acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of domestic banks and
thrift institutions whose deposits are insured by the Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or their equivalent
on the same day as such purchase and sale, all of which mature in not more than
thirteen (13) months.
Officers - the Chairman, President, Secretary, Treasurer, Controller,
and Senior Vice President of the Fund listed in the Certificate annexed hereto
as Appendix A, or such other
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Certificate as may be received by the Custodian from time to time.
Oral Instructions - verbal instructions received by the Custodian from
an Authorized Person (or from a person that the Custodian reasonably believes in
good faith to be an Authorized Person) and confirmed by Written Instructions in
such a manner that such Written Instructions are received by the Custodian not
later than the business day immediately following receipt of such Oral
Instructions.
Prospectus - the Fund's then currently effective prospectus and
Statement of Additional Information, as filed with and declared effective from
time to time by the Securities and Exchange Commission.
Security or Securities - Money Market Securities, common stock,
preferred stock, options, financial futures, bonds, notes, debentures, corporate
debt securities, mortgages, and any certificates, receipts, warrants, or other
instruments representing rights to receive, purchase, or subscribe for the same
or evidencing or representing any other rights or interest therein, or any
property or assets.
Written Instructions - communication received in writing by the
Custodian from an Authorized Person.
ARTICLE II
Documents and Notices to be Furnished by the Fund
A The following documents, including any amendments thereto, will be
provided contemporaneously with the execution of the Agreement, to the Custodian
by the Fund:
1. A copy of the Articles of Incorporation of the Fund
certified by the Secretary.
2. A copy of the By-Laws of the Fund certified by the
Secretary.
3. A copy of the resolution of the Board of Directors of
the Fund appointing the Custodian, certified by the Secretary.
4. A copy of the then current Prospectus of the Series.
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5. A Certificate of the President and Secretary of the
Fund setting forth the names and signatures of the Officers of
the Fund.
B. The Fund agrees to notify the Custodian in writing of
the appointment of any Dividend and Transfer Agent.
ARTICLE III
Receipt of Fund Assets
A. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all moneys constituting Series Assets. The
Custodian shall be entitled to reverse any deposits made on the Fund's behalf
where such deposits have been entered and moneys are not finally collected
within 30 days of the making of such entry.
B. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all Securities constituting Series Assets. The
Custodian will not have any duties or responsibilities with respect to such
Securities until actually received by the Custodian.
C. As and when received, the Custodian shall deposit to the account(s)
of the Series any and all payments for shares of the Series issued or sold from
time to time as they are received from the Fund's distributor or Dividend and
Transfer Agent or from the Fund itself.
ARTICLE IV
Disbursement of Fund Assets
A. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Directors of the Fund, certified by the Fund's Secretary, either
(i) setting forth the date of the declaration of any dividend or distribution in
respect of shares of the Series, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be determined, the amount
payable per share to Series shareholders of record as of that date, and the
total amount to be paid by the Dividend and
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Transfer Agent on the payment date, or (ii) authorizing the declaration of
dividends and distributions in respect of shares of the Fund on a daily basis
and authorizing the Custodian to rely on a Certificate setting forth the date of
the declaration of any such dividend or distribution, the date of payment
thereof, the record date as of which Series shareholders entitled to payment
shall be determined, the amount payable per share to Series shareholders of
record as of that date, and the total amount to be paid by the Dividend and
Transfer Agent on the payment date.
On the payment date specified in such resolution or
Certificate described above, the Custodian shall segregate such amounts from
moneys held for the account of the Series so that they are available for such
payment.
B. Upon receipt of Written Instructions so directing it, the Custodian
shall segregate amounts necessary for the payment of redemption proceeds to be
made by the Dividend and Transfer Agent from moneys held for the account of the
Series so that they are available for such payment.
C. Upon receipt of a Certificate directing payment and setting forth
the name and address of the person to whom such payment is to be made, the
amount of such payment, and the purpose for which payment is to be made, the
Custodian shall disburse amounts as and when directed from the Series Assets.
The Custodian is authorized to rely on such directions and shall be under no
obligation to inquire as to the propriety of such directions.
D. Upon receipt of a Certificate directing payment, the Custodian shall
disburse moneys from the Series Assets in payment of the Custodian's fees and
expenses as provided in Article VIII hereof.
E. Upon receipt of a Certificate directing payment and
setting forth the name and address of the person to whom such
payment is to be made, the amount of such payment, and the
purpose for which payment is to be made, the Custodian shall
disburse amounts to any imprest account maintained for the Series
as and when directed from the Series Assets. The Custodian is
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authorized to rely on such directions and shall be under no obligation to
inquire as to the propriety of such directions.
ARTICLE V
Custody of Fund Assets
A. The Custodian shall open and maintain a separate bank account or
accounts in the United States in the name of the Fund for the assets of the
Series, subject only to draft or order by the Custodian acting pursuant to the
terms of this Agreement, and shall hold all cash received by it from or for the
account of the Series, other than cash maintained by the Fund in a bank account
established and used by the Series in accordance with Rule 17f-3 under the Act.
Moneys held by the Custodian on behalf of the Series may be deposited by the
Custodian to its credit as Custodian in the banking department of the Custodian.
Such moneys shall be deposited by the Custodian in its capacity as such, and
shall be withdrawable by the Custodian only in such capacity.
B. The Custodian shall hold all Securities delivered to
it in safekeeping in a separate account or accounts maintained at
Star Bank, N.A. for the benefit of the Series.
C. All Securities held which are issued or issuable only in bearer
form, shall be held by the Custodian in that form; all other Securities held for
the Series shall be registered in the name of the Custodian or its nominee. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold, or deliver in proper form for transfer, any Securities that
it may hold for the account of the Fund and which may, from time to time, be
registered in the name of the Series.
D. With respect to all Securities held for the Series, the Custodian
shall on a timely basis (concerning items 1 and 2 below, as defined in the
Custodian's Standards of Service Guide, as amended from time to time, annexed
hereto as Appendix C):
1. Collect all income due and payable with
respect to such Securities;
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2. Present for payment and collect amounts payable upon
all Securities which may mature or be called, redeemed,
or retired, or otherwise become payable;
3. Surrender Securities in temporary form for definitive
Securities; and
4. Execute, as agent, any necessary declarations or certificates
of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority, including any
foreign taxing authority, now or hereafter in effect.
E. Upon receipt of a Certificate and not otherwise, the
Custodian shall:
1. Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby
the authority of the Fund as beneficial owner of
any Securities may be exercised;
2. Deliver any Securities in exchange for other
Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing,
merger, consolidation, or recapitalization of any
corporation, or the exercise of any conversion
privilege;
3. Deliver any Securities to any protective
committee, reorganization committee, or other
person in connection with the reorganization,
refinancing, merger, consolidation,
recapitalization, or sale of assets of any
corporation, and receive and hold under the terms
of this Agreement such certificates of deposit,
interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
4. Make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be
stated in said Certificate to be for the purpose
of effectuating any duly authorized plan of
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liquidation, reorganization, merger,
consolidation or recapitalization of the Fund; and
5. Deliver any Securities held for the Series to the
depository agent for tender or other similar
offers.
F. The Custodian shall promptly deliver to the Fund all notices, proxy
material and executed but unvoted proxies pertaining to shareholder meetings of
Securities held by the Fund. The Custodian shall not vote or authorize the
voting of any Securities or give any consent, waiver or approval with respect
thereto unless so directed by a Certificate or Written Instruction.
G. The Custodian shall promptly deliver to the Fund all information
received by the Custodian and pertaining to Securities held by the Fund with
respect to tender or exchange offers, calls for redemption or purchase, or
expiration of rights.
ARTICLE VI
Purchase and Sale of Securities
A. Promptly after each purchase of Securities by the Fund for the
Series, the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each purchase of Money Market Securities,
Written Instructions or Oral Instructions, specifying with respect to each such
purchase the;
1. name of the issuer and the title of the
Securities,
2. principal amount purchased and accrued interest,
if any,
3. date of purchase and settlement,
4. purchase price per unit,
5. total amount payable, and
6. name of the person from whom, or the broker
through which, the purchase was made.
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The Custodian shall, against receipt of Securities purchased by or for the
Series, pay out of the Series Assets, the total amount payable to the person
from whom or the broker through which the purchase was made, provided that the
same conforms to the total amount payable as set forth in such Written
Instructions or Oral Instructions, as the case may be.
B. Promptly after each sale of Securities by the Fund for the Series,
the Fund shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, Written Instructions, and (ii)
with respect to each sale of Money Market Securities, Written Instructions or
Oral Instructions, specifying with respect to each such sale the;
1. name of the issuer and the title of the
Securities,
2. principal amount sold and accrued interest, if
any,
3. date of sale and settlement,
4. sale price per unit,
5. total amount receivable, and
6. name of the person to whom, or the broker through
which, the sale was made.
The Custodian shall deliver the Securities against receipt of the total amount
receivable, provided that the same conforms to the total amount receivable as
set forth in such Written Instructions or Oral Instructions, as the case may be.
C. On contractual settlement date, the account of the Series will be
charged for all purchased Securities settling on that day, regardless of whether
or not delivery is made. Likewise, on contractual settlement date, proceeds from
the sale of Securities settling that day will be credited to the account of the
Series, irrespective of delivery.
D. Purchases and sales of Securities effected by the Custodian will be
made on a delivery versus payment basis. The Custodian may, in its sole
discretion, upon receipt of a Certificate, elect to settle a purchase or sale
transaction in some other manner, but only upon receipt of acceptable
indemnification from the Fund.
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E. The Custodian shall, upon receipt of a Written Instructions so
directing it, establish and maintain a segregated account or accounts for and on
behalf of the Series. Cash and/or Securities may be transferred into such
account or accounts for specific purposes, to-wit:
1. in accordance with the provision of any agreement
among the Fund, the Custodian, and a broker-dealer
registered under the Securities and Exchange Act
of 1934, as amended, and also a member of the
National Association of Securities Dealers (NASD)
(or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of the Options Clearing
Corporation and of any registered national
securities exchange, the Commodity Futures Trading
Commission, any registered contract market, or any
similar organization or organizations requiring
escrow or other similar arrangements in connection
with transactions by the Fund for the Series;
2. for purposes of segregating cash or government
securities in connection with options purchased,
sold, or written by the Fund or commodity futures
contracts or options thereon purchased or sold by
the Fund for the Series;
3. for the purpose of compliance by the Series with
the procedures required for reverse repurchase
agreements, firm commitment agreements, standby
commitment agreements, and short sales by Act
Release No. 10666, or any subsequent release or
releases or rule of the Securities and Exchange
Commission relating to the maintenance of
segregated accounts by registered investment
companies; and
4. for other corporate purposes, only in the case of
this clause 4 upon receipt of a copy of a
resolution of the Board of Directors of the Fund,
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certified by the Secretary of the Fund, setting
forth the purposes of such segregated account.
F. Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with any Written Instructions to
settle the purchase of any Securities on behalf of the Series unless there is
sufficient cash in the account(s) at the time or to settle the sale of any
Securities from an account(s) unless such Securities are in deliverable form.
Notwithstanding the foregoing, if the purchase price of such Securities exceeds
the amount of cash in the account(s) at the time of such purchase, the Custodian
may, in its sole discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any such advance shall be
deemed a loan from the Custodian to the Fund for the respective Series payable
on demand and bearing interest accruing from the date such loan is made up to
but not including the date such loan is repaid at a rate per annum customarily
charged by the Custodian on similar loans.
ARTICLE VII
Fund Indebtedness
In connection with any borrowings by the Fund for the Series, the Fund
will cause to be delivered to the Custodian by a bank or broker requiring
Securities as collateral for such borrowings (including the Custodian if the
borrowing is from the Custodian), a notice or undertaking in the form currently
employed by such bank or broker setting forth the amount of collateral. The Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the name of the bank or broker, (b) the amount and
terms of the borrowing, which may be set forth by incorporating by reference an
attached promissory note duly endorsed by the Fund, or a loan agreement, (c) the
date, and time if known, on which the loan is to be entered into, (d) the date
on which the loan becomes due and payable, (e) the total amount payable to the
Series on the borrowing date, and (f) the description of the Securities
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securing the loan, including the name of the issuer, the title and the number of
shares or the principal amount. The Custodian shall deliver on the borrowing
date specified in the Certificate the required collateral against the lender's
delivery of the total loan amount then payable, provided that the same conforms
to that which is described in the Certificate. The Custodian shall deliver, in
the manner directed by the Fund, such Securities as additional collateral, as
may be specified in a Certificate, to secure further any transaction described
in this Article VII. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it.
The Custodian may, at the option of the lender, keep such collateral in
its possession, subject to all rights therein given to the lender because of the
loan. The Custodian may require such reasonable conditions regarding such
collateral and its dealings with third-party lenders as it may deem appropriate.
ARTICLE VIII
Concerning the Custodian
A. Except as otherwise provided herein, the Custodian shall not be
liable for any loss or damage resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its own negligence
or willful misconduct. The Fund shall defend, indemnify and hold harmless the
Custodian and its directors, officers, employees and agents with respect to any
loss, claim, liability or cost (including reasonable attorneys' fees) arising or
alleged to arise from or relating to the Fund's duties hereunder or any other
action or inaction of the Fund or its Directors, officers, employees or agents,
except such as may arise from the negligent action, omission, willful misconduct
or breach of this Agreement by the Custodian. The Custodian may, with respect to
questions of law, apply for and obtain the advice and opinion of counsel, at the
expense of the Fund, and shall be fully protected with respect
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to anything done or omitted by it in good faith in conformity with the advice or
opinion of counsel. The provisions under this paragraph shall survive the
termination of this Agreement.
B. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall
be under no obligation to inquire into, and shall not be liable
for: 1. The validity of the issue of any Securities
purchased by or for the account of the Fund,
the legality of the purchase thereof, or the
propriety of the amount paid therefor;
2. The legality of the sale of any Securities by or
for the account of the Series, or the propriety of
the amount for which the same are sold;
3. The legality of the issue or sale of any shares of
the Series, or the sufficiency of the amount to be
received therefor;
4. The legality of the redemption of any shares of
the Series, or the propriety of the amount to be
paid therefor;
5. The legality of the declaration or payment of any
dividend by the Fund in respect of shares of the
Series;
6. The legality of any borrowing by the Series on
behalf of the Fund, using Securities as
collateral;
C. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Series from any Dividend
and Transfer Agent of the Fund nor to take any action to effect payment or
distribution by any Dividend and Transfer Agent of the Fund of any amount paid
by the Custodian to any Dividend and Transfer Agent of the Fund in accordance
with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian shall not be
under any duty or obligation to take action to effect collection of any amount,
if the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (i) it
shall
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be directed to take such action by a Certificate and (ii) it shall be assured to
its satisfaction (including prepayment thereof) of reimbursement of its costs
and expenses in connection with any such action.
E. The Fund acknowledges and hereby authorizes the Custodian to hold
Securities through its various agents described in Appendix B annexed hereto.
The Fund hereby represents that such authorization has been duly approved by the
Board of Directors of the Fund as required by the Act. The Custodian
acknowledges that although certain Series Assets are held by its agents, the
Custodian remains primarily liable for the safekeeping of the Series Assets.
In addition, the Fund acknowledges that the Custodian may appoint one
or more financial institutions, as agent or agents or as sub-custodian or
sub-custodians, including, but not limited to, banking institutions located in
foreign countries, for the purpose of holding Securities and moneys at any time
owned by the Series. The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the appointment or activities
of such agents or sub-custodians. Any such agent or sub-custodian shall be
qualified to serve as such for assets of investment companies registered under
the Act. Upon request, the Custodian shall promptly forward to the Fund any
documents it receives from any agent or sub-custodian appointed hereunder which
may assist directors of registered investment companies fulfill their
responsibilities under Rule 17f-5 of the Act, and the Custodian acknowledges
that no appointment of a custodian outside the U.S shall be effective unless
provisions of such Rule 17f-5 have been met.
F. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
the Fund are such as properly may be held by the Series under the provisions of
the Articles of Incorporation and the Fund's By-Laws.
G. The Custodian shall treat all records and other
information relating to the Fund and the Series Assets as
confidential and shall not disclose any such records or
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information to any other person unless (i) the Fund shall have consented thereto
in writing or (ii) such disclosure is required by law.
H. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian from the assets of the Series such compensation as shall be
determined pursuant to Appendix D attached hereto, or as shall be determined
pursuant to amendments to such Appendix D. The Custodian shall be entitled to
charge against any money held by it for the account of the Series, the amount of
any of its fees, any loss, damage, liability or expense, including counsel fees
relating to such Series. The expenses which the Custodian may charge against the
account of the Series include, but are not limited to, the expenses of agents or
sub-custodians incurred in settling transactions involving the purchase and sale
of Securities of the Fund.
I. The Custodian shall be entitled to rely upon any Oral Instructions
and any Written Instructions. The Fund agrees to forward to the Custodian
Written Instructions confirming Oral Instructions in such a manner so that such
Written Instructions are received by the Custodian, whether by hand delivery,
facsimile or otherwise, not later than the following business day on which such
Oral Instructions were given. The Fund agrees that the failure of the Custodian
to receive such confirming instructions shall in no way affect the validity of
the transactions or enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no greater liability to the
Fund for acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions than would arise as to a similar transaction
pursuant to a Written Instruction.
J. The Custodian will (i) set up and maintain proper books of account
and complete records of all transactions in the accounts maintained by the
Custodian hereunder in such manner as will meet the obligations of the Fund
under the Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder and those records are the property of the Fund, and (ii)
preserve for the periods prescribed by applicable
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Federal statute or regulation all records required to be so preserved. All such
books and records shall be the property of the Fund, and shall be open to
inspection and audit at reasonable times and with prior notice by Officers and
auditors employed by the Fund.
K. The Custodian shall send to the Fund any report
received on the systems of internal accounting control of the
Custodian, or its agents or sub-custodians, as the Fund may
reasonably request from time to time.
L. The Custodian performs only the services of a custodian and shall
have no responsibility for the management, investment or reinvestment of the
Securities from time to time owned by the Fund. The Custodian is not a selling
agent for shares of the Series and performance of its duties as custodian shall
not be deemed to be a recommendation to the Fund's depositors or others of
shares of the Series as an investment.
M. The Custodian shall take all reasonable action, that the Fund may
from time to time request, to assist the Fund in obtaining favorable opinions
from the Fund's independent accountants, with respect to the Custodian's
activities hereunder, in connection with the preparation of the Fund's Form
N-1A, Form N-SAR, or other annual reports to the Securities and Exchange
Commission.
N. The Fund hereby pledges to and grants the Custodian a security
interest in any Series Assets to secure the payment of any liabilities of the
Series to the Custodian, whether acting in its capacity as Custodian or
otherwise, or on account of money borrowed from the Custodian. This pledge is in
addition to any other pledge of collateral by the Fund to the Custodian.
ARTICLE X
Termination
A. Either of the parties hereto may terminate this
Agreement for any reason by giving to the other party a notice in
writing specifying the date of such termination, which shall be
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not less than ninety (90) days after the date of giving of such notice. If such
notice is given by the Fund, it shall be accompanied by a copy of a resolution
of the Board of Directors of the Fund, certified by the Secretary of the Fund,
electing to terminate this Agreement and designating a successor custodian or
custodians. In the event such notice is given by the Custodian, the Fund shall,
on or before the termination date, deliver to the Custodian a copy of a
resolution of the Board of Directors of the Fund, certified by the Secretary,
designating a successor custodian or custodians to act on behalf of the Fund. In
the absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less than
$100,000,000 aggregate capital, surplus, and undivided profits. Upon the date
set forth in such notice this Agreement shall terminate, and the Custodian,
provided that it has received a notice of acceptance by the successor custodian,
shall deliver, on that date, directly to the successor custodian all Securities
and moneys then owned by the Fund and held by it as Custodian. Upon termination
of this Agreement, the Fund shall pay to the Custodian on behalf of the Fund
such compensation as may be due as of the date of such termination. The Fund
agrees on behalf of the Fund that the Custodian shall be reimbursed for its
reasonable costs in connection with the termination of this Agreement.
B. If a successor custodian is not designated by the Fund, or by the
Custodian in accordance with the preceding paragraph, or the designated
successor cannot or will not serve, the Fund shall, upon the delivery by the
Custodian to the Fund of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund, be deemed to be the custodian for the Fund, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-Entry
System, which cannot be delivered to the Fund, which shall be held by the
Custodian in accordance with this Agreement.
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ARTICLE XI
MISCELLANEOUS
A. Appendix A sets forth the names and the signatures of all Authorized
Persons, as certified by the Secretary of the Fund. The Fund agrees to furnish
to the Custodian a new Appendix A in form similar to the attached Appendix A, if
any present Authorized Person ceases to be an Authorized Person or if any other
or additional Authorized Persons are elected or appointed. Until such new
Appendix A shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the then current Authorized Persons as set forth in the last delivered Appendix
A.
B. No recourse under any obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder, Officer,
Director, past, present or future as such, of the Fund or of any predecessor or
successor, either directly or through the Fund or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder are enforceable solely against the Fund, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Directors of the Fund or of any predecessor
or successor, or any of them as such. To the extent that any such liability
exists, it is hereby expressly waived and released by the Custodian as a
condition of, and as a consideration for, the execution of this Agreement.
C. The obligations set forth in this Agreement as having been made by
the Fund have been made by the Board of Directors, acting as such Directors for
and on behalf of the Fund, pursuant to the authority vested in them under the
laws of the State of Maryland, the Articles of Incorporation and the By-Laws of
the Fund. This Agreement has been executed by Officers of the Fund as officers,
and not individually, and the obligations contained herein are not binding upon
any of the Directors, Officers,
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agents or holders of shares, personally, but bind only the
Fund.
D. Provisions of the Prospectus and any other documents (including
advertising material) specifically mentioning the Custodian (other than merely
by name and address) shall be reviewed with the Custodian by the Fund prior to
publication and/or dissemination or distribution, and shall be subject to the
consent of the Custodian.
E. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at Star
Bank Center, 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Mutual Fund Custody Department, or at such other place as the Custodian may from
time to time designate in writing.
F. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given when
delivered to the Fund or on the second business day following the time such
notice is deposited in the U.S. mail postage prepaid and addressed to the Fund
at its office at 1500 Forest Avenue, Suite 223, Richmond, Virginia, 23229 or at
such other place as the Fund may from time to time designate in writing.
G. This Agreement, with the exception of the Appendices,may not be
amended or modified in any manner except by a written agreement executed by both
parties with the same formality as this Agreement, and authorized and approved
by a resolution of the Board of Directors of the Fund.
H. 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 or by the Custodian, and no
attempted assignment by the Fund or the Custodian shall be effective without the
written consent of the other party hereto.
I. This Agreement shall be construed in accordance with
the laws of the State of Ohio.
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J. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and year first above written.
TANAKA Funds, Inc.
ATTEST: By: _________________________
________________________ Chairman
Star Bank, N.A.
ATTEST: By: _________________________
Marsha A. Croxton
_________________________ Vice President
APPENDIX A
Authorized Persons Specimen Signatures
Chairman:
President:
Secretary:
Treasurer:
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Controller:
Adviser Employees:
Transfer Agent/Fund Accountant
Employees:
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APPENDIX B
The following agents are employed currently by Star Bank, N.A.
for securities processing and control . . .
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible
Securities)
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APPENDIX C
Standards of Service Guide
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APPENDIX D
Schedule of Compensation
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FUND SERVICES, INC.
TRANSFER AGENT AGREEMENT
THIS AGREEMENT, dated March ____, 1998 between TANAKA Funds, Inc.. (the
"Fund"), a corporation operating as an open-end investment company under the
Investment Company Act of 1940, duly organized and existing under the laws of
the State of Maryland, and FUND SERVICES, INC., a corporation organized under
the laws of the State of Virginia ("FSI"), provides as follows:
WHEREAS, FSI has agreed to act as transfer agent for the purpose of
recording the transfer, issuance and redemption of Shares of the Fund,
transferring the Shares of the Fund, disbursing dividends and other
distributions to Shareholders, filing various tax forms, mailing shareholder
information and receiving and responding to various shareholder inquiries;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. The Fund hereby appoints FSI as its transfer agent and FSI
agrees to act in such capacity upon the terms set forth in this Agreement.
SECTION 2. If the Fund has authorized issuance of shares in
certificated form, the Fund shall furnish to FSI a supply of blank Share
Certificates of each Series and, from time to time, will renew such supply upon
FSI's request. Blank Share Certificates shall be signed manually or by facsimile
signatures of officers of the Fund and, if required by FSI, shall bear the
Fund's seal or a facsimile thereof.
<PAGE>
SECTION 3. FSI shall make original issues of Shares of each Series in
accordance with SECTIONS 13 and 14 below and the Fund's then current prospectus,
upon receipt of (i) Written Instructions requesting the issuance, (ii) a
certified copy of a resolution of the Fund's Board of Directors authorizing the
issuance, (iii) necessary funds for the payment of any original issue tax
applicable to such additional Shares, (iv) an opinion of the Fund's counsel as
to the legality and validity of the issuance, which opinion may provide that it
is contingent upon the filing by the Fund of an appropriate notice with the
Securities and Exchange Commission, as required by Rule 24f-2 of the Investment
Company Act of 1940, as amended from time to time. If the opinion described in
(iv) above is contingent upon a filing under such rule, the Fund shall fully
indemnify FSI for any liability arising from the failure of the Fund to comply
with such rule.
SECTION 4. Transfers of Shares of each Series shall be registered and,
subject to the provisions of SECTION 10, new Share Certificates shall be issued
by FSI upon surrender of outstanding Share Certificates in the form deemed by
FSI to be properly endorsed for transfer, which form shall include (i) all
necessary endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank, (ii) such assurances as FSI
may deem necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with all applicable
laws relating to the payment or collection of taxes. FSI shall take reasonable
measures as instructed by the Fund and agreed upon by
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FSI to enable the Fund to identify proposed transfers that, if effected, will
likely cause the Fund to fall within the Internal Revenue Code definitions of a
personal holding company and shall not make such transfers contrary to the
Fund's instructions without the prior written approval of the Fund and its
counsel.
SECTION 5. If and as shares are issued in certificated form, FSI shall
forward Share Certificates in "non-negotiable" form by first-class or registered
mail, or by whatever means FSI deems equally reliable and expeditious. While in
transit to the addressee, all deliveries of Share Certificates shall be insured
by FSI as it deems appropriate. FSI shall not mail Share Certificates in
"negotiable" form, unless requested in writing by the Fund and fully indemnified
by the Fund to FSI's satisfaction.
SECTION 6. In registering transfers of Shares of each Series, FSI may
rely upon the Uniform Commercial Code or any other statutes that, in the opinion
of FSI's counsel, protect FSI and the Fund from liability arising from (i) not
requiring complete documentation, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of such inquiry, or (iv)
refusing registration whenever an adverse claim requires such refusal.
SECTION 7. FSI may issue new Share Certificates in place of those lost,
destroyed or stolen, as and when authorized by the Bylaws of the Fund, and upon
receiving indemnity satisfactory to FSI and may issue new Share Certificates in
exchange for, and upon surrender of, mutilated Share Certificates as FSI deems
appropriate.
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SECTION 8. Unless otherwise directed by the Fund, FSI may issue or
register Share Certificates reflecting the signature, or facsimile thereof, of
an officer who has died, resigned or been removed by the Fund. The Fund shall
file promptly with FSI any approvals, adoptions, or ratifications of such
actions as may be required by law or FSI.
SECTION 9. FSI shall maintain customary stock registry records for each
Series in the Fund, noting the issuance, transfer or redemption of Shares and
the issuance and transfer of Share Certificates. FSI may also maintain for each
Series an account entitled "Unissued Certificate Account," in which it will
record the Shares, and fractions thereof, issued and outstanding from time to
time for which issuance of Share Certificates has not been requested. FSI is
authorized to keep records for each Series, containing the names and last known
addresses of Shareholders and Planholders, and the number of Shares, and
fractions thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder or Planholder will be assigned a
single account number for each Series, even though Shares held under each Plan
and Shares for which Certificates have been issued will be accounted for
separately. Whenever a Shareholder deposits Shares represented by Share
Certificates in a Plan that permits the deposit of Shares thereunder, FSI upon
receipt of the Share Certificates registered in the name of the Shareholder (or
if not registered, in proper form for transfer), shall cancel such Share
Certificates, debit the Shareholder's individual account, credit the Shares to
the Unissued Share Certificate Account pursuant to
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SECTION 10 below and credit the deposited Shares to the proper Plan account.
SECTION 10. To the extent authorized by the Fund, FSI shall issue Share
Certificates for Shares of each Series only upon receipt of a written request
from a Shareholder. If Shares are purchased without such request, FSI shall note
on its stock registry records the issuance of the Shares and fractions thereof,
shall credit the Unissued Certificate Account and the respective Shareholders'
accounts with the Shares, and shall issue such confirmation or other
documentation as the Fund shall require in conformity with Maryland law.
Whenever Shares, and fractions thereof, owned by Shareholders are surrendered
for redemption, FSI may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued Certificate Account and
the record of issued Shares outstanding; it shall be unnecessary for FSI to
reissue Share Certificates in the name of the Fund.
SECTION 11. FSI shall also perform the usual duties and functions
required of a stock transfer agent for a corporation, including but not limited
to (i) issuing Share Certificates as Treasury Shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one Shareholder to
another in the usual manner. FSI may rely conclusively and act without further
investigation upon any list, instruction, certification, authorization, Share
Certificate or other instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed, countersigned or executed
or
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authorized by a duly-authorized person or persons, or by the Fund, upon the
advice of counsel for the Fund or for FSI, or upon the net asset value quotation
of the Service Agent, as hereinafter defined. FSI may record any transfer of
Share Certificates which it reasonably believes in good faith to have been
duly-authorized, or may refuse to record any transfer of Share Certificates if,
in good faith, it deems such refusal necessary in order to avoid any liability
on the part of either the Fund or FSI. The Fund agrees to indemnify and hold
harmless FSI from and against any and all losses, costs, claims, and liability
that it may suffer or incur by reason of such good faith reliance, action or
failure to act.
SECTION 12. FSI shall notify the Fund of any request or demand for the
inspection of the Fund's share records. FSI shall abide by the Fund's
instructions for granting or denying the inspection; provided, however, FSI may
grant the inspection without such instructions if it is advised by its counsel
that failure to do so will result in liability to FSI.
SECTION 13. For purposes of this Section, the Fund hereby instructs FSI
to consider Shareholder and Planholder payments as federal funds on the day
indicated below:
(a) for a wire received prior to 12:00 noon Eastern time,
on the same day;
(b) for a wire received on or after 12:00 noon Eastern
time, on the next business day;
(c) for a check received prior to 12:00 noon Eastern time,
on the second business day following receipt; and
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(d) for a check received on or after 12:00 noon Eastern
time, on the third business day following receipt.
Immediately after 4:00 p.m. Eastern time or such other time as the Fund may
reasonably specify for any Series (the "Valuation Time") on each day that the
Fund and FSI are open for business, FSI shall obtain from the Fund's service
agent, as specified by the Fund in writing to FSI (the "Service Agent"), a
quotation (on which it may conclusively rely) of the net asset value, determined
as of the Valuation Time on that day. On each day FSI is open for business, it
shall use the net asset value determined by the Service Agent to compute the
number of Shares and fractional Shares to be purchased and the aggregate
purchase proceeds to be deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is agreed to by FSI), FSI
shall place a purchase order with the Custodian for the proper number of Shares
and fractional Shares to be purchased and promptly thereafter shall send written
confirmation of such purchase to the Custodian and the Fund.
SECTION 14. Having made the calculations required by SECTION 13, FSI
shall thereupon pay the Custodian the aggregate net asset value of Shares of
each Series purchased. The aggregate number of Shares and fractional Shares
purchased shall then be issued daily and credited by FSI to the Unissued
Certificate Account. FSI shall also credit each Shareholder's separate account
with the number of shares purchased by such Shareholder. FSI shall promptly
thereafter mail written confirmation of the purchase to each Shareholder or
Planholder, and if requested, to a specified broker-dealer and the Fund.
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Each confirmation shall indicate the prior Share balance, the new Share balance,
the Shares held under a Plan (if any), the Shares for which Share Certificates
are outstanding (if any), the amount invested and the price paid for the
newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each business day, as
specified in accordance with SECTION 13 above, FSI shall process all requests to
redeem Shares of each Series and advise the Custodian of (i) the total number of
Shares of each Series available for redemption and (ii) the number of Shares and
fractional Shares of each Series requested to be redeemed. Upon confirmation of
the net asset value, FSI shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with SECTION 16 and the
Fund's prospectus, record the redemption in the stock registry books, and debit
the redeemed Shares from the Unissued Certificate Account and the individual
account of the Shareholder or Planholder.
In lieu of carrying out the redemption procedures described in the
preceding paragraph, FSI may, at the request of the Fund, sell Shares of each
Series to the Fund as repurchases from Shareholders and/or Planholders, provided
that the sales price is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. The proceeds of redemption shall be remitted by FSI in
accordance with the Fund's then current prospectus as follows:
(a) By check mailed to the Shareholder or Planholder at his
last known address. The request and stock certificates, if any,
for Shares being redeemed must reflect a guarantee of the owner's
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signature by a domestic commercial bank or trust company or a member firm of a
national securities exchange. If Share Certificates have not been issued to the
redeeming Shareholder or Planholder, the signature of the Shareholder or
Planholder on the redemption request must be similarly guaranteed. The Fund may
authorize FSI in writing to waive the signature guarantee for any specific
transaction or classes of transactions;
(b) By wire to a designated bank or broker upon telephone request,
without signature guarantee, if such redemption procedure has been elected on
the Shareholder's or Planholder's account information form. Any change in the
designated bank or broker account will be acted upon by FSI only if made in
writing by the Planholder or Shareholder, with signature guaranteed as required
by paragraph (a) above;
(c) In case of an expedited telephone redemption, by check payable to
the Shareholder or Planholder of record and mailed for deposit to the bank
account designated in the Shareholder account information form;
(d) By other procedures commonly followed by mutual funds, as set forth
in Written Instructions from the Fund and mutually agreed upon by the Fund and
FSI.
For purposes of redemption of shares of any Series that have been
purchased by check within fifteen (15) days prior to receipt of the redemption
request, the Fund shall provide FSI with Written Instructions concerning the
time within and the procedures under which such requests shall be processed.
The authority of FSI to perform its responsibilities under SECTIONS 15
and 16 shall be suspended if FSI receives notice of
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the suspension of the determination of the Fund's net asset value
or of the right of redemption of such shares.
SECTION 17. Upon the declaration of each dividend and each capital
gains distribution by the Fund's Board of Directors, the Fund shall notify FSI
of the date of such declaration, the amount payable per share, the record date
for determining the Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 18. On or before each payment date the Fund will transfer, or
cause the Custodian to transfer, to FSI the total amount of the dividend or
distribution currently payable. FSI will, on the designated payment date,
reinvest all dividends in additional shares and shall thereupon pay the
Custodian the aggregate net asset value of the additional shares and shall
promptly mail to each Shareholder or Planholder at his last known address, a
statement showing the number of full and fractional shares (rounded to three
decimal places) then owned by the Shareholder or Planholder and the net asset
value of such shares; provided, however, that if a Shareholder or Planholder
elects to receive dividends in cash, FSI shall prepare a check in the
appropriate amount and mail it to him at his last known address within five (5)
business days after the designated payment date.
SECTION 19. FSI shall maintain records regarding the issuance and
redemption of Shares of each Series and dividend reinvestments. Such records
will list the transactions effected for each Shareholder and Planholder and the
number of Shares and fractional Shares owned by each for which no Share
Certificates are outstanding. FSI agrees to make available upon request and
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to preserve for the periods prescribed in Rule 31a-2 of the Investment Company
Act of 1940 any records related to services provided under this Agreement and
required to be maintained by Rule 31a-1 of such Act. FSI acknowledges that these
records are the property of the Fund and will surrender same to the Fund
promptly on request.
SECTION 20. FSI shall maintain those records necessary to enable the
Fund to file, in a timely manner, Form N-SAR (Semiannual report) or any
successor monthly, quarterly or annual report required by the Investment Company
Act of 1940, or rules and regulations thereunder.
SECTION 21. FSI shall cooperate with the Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to such accountants for the performance of their duties.
SECTION 22. In addition to the services described above, FSI will
perform other services for the Fund as mutually agreed upon in writing from time
to time, including but not limited to preparing and filing federal tax forms
with the Internal Revenue Service, mailing federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing the annual list
of Shareholders and mailing notices of Shareholders' meetings, proxies and proxy
statements. FSI shall answer Shareholder inquiries related to their share
accounts and other correspondence requiring an answer from the Fund. FSI shall
maintain dated copies of written communications from Shareholders, and replies
thereto.
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SECTION 23. Nothing contained in this Agreement is intended to or shall
require FSI, in any capacity hereunder, to perform any functions or duties on
any holiday, weekend or weekday on which day FSI or the New York Stock Exchange
is closed. Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day on which both the New
York Stock Exchange and FSI are open, unless otherwise required by law;
provided, however, that all purchase or redemption requests received by the Fund
for a date on which the Exchange is open but FSI is not shall be priced and
executed "as of" such date on the next business day FSI is open, unless
otherwise required by law.
SECTION 24. The Fund agrees to pay FSI compensation for its services as
set forth in Schedule A attached hereto, or as shall be set forth in written
amendments to such Schedule approved by the Fund and FSI from time to time.
SECTION 25. FSI shall not be liable for any taxes, assessments or
governmental charges that may be levied or assessed on any basis whatsoever in
connection with the Fund, or any Plan thereof, Shareholder or Planholder,
excluding taxes assessed against FSI for compensation received by it hereunder.
SECTION 26. FSI shall not be liable for any non-negligent action taken
in good faith and reasonably believed by FSI to be within the powers conferred
upon it by this Agreement. The Fund shall indemnify FSI and hold it harmless
from and against any and all losses, claims, damages, liabilities or expenses
(including reasonable expenses for legal counsel) arising directly or indirectly
out of or in connection with this Agreement; provided
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such loss, claim, damage, liability or expense is not the direct result of FSI's
negligence or willful misconduct, and provided further that FSI shall give the
Fund notice and reasonable opportunity to defend any such loss, claim, etc. in
the name of the Fund or FSI, or both. Without limiting the foregoing:
(a) FSI may rely upon the advice of the Fund or counsel to the Fund or
FSI, and upon statements of accountants, brokers and other persons believed by
FSI in good faith to be experts in the matters upon which they are consulted.
FSI shall not be liable for any action taken in good faith reliance upon such
advice or statements;
(b) FSI shall not be liable for any action reasonably taken in good
faith reliance upon any Written Instructions, Oral Instructions, including the
Service Agent's net asset value quotation, or certified copy of any resolution
of the Fund's Board of Directors; provided, however, that upon receipt of a
Written Instruction countermanding a prior Written or Oral Instruction that has
not been fully executed by FSI, FSI shall verify the content of the second
Written Instruction and honor it, to the extend possible. FSI may rely upon the
genuineness of any such document, or copy thereof, reasonably believed by FSI in
good faith to have been validly executed; and
(c) FSI may rely, and shall be protected by the Fund in acting upon any
signature, instruction, request, letter of transmittal, certificate, opinion of
counsel, statement, instrument, report, notice, consent, order, or other paper
or document reasonably believed by it in good faith to be genuine
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and to have been signed or presented by the purchaser, Fund or other proper
party or parties.
(d) The Fund shall, as soon as possible, amend its prospectus to
conform with the provisions of this Agreement and make all necessary filings of
the amended prospectus, and shall indemnify FSI for any loss, claim or expense
resulting from FSI's reliance upon the Fund's representations in this Agreement,
notwithstanding a contrary representation in its prospectus.
SECTION 27. Upon receipt of Written Instructions, FSI is authorized to
make payment upon redemption of Shares without a signature guarantee. The Fund
hereby agrees to indemnify and hold FSI harmless from any and all expenses,
damages, claims, suits, liabilities, action, demands or losses whatsoever
arising out of or in connection with a payment by FSI for redemption of Shares
without a signature guarantee. Upon the request of FSI, the Fund shall assume
the entire defense of any such action, suit or claim. FSI shall notify the Fund
in a timely manner of any such action, suit or claim.
SECTION 28. The Fund shall deliver or cause to be delivered over to FSI
(i) an accurate list of Shareholders of the Fund, showing each Shareholder's
last known address, number of Shares owned and whether such shares are
represented by outstanding Share Certificates or by non-certificated share
accounts, (ii) all records relating to Plans of the Fund, including original
applications signed by the Planholders and original plan accounts recording
payment, deductions, reinvestments, withdrawals and liquidations and (iii) all
shareholder records, files, and other materials necessary or
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appropriate for proper performance of the functions assumed by FSI under this
Agreement (collectively referred to as the "Materials"). The Fund shall
indemnify and hold FSI harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out of or in connection
with any error, omission, inaccuracy or other deficiency of such Materials, or
out of the failure of the Fund to provide any portion of the Materials or to
provide any information needed by FSI to knowledgeably perform its functions.
SECTION 29. FSI shall, at all times, act in good faith and shall use
whatever methods it deems appropriate to ensure the accuracy of all services
performed under this Agreement. FSI shall be liable only for loss or damage due
to errors caused by FSI's negligence, bad faith or willful misconduct or that of
its employees.
SECTION 30. This Agreement may be amended from time to time by a
written supplemental agreement executed by the Fund and FSI and without notice
to or approval of the Shareholders or Planholders; provided the intent and
purposes of any Plan, as stated from time to time in the Fund's prospectus, are
observed. The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and FSI may conclusively rely on the
determination of the Fund that any procedure that has been approved by the Fund
does not conflict with or violate any requirement of its Articles of
Incorporation, By-Laws or prospectus, or any rule, regulation or requirement of
any regulatory body.
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SECTION 31. The Fund shall file with FSI a certified copy of the
operative resolution of its Board of Directors authorizing the execution of
Written Instructions or the transmittal of Oral Instructions.
SECTION 32. The terms, as defined in this Section, whenever used in
this Agreement or in any amendment or supplement hereto, shall have the meanings
specified below, insofar as the context will allow:
(a) The Fund: The term Fund shall mean TANAKA Funds, Inc.
(b) Custodian: The term Custodian shall mean Star Bank, NA
(c) Series: The term Series shall mean TANAKA Growth Fund
and any series that the Fund shall subsequently establish.
(d) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by the Fund.
(e) Share Certificates: The term Share Certificates shall
mean the stock certificates for the Shares of the Fund.
(f) Shareholders: The term Shareholders shall mean the registered
owners from time to time of the Shares of the Fund, as reflected on the stock
registry records of the Fund.
(g) Shares: The term Shares shall mean the issued and
outstanding shares of common stock of the Fund.
(h) Oral Instructions: The term Oral Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to FSI in person or by telephone, vocal telegram or other
electronic means, by a person or person reasonably believed in good faith by FSI
to be a
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person or person authorized by a resolution of the Board of Directors of the
Fund to give Oral Instructions on behalf of the Fund. Each Oral Instruction
shall specify whether it is applicable to the entire Fund or a specific Series
of the Fund.
(i) Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to FSI in original writing containing original signatures, or a
copy of such document transmitted by telecopy, including transmission of such
signature, or other mechanical or documentary means, at the request of a person
or persons reasonably believed in good faith by FSI to be a person or persons
authorized by a resolution of the Board of Directors of the Fund to give Written
Instructions on behalf of the Fund. Each Written Instruction shall specify
whether it is applicable to the entire Fund or a specific Series of the Fund.
(j) Plan: The term Plan shall include such investment plan, dividends
or capital gains reinvestment plans, systematic withdrawal plans or other types
of plans set forth in the then current prospectus of the Fund (excluding any
qualified retirement plan that is a Shareholder of the Fund) in form acceptable
to FSI, adopted by the Fund from time to time and made available to its
Shareholders, including plans or accounts by self-employed individuals or
partnerships.
(k) Planholder: The term Planholder shall mean a Shareholder who, at
the time of reference, is participating in a Plan, including any underwriter,
representative or broker-dealer.
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SECTION 33. In the event that any check or other order for the payment
of money is returned unpaid for any reason, FSI shall promptly notify the Fund
of the non-payment.
SECTION 34. Either party may give sixty (60) days written notice to the
other of the termination of this Agreement, such termination to take effect at
the time specified in the notice.
SECTION 35. Any notice or other communication required by or permitted
to be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until further notice:
TANAKA Funds, Inc.
1500 Forrest Avenue
Suite 223
Richmond, VA 23229
Attn: JP III
With a copy to:
TANAKA Fund Advisers, LLC
230 Park avenue, Suite 1432
New York, N.Y. 10169
Attention: Mr. Graham Y. Tanaka
Notice to FSI shall be given as follows until further notice:
FUND SERVICES, INC.
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
Attention: Mr. William R. Carmichael, Jr., President
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SECTION 36. The Fund represents and warrants to FSI that the execution
and delivery of this Transfer Agent Agreement by the undersigned officer of the
Fund has been duly and validly authorized by resolution of the Fund's Board of
Directors. FSI represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of FSI has also been duly
and validly authorized.
SECTION 37. This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original.
SECTION 38. This Agreement shall extend to and shall bind the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of FSI
or by FSI without the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors.
SECTION 39. This Agreement shall be governed by the laws
of the State of Virginia.
WITNESS the following signatures:
TANAKA Funds, Inc.
By:
Title:
Date:
Fund Services, Inc.
By:
Title:
Date:
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228822.4
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ATTACHMENT A
FEE SCHEDULE
I. Account Maintenance Fees - Per Fund:
0 - 5,000 Accounts - $11.00 per account per year
5,001 - 15,000 Accounts - $10.00 per account per year
Over 15,000 Accounts - $ 9.50 per account per year
Applicable fees billed monthly at 1/12 the annual rate for
each month the account is open. Accounts in each fund that
exceeds minimum billing will be aggregated to determine
pricing break points.
II. Transaction/Processing Fees:
Open New Account - $2.50
Partial or Total Redemption - $2.50
Tax Statement or other Transaction - $1.00
Addition to Account - $1.00
Dividend/Distribution - $1.00
(In excess of two per year)
(Plus statement charges)
Fees incurred will be billed monthly
III. Other Specified Charges:
Blue Sky Reports (Under 1,000 S/H) - $10.00 Blue Sky Reports
(Under 5,000 S/H) - $15.00 Blue Sky Reports (Over 5,000 S/H) -
$25.00 Shareholder List (Under 2,500 S/H) - $15.00 Shareholder
List (Over 2,500 S/H) - $25.00
IV. Minimum Fee:
The minimum annual fee is $16,500.00 per fund and is
payable at the rate $1,375.00 per month. The minimum
covers account maintenance fees and regular
purchase/redemption transaction fees only. Any new
funds started by TANAKA Funds, Inc., will receive a
reduced minimum of $12,000.00 for the first twelve months of operation.
V. Conversion Fees:
Conversion Fees for acquired funds will be billed at the new
account rate per account converted plus programming and out of pocket costs.
V. Out of Pocket Costs:
The cost of forms, postage, stationery, outside mailing
services, microfilm or magnetic tape data transfer etc. will
be in addition to the fees listed above.
VI. Term of Agreement
<PAGE>
Notwithstanding the Notice of Termination provisions of SECTION 34 of the Basic
Agreement, the Initial term of this contract will be 24 months from the date of
execution. The above fees are guaranteed for the initial term. This contract may
be extended beyond such initial term upon mutual agreement of the Funds and FSI.
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ADMINISTRATIVE SERVICES AGREEMENT
Administrative Services Agreement (the "Agreement") dated March ____,
1998, by and between TANAKA Funds, Inc. (the "Fund"), a diversified, open-end
management investment company, duly organized as a corporation in accordance
with the laws of the State of Maryland, and COMMONWEALTH SHAREHOLDER SERVICES,
INC. ("CSS"), a corporation duly organized as a corporation in accordance with
the laws of the Commonwealth of Virginia.
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint CSS as its Administrative Services
Agent, for and on behalf of the TANAKA Growth Fund series (the "Portfolio"), to
perform certain recordkeeping and shareholder servicing functions required of a
duly registered investment company to comply with certain provisions of federal,
state and local law, rules and regulations, and, as is required, to assist the
Fund in preparing and filing certain financial reports, and further to perform
certain daily functions in connection with on-going operations of the Fund and
the Portfolio, and provide ministerial services to implement the investment
decisions of the Fund and the investment advisor of the Portfolio, Tanaka Fund
Advisers, LLC (the "Advisor"); and
WHEREAS, CSS is willing to perform such functions upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
agree as follows:
Section 1. CSS shall examine and review all records and documents of
the Portfolio pertaining to its duties under this Agreement in order to
determine and/or recommend how such records and documents shall be maintained.
Section 2. CSS shall, as necessary for such purposes, advise the Fund
and its agents of the information which is deemed to be "necessary" for the
performance of its duties under this Agreement, and upon receipt of necessary
information and Written or Oral Instructions from the Fund, shall maintain and
keep current such shareholder relations records.
Unless the information necessary to perform the above functions is
furnished in writing to CSS by the Fund or its agents (such as Custodians,
Transfer Agents, etc.), CSS shall incur no liability and the Fund shall
indemnify and hold harmless CSS from and against any liability arising from any
discrepancy in the information received by CSS and used in the performance by
CSS of its duties.
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It shall be the responsibility of the Fund to furnish CSS with the net
asset value per share, declaration, record and payment dates and amounts of any
dividends or income and any other special actions required concerning each of
its securities.
CSS shall maintain such shareholder records above mentioned as required
by regulation and as agreed upon between the Fund and CSS.
Section 3. The Fund shall confirm to the Fund's Transfer Agent all
purchases and redemptions of shares of the Portfolio effected through the Fund
or its distributor, as and when such orders are accepted by the Fund or an
authorized agent of the Fund designated for that purpose. CSS shall receive from
the Fund's Transfer Agent daily reports of share purchases, redemptions, and
total shares outstanding, and shall be accountable for the information contained
in such reports of purchases and redemptions when received. It is agreed by the
parties that the net asset value per share of the Fund will be calculated in
accordance with Rule 22c-1 under the Investment Company Act of 1940 and as
otherwise directed by the Board of Directors of the Fund.
CSS shall reconcile its records of outstanding shares and shareholder
accounts with the Fund's Transfer Agent periodically, and not less frequently
than monthly.
Section 4. CSS shall provide assistance to the Fund in the servicing of
shareholder accounts, which may include telephone and written conversations,
assistance in redemptions, exchanges, transfers and opening accounts as may be
required from time to time. CSS shall, in addition, provide such additional
administrative non-advisory management services as CSS and the Fund may from
time to time agree.
Section 5. The accounts and records maintained by CSS shall be the
property of the Fund, and shall be made available to the Fund, within a
reasonable period of time, upon demand. CSS shall assist the Fund's independent
auditors, or any other person authorized by the Fund or, upon demand, any
regulatory body as authorized by law or regulation, in any requested review of
the Fund's accounts and records but shall be reimbursed for all reasonable and
documented expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from the Fund of any necessary
information, CSS shall assist the Fund in organizing necessary data for the
Fund's completion of any necessary tax returns, questionnaires, periodic reports
to shareholders and such other reports and information requests as the Fund and
CSS shall agree upon from time to time.
-2-
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Section 6. CSS and the Fund may from time to time adopt procedures they
agree upon, and, absent knowledge to the contrary, CSS may conclusively assume
that any procedure approved by the Fund or directed by the Fund, does not
conflict with or violate any requirements of Fund's Prospectuses, Articles of
Incorporation, By-Laws, registration statements, orders, or any rule or
regulation of any regulatory body or governmental agency. The Fund (acting
through its officers or other agents) shall be responsible for notifying CSS of
any changes in regulations or rules which might necessitate changes in the
Fund's procedures.
Section 7. CSS may rely upon the advice of the Fund and upon statements
of the Fund's lawyers, accountants and other persons believed by it in good
faith to be expert in matters upon which they are consulted, and CSS shall not
be liable for any actions taken in good faith upon such statements.
Section 8. CSS shall not be liable for any actions taken in good faith
reliance upon any authorized Oral Instructions, any Written Instructions, and
certified copy of any resolution of the Board of Directors of the Fund or any
other document reasonably believed by CSS to be genuine and to have been
executed or signed by the proper person or persons.
CSS shall not be held to have notice of any change of authority of any
officer, employee or agent of the Fund until receipt of notification thereof by
the Fund.
The Fund shall indemnify and hold CSS harmless from any and all
expenses, damages, claims, suits, liabilities, actions, demands and losses
whatsoever arising out of or in connection with any error, omission, inaccuracy
or other deficiency of any information provided to CSS by the Fund, or the
failure of the Fund to provide any information needed by CSS knowledgeably to
perform its functions hereunder. Also, the Fund shall indemnify and hold
harmless CSS from all claims and liabilities (including reasonable documented
expenses for legal counsel) incurred by or assessed against CSS in connection
with the performance of this Agreement, except such as may arise from CSS's own
negligent action, omission or willful misconduct; provided, however, that before
confessing any claim against it, CSS shall give the Fund reasonable opportunity
to defend against such claim in the name of the Fund or CSS or both.
Section 9. The Fund agrees to pay CSS compensation for its services and
to reimburse it for expenses, as set forth in the Schedule attached hereto, or
as shall be set forth in amendments
-3-
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to such schedule approved by the Fund's Board of Directors and
CSS.
Section 10. Except as required by laws and regulations governing
investment companies, nothing contained in this Agreement is intended to or
shall require CSS, in any capacity hereunder, to perform any functions or duties
on any holiday or other day of special observance on which CSS is closed.
Functions or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day on which both the Fund and CSS
are open. CSS will be open for business on days when the Fund is open for
business and/or as otherwise set forth in the Fund's Prospectuses and Statements
of Additional Information.
Section 11. Either the Fund or CSS may give written notice to the other
of the termination of this Agreement, such termination to take effect at the
time specified in the notice, which time shall be not less than 90 days from the
giving of such notice. Such termination shall be without penalty.
Section 12. Any notice or other communication required by or permitted
to be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first-class mail, postage prepaid, to the
respective parties at their last known address, except that Oral Instructions
may be given if authorized by the Board of the Fund and preceded by a
certificate from the Fund's secretary so attesting.
Notices to the Fund shall be directed to:
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Notices to CSS shall be directed to:
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Section 13. This Agreement may be executed in two or more counterparts,
each of which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 14. This Agreement shall extend to and shall be
binding upon the parties hereto and their respective successors
and
-4-
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assigns; provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of CSS, or by CSS without the written consent
of the Fund, authorized or approved by a resolution of its Board of Directors.
Section 15. For purposes of this Agreement, the terms Oral Instructions
and Written Instructions shall mean:
Oral Instructions: The term Oral Instruction shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to CSS in person or by telephone, telegram, telecopy, or other
mechanical or documentary means lacking a signature, by a person or persons
believed in good faith by CSS to be a person or persons authorized by a
resolution of the Board of Directors of the Fund, to give Oral Instructions on
behalf of the Fund.
Written Instructions: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to CSS in original writing containing original signatures or a
copy of such document transmitted by telecopy including transmission of such
signature believed in good faith by CSS to be the signature of a person
authorized by a resolution of the Board of Directors of the Fund to give Written
Instructions on behalf of the Fund.
The Fund shall file with CSS a certified copy of each resolution of its
Board of Directors authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 16. This Agreement shall be governed by the laws of the State
of Maryland.
-5-
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
TANAKA FUNDS, INC.
By:
COMMONWEALTH SHAREHOLDER SERVICES, INC.
By:
John Pasco, III
President
-7-
SCHEDULE A TO
ADMINISTRATIVE SERVICES AGREEMENT
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BY AND BETWEEN
TANAKA FUNDS, INC. AND
COMMONWEALTH SHAREHOLDER SERVICES, INC.
FOR THE
TANAKA GROWTH FUND
Pursuant to Section 9 of the Administrative Services
Agreement, dated , 1998, by and between TANAKA
Funds, Inc. (the "Fund"), and Commonwealth Shareholder Services,
Inc. ("CSS"), the TANAKA Growth Fund series of the Fund shall pay
CSS a fee calculated and paid monthly as follows:
A. For the performance of Blue Sky matters, CSS shall be
paid at the rate of $30 per hour of actual time used.
B. For shareholder servicing, CSS shall be paid at the rate
of $30 per hour of actual time used.
C. For all other administration, CSS shall be paid a fee at the rate of
0.2% per annum of the average daily net assets of the TANAKA Growth
Fund series of the Fund (the "Portfolio"), payable monthly, with a
minimum fee of $30,000.
D. In addition to the foregoing, the Fund shall reimburse
CSS, from the assets of the Portfolio, for the
Portfolio's proportionate share of general expenses
incurred for the Fund and for all expenses incurred by
the Portfolio individually. Such out-of-pocket expenses
shall include, but not be limited to: documented fees
and costs of obtaining advice of counsel or accountants
in connection with its services to the Fund; postage;
long distance telephone; special forms required by the
Fund; any travel which may be required in the performance
of its duties to the Fund; and any other extraordinary
expenses it may incur in connection with its services to
the Fund.
C-116
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FUND ACCOUNTING SERVICE AGREEMENT
This agreement (the "Agreement") is entered into as of the day of
March, 1998 by and between TANAKA Funds, Inc., (the
"Fund"), an open-end diversified investment business corporation organized under
the laws of Maryland and having its office at 1500 Forest Avenue, Suite 223,
Richmond, Virginia, 23229, for the benefit of the TANAKA Growth Fund series (the
"Series") and Star Bank, National Association, ("Star Bank"), a national banking
association having its principal office at 425 Walnut Street, Cincinnati, Ohio,
45202.
WHEREAS, the Fund desires to appoint Star Bank as an Accounting
Services Agent to maintain and keep current the books, accounts, records,
journals or other records of original entry relating to the business of the
Series as set forth in this Agreement; and
WHEREAS, the Fund will cause to be provided certain information to Star
Bank as set forth below:
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereafter contained, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the terms Oral Instructions and Written
Instructions shall mean: (a) Oral Instructions: The term Oral Instructions shall
mean an authorization, instruction, approval, item or set of data, or
information of any kind transmitted to Star Bank in person or by telephone,
telegram, telecopy or other mechanical or documentary means lacking an original
signature, by a person or persons believed in good faith by Star Bank to be a
person or persons authorized by a resolution of the Board of Directors of the
Fund, to give Oral Instructions on behalf of the Fund. (b) Written Instructions:
The term Written Instructions shall mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted to Star
Bank
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bearing an original signature of an authorized person, or a copy of such
document transmitted by telecopy including transmission of such signature
believed in good faith by Star Bank to be the signature of a person authorized
by a resolution of the Board of Directors of the Fund to give Written
Instructions of behalf of the Fund. (c) The Fund shall file with Star Bank a
certified copy of each resolution of its Board of Directors authorizing
execution of Written Instructions or the transmittal of Oral Instructions as
provided above.
Section 2. SCOPE OF DUTIES OF STAR BANK (a) Upon receipt of the necessary
information from the Fund or its agents by Written or Oral Instructions, Star
Bank shall maintain and keep current the following Accounts and Records relating
to the business of the Series, in such form as may be mutually agreed to between
the Fund and Star Bank, and as may be required by the Investment Company Act of
1940 (the "Act"):
(1) Cash Receipts Journal
(2) Cash Disbursements Journal
(3) Dividends Paid and Payable Schedule
(4) Purchase and Sales Journals - Portfolio Securities
(5) Subscription and Redemption Journals
(6) Security Ledgers - Transaction Report and Tax Lot Report
(7) Broker Ledger - Commission Report
(8) Daily Expense Accruals
(9) Daily Interest Accruals
(10) Daily Trial Balance
(11) Portfolio Interest Receivable and Income Journal
(12) Listing of Portfolio Holdings showing cost, market value
and percentage of portfolio comprised of each security.
(b) Star Bank 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.
Section 3. LIMITATION OF LIABILITY OF STAR BANK (a) Unless necessary information
to perform the above functions is furnished by Written or Oral Instructions to
Star Bank in a timely manner to enable the daily calculation of the
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Fund's net asset value at the time set by the Fund pursuant to Rule 22c-1 under
the Act, Star Bank shall incur no liability, and the Fund shall indemnify and
hold harmless Star Bank from and against any liability arising from any failure
to provide complete information or from any discrepancy between the information
received by Star Bank and used in such calculations and any subsequent
information received from the Fund or any of its designated Agents. (b) Star
Bank 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, Star Bank
shall not be liable to anyone.
Section 4. REPORTS
(a) The Fund shall provide to Star Bank on a quarterly basis a report of a duly
authorized officer of the Fund representing that all information furnished to
Star Bank during the preceding quarter was true, complete and correct in all
material respects. Star Bank 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 Star Bank 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, Star Bank determines, on the basis of
information supplied to Star Bank 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 have occurred or, with the passage of time,
would occur, Star Bank shall promptly notify the Fund and its counsel of such
violation.
Section 5. PRICING
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(a) Star Bank shall perform ministerial calculations necessary to calculate the
Fund's net asset value daily, in accordance with the Fund's current prospectus
and utilizing the information described in this Section. (b) Portfolio
investments for which market value is to be determined by the use of an
automated financial service (a "Pricing Service") approved by the Fund shall be
valued based on the prices of the portfolio investment reported by such Pricing
Service except where the Fund has given or caused to be given specific Written
or Oral Instructions to utilize a different value. Notwithstanding any
information obtained from a Pricing Service, all portfolio securities shall be
given such values as the Fund shall direct by Written or Oral Instructions,
including all restricted securities and other securities requiring valuation not
readily ascertainable solely by the use of such a Pricing Service. (c) Star Bank
shall have no responsibility or liability for the accuracy of prices quoted by
any recognized Pricing Service used by it pursuant to the preceding paragraph;
for the accuracy of the information supplied by the Fund; or for any loss,
liability, damage, or cost arising out of any inaccuracy of such data, unless
Star Bank is itself negligent with respect thereto.
Section 6. RELIANCE UPON INSTRUCTIONS (a) For all purposes under this Agreement,
Star Bank is authorized to act upon receipt of the first of any Written or Oral
Instructions it receives from the Fund or authorized agents of the Fund. In
cases where the first instruction is an Oral Instruction that is not in the form
of a document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where Star Bank receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Fund shall cause the
broker-dealer to send a written confirmation to Star Bank.
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(b) Star Bank shall be entitled to rely on the first Instruction received by it,
and for any act or omission undertaken in compliance therewith shall be free of
liability and fully indemnified and held harmless by the Fund. If additional
Instructions are received by the bank prior to complying with the original
Instruction, the sole obligation of Star Bank with respect to any follow-up or
confirmatory Written Instruction, Oral Instruction in documentary or written
form, or broker-dealer written confirmation shall be to make reasonable efforts
to detect any such discrepancy between the original Instruction and such
confirmation and to report such discrepancy to the Fund. The Fund shall be
responsible, at the Fund's expense, for taking any action, including any
reprocessing, necessary to correct any discrepancy or error.
Section 7. OWNERSHIP OF AND ACCESS TO FUND RECORDS (a) It is agreed that the
Accounts and Records maintained by Star Bank for the Fund are the property of
the Fund, and shall be made available to the Fund promptly upon request and
shall be maintained for the periods prescribed in Rule 31(a)-2 under the Act.
(b) Star Bank shall assist the Fund's independent auditors or, upon lawful
demand, any authorized regulatory body, in any authorized inspection or review
of the Fund's Accounts and Records.
Section 8. PROCEDURES AND COMPLIANCE
Star Bank and the Fund may from time to time adopt such
procedures as they agree upon in writing, and Star Bank may conclusively assume
that any procedure approved or directed by the Fund does not conflict with or
violate any requirements of its Prospectus, Articles of Incorporation, By-Laws,
or any rule or regulation of any regulatory body or governmental agency. The
Fund shall be responsible for notifying Star Bank of any changes in regulations
or rules which might necessitate changes in Star Bank's procedures, and for
working out such changes with Star Bank.
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Section 9. COMPENSATION
In consideration of the services to be performed by Star Bank, the Fund
agrees to pay Star Bank the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
Section 10. HOLIDAYS
Nothing contained in this Agreement is intended to or shall require
Star Bank, in any capacity hereunder, to perform any functions or duties on any
holiday, day of special observance or any other day on which the Custodian or
the New York Stock Exchange is closed. Functions or duties normally scheduled to
be performed on such days shall be performed, and as of, the next succeeding
business day on which both the New York Stock Exchange and the Custodian are
open. Not withstanding the foregoing, Star Bank shall compute the net asset
value of the Fund on each day required pursuant to Rule 22c-1 promulgated under
the Act.
Section 11. AGENTS
Star Bank reserves the right to appoint, subject to the prior written
approval of the Fund, agents who may serve as accounting service agents, or
perform any part of the duties and responsibilities of Star Bank under this
Agreement.
Section 12. TERMINATION
Either Party hereto may give written notice to the other party (the
"Termination Notice") of the termination of this Agreement. Such Termination
Notice shall state a date upon which the termination is effective (the
"Termination Date"), which shall be not less than sixty (60) days after the date
of the giving of the notice unless otherwise agreed by the parties hereto in
writing.
Section 13. NOTICE
Any notice or other communication required by or permitted to be given
in connection with this Agreement shall be in writing,
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and shall be delivered in person or sent by first class mail, postage prepaid to
the respective parties as follows:
If to the Fund:
TANAKA Funds, Inc.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
If to Star Bank:
Star Bank, N.A.
425 Walnut Street ML 6118
Cincinnati, OH 45202
Section 14. AMENDMENTS TO BE IN WRITING
This Agreement may be amended from time to time by a writing
executed by the Fund and Star Bank. The compensation stated in Schedule A
attached hereto may be adjusted from time to time by the execution of a new
schedule signed by both of the parties.
Section 15. CONTROLLING LAW
This Agreement shall be construed in accordance with the laws of the
State of Ohio.
Section 16. JURISDICTION
Any legal action, suit or proceeding to be instituted by either party
with respect to this Agreement shall be brought by such party exclusively in the
courts of the State of Ohio or in courts of the United States for the Southern
District of Ohio, and each party, by its execution of this Agreement,
irrevocably (i) submits to such jurisdiction and (ii) consents to the service of
any process or pleadings by first class U.S. mail, postage prepaid and return
receipt requested, or by any other means from time to time authorized by the
laws of such jurisdiction.
Section 17. COUNTERPARTS
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This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
Section 18. HEADINGS
The headings of paragraphs in this Agreement are for convenience of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and year first above written.
TANAKA Funds, Inc.
ATTEST:
By: ___________________________
______________________ xxxxx
Title: Chairman
Star Bank, N.A.
ATTEST:
By: ____________________________
________ Marsha A. Croxton
Title: Vice President
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SCHEDULE A
1. Domestic and ADR Securities Annual Basic Fee per
portfolio (1/12 payable monthly)
$12,000 Minimum up to $5 Million Average Net Assets
$18,000 Minimum up to $10 Million Average Net Assets
$24,000 Minimum up to $25 Million Average Net Assets
.0002 on Next $75 Million of Average Net Assets
Should total assets exceed $100 Million/Fund the fee schedule
will be renegotiated.
2. Should the Series security trading activity exceed an average of 100
trades per month per portfolio, and additional fee of $2.50 will be
charged per trade.
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FUND EXPENSE AGREEMENT
Agreement dated ____ March, 1998.
WHEREAS, TANAKA Funds, Inc. (the "Fund") is a registered
investment company which is obligated to pay from its
assets the just and proper debts of the Fund, and
WHEREAS, Commonwealth Shareholder Services, Inc. ("CSS")
serves as Administrator for the Fund, and
WHEREAS, as Administrator for the Fund, CSS is charged with
arranging for the payment by the Fund of the Fund's just and
proper debts, and
WHEREAS, the Fund and CSS wish to provide for the
efficient and economical payment of the debts of the
Fund, and
WHEREAS, the Fund and CSS wish to revise the procedures
for the lawful and efficient payment of the Fund's debts,
NOW THEREFORE, in furtherance of the Administrative Agreements
currently in effect between the Fund and CSS, the Fund and CSS, for good and
valid consideration, and intending to be legally bound, have entered into this
Agreement (the "Agreement") that:
1. CSS shall arrange for the payment on behalf of the Fund
of the debts of the Fund. In connection therewith:
1.1 CSS may require and direct the Fund or any duly authorized
custodian of, or agent acting for, the Fund to deliver a check
or draft payable by or from the assets of
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the Fund, or otherwise transfer monies, to make payment
of any debt of the Fund.
1.2 CSS may elect to advance monies for the purpose of making any
payment of a debt of the Fund, subject to the right of CSS
promptly to be made whole for such advance.
1.3 Any payment made by or at the instance of CSS under this
paragraph shall only be effected as and when the payment of
the debt in question has been authorized by, and duly approved
in accordance with, procedures set and approved by the Board
of Directors of the Fund.
1.4 Subject to written modification by agreement of the Fund
and CSS, CSS shall arrange for payment of the debts of
-2-
the Fund twice each calendar month, or more frequently as the
Fund's payment needs may dictate.
1.5 CSS shall deliver to the Fund's custodian a schedule of such
payments by CSS of debts of the Fund (a "Certification"),
indicating whether such payment has been made from assets of
the Fund, or from amounts advanced by CSS. Each Certification
shall set forth a written breakdown of the expense category of
each item for which payment has been made, and for which
reimbursement is requested by such certification, indicating
the form of payment thereof.
2. Upon receipt of a Certification from CSS, the Fund shall
promptly reimburse CSS for amounts advanced by CSS for
the payment of the just debts of the Fund. Such
reimbursement shall be made by a wire or comparable
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<PAGE>
transfer of monies from the Fund to CSS, such transfer in good funds to
be effective five business days following the payment of the expenses
for such Certification.
IN WITNESS WHEREOF, the undersigned, each being duly authorized, has
executed this Agreement on the date first set forth above:
TANAKA FUNDS, INC.
By: __________________________________
Graham Y. Tanaka
COMMONWEALTH SHAREHOLDER SERVICES, INC.
By: ___________________________________
John Pasco, III
President
C-128
<PAGE>
TANAKA FUNDS, INC. - INDIVIDUAL RETIREMENT ACCOUNTS
SERVICE AGREEMENT
This Agreement is made as of the day of March, 1998, between Star Bank
N.A. ("Star Bank"), a national bank incorporated under Ohio law having a place
of business at 425 Walnut Street, Cincinnati, Ohio 45202; TANAKA Funds, Inc.
(the "Fund"), a Maryland corporation having its principal place of business at
1500 Forest Avenue, Suite 223, Richmond, Virginia 23229; and Fund Services, Inc.
("FSI"), a Virginia corporation having its principal place of business at 1500
Forest Avenue, Suite 111, Richmond, Virginia 23229.
WHEREAS, the Fund desires to retain Star Bank as custodian under the
Fund's model Individual Retirement Account ("IRA") plan for exclusive
investment in shares of certain TANAKA Funds-sponsored mutual funds
(the "IRA Plan"); and
WHEREAS, FSI is the transfer agent for the TANAKA Growth Fund series,
and any future funds established as a series of TANAKA Funds
("Series"); and
WHEREAS, Star Bank wishes to retain FSI to provide administrative and
recordkeeping services for the IRA Accounts (as hereafter defined); and
WHEREAS, FSI, as the Fund's transfer agent, has agreed that it can, and
will, furnish the necessary administrative and recordkeeping services
applicable to the IRA Accounts on behalf of Star Bank;
NOW, THEREFORE, in consideration of the respective undertakings and consents set
forth herein, and intending to be legally bound, the parties do hereby agree as
follows:
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<PAGE>
1. Star Bank will act as custodian under the terms of the Individual
Retirement Account Custodial Account Agreement, a copy of which is attached
hereto, as said agreement may from time to time hereafter be amended with Star
Bank's prior written consent (the "Custodial Account Agreement") for the Fund's
IRA accounts which are invested exclusively in shares of the Fund and for which
Star Bank is appointed the custodian by the Depositor (as defined in the
Custodian Account Agreement, which term shall accordingly mean the individual
depositor identified in an IRA application) (the aforesaid accounts being
hereinafter referred to as the "IRA Accounts") and as otherwise provided under
such agreement. Under no circumstances shall Star Bank be required to provide
any other services to the IRA Accounts. Star Bank shall act as such custodian
under the terms of and with the benefit of this Service Agreement.
C-130
<PAGE>
2. Star Bank hereby designates FSI as its agent to service the IRA
Accounts. FSI agrees to perform the services set forth in this Service
Agreement, including in Schedule A attached hereto, on behalf of Star Bank.
3. FSI is responsible for all recordkeeping with respect to the IRA Plan
and IRA Accounts, including existing and new IRA Accounts, all payment and
withdrawal activity, dividend processing, data changes and file maintenance and
the preparation, reporting and filing on behalf of, and with the consent and
review by, Star Bank of all informational tax returns and reports and all other
filing and reporting requirements imposed on a custodian pursuant to tax,
securities, labor, banking or any other applicable laws or regulations.
Without limiting the generality of the preceding paragraph, FSI is
responsible for the preparation and filing of all special tax reports relating
to IRA plans and accounts, for delivering to Depositors information as to the
withholding options available to holders of IRA accounts and for withholding and
paying over to appropriate tax authorities any amounts to be withheld in respect
of any IRA Accounts.
Prior to filing or delivering any of the aforesaid documents to any
Depositors or to tax, securities, labor, banking or other applicable regulatory
authorities, FSI shall provide drafts of such documents to Star Bank for its
examination, it being understood that this requirement shall not, however, in
any way reduce FSI's responsibility for the accuracy and completeness of such
documents and their compliance with all applicable laws and regulations relating
thereto.
Upon request of Star Bank, FSI shall confirm in writing to Star Bank, from
time to time, performance by FSI of its aforesaid responsibilities, including
compliance with all such filing and reporting requirements, and FSI shall make
such records available to Star Bank from time to time as Star Bank shall
request, in
C-131
<PAGE>
order to allow Star Bank to satisfy itself as to such performance and compliance
as well as compliance with sound auditing practices. FSI also agrees to provide
at its expense to Star Bank not less frequently than annually an audit of
compliance of the IRA Plan and IRA Accounts with all recordkeeping, reporting
and filing requirements imposed by applicable laws or regulations, such audit to
be performed by an accounting firm satisfactory to Star Bank.
4. The Fund is responsible for preparing and maintaining up to date,
including in connection with any changes in applicable law or regulation, the
Individual Retirement Account Disclosure Statement and the Custodial Account
Agreement and any other documentation pursuant to which the IRA Plan or the IRA
Accounts have been or shall be established, as well as all prospectuses,
statements of additional information, registration statements and other
materials provided to shareholders of the Fund generally, including to the
Depositors. The Fund is responsible for distribution to the Depositors of
prospectuses, statements of additional information, registration statements and
other materials to be provided to shareholders of the Fund generally, including
to new or existing Depositors.
The Fund shall promptly notify Star Bank and FSI in writing of any
amendments and/or modifications to the IRA Plan documents and promptly provide
both Star Bank and FSI with copies of the same. The Fund shall also promptly
deliver to Star Bank and FSI copies of any and all annual or semiannual reports
for the Fund or other communications or documents generally distributed to
shareholders of the Fund, as well as copies of all prospectuses, statements of
additional information, registration statements and amendments thereto relating
to the Fund.
5. FSI agrees to fully indemnify, protect and hold harmless Star Bank from
and against any and all losses, damages, costs, expenses, claims, liabilities
and responsibilities of whatever kind and nature, including reasonable
attorney's fees
C-132
<PAGE>
and costs, which Star Bank may suffer or incur arising from FSI's failure to
perform its duties under this Agreement or FSI's failure to perform its duties
under any other agreement or document relating to the IRA Plan or the IRA
Accounts (collectively referred to as "FSI-Caused Losses"), including FSI-Caused
Losses which Star Bank may suffer or incur arising from Star Bank's performance
hereunder as custodian of the IRA Accounts (except in respect of Star Bank's
negligence or willful default), such as but not limited to responsibilities
imposed by law on Star Bank as custodian or liabilities incurred in respect of
the inaccuracy or incompleteness of, or the misstatement of material fact or
failure to state a material fact in, or noncompliance with applicable law or
regulation of, any IRA Plan documents, IRA Account documents or tax or
informational returns, or other documents delivered or required to be delivered
to Depositors.
FSI hereby agrees to fully indemnify, protect and hold harmless the Fund
from and against any and all losses, damages, costs, expenses, claims,
liabilities and responsibilities of whatever kind and nature, including
reasonable attorney's fees and costs, which the Fund may suffer or incur arising
from the failure of FSI to properly perform its duties under the Agreement.
FSI hereby represents and warrants that as of the effective date of this
Agreement and as of the date of execution hereof, it has no knowledge, direct or
indirect, of any outstanding claims or liabilities relating to prior acts or
omissions of any prior custodian of the IRA Plans and any IRA Account or of any
prior acts or omissions of FSI or the Fund for which Star Bank might as
custodian be asserted to be responsible or liable.
Without limiting the foregoing in any way, FSI agrees that it shall
maintain in effect errors and omissions insurance in the amount of One Million
($1,000,000) Dollars during the term of this Agreement and any renewals hereof.
FSI shall at least
C-133
<PAGE>
annually provide Star Bank with written proof that such insurance is in effect.
6. The Fund agrees to fully indemnify, protect and hold harmless Star Bank
and FSI from and against any and all losses, damages, costs, expenses, claims,
liabilities and responsibilities of whatever kind and nature, including
reasonable attorney's fees and costs,
C-134
<PAGE>
which Star Bank or FSI may suffer or incur arising from the Fund's failure to
perform its duties under this Agreement or the Fund's failure to perform its
duties under any other agreement or document relating to the IRA Plan or the IRA
Accounts (collectively referred to as "TANAKA Funds-Caused Losses"), such
obligations to indemnify shall include TANAKA Funds-Caused Losses which Star
Bank may suffer or incur arising from Star Bank's performance hereunder or under
the Custodial Account Agreement or its status as custodian of the IRA Accounts
(except in respect of Star Bank's negligence or willful default), such as but
not limited to responsibilities imposed by law on Star Bank as custodian or
liabilities incurred in respect of the inaccuracy or incompleteness of, or the
misstatement of material fact or failure to state a material fact in, or
noncompliance with applicable law or regulation of, any IRA Plan documents, IRA
Account documents or tax or informational returns, or Fund prospectuses,
statements of additional information, registration statements or other documents
delivered or required to be delivered to Depositors.
The Fund hereby represents and warrants that as of the effective date of
this Agreement and as of the date of execution hereof, it has no knowledge,
direct or indirect, of any outstanding claims or liabilities relating to prior
acts or omissions of any prior custodian of the IRA Plans and any IRA Account or
of any prior acts or omissions of FSI or the Fund for which Star Bank might as
custodian be asserted to be responsible or liable.
7. Within one month of the date of this Agreement, FSI shall deliver to
Star Bank a copy of its disaster recovery plan and FSI shall promptly deliver to
Star Bank, from time to time, copies of any amendments and/or modifications to
the disaster recovery plan.
8. FSI shall promptly deliver to Star Bank copies of
all written correspondence received by FSI from the U.S.
C-135
<PAGE>
Securities and Exchange Commission, the Internal Revenue Service or any other
governmental agencies regarding any act, transaction, duty or failure to perform
any act or duty which is the subject matter of or is related to the IRA
Accounts, this Agreement or the performance thereof.
9. FSI shall promptly deliver to Star Bank copies of any letters or
correspondence concerning FSI's performance or responsibilities under this
Agreement received by FSI from its independent accountants who audit or review
FSI's books and records or from any Depositor.
10. As compensation for its custodial services for the IRA Accounts, Star
Bank will receive from each Depositor an annual maintenance fee of $20.00 per
fund account, per year. This fee will remain in effect for a three (3) year
period and thereafter may be increased upon thirty days' notice from Star Bank
to the Fund.
C-136
<PAGE>
11. For its services to Star Bank under this Agreement, FSI shall be
entitled to retain from the aforesaid annual maintenance fee $10.00 per fund
account, per year. Reimbursements for forms, postage and other out-of-pocket
expenses incurred by FSI in executing its responsibilities under this Agreement
will be billable to the respective Series as an expense incurred on behalf of
Star Bank chargeable to the Series.
12. FSI agrees to collect the published annual maintenance fees from the
Depositors (pursuant to Paragraph 10 above) and to remit to Star Bank the net
amount due Star Bank (after deduction of the fee due FSI pursuant to Paragraph
11) within ten (10) business days after the end of each month in which such fees
are collected. The annual maintenance fees will ordinarily be collected during
the month of September and remitted to Star Bank in October. Fees from a
complete distribution, exchange or roll-over/transfer, or similar transaction,
will be collected as part of the transaction processing and remitted within ten
(10) business days after the end of the month in which the transaction occurred.
13. This Agreement may be terminated by any party, without prejudice to
any obligations or liabilities of a party which have arisen prior to or relate
to a period prior to termination, upon thirty days' prior written notice to the
other parties, provided that if termination is by FSI or the Fund and Star Bank
so advises them within said thirty-day period, termination of this Agreement
shall not become effective until, and shall occur simultaneously with,
termination of Star Bank's position as custodian for the IRA Accounts provided
that Star Bank shall promptly notify the Depositors of its determination to
cease acting as custodian.
This Agreement may not be amended except by written agreement executed
by all of the parties hereto. No provision of this Agreement shall be deemed
waived unless said waiver is evidenced by a writing executed by the party to be
bound.
C-137
<PAGE>
14. The books, records, information and operations of FSI under this
Agreement shall be subject to inspection or audit by Star Bank, its independent
auditors, its agents and appropriate supervisory authorities, including the
National Association of Securities Dealers and the Securities and Exchange
Commission.
15. As of the end of each calendar month, FSI will promptly supply a
report to Star Bank as to the account number, short name, tax ID number, blue
sky state, number of shares held on a Series-by-Series basis, and value of each
IRA Account open as of the end of the month and each IRA Account closed during
the month, as well as the total activity for the month.
In addition, as of June 30th and December 31st, FSI will promptly supply a
similar report for the six months ended that date, provided that the six-month
report shall include the full name and address of each IRA Account.
C-138
<PAGE>
16. This Agreement shall be governed by and construed in accordance with
the law of the State of Ohio, without giving effect to conflicts of laws
principles.
17. All notices, requests, consents and other communications pursuant to
this Agreement shall be in writing and shall be deemed to have been given when
sent by first class mail, or by personal delivery.
(a) Notices to the Fund shall be directed to:
TANAKA Funds, Inc.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
(b) Notices to FSI shall be directed to:
Fund Services, Inc.
1500 Forest Avenue
Suite 111
Richmond, VA 23229
Attention: William R. Carmichael, President
(c) Notices to Star Bank shall be directed to:
Star Bank N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Marsha A. Croxton
C-139
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered by their proper officers as of the day and year
first above written.
ATTEST: TANAKA FUNDS, INC.
- -----------------------------
- ----------------------------------------
ATTEST: FUND SERVICES, INC.
- -----------------------------
- ----------------------------------------
William R. Carmichael
President
ATTEST: STAR BANK N.A.
- -----------------------------
- ----------------------------------------
Marsha A. Croxton
Vice President
C-140
<PAGE>
SCHEDULE A
SERVICES TO BE PERFORMED BY FUND SERVICES, INC.
FOR RETIREMENT PLAN ACCOUNTS OF
TANAKA FUNDS, INC.
Account Processing:
Opening new accounts
Processing all payments, including transfers and rollovers Issuing and
canceling certificates Processing partial and complete redemptions and
systematic
withdrawal plans
Regular and legal transfers of accounts Mailing up to four reports;
prospectus and proxy annually Processing dividends and capital gain
distributions annually,
if any. This includes mailing of cash dividends and/or
preparing statements to
Depositors for reinvested
distributions
TEFRA withholdings, as applicable
Blue Sky Reports. This includes shares sold to Depositors in
various states
Establish and maintain dealer file
Wire order services
Create purchase or redemption trade confirmations Provide
reports on status of trades Cashier payments received Post
trades to Depositor accounts to include any dividends due
Sell shares to collect unpaid IRA maintenance fees Advise Depositors of
withdrawal requirements necessary to
avoid tax penalties
Account Maintenance/Tax Reporting
1. Maintaining Depositor records of certificate and whole and
fractional unissued ("Book") shares.
2. Changing Depositors' addresses.
3. Daily or periodic reports on numbers of shares, accounts, etc.
4. Addressing and tabulating annual proxy cards.
5. Supplying an annual stockholder list.
6. Preparation and reporting of federal tax information (1099
DIV, 1099R, W-2P, 5498, and 1042S as appropriate) to
Depositors and IRS.
7. Issuance of year end annual valuation confirmations for IRA
accounts.
8. Replying to Depositor correspondence other than that for Fund-
related inquiries.
C-141
<PAGE>
TANAKA FUNDS, INC.
Distribution Plan - Class B Shares
This Plan of Distribution (the "Plan") has been adopted
pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act") by TANAKA Funds, Inc. (the "Fund") for the Class B
shares of the Fund's TANAKA Growth Fund series (the "Series"). The Plan has been
approved by a majority of the Fund's Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan (the "12b-1
Directors"), by votes cast in person at a meeting called for the purpose of
voting on the Plan.1 The Fund contemplates that the Plan shall operate as a
compensation Plan.
The Plan provides that:
1. Subject to the limits on payments under the Plan set
forth herein, or in any annual budget approved by the Fund and the Distributor,
the Fund shall pay to the Distributor, or others through the Distributor, the
amounts called for under the Plan. Such payments shall be applied by the
Distributor for all expenses incurred by such parties in the promotion and
distribution of the Series' Class B shares. For this purpose, expenses
authorized under the Plan include, but are not limited to, printing of
prospectuses and reports used for sales purposes, expenses of preparation of
sales literature and related expenses, advertisements, salaries and benefits of
employees involved in sales of shares, telephone expenses, meeting and space
rental expenses, underwriter's spreads, interest charges on funds used to
finance activities under this Plan, and other distribution-related expenses, as
well as any sales commissions or service
- --------
1 In its consideration of the Plan, the Board of Directors considered the
proposed schedule and nature of payments under the Plan. The Board of Directors
concluded that the proposed reimbursement of the Company's principal
underwriter, First Dominion Capital Corp. (the "Distributor"), for commissions
and distribution expenses under the Plan is fair and not excessive. Accordingly,
the Board determined that the Plan should provide for such reimbursement and
that adoption of the Plan would be prudent and in the best interests of the
Company and the Series' Class B shareholders. Such approval included a
determination that in the exercise of their reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Company, the Series and the Series' Class B shareholders.
<PAGE>
fees paid to securities dealers or others who have executed an agreement with
the Fund or its affiliates.
2. The following agreements are deemed to be "agreements under
the Plan" and the form of each such agreement, and any material amendments
thereto, shall be approved as required under the Rule:
a. Any Distribution Agreement between the Fund and its
National Distributor, or any other distributor of shares
in privity with the Fund.
b. The Distribution Financing Agreement between the National
Distributor and the Investment Adviser.
c. The National Distributor's Selling Dealer Agreement.
Purchase orders for goods and services acquired from persons who are not
affiliates of the Fund are not deemed to be agreements under this Plan.
3. The maximum aggregate amount which may be reimbursed by the
Fund under this Plan is 1.00% per annum of the average daily net assets of the
Series' Class B shares. The amount so paid shall be accrued daily, and payment
thereon shall be made monthly by the Fund.
4. It is anticipated that amounts paid by the Fund under this
Plan shall be used to pay the Distributor a 4% payment on new sales of Class B
shares, and amounts so paid will be applied by the Distributor to pay
reallowances to firms and to the salespersons responsible for such sales in
accordance with applicable Selling Dealer Agreements. No commissions will be
paid by the Fund with respect to sales to officers, directors and full-time
employees of the Fund, the Distributor, the Fund's investment adviser (the
"Adviser"), the Adviser's General Partner or to certain affiliates or clients of
the Adviser which are made without the imposition of any charge. Up to 0.25% of
the amounts payable by the Fund under this Plan may be applied to pay service
and maintenance fees for shareholder servicing and maintenance of shareholder
accounts by other providers.
5. The Distributor shall collect and disburse payments made
under this Plan, and shall furnish to the Board of Directors of the Fund for its
review on a quarterly basis, a written report of the monies reimbursed to the
Distributor and others under the Plan, and shall furnish the Board of Directors
of the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan in order to enable the Board to
make an informed determination of whether the Plan should be continued.
6. The Fund agrees that it will impose a deferred sales charge
on Class B shares of 4% on shares redeemed during the first year after purchase,
3% on shares redeemed during the second or third year after purchase, 2% on
shares redeemed during the fourth or fifth year after purchase and 1% on shares
redeemed
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<PAGE>
during the sixth year after purchase and 0% on shares redeemed during the
seventh or subsequent year after purchase, and shall remit promptly to the
Distributor the amounts so retained. Class B shares that have been outstanding
for eight years may be redeemed without a sales charge.
7. The Plan shall continue in effect for a period of more than
one year only so long as such continuance is specifically approved at least
annually by the Fund's Board of Directors, including the non-interested
Directors, cast in person at a meeting called for the purpose of voting on the
Plan.
8. The Plan, or any agreements entered into pursuant to the
Plan, may be terminated at any time, without penalty, by vote of a majority of
the outstanding voting securities of the Fund, or by vote of a majority of the
non-interested Directors, on not more than sixty (60) days' written notice, and
shall terminate automatically in the event of any act that constitutes an
assignment of the management agreement between the Fund and the Fund's
investment adviser.
9. The Plan and any agreements entered into pursuant to the
Plan may not be amended to increase materially the amount to be spent by the
Fund for distribution pursuant to paragraph 3 of this Plan without approval by a
majority of the Fund's outstanding voting securities.
10. All material amendments to the Plan, or any agreements
entered into pursuant to the Plan, shall be approved by the Board, including a
majority of the 12b-1 Directors, cast in person at a meeting called for the
purpose of voting on any such amendment.
11. So long as the Plan is in effect, the selection and
nomination of the Fund's 12b-1 Directors shall be committed to
the discretion of such 12b-1 Directors.
12. This Plan shall take effect on the ___ day of
March, 1998.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Fund and the Distributor as evidenced by their
execution hereof.
TANAKA Funds, Inc.
By:
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<PAGE>
First Dominion Capital Corp.
By:
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<PAGE>
TANAKA FUNDS, INC.
Multiple Class Plan Pursuant to Rule 18f-3
I. Introduction
This Multiple Class Plan (the "Plan") has been adopted by a
majority of the Board of Directors of TANAKA Funds, Inc. (the "Company"),
including a majority of the Directors who are not interested persons of the
Company, pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "Act").
Rule 18f-3 requires that the Board of an investment company
desiring to offer multiple classes of shares pursuant to said Rule adopt a plan
setting forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges. The Plan provides a detailed
statement of the differences between the Company's two classes of shares.
The Company's Board of Directors, including a majority of the
non-interested Directors, has determined that the Plan, including the allocation
of expenses, is in the best interests of the Company as a whole, the Company's
TANAKA Growth Fund series of shares and each class of shares offered by the
TANAKA Growth Fund series.
<PAGE>
II. Elements of the Plan
1. Class Designation: The shares of the TANAKA Growth
Fund series shall be divided into Class A shares and Class B
shares.
2. Differences in Availability: Class B shares shall be
available to all investors and will be sold by First Dominion Capital Corp. (the
"Distributor") and by banks, securities brokers or dealers and other financial
institutions. Class A shares shall be available only to Class B shareholders
upon automatic conversion of their Class B shares after such shares have been
held for a period of eight years.
3. Differences in Distribution Arrangements: Class B
shares shall be subject to a Distribution Plan adopted pursuant
to Rule 12b-1 under the Act. The Distribution Plan for Class B
shares allows the TANAKA Growth Fund series to spend annually up
to 1.00% of its average daily net assets attributable to Class B
shares to reimburse the Distributor for distribution activities
and expenses primarily intended to result in the sale of Class B
shares. Class B shares are offered at net asset value without a
front-end sales charge. The Distribution Plan provides for a
deferred sales charge of 5.0% on Class B shares redeemed during
the first year after purchase, 4.0% on shares redeemed during the
second or third year after purchase, 2% on shares redeemed during
the fourth or fifth year after purchase and 1% on shares redeemed
during the sixth year after purchase. Class B shares may be
redeemed without a sales charge during or after the seventh year
following the purchase.
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<PAGE>
Class A shares shall not be subject to a Distribution Plan. No
front-end, asset-based or deferred sales charges apply to Class A shares.
4. Differences in Shareholder Services: Other than any
shareholder services that may be provided under the Class B
shares' Distribution Plan, the services offered to shareholders
of each Class shall be the same.
5. Expense Allocation. The following expenses shall be
allocated on a Class-by-Class basis:
(a) fees under the Distribution Plan;
(b) transfer agency and other recordkeeping costs;
(c) Securities and Exchange Commission and blue sky
filing fees;
(d) printing and postage expenses related to printing and
distributing class-specific materials, such as
shareholder reports, prospectuses and proxies to
current shareholders of a particular class or to
regulatory authorities with respect to such class of
shares;
(e) audit or accounting fees or expenses relating solely
to such class;
(f) the expenses of administrative personnel and
services as required to support the shareholders of
such class;
(g) litigation or other legal expenses relating solely
to such class of shares;
(h) Directors' fees and expenses incurred as a result of
issues relating solely to such class of shares; and
(i) other expenses subsequently identified and
determined to be properly allocated to such class of
shares.
6. Conversion Features. Class B shares shall convert
automatically to Class A shares after a period of eight years
without imposition of a sales charge or exchange fee.
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<PAGE>
7. Voting and Other Rights. Each class shall have: (a)
exclusive voting rights on any matter submitted to shareholders that relates
solely to its arrangements; (b) separate voting rights on any matter submitted
to shareholders in which the interests of one class differ from the interests of
the other class; and (c) in all other respects, the same rights and obligation
as each other class.
Dated: March ____, 1998
-149-
<PAGE>
TANAKA FUNDS, INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of Tanaka Funds, Inc. hereby appoints John Pasco, III, his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration pursuant to the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, of shares of said Corporation's Common Stock , and any and all
amendments to said Registration Statement (including post-effective amendments),
and all instruments necessary or incidental in connection therewith and to file
the same with the U.S. Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
-150-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this
2nd day of March, 1998.
/s/ Graham Y. Tanaka
Director
-151-
<PAGE>
TANAKA FUNDS, INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of Tanaka Funds, Inc. hereby appoints John Pasco, III, his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration pursuant to the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, of shares of said Corporation's Common Stock , and any and all
amendments to said Registration Statement (including post-effective amendments),
and all instruments necessary or incidental in connection therewith and to file
the same with the U.S. Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
-152-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this
2nd day of March, 1998.
/s/ Michael Seely
Director
-153-
<PAGE>
TANAKA FUNDS, INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of Tanaka Funds, Inc. hereby appoints John Pasco, III, his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration pursuant to the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, of shares of said Corporation's Common Stock , and any and all
amendments to said Registration Statement (including post-effective amendments),
and all instruments necessary or incidental in connection therewith and to file
the same with the U.S. Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
-154-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this
2nd day of March, 1998.
/s/ Thomas R. Schwarz
Director
-155-
<PAGE>
TANAKA FUNDS, INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of Tanaka Funds, Inc. hereby appoints John Pasco, III, his true and lawful
attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration pursuant to the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, of shares of said Corporation's Common Stock, and any and all
amendments to said Registration Statement (including post-effective amendments),
and all instruments necessary or incidental in connection therewith and to file
the same with the U.S. Securities and Exchange Commission. Said attorney shall
have full power and authority to do and perform in the name and on behalf of the
undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 2nd
day of March, 1998.
/s/ Charles A. Dill
Director
TANAKA FUND, INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of Tanaka Funds, Inc. hereby appoints John Pasco, III his true and lawful
attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration pursuant to the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, of shares of said Corporaion's Common Stock, and any and all amendments
to said Registration Statement (including post-effective amendments), and all
instruments necessary or incidental in connection therewith and to file the same
with the U.S. Securities and Exchange Commission. Said attorney shall have full
power and authority to do and perform in the name and on behalf of the
undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this insrument this 2nd
day of March, 1998.
/s/ Scott D. Stooker
Director
TANAKA FUNDS, INC
1500 Forest Avenue, Suite 223 * Richmond, Va. 23229
800-TANAKAO (800-826-2520)
Filed Via EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: TANAKA Funds, Inc. (the "Company)
File Numbers 811-_______ and 33-________
Gentlemen:
Submitted herewith for electronic filing via the EDGAR system are the
following materials:
1. A Form N-8A for TANAKA Funds, Inc. (the "Fund") a new
registered investment company.
2. A Form N-1A Registration Statement of TANAKA Funds, Inc (the
"Fund") under the Securities Act of 1933 (the "1933 Act") and
the Investment Company Act of 1940 (the "1940 Act"). The Form
N-1A contains an election to register an indefinite number of
shares pursuant to Rule 24f-2.
3. A letter signed by the Company and its designated agent for
service, and by the chief executive officer of the National
Distributor, requesting acceleration of the effective date of
the registration statement.
The following matters are set forth for the convenience of the
Staff:
a. The administrator of the Fund is Commonwealth Shareholder
Services, Inc., which also serves as the administrator of the
Vontobel Funds, Inc. ("VFI") and The World Funds, Inc. ("TWF").
b. The Company does not have, and will not have on the proposed effective date
of the registration statement, the minimum capital required under Section 14 of
the 1940 Act. In lieu thereof, the Company's registration statement contains an
undertaking that it will not engage in a public offering or sale of shares of
the Fund until the completion of the Reorganization, at which time the Fund will
have assets substantially in excess of the minimum capital required by the 1940
Act.
<PAGE>
Please direct questions or comments relating to this filing to Steve
Felsenstein of Stradley Ronon Stevens & Young at (215) 564- 8074.
Sincerely,
/s/John Pasco, III
John Pasco, III
Enclosures
cc: Steven M. Felsenstein, Esquire
<PAGE>
