As filed with the Securities and Exchange Commission on May 18, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. __ / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
INTERNET.COM(TM) INDEX FUND, INC.
---------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5220
--------------
BERNADETTE N. FINN
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
-------------------------------------------
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective: (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (Date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may declare.
837532.1
<PAGE>
[Subject to completion, dated May 18, 1999]
Internet.com(TM) Index Fund, Inc. 600 FIFTH AVENUE
NEW YORK, NY 10020
(212) 830-5220
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- --------------------------------------------------------------------------------
Prospectus
[June , 1999]
The Fund seeks to match, as closely as possible, the performance of the
ISDEX(R), an Internet stock index that consists of a modified
capitalized-weighted group of 50 Internet stocks.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C> <C>
2. Risk/Return Summary: Investments, Risks, 9. Management, Organization and Capital Structure
and Performance 9. Shareholder Information
4. Fee Table 17. Tax Consequences
5. Investment Objectives, Principal Investment 17. Distribution Arrangements
Strategies and Related Risks
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</TABLE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any State.
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objective
- --------------------------------------------------------------------------------
The Fund seeks to match, as closely as possible, the performance of the
ISDEX(R), an Internet stock index that consists of a modified
capitalized-weighted group of 50 Internet stocks. There is no assurance that the
Fund will achieve its investment objective.
Principal Investment Strategy
- --------------------------------------------------------------------------------
An index, like the ISDEX(R), is an unmanaged group of securities whose
overall performance is used as a standard to measure investment performance. An
index (or "passively managed") fund tries to match, as closely as possible, the
performance of an established target index. An index fund does this by holding
all, or a representative sample, of the securities that comprise the index.
The Fund employs a passive management strategy designed to track the
performance of the ISDEX(R), an Internet stock index. The ISDEX(R) contains 50
stocks representative of the diversity of publicly traded U.S. companies that
derive revenue primarily from the Internet, including from the software,
hardware, content, commerce and communications/access sectors. The Fund invests
in the same 50 stocks that comprise the ISDEX(R).
Principal Risks
- --------------------------------------------------------------------------------
o The loss of money is a risk of investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o Investments in companies in the rapidly changing fields of computer/Internet
technology and science face special risks such as competitive pressures and
technological obsolescence and may be subject to greater governmental
regulation than many other industries. These type of companies may also be
subject to greater share price fluctuation.
o [Investments in smaller capitalized companies may involve greater risks, such
as limited product lines, markets and financial or managerial resources.
These types of companies may also be subject to greater share price
fluctuation.]
o Keep in mind that an index fund has operating expenses and transaction costs,
while a market index does not. Therefore, an index fund, while expected to
track its target index closely, typically will be unable to match the
performance of the index exactly.
o The nature of an index fund is to attempt to match the portfolio to the
stocks comprising the index. The Fund will not be managed by the Manager in a
way that attempts to maximize performance of the Fund by purchasing or
selling any securities other than purchases or sales made to track the index.
Who May Want to Invest in this Fund
- --------------------------------------------------------------------------------
The Fund may be a suitable investment for you if you are looking for a
U.S. stock portfolio that follows a simple, cost-effective index-matching
strategy and, in doing so, provides the potential for growth in the value of
your investment over the long term.
This Fund is designed for long-term investors who understand and are
willing to accept the risk of loss involved in investing in a fund seeking
long-term capital appreciation. Investors should consider their investment
goals, their time horizon for achieving them, and their tolerance for risks
before investing in the Fund. If you seek an aggressive approach to capital
growth and can accept the above average level of price fluctuations that this
Fund is expected to experience, this Fund could be an appropriate part of your
overall investment strategy.
The Fund should not represent your complete investment program. It is not
designed to provide investors with a means of speculating on short-term
fluctuations in the stock market.
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834327.2
<PAGE>
Risk/Return Bar Chart
- --------------------------------------------------------------------------------
A bar chart and table will be available to track the Fund's performance
once the Fund has a record of average annual returns for a full calendar year.
Included is past performance information on the ISDEX(R), whose
performance the Fund seeks to match. While analyzing this information, please
note that the Index's past performance is not an indication of how the Fund will
perform in the future.
Average Annual Total Returns - for the period ending December 31, 1998:
ISDEX(R)
One year ------ %
Five year ------ %
-3-
834327.2
<PAGE>
FEE TABLE
- ------------------------
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
Shareholder Fees
----------------
(fees paid directly from your investment)
Maximum Sales Load Imposed on Purchases
(as a percentage of the offering price) None
Redemption Fees for shares held less than 1 year
(as a percent of amount redeemed, if applicable) 2.00%
Annual Fund Operating Expenses
------------------------------
(expenses that are deducted from Fund assets)
Management Fee................................... .65%
Distribution and Service (12b-1) Fee............. None
Other Expenses................................... .35%
Administration Fee........................... .20%
-------------------------------------------------------------------
Total Annual Fund Operating Expenses............. 1.00%
-------------------------------------------------------------------
"Other Expenses" are based on estimated amounts for the current fiscal year.
At the current time the Manager has agreed to cap the Total Annual Fund
Operating Expenses at 1.00% by waiving or reimbursing Other Expenses.
Example
-------
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other index funds.
Assume that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. Also
assume that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 year 3 years
$ $
You would pay the following expenses if you did
not redeem your shares......................... $ $
-4-
834327.2
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective
- --------------------------------------------------------------------------------
The Fund seeks to match, as closely as possible, the performance of the
ISDEX(R), an Internet stock index that consists of a modified
capitalized-weighted group of 50 Internet stocks.
The Fund's investment objective is fundamental and may only be changed
upon the approval of the holders of a majority of the outstanding shares of the
Fund.
Principal Investment Strategy
- --------------------------------------------------------------------------------
The Fund employs a "passively managed" investment--or index--approach
designed to track the performance of the ISDEX(R). The Fund holds each stock in
the ISDEX(R) in roughly the same proportions as represented in the ISDEX(R)
itself. Therefore, if 2% of the ISDEX(R) were comprised of a particular stock,
then this Fund would invest 2% of its assets in that company.
The ISDEX(R) is a modified capitalization-weighted index of internet
stocks which was created in April 1996. This means that ISDEX(R) restricts the
weighting of the largest component stocks to no more than 10% of the total
capitalization of all index stocks. Weights are reviewed, and adjusted only if
necessary, at the end of each calendar quarter. Adjustments to ISDEX(R) will be
made when any stock's weight exceeds 15% of the total capitalization of all 50
index stocks. When such an adjustment is necessary, all stocks will be adjusted
so their weight is 10% or less. The Fund's investments will be similarly
reviewed and adjusted, if necessary, at the end of each calendar quarter, so
that the Fund's investment portfolio tracks, as closely as possible, any
adjustments in ISDEX(R).
The ISDEX(R) contains 50 stocks representative of the diversity of
publicly traded U.S. companies that derive revenue primarily from the Internet,
including stocks from the software, hardware, content, commerce and
communications/access sectors. In addition, companies are reviewed for their
marketshare leadership (as measured by revenue) and for their internet diversity
(as measured by the sectors described below). The ISDEX(R) is reviewed quarterly
on a regular basis to add or delete stocks that best represent the Internet
diversity for investors. If a new company debuts intra-quarterly, that stock may
be added to ISDEX(R) immediately upon its initial public offering or soon
thereafter.
The Internet is a world-wide network of computers designed to permit users
to share information and transfer data quickly and easily. The world wide web
("www") is a means of graphically interfacing with the Internet. It is a
hyper-text based publishing medium containing text, graphics, interactive
feedback mechanisms and links within www documents and to other www documents.
ISDEX(R) will generally select companies for inclusion in the index from
the following sectors:
o Internet Access Providers - Companies that provide users with access to
the Internet.
o Software Developers - Companies that develop software tools to access
to the Internet, to facilitate information distribution and gathering, to
secure Internet-based transactions, etc.
o Hardware Manufacturers - Companies that develop and manufacture
communication equipment, such as modems, switches and routers, used to
access the Internet, and those that develop and manufacture workstations
and Personal Communications Systems used to access to the Internet and
provide Internet services.
o High-Speed Service Developers - Companies that develop next-generation
infrastructure and services.
-5-
834327.2
<PAGE>
o Content Developers - Companies that supply information and
entertainment content, such as games, music, and video, on the Internet.
o Security Developers - Companies that develop software and services that
protect web sites and users from fraud, theft and unauthorized access.
o e-commerce/e-tailer - Companies that buy and sell goods and services
using the Internet.
The following is a list of the 50 stocks that comprise the ISDEX(R) as of
the quarter ended April 30, 1999. Be aware of the fact that the ISDEX(R) can
change quarterly so that this listing is only a "snapshot" of the ISDEX(R) at
one point in time.
- ----------------------------------- --------------------------------
Company Symbol
- ----------------------------------- --------------------------------
AMAZON.COM AMZN
- ----------------------------------- --------------------------------
AMERICA ONLINE AOL
- ----------------------------------- --------------------------------
AT HOME CP A ATHM
- ----------------------------------- --------------------------------
AXENT TECHNOL AXNT
- ----------------------------------- --------------------------------
BROADCAST.COM BCST
- ----------------------------------- --------------------------------
BROADCOM CORP BRCM
- ----------------------------------- --------------------------------
BROADVISION BVSN
- ----------------------------------- --------------------------------
BEYOND.COM CORP BYND
- ----------------------------------- --------------------------------
CDNOW INC CDNW
- ----------------------------------- --------------------------------
CHECK PT SFTWRE CHKP
- ----------------------------------- --------------------------------
CMGI INC CMGI
- ----------------------------------- --------------------------------
CONCENT NETW CNCX
- ----------------------------------- --------------------------------
CNET INC CNET
- ----------------------------------- --------------------------------
CYBERIAN OUTPST COOL
- ----------------------------------- --------------------------------
CISCO SYSTEMS CSCO
- ----------------------------------- --------------------------------
CYBERCASH INC CYCH
- ----------------------------------- --------------------------------
DOUBLECLICK INC DCLK
- ----------------------------------- --------------------------------
EBAY INC EBAY
- ----------------------------------- --------------------------------
EGGHEAD.COM EGGS
- ----------------------------------- --------------------------------
E*TRADE GROUP EGRP
- ----------------------------------- --------------------------------
EARTHLINK NET ELNK
- ----------------------------------- --------------------------------
EXODUS COMMS EXDS
- ----------------------------------- --------------------------------
GEOCITIES GCTY
- ----------------------------------- --------------------------------
GO2NET INC GNET
- ----------------------------------- --------------------------------
INKTOMI CORP INKT
- ----------------------------------- --------------------------------
INFOSPACE.COM INSP
- ----------------------------------- --------------------------------
ISS GROUP ISSX
- ----------------------------------- --------------------------------
IVILLAGE INC IVIL
- ----------------------------------- --------------------------------
LYCOS INC LCOS
- ----------------------------------- --------------------------------
MINDSPRING ENT MSPG
- ----------------------------------- --------------------------------
NETWORK ASSOC NETA
- ----------------------------------- --------------------------------
NETWORK SOLUT NSOL
- ----------------------------------- --------------------------------
OPEN MARKET INC OMKT
- ----------------------------------- --------------------------------
ONSALE INC ONSL
- ----------------------------------- --------------------------------
PRODIGY COMM CORP PRGY
- ----------------------------------- --------------------------------
PSINET INC PSIX
- ----------------------------------- --------------------------------
PREVIEW TRAVEL PTVL
- ----------------------------------- --------------------------------
REALNETWORKS RNWK
- ----------------------------------- --------------------------------
SECUR DYNAMICS SDTI
- ----------------------------------- --------------------------------
INFOSEEK CP SEEK
- ----------------------------------- --------------------------------
SECURITY FIRST SONE
- ----------------------------------- --------------------------------
SPORTSLINE USA SPLN
- ----------------------------------- --------------------------------
24/7 MEDIA INC TFSM
- ----------------------------------- --------------------------------
USWEB CP USWB
- ----------------------------------- --------------------------------
VOCALTEC LTD VOCLF
- ----------------------------------- --------------------------------
-6-
834327.2
<PAGE>
VERIO INC VRIO
- ----------------------------------- --------------------------------
VERISIGN INC VRSN
- ----------------------------------- --------------------------------
EXCITE INC XCIT
- ----------------------------------- --------------------------------
XOOM.COM INC XMCM
- ----------------------------------- --------------------------------
YAHOO INC YHOO
- ----------------------------------- --------------------------------
[Although index funds, by their nature, tend to be tax-efficient
investment vehicles, the Fund generally is managed without regard to tax
ramifications.]
[To track the ISDEX(R) as closely as possible, the Fund attempts to remain
fully invested in stocks. To help stay fully invested, and to reduce transaction
costs, the Fund may invest, to a limited extent, in stock futures and options
contracts, warrants, convertible securities, and swap agreements, which are
types of derivatives.
Losses (or gains) involving futures can sometimes be substantial--in part
because a relatively small price movement in a futures contract may result in an
immediate and substantial loss (or gain) for a fund. Similar risks exist for
warrants (securities that permit their owners to purchase a specific number of
stock shares at a predetermined price), convertible securities (securities that
may be exchanged for another asset), and swap agreements (contracts in which
each party agrees to make payments to the other based on the return of a
specified index or asset).
For this reason, the Fund will not use futures, options, warrants,
convertible securities, or swap agreements for speculative purposes or as
leveraged investments that magnify the gains or losses of an investment. The
value of all futures contracts in which the Fund acquires an interest cannot
exceed 20% of that Fund's total assets.
The reasons for which the Fund will invest in futures and options are:
--To keep cash on hand to meet shareholder redemptions or other needs
while simulating full investment in stocks.
--To reduce the Fund's transaction costs or add value when these
instruments are favorably priced.]
Defensive Position
------------------
[The Fund may take a temporary defensive position and invest in securities
that are inconsistent with its principal investment strategies when the Manager
determines that adverse market, economic, political, or other conditions warrant
such a position. Pursuant to this policy, the Fund may invest temporarily
without limit in investment grade debt securities, preferred stocks or money
market instruments.
The Fund will not necessarily dispose of a security that falls below
investment grade unless the Manager determines that the security is inconsistent
with the Fund's investment objectives.
Money market instruments purchased for this purpose include U.S.
Government obligations, high quality commercial paper and certificates of
deposit and bankers' acceptances issued by domestic banks having more than $1
billion in total assets.]
Buy/Sell Decisions
------------------
Index funds are not actively managed by investment advisers who buy and
sell securities based on research and analysis in an attempt to outperform a
particular benchmark or the market as a whole. Rather, the index funds simply
attempt to mirror what the target index does, for better or worse.
Portfolio Turnover
------------------
Although the Fund seeks to invest for the long term, it retains the right
to sell securities regardless of how long they have been held. Generally, a
passively managed fund sells securities only to respond to redemption requests
or to adjust the number of shares held to reflect a change in the portfolio's
target index. Because of this, the turnover rate for the Fund should be
extremely low. The Fund expects the turnover
-7-
834327.2
<PAGE>
rate to be ___% for the fiscal year ended __________, 1999.
Before investing in a mutual fund, you should review its portfolio
turnover rate for an indication of the potential effect of transaction costs on
the fund's future returns. In general, the greater the volume of buying and
selling by the fund, the greater the impact that brokerage commissions and other
transaction costs will have on its return. Also, funds with high portfolio
turnover rates may be more likely than low-turnover funds to generate capital
gains that must be distributed to shareholders as taxable income. [The average
turnover rate for passively managed domestic index funds investing in common
stocks is roughly 10%. By comparison, the average turnover rate for all domestic
stock funds is approximately 80%.]
Risks
-----
The Computer/Internet Technology and Science Areas. Companies in the
rapidly changing fields of computer/Internet technology and science face special
risks. For example, these companies spend heavily on research and development
and their products or services may not prove commercially successful or may
become obsolete quickly. The value of the Fund's shares may be susceptible to
factors affecting the technology and science areas and to greater risk and
market fluctuation than an investment in a fund that invests in a broader range
of portfolio securities not concentrated in any particular industry. As such,
the Fund is not an appropriate investment for individuals who are not long-term
investors and who, as their primary objective, require safety of principal or
stable income from their investments. The computer/Internet technology and
science areas may be subject to greater governmental regulation than many other
areas and changes in governmental policies and the need for regulatory approvals
may have a material adverse effect on these areas. Additionally, companies in
these areas may be subject to risks of developing technologies, competitive
pressures and other factors and are dependent upon consumer and business
acceptance as new technologies evolve.
[Smaller Capitalized Companies. The Adviser believes that smaller
capitalized companies generally have greater earnings and sales growth potential
than larger capitalized companies. [Many] of the companies (list approximately
%) are either smaller capitalized or unseasoned companies (those with less than
a three-year operating history). Investments in smaller capitalized companies
may involve greater risks, such as limited product lines, markets and financial
or managerial resources. In addition, less frequently-traded securities may be
subject to more abrupt price movements than securities of larger capitalized
companies.]
[Repurchase Agreements. The Fund's portfolio position in cash or cash
equivalents may include entering into repurchase agreements. A repurchase
agreement is an instrument under which an investor purchases a U.S. Government
security from a vendor, with an agreement by the vendor to repurchase the
security at the same price, plus interest at a specified rate. Repurchase
agreements may be entered into with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government securities. Repurchase agreements usually have a short duration,
often less than one week. The Fund requires continual maintenance by the Fund's
custodian of the market value of underlying collateral in amounts equal to, or
in excess of, the value of the repurchase agreement including the agreed upon
interest. If the institution defaults on the repurchase agreement, the Fund will
retain possession of the underlying securities. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated with
changes in the market value of the collateral securities. The Fund intends to
limit repurchase agreements to transactions with institutions believed by the
Adviser to present minimal credit risk. Repurchase agreements may be considered
to be loans under the Investment Company Act of 1940, as amended.]
-8-
834327.2
<PAGE>
Year 2000 Compliance. As the year 2000 approaches, an issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Failure to adequately address this issue could have
potentially serious repercussions. The Adviser is in the process of working with
the Fund's service providers to prepare for the year 2000. Based on information
currently available, the Adviser does not expect that the Fund will incur
significant operating expenses or be required to incur materials costs to be
year 2000 compliant. Although the Adviser does not anticipate that the year 2000
issue will have a material impact on the Fund's ability to provide service at
current levels, there can be no assurance that steps taken in preparation for
the year 2000 will be sufficient to avoid any adverse impact on the Fund. The
year 2000 problem may also adversely affect issuers of the Securities contained
in the Fund to varying degrees based upon various factors, and these may have a
corresponding adverse effect on the Fund's performance. The Manager is unable to
predict what effect, if any, the year 2000 problem will have on such issues.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management, L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of March 31, 1999, the Manager was the investment
manager, adviser or supervisor with respect to assets aggregating in excess of
$13.2 billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the
Fund's portfolio of securities and makes decisions with respect to the purchase
and sale of investments, subject to the general control of the Board of
Directors of the Fund. Pursuant to the Investment Management Contract, the Fund
pays the Manager a fee equal to [.65]% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services.
Pursuant to the Administrative Services Contract, the Fund pays the
Manager a fee equal to [.20%] per annum of the Fund's average daily net assets
for performing clerical, accounting supervision and office service functions for
the Fund. The Manager provides the Fund with the personnel to perform all other
clerical and accounting type functions not performed by the Manager.
The Manager, at its discretion, may voluntarily waive all or a portion of
the Investment Management Fee and the administrative services fee. Any portion
of the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
[The ISDEX(R) and the Internet Stock Index are the exclusive trademarks
of internet.com LLC, a Delaware limited liability company organized in 1998.
Pursuant to a license agreement between internet.com LLC and [R&T Distributors,
Inc., ("R&T")], R&T has obtained the exclusive use of the ISDEX(R) in connection
with investment company products. Any changes in the composition and/or
weightings of the ISDEX(R) will be immediately transmitted to the Advisor so
that the Fund's portfolio will be adjusted to match any changes in ISDEX(R).
Pursuant to the License Agreement, R&T has agreed to retain marketing and
advertising services from internet.com(TM), LLC to be paid at the expense of
R&T. internet.com(TM) is a leading network of integrated business-to-business
vertical content Web sites and related Internet media properties focused solely
on the Internet industry. internet.com provides Internet users, including
Internet industry professionals and sophisticated Internet users, with a wide
variety of content, community and commerce products and services. Internet media
properties currently include 53 Web sites, 32 e-mail newsletters, 54 online
discussion forums and 52 moderated e-mail discussion lists, which provide: (i)
real-time Internet industry news; (ii) archives of definitive in publications;
(iii) tutorials, training and skills development; (iv) discussion forums; (v)
Internet market research; (vi) software downloads; or (vii) buyer's guides and
products reviews. There is no current affiliation between R&T and internet.com
LLC except for the License Agreement.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for sales or redemptions of shares held
for less than one year. All transactions in Fund shares are effected through the
Fund's transfer agent who accepts orders for purchases and redemptions from
investors directly.
-9-
834327.2
<PAGE>
Pricing of Fund Shares
- -----------------------
The Fund determines the net asset value of the shares as of 4:00 p.m., New
York City time, on each Fund Business Day. Fund Business Day means weekdays
(Monday through Friday) except days on which the [New York Stock Exchange] is
closed for trading (e.g. national holidays). The net asset value is computed by
dividing the value of the Fund's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued,
but excluding capital stock and surplus) by the total number of shares
outstanding.
[Portfolio securities for which market quotations are readily available
are valued at market value.] U.S. Government obligations and other debt
instruments having sixty days or less remaining until maturity are stated at
amortized cost. All other investment assets of the Fund are valued in such
manner as the Board of Directors of the Fund in good faith deems appropriate to
reflect their fair value.
Shares are issued as of the first determination of the Fund's net asset
value per share made after acceptance of the investor's purchase order. In order
to maximize earnings on its portfolio, the Fund normally has its assets as fully
invested as is practicable. Many securities in which the Fund invests require
the immediate settlement in funds of Federal Reserve member banks on deposit at
a Federal Reserve Bank (commonly known as "Federal Funds"). The Fund reserves
the right to reject any purchase order for its shares. Certificates for Fund
shares will not be issued to an investor.
Shares are issued as of 4:00 p.m., New York City time, on any Fund
Business Day on which an order for the shares and accompanying Federal Funds are
received by the Fund's transfer agent before 4:00 p.m., New York City time. Fund
shares begin accruing income on the day after the shares are issued to an
investor.
Purchase of Fund Shares
- -----------------------
Investors may invest in the Fund directly.
The minimum initial investment in the Fund is $10,000 ($2,500 for IRA
accounts). Initial investments may be made in any amount in excess of the
applicable minimums. There is no minimum for subsequent investments.
The Fund will send each shareholder a personalized monthly statement
listing (i) the total number of Fund shares owned as of the statement closing
date, (ii) purchase and redemptions of Fund shares, and (iii) the dividends paid
on Fund shares (including dividends paid in cash or reinvested in additional
Fund shares).
Initial Purchases of Shares
- ---------------------------
Investors who wish to invest in the Fund may obtain a current prospectus
and the subscription order form necessary to open an account by telephoning the
Fund at the following numbers:
Within New York 212-830-5220
Outside New York (TOLL FREE) 800-221-3079
Mail
- ----
Investors may send a check made payable to "internet.com(TM) Index Fund,
Inc." along with a completed subscription order form to:
Internet.com(TM) Index Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency.
Bank Wire
- ---------
To purchase shares of the Fund using the wire system for transmittal of
money among banks, investors should first obtain a new account number by
telephoning the Fund at 212-830-5220 (within New York) or at 800-221-3079
(outside New York) and then instruct a member commercial bank to wire money
immediately to:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-955-4
-10-
834327.2
<PAGE>
For internet.com(TM) Index Fund, Inc.
Account of (Investor's Name)
-----------------------------
Account #
-----------------------------
SS#/Tax ID#
-----------------------------
The investor should then promptly complete and mail the subscription order
form.
Investors planning to wire funds should instruct their bank early in the
day so the wire transfer can be accomplished the same day. There may be a charge
by the investor's bank for transmitting the money by bank wire, and there also
may be a charge for use of Federal Funds. The Fund does not charge investors in
the Fund for its receipt of wire transfers. Payment in the form of a "bank wire"
received prior to 4:00 p.m., New York City time, on a Fund Business Day, will be
treated as a Federal Funds payment received on that day.
Personal Delivery
- -----------------
Deliver a check made payable to "internet.com(TM) Index Fund, Inc." along
with a completed subscription order form to:
Reich & Tang Mutual Funds 600
Fifth Avenue - 8th Floor
New York, New York 10020
On-Line
- -------
[Insert procedures for Internet purchases]
Electronic Funds Transfers (EFT),
Pre-authorized Credit and Direct Deposit Privilege
- ---------------------------------------------------
You may purchase shares of the Fund (minimum of $[ ]) by having salary,
dividend payments, interest payments or any other payments designated by you,
Federal salary, social security, or certain veteran's, military or other
payments from the Federal government, automatically deposited into your Fund
account. You can also have money debited from your checking account. To enroll
in any one of these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up Form
for each type of payment that you desire to include in the Privilege. The
appropriate form may be obtained from your broker or the Fund. You may elect at
any time to terminate your participation by notifying in writing the appropriate
depositing entity and/or Federal agency. Death or legal incapacity will
automatically terminate your participation in the Privilege. Further, the Fund
may terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
- ------------------------------
Subsequent purchases can be made by personal delivery, bank wire or
online, as indicated above, or by mailing a check to:
internet.com(TM) Index Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
All payments should clearly indicate the shareholder's account number.
Provided that the information on the subscription form on file with the
Fund is still applicable, a shareholder may reopen an account without filing a
new subscription order form at any time during the year the shareholder's
account is closed or during the following calendar year.
Redemption of Shares
- --------------------
A redemption is effected immediately following, and at a price determined
in accordance with, the next determination of net asset value per share upon
receipt by the Fund's transfer agent of the redemption order (and any supporting
documentation which it may require). Normally, payment for redeemed shares is
made on the same Fund Business Day the redemption is effected, provided the
redemption request is received prior to 4:00 p.m., New York City time. However,
redemption payments will not be effected unless the check (including a certified
or cashier's check) used for investment has been cleared for payment by the
investor's bank, which could take up to 15 days after investment.
A shareholder's original subscription order form permits the shareholder
to redeem by written request and to elect one or more of the additional
-11-
834327.2
<PAGE>
redemption procedures described below. A shareholder may only change the
instructions indicated on his original subscription order form by transmitting a
written direction to the Fund's transfer agent. Requests to institute or change
any of the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature. It should be signed and
guaranteed by an eligible guarantor institution which includes a domestic bank,
a domestic savings and loan institution, a domestic credit union, a member bank
of the Federal Reserve system or a member firm of a national securities
exchange, pursuant to the Fund's transfer agent's standards and procedures.
Redemption Fee
- --------------
The Fund is designed for long-term investors willing to accept the risks
associated with a long-term investment in the common stocks of companies in the
technology, technology-related and science industries. The Fund is not designed
for short-term traders whose frequent purchases and redemptions can generate
substantial cash flow. These cash flows can unnecessarily disrupt the Fund's
investment program. Short-term traders often redeem when the market is most
turbulent, thereby forcing the sale of underlying securities held by the Fund at
the worst possible time as far as long-term investors are concerned.
Additionally, short-term trading drives up the Fund's transaction
costs--measured by both commissions and bid/ask spreads--which are borne by the
remaining long-term investors. For these reasons, the Fund assesses a 2.00% fee
on the redemption of shares held for less than one year. Redemption fees will be
paid to the Fund to help offset transaction costs. [The fee does not apply to
any shares purchased through reinvested distributions (dividends and capital
gains) or to shares held in retirement plans (such as 401(k), 403(b), 457,
Keogh, Profit Sharing Plans, and Money Purchase Pension Plans). This fee also
does not apply to shares held in IRA accounts.]
The Fund will use the first-in, first-out (FIFO) method to determine the
one-year holding period. Under this method, the date of the redemption will be
compared to the earliest purchase date of shares held in the account. If this
holding period is less than one year, the redemption fee will be assessed. In
determining "one year" the Fund will use the anniversary date of a transaction.
Thus, shares purchased on April 5, 1999, for example, will be subject to the fee
if they are redeemed on or prior to April 4, 2000. If they are redeemed on or
after April 5, 2000, the shares will not be subject to the redemption fee. The
redemption fee will be applied on redemptions of each investment made by a
shareholder that does not remain in the Fund for a one-year period from the date
of purchase.
Proceeds of redemptions are paid by check. Unless other instructions are
given in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Additional exceptions
include any period during which an emergency (as determined by the SEC) exists
as a result of which disposal by the Fund of its portfolio securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the SEC may by order permit for the protection of the shareholders of
the Fund.
-12-
834327.2
<PAGE>
The Fund has reserved the right to redeem the shares of any shareholder
(other than those in an IRA) if the net asset value of all the remaining shares
in the shareholder's account after a withdrawal is less than $[ ]. Written
notice of a proposed mandatory redemption will be given at least 30 days in
advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts.
Written Requests
- ----------------
Shareholders may make a redemption in any amount by sending a written
request to the Fund addressed to:
Reich & Tang internet.com(TM) Index Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be
endorsed by the shareholder and all written requests for redemption must be
signed by the shareholder, in each case with signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to the
shareholder of record.
[Checks
- -------
By making the appropriate election on their subscription order form,
shareholders may request a supply of checks which may be used to effect
redemptions from the Class of shares of the Fund in which they invest. The
checks, which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the Fund's agent bank. Checks may be drawn
in any amount of [$ ] or more. When a check is presented to the Fund's agent
bank, it instructs the Fund's transfer agent to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount of
the check. The use of a check to make a withdrawal enables a shareholder in the
Fund to receive dividends on the shares to be redeemed up to the Fund Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Fund shares purchased by check may not be redeemed by check until the check has
cleared, which can take up to 15 days following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The
Fund reserves the right to impose a charge or impose a different minimum check
amount in the future if the Board of Directors determines that doing so is in
the best interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and/or a post-dated check. The
Fund reserves the right to terminate or modify the check redemption procedure at
any time or to impose additional fees following notification to the Fund's
shareholders.
Corporations and other entities electing the checking option are required
to furnish a certified resolution or other evidence of authorization in
accordance with the Fund's normal practices. Individuals and joint tenants are
not required to furnish any supporting documentation. Appropriate authorization
forms will be sent by the Fund or its agents to corporations and other
shareholders who select this option. As soon as the authorization forms are
filed in good order with the Fund's agent bank, it will provide the shareholder
with a supply of checks.]
-13-
834327.2
<PAGE>
Telephone
- ---------
The Fund accepts telephone requests for redemption from shareholders who
elect this option on their subscription order form. Telephone requests for
redemptions may not exceed $25,000 per request per day. The proceeds of a
telephone redemption may be sent to the shareholders at their addresses or to
their bank accounts, both as set forth in the subscription order form or in a
subsequent written authorization. The Fund may accept telephone redemption
instructions from any person with respect to accounts of shareholders who elect
this service and thus such shareholders risk possible loss of principal and
interest in the event of a telephone redemption not authorized by them. The Fund
will employ reasonable procedures to confirm that telephone redemption
instructions are genuine, and will require that shareholders electing such
option provide a form of personal identification. Failure by the Fund to employ
such reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to unauthorized or fraudulent telephone redemptions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220; outside New York at 800-221-3079, and state: (i) the name of the
shareholder appearing on the Fund's records; (ii) the shareholder's account
number with the Fund; (iii) the amount to be withdrawn; (iv) whether such amount
is to be forwarded to the shareholder's designated bank account or address; and
(v) the name of the person requesting the redemption. Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected, provided the redemption request is received before 4:00
p.m., New York City time. If the redemption request is received after such time,
proceeds are sent the next Fund Business Day. The Fund reserves the right to
terminate or modify the telephone redemption service in whole or in part at any
time and will notify shareholders accordingly.
On-Line
- -------
[Insert instructions for redeeming shares on the internet]
[Specified Amount Automatic
Withdrawal Plan
- ---------------------------
Shareholders may elect to withdraw shares and receive payment from the
Fund of a specified amount of $[ ] or more automatically on a monthly or
quarterly basis. The monthly or quarterly withdrawal payments of the specified
amount are made by the Fund on the 23rd day of the month. Whenever such 23rd day
of a month is not a Fund Business Day, the payment date is the Fund Business Day
preceding the 23rd day of the month. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating on the subscription order
form. The election may also be made, changed or terminated at any later time by
sending a signature guaranteed written request to the transfer agent. Because
the withdrawal plan involves the redemption of Fund shares, such withdrawals may
constitute taxable events to the shareholder.]
Dividends and Distributions
- ----------------------------
Each dividend and capital gains distribution, if any, declared by the Fund
on its outstanding shares will, at the election of each stockholder, be paid in
cash or in additional shares of common stock of the Fund having an aggregate net
asset value as of the payment date of such dividend or distribution equal to the
cash amount of such
-14-
834327.2
<PAGE>
dividend or distribution. Election to receive dividends and distributions in
cash or shares is made at the time shares are subscribed for and may be changed
by notifying the Fund in writing at any time prior to the record date for a
particular dividend or distribution. If the stockholder makes no election the
Fund will make the distribution in shares. There is no sales or other charge in
connection with the reinvestment of dividends and capital gains distributions.
While it is the intention of the Fund to distribute to its stockholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. Dividends will normally be paid quarterly. Capital gains
distributions, if any, will be made at least annually and usually at the end of
the Fund's fiscal year. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital gains.
Retirement Plans
- ----------------
The Fund has available a form of individual retirement account ("IRA") for
investment in the Fund's shares. In general, an individual can make an annual
contribution to an IRA in an amount equal to the lesser of $2000 or 100% of the
individual's earned income. In addition, in the case of a married couple filing
a joint return, annual IRA contributions of up to $2000 can generally be made
for each spouse, as long as the combined compensation of both spouses is at
least equal to the contributed amounts. IRA contributions can, in general, be
made to either traditional deductible IRAs, traditional non-deductible IRAs or
non-deductible Roth IRAs, a new type of IRA established by the Taxpayer Relief
Act of 1997. Contributions to a Roth IRA are not deductible, but qualified
distributions from a Roth IRA are not includable in income or subject to the
additional ten-percent tax on early withdrawals, if deemed a qualified
distribution. A "qualified distribution" is a distribution that is made after
the end of the five taxable year period beginning with the first taxable year in
which the individual made a contribution to a Roth IRA, and which is made on or
after the date in which the individual attains an age of 59 1/2, on or after
the death of the individual or is attributable to the disability of the
individual, or is a distribution for specified first-time home buyer expenses or
certain education expenses.
Contributions to traditional deductible IRAs and Roth IRAs may be limited
based on adjusted gross income levels. The ability of a person who is an active
participant in an employer sponsored retirement plan to make deductible
contributions to a regular IRA is phased out based on the individual's adjusted
gross incomes. For 1998, the phase out occurs over a range of adjusted gross
incomes from $50,000 to $60,000 on a joint return and $30,000 to $40,000 on a
single return. The phase out range for a married individual who is not an active
participant but whose spouse is an active participant is between $150,000 and
$160,000.
The maximum annual contribution that can be made to a Roth IRA is also
subject to phase out rules that apply to married individuals filing joint
returns when adjusted gross income is between $150,000 and $160,000 and to
single individuals when adjusted gross income is between $95,000 and $110,000.
For both traditional deductible IRAs and Roth IRAs, the phase out range
for married individuals filing separate returns is from $0 to $10,000. The
minimum investment required to open an IRA is $250. Generally, there are
penalties for premature distributions from an IRA before the attainment of age
59 1/2, except in the case of the participant's death or disability and certain
other circumstances including first-time home buyer expenses and certain
education expenses.
Fund shares may also be a suitable investment for assets of other types of
qualified pension or profit-sharing plans, including cash or deferred or salary
reduction "Section 401(k) plans" which give participants the right to defer
portions of their compensation for investment on a tax-deferred basis until
distributions are made from the plans.
-15-
834327.2
<PAGE>
Persons desiring information concerning investments by IRAs and other
retirement plans should write or telephone the Fund.
Tax Consequences
- ----------------
The Fund intends to qualify for the fiscal year ended __________, 1999 and
intends for each year thereafter to qualify for tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended.
Qualification as a regulated investment company relieves the Fund of Federal
income tax on net ordinary income and net realized capital gains paid out to its
stockholders. Distributions of net ordinary income and net short-term capital
gains are taxable to stockholders as ordinary income. Some corporate
stockholders will be entitled to the dividends-received deduction to the extent
that the Fund's income is derived from qualifying dividends from domestic
corporations. A corporation's dividends-received deduction will be disallowed
unless the corporation holds shares in the Fund at least 46 days. Furthermore, a
corporation's dividends-received deduction will be disallowed to the extent a
corporation's investment in shares of the Fund is financed with indebtedness.
The excess of net long-term capital gains over net short-term capital
losses realized and distributed by the Fund as capital gains distributions is
taxable to stockholders as long-term capital gains, irrespective of the length
of time a stockholder may have held its stock. Long-term capital gains
distributions are not eligible for the dividends-received deduction referred to
above. If a stockholder that sells shares held for six months or less received a
distribution taxable as long-term capital gain, any loss realized on the sale of
the shares would be a long-term capital loss to the extent of the distribution.
The Plan provides that the Manager may make payments from time to time
from its own resources, which may include the investment management fee and past
profits for the following purposes: to pay promotional and administrative
expenses in connection with the offer and sale of the shares of the Fund,
including payments to participating organizations or financial intermediaries
for
Any dividend or distribution received by a stockholder shortly after the
purchase of shares of the Fund will reduce the net asset value of the shares by
the amount of the dividend or distribution. Furthermore, the dividend or
distribution is subject to tax even though they are, in effect, a return of
capital.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to stockholders who have not complied with IRS regulations by certifying on its
application that the social security or tax identification number provided is
correct and that the stockholder is not subject to 31% backup withholding for
previous underreporting to the IRS.
The redemption of shares may result in the investor's receipt of more or
less than the investor paid for its shares and, thus, in a taxable gain or loss
to the investor.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- ---------------
The Fund has adopted a Distribution & Service Plan (the "Plan"), pursuant
to Rule 12b-1 under the Act (the "Rule") for the Fund. The Rule provides that an
investment company which bears any direct or indirect expense of distributing it
shares must do so only in accordance with a plan permitted by the Rule. Although
there are no fees or expenses chargeable to the Fund under the Plan, the Fund's
Board of Directors has adopted the Plan in case certain expenses of the Fund
might be considered to constitute indirect payments by the Fund of distribution
expenses. If a payment by the Fund to the Manager or investment management fee
should be deemed to be indirect financing by the Fund of the distribution of its
shares, such payment would be authorized under the Plan.
-16-
834327.2
<PAGE>
The Plan provides that the Manager may make payments from time to time
from its own resources, which may include the investment management fee and past
profits, for the following purposes: to pay promotional and administrative
expenses in connection with the offer and sale of the shares of the Fund,
including payments to participating organization or financial institutions for
performing shareholder servicing and related administrative functions and for
providing assisting in distributing the Fund's shares. Pursuant to the License
Agreement, R&T has agreed to retain marketing and advertising services from
internet.com LLC to be paid at the expense of R&T.
The Manager, in its sole discretion, will determine the amount of such
payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager for any
fiscal year under the Investment Management Contract in effect for that year.
-17-
834327.2
<PAGE>
A Statement of Additional
Information (SAI) dated [June , 1999,]
and the Fund's Annual and Semi-Annual
Reports include additional information internet.com(TM) Index
about the Fund and its investments and Fund, Inc.
are incorporated by reference into this
prospectus. In the Fund's Annual Report,
you will find a discussion of the market
conditions and investment strategies
that significantly affected the Fund's
performance during its last fiscal year.
You may obtain the SAI, the Annual and
Semi-Annual Reports and material
incorporated by reference without charge
by calling the Fund at 1-800-221-3079.
To request other information, please
call your financial intermediary or the
Fund.
=========================================
=========================================
A current SAI has been filed with PROSPECTUS
the Securities and Exchange Commission. June ___, 1999
You may visit the Securities and
Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material Reich & Tang Distributors,Inc.
incorporated by reference and other 600 Fifth Avenue
information. These materials can also be New York, NY 10020
reviewed and copied at the Commission's (212) 830-5220
Public Reference Room in Washington D.C.
Information on the operation of the
Public Reference Room may be obtained by
calling the Commission at
1-800-SEC-0330. In addition, copies of
these materials may be obtained, upon
payment of a duplicating fee, by writing
the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
[811- ]
-18-
834327.2
<PAGE>
- --------------------------------------------------------------------------------
INTERNET.COM(TM) INDEX 600 FIFTH AVENUE, NEW YORK, NY 10020
FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
June ___, 1999
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current Prospectus
for internet.com(TM) Fund, Inc. (the "Fund"), dated June ____, 1999 and should
be read in conjunction with the Fund's Prospectus.
A Prospectus may be obtained by writing or calling the Fund toll-free at 1-(800)
221-3079. The Financial Statements of the Fund have been incorporated by
reference to the Fund's Annual Report. The Annual Report is available, without
charge, upon request by calling the toll-free number provided.
This Statement of Additional Information is incorporated by reference into the
Fund's Prospectus in its entirety.
<TABLE>
<CAPTION>
Table of Contents
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Fund History...................................... 2 Brokerage Allocation and Other Practices............ 9
Description of the Fund and its Investments and Capital Stock and Other Securities.................. 10
Risks............................................. 2 Purchase, Redemption and Pricing Shares............. 10
Management of the Fund............................ 5 Taxation of the Fund................................ 10
Control Persons and Principal Holders of Underwriters........................................ 12
Securities...................................... 7 Calculation of Performance Data..................... 12
Investment Advisory and Other Services............ 7 Financial Statements................................ 12
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
834320.2
<PAGE>
- --------------------------------------------------------------------------------
I. FUND HISTORY
The Fund was incorporated on May 17, 1999 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end management investment company. The Fund seeks to match,
as closely as possible, the performance of the ISDEX(R), an internet stock index
that consists of modified capitalized-weighted group of 50 internet stocks. The
Fund is not an appropriate investment for individuals who are not long-term
investors and who, as their primary objective, require safety of principal or
stable income from their investments. The Fund is intended to be a long-term
investment and investors should not use the Fund for speculating or short-term
fluctuations in the market.
Although not principal strategies, the Manager may enter into the following
types of transactions or invest in the following types of instruments as part of
its investment strategies:
[(i) Warrants
--------
The Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.
The Fund will not purchase any warrant if, as a result of such purchase, 5% or
more of the Fund's total assets are invested in warrants. Included within that
amount, but not to exceed 2% of the value of the Fund's total assets, may be
warrants which are not listed on the New York or American Stock Exchanges.
(ii) Futures Contracts
-----------------
The Fund may enter into futures contracts, options, warrants, options on futures
contracts, convertible securities and swap agreements for the purpose of
simulating full investment and reducing transactions costs. The Fund does not
use futures or options for speculative purposes. It will only use futures and
options to simulate full investment in the index while retaining a cash balance
for fund management purposes. Future contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. Futures contracts
which are standardized as to maturity date and underlying financial instrument
are traded on national futures exchanges. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission (CFTC), a U.S. Government agency. Assets committed to futures
contracts will be segregated to the extent required by law.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement dated without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion to the contract (delivery and acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on deposits which
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers" or
"speculators." Hedgers use the futures markets primarily to offset unfavorable
changes in the value of securities either held for investment purposes or
expected to be acquired by them. Speculators are less inclined to own, or intend
to purchase, the securities underlying the futures contracts which they trade,
and use futures contracts with the expectation of realizing profits form
fluctuations in the prices of underlying securities. The Fund intends to use
futures contracts only for bona fide hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its futures
transactions constitute bona fide hedging transactions except to the extent that
the aggregate initial margins and premiums required to establish any non-hedging
- --------------------------------------------------------------------------------
-2-
834320.2
<PAGE>
positions do not exceed five percent of the value of the Fund's portfolio. The
Fund will only sell futures contracts to protect against declines in the prices
of the securities underlying the futures contracts or purchase contracts to
protect against an increase in the price of securities it intends to purchase.
As evidence of this hedging interest, the Fund expects that the majority of its
futures contract purchases will be "completed;" that is, equivalent amounts of
related securities will have been purchased or are being purchased by the Fund
upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts could
be used to control a Fund's exposure to market fluctuations, the use of futures
contracts may be a more effective means of hedging this exposure. While the Fund
will incur commission expenses in both opening and losing out futures positions,
these costs are lower than transaction costs incurred in the purchase and sale
of the underlying securities.
Restrictions on the Use of Futures Contracts
The Fund will not enter into futures transactions to the extent that,
immediately thereafter, the sum of initial margin deposits on open contacts
exceeds 5% of the market value of the Fund's total assets. In addition, the Fund
will not enter into futures contracts to the extent that its outstanding
obligations to purchase securities under these contracts would exceed 20% of the
Fund's total assets.
Risk Factors in Futures Transactions
Positions in futures contracts may be closed out only on an Exchange which
provides a secondary market for such futures. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close a futures position. In
the event of adverse price movements, a fund would continue to be required to
make daily cash payments to maintain its required margin. In such situations, if
the Fund has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it may be disadvantageous to do so. In
addition, the Fund may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the ability to
effectively hedge.
The Fund will minimize the risk that it will be unable to close out a futures
contract by only entering into futures which are traded on national futures
exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase sale of a futures contract may result in losses in excess
of the amount invested in the contract. The Fund also bears the risk that the
adviser will incorrectly predict future stock market trends. However, because
the futures strategy of the Fund is engaged in only for hedging purposes, the
Fund's Officers do not believe that the Fund is subject to the risks or loss
frequently associated with futures transactions. The Fund would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that the Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may very either up or down
from the previous day's settlement price at the end of a trading session. One
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
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Federal Tax Treatment of Futures Contracts
The Fund is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on certain futures
contracts as of the end of the year as well as those actually realized during
the year. In most cases, any gain or loss recognized with respect to a futures
contract is considered to be 60% long-term capital gain or loss and 40%
short-term capital gain or loss, without regard to the holding period of the
contract. Furthermore, sales of futures contracts which are intended to hedge
against a change in the value of securities held by the Fund may affect the
holding period of such securities and, consequently, the nature of the gain or
loss on such securities upon disposition. The Fund may be required to defer the
recognition of losses on futures contracts to the extent of any unrecognized
gains on related positions held by the Fund.
In order for the Fund to continue to qualify for Federal income tax treatment as
a regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, gains from the sale of securities or of
foreign currencies or other income derived with respect to the fund's business
of investing in securities. Net gain realized from the closing out of futures
contracts will be considered qualifying income for purposes of the 90%
requirement.
The Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized gains
at the end of the Fund's fiscal year) on futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Fund's other investments and shareholders will be advised on the nature of
the distributions.]
Investment Restrictions
The Fund has adopted the following fundamental investment restrictions. They may
not be changed unless approved by a majority of the outstanding shares "of each
series of the Fund's shares that would be affected by such a change." The term
"majority of the outstanding shares" of the Fund means the vote of the lesser of
(i) 67% or more of the shares of the Fund present at a meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Fund. The Fund may not:
1. Purchase the securities of any one issuer, other than the U.S. government or
any of its agencies or instrumentalities, if immediately after such purchase
more than 5% of the value of its total assets would be invested in such
issuer or the Fund would own more than 10% of the outstanding voting
securities of such issuer, except that up to 25% of the value of the Fund's
total assets may be invested without regard to such 5% and 10% limitations;
2. Invest more than 25% of the value of its total assets in any particular
industry;
3. Purchase securities on margin, but it may obtain such short-term credits
from banks as may be necessary for the clearance of purchases and sales of
securities;
4. Make loans of its assets to any person, except for the purchase of debt
securities as discussed under "Investment Objectives, Policies and Risks"
herein;
5. Borrow money except for (i) the short-term credits from banks referred to in
paragraph 3 above and (ii) borrowings from banks for temporary or emergency
purposes, including the meeting of redemption requests which might require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the value of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time
the borrowing is made. Outstanding borrowings in excess of 5% of the value
of the Fund's total assets will be repaid before any subsequent investments
are made;
6. Mortgage, pledge or hypothecate any of its assets, except as may be
necessary in connection with permissible borrowings mentioned in paragraph 5
above;
7. Purchase the securities of any other investment company, except by purchase
in the open market where to the best information of the Fund no commission
or profit to a sponsor or dealer (other than the customary broker's
commission) results from such purchase, or except when such purchase is part
of a merger, consolidation or acquisition of assets; and
8. Act as an underwriter of securities of other issuers, except that the Fund
may acquire restricted or not readily marketable securities under
circumstances where, if such securities were sold, the Fund might be deemed
to be an underwriter for purposes of the Securities Act of 1933. The Fund
will not, however, invest more than 10% of the value of its net assets in
restricted securities and not readily marketable securities.
9. Purchase or otherwise acquire interests in real estate, real estate mortgage
loans or interests in oil, gas or other
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mineral exploration or development programs;
10. Sell securities short or invest in puts, calls, straddles, spreads or
combinations thereof;
11. Purchase or acquire commodities or commodity contracts;
12. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with any permitted borrowing;
13. Participate on a joint or a joint and several basis in any securities
trading account; and
14. Invest in companies for the purpose of exercising control. If a percentage
restriction is adhered to at the time an investment is made, a later change
in percentage resulting from changes in the value of the Fund's portfolio
securities will not be considered a violation of the Fund's policies or
restrictions.
Temporary Defensive Strategies
The Fund may take a temporary defensive position and invest in securities that
are inconsistent with its principal investment strategies when the Manager
determines that adverse market, economic, political, or other conditions warrant
such a position. Pursuant to this policy, the Fund may invest temporarily
without limit in investment grade debt securities, preferred stocks or money
market instruments.
The Fund will not necessarily dispose of a security that falls below investment
grade unless the Manager determines that the security is inconsistent with the
Fund's investment objectives.
Money market instruments purchased for this purpose include U.S. Government
obligations, high quality commercial paper and certificates of deposit and
bankers' acceptances issued by domestic banks having more than $1 billion in
total assets.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be director, officers or
employees of the Manager or its affiliates. Due to the services performed by the
Manager, the Fund currently has no employees and its officers are not required
to devote their full-time to the affairs of the Fund.
The Directors and Executive Officers of the Fund, and their principal
occupations during the past five years, are set forth below. Unless otherwise
specified, the address of each of the following persons is 600 Fifth Avenue, New
York, New York 10020. Directors deemed to be "interested persons" of the Fund
for the purposes of the Investment Company Act of 1940 (the "1940 Act"), as
amended are indicated by an asterisk.
RICHARD E. SMITH, III, 49*: Director and Chairman of the Fund, has been
President and Chief Executive Officer of the Capital Management Division of the
Manager with which he has been associated since May 1994. Mr. Smith was formerly
Executive Vice President of Rhode Island Hospital Trust which he was associated
with from March 1993 to May 1994.
ALAN MECKLER, __*: Director and President of the Fund, has been a Director,
Chairman of the Board and Chief Executive Officer of internet.com(TM) since its
inception. Previously, Mr. Meckler had been Chairman of the Board and Chief
Executive Officer of Mecklermedia since December 1993 and had been President and
a Director from 1971 through November 1997. Mr. Meckler also held the office of
Chairman of the Board of Mecklermedia during certain periods since 1971, and was
the only person to have held the offices of Chairman of the Board or Chief
Executive Officer since Mecklermedia's founding.
[insert names and bios for the 3 independent Directors]
STEVEN W. DUFF, 45: Executive Vice President of the Fund, has been President of
the Mutual Funds division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank which he was
associated from June 1981 to August 1994. Mr. Duff is also President and a
Director/Trustee of 14 funds in the Reich & Tang Fund Complex, President of Back
Bay Funds, Inc., Director of Pax World Money Market Fund, Inc., and President
and Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.
BERNADETTE N. FINN, 51: Vice President and Secretary of the Fund, has been Vice
President of the Mutual Funds division of the Manager since September 1993. Ms.
Finn was formerly Vice President and Assistant Secretary of Reich & Tang, Inc.
with which she was associated with from September 1970 to September 1993. Ms.
Finn is also Vice
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834320.2
<PAGE>
President and Secretary of 4 additional funds, and a Secretary of 14 funds in
the Reich & Tang Fund Complex.
MOLLY FLEWHARTY, 48: Vice President of the Fund has been Vice President of the
Mutual Funds division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. with which she was associated with
from December 1977 to September 1993. Ms. Flewharty is also a Vice President of
18 other funds in the Reich & Tang Fund Complex.
LESLEY M. JONES, 50: Vice President of the Fund has been Senior Vice President
of the Mutual Funds division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. with which she was
associated from April 1973 to September 1993. Ms. Jones is also a Vice President
of 14 other funds in the Reich & Tang Complex.
DANA E. MESSINA, 42: Vice President of the Fund has been Executive Vice
President of the Mutual Funds division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated from December
1980 to September 1993. Ms. Messina is also Vice President of 15 other funds in
the Reich & Tang Fund Complex.
RICHARD De SANCTIS, 42: Treasurer of the Fund, has been Vice President and
Treasurer of the Manager since September 1993. Mr. De Sanctis was formerly
Controller of Reich & Tang, Inc. from January 1991 to September 1993. Mr. De
Sanctis is also Treasurer of 17 other funds in the Reich & Tang Fund Complex,
and is Vice President and Treasurer of Cortland Trust, Inc.
ROSANNE D. HOLTZER, 34: Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated since June 1986. She is also Assistant Treasurer of 18 other funds in
the Reich & Tang Fund Complex.
Directors of the Fund not affiliated with the Manager receive from the Fund an
annual retainer of $2,000 and a fee of $500 for each Board of Directors meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Manager do
not receive compensation from the Fund.
The Fund anticipates paying an aggregate remuneration of [$12,000] to its
disinterested directors with respect to the period ended ___________, 1999, all
of which consisted of aggregate director's fees paid to the three disinterested
directors, pursuant to the terms of the Investment Management Contract. See
Compensation Table below.
<TABLE>
<CAPTION>
Estimated Compensation Table
(1) (2) (3) (4) (5)
Name of Person, Aggregate Compensation Pension or Retirement Total Compensation from
Position from Registrant for Benefits Accrued as Estimated Annual Fund and Fund
Fiscal Year Part of Fund Expenses Benefits upon Retirement Complex Paid to Directors*
<S> <C> <C> <C> <C>
[ ,] [$4,000.00] 0 0 [$ ( Funds)]
Director
[ ,] [$4,000.00] 0 0 [$ ( Funds)]
Director
[ ,] [$4,000.00] 0 0 [$ ( Funds)]
Director
</TABLE>
* The estimated total compensation paid to such persons by the Fund and Fund
Complex for the fiscal year ending [___________, 1999]. The parenthetical
number represents the number of investment companies (including the Fund)
from which such person receives compensation that are considered part of
the same Fund complex as the Fund, because, among other things, they have a
common investment advisor.
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834320.2
<PAGE>
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On [June ____, 1999] the Manager purchased $100,000 of the Fund's common stock
at an initial subscription price of $1.00 per share. As of [June ____,1999,] the
amount of shares owned by all officers and directors of the Fund, as a group,
was less than 1% of the outstanding shares of the Fund.
V. INVESTMENT ADVISORY AND OTHER SERVICES
Pursuant to its Investment Management Contract with the Fund, Reich & Tang Asset
Management L.P. (the "Manager") is responsible for the investment management of
the Fund's assets, including the responsibility for making investment decisions
and placing orders for the purchase and sale of the Fund's investments directly
with the issuers or with brokers or dealers selected by it in its discretion.
(See "Portfolio Transactions" herein.) The Manager also furnishes to the Board
of Directors periodic reports on the investment performance of the Fund.
Reich & Tang Asset Management L.P. is a Delaware limited partnership with
principal offices at 600 Fifth Avenue, New York, New York 10020. The Manager was
at March 31, 1999 manager, advisor or supervisor with respect to assets
aggregating in excess of $13.2 billion. The Manager acts as manager or
administrator of seventeen other investment companies and also advises pension
trusts, profit sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaces
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly or indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company with assets of $330.6 billion at
December 31, 1997. MetLife provides a wide range of insurance and investment
products and services to individuals and groups and is the leader among United
States life insurance companies in terms of total life insurance in force, which
exceeded $1.7 trillion at December 31, 1997 for MetLife and its insurance
affiliates. MetLife and its affiliates provide insurance or other financial
services to approximately 36 million people worldwide.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, division
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
Back Bay Advisors, L.P., Capital Growth Management, Limited Partnership,
Greystone partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Company, L.P., Nvest Associates, Inc., Snyder Capital
Management, L.P., Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak
Investment Advisors, L.P. These affiliates in the aggregate are investment
advisors or managers to 80 other registered investment companies.
The Investment Management Contract was initially approved by the Board of
Directors and the shareholders of the Fund and entered into on [June ____, 1999]
with a term until June 30, 2001 and is continued in force thereafter for
successive twelve-month periods beginning each [July 1st], provided that such
continuance is specifically approved annually by majority vote of the Fund's
outstanding voting securities or by its Board of Directors, and in either case
by a majority of the directors who are not parties to the Investment Management
Contract or interest persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of the Manager
or its affiliates.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or
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<PAGE>
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by the Manager on sixty days' written notice, and will automatically terminate
in the event of its assignment. The Management Contract provides that in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Manager, or of reckless disregard of its obligations thereunder, the Manager
shall not be liable for any action or failure to act in accordance with its
duties thereunder.
For its services under the Investment Management Contract, the Manager receives
from the Fund a fee, payable monthly, at the annual rate of [.65%] of the Fund's
average daily net assets. In addition to management services with respect to the
purchase and sale of securities, the fee includes compensation for overall
management of the Fund, including distributing the Fund's shares.
Pursuant to the Administrative Services Contract with the Fund, the Fund pays
the Manager a fee equal to [.20%] per annum of the Fund's average daily net
assets for performing clerical, accounting supervision, office service and
related functions for the Fund and provides the Fund with personnel to (i)
supervise the performance of accounting related services by Investors Fiduciary
Trust Company, the Fund's bookkeeping or recordkeeping agent, (ii) prepare
reports to and filings with regulatory authorities and (iii) perform such other
services as the Fund may from time to time request of the Manager. The personnel
rendering such services may be employees of the Manager, of its affiliates or of
other organizations. For its services under the Administrative Services
Contract, the Manager receives from the Fund a fee equal to [.20%] per annum of
the Fund's average daily net assets.
Expense Limitation
The Manager has agreed to reimburse the Fund for its expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
the limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund's expenses for distribution purposes pursuant to the Plan,
described above, are included within such expenses only to the extent required
by the state with the most restrictive expense limitation in which the Fund's
shares are qualified for sale. The Fund may elect not to qualify its shares for
sale in every state. For the purpose of this limitation, expenses shall include
the fee payable to the Manager and the amortization of organization expenses.
For the purpose of this obligation to reimburse expenses, the Fund's annual
expenses are estimated and accrued daily, and any appropriate estimated payments
are made to it on a monthly basis. No such reimbursement was required for the
year ended December 31, 1998. As a result of the passage of the National
Securities Markets Improvement Act of 1996, all state expense limitations have
been eliminated at this time.
Subject to the Manager's obligations to pay for services performed by officers
of the Manager or its affiliates and for investment management services and
certain distribution and promotional expenses and to reimburse the Fund for its
excess expenses as described above, under the Investment Management Contract the
Fund has assumed responsibility for payment of all of its other expenses,
including (a) brokerage and commission expenses, (b) Federal, state and local
taxes, including issue and transfer taxes incurred by or levied on the Fund, (c)
commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of the Fund's custodian, (f) charges and
expenses of persons performing issuance, redemption, transfer and dividend
disbursing functions for the Fund, (g) recurring and nonrecurring legal and
accounting expenses, including the Fund's cost of the bookkeeping agent for the
determination of net asset value per share and the maintenance of portfolio and
general accounting records, (h) telecommunication expenses, (i) costs of
organizing and maintaining the Fund's existence as a corporation, (j)
compensation, including directors' fees, of any of the Fund's directors,
officers or employees who are not officers of Reich & Tang Asset Management,
Inc., the general partner of the Manager, and costs of other personnel providing
services to the Fund, (k) costs of stockholders' services including charges and
expenses of persons providing confirmations of transactions in Fund shares,
periodic statements to stockholders, and recordkeeping and stockholder services,
(l) costs of stockholders' reports, proxy solicitations, and corporate meetings,
(m) fees and expenses of registering the Fund's shares under the appropriate
Federal securities laws and of qualifying those shares under applicable state
securities laws, including expenses attendant upon the initial registration and
qualifications of the Fund's shares and attendant upon renewals of, or
amendments to, those registrations and qualifications, (n) expenses of preparing
and printing the Fund's prospectuses and statements of additional information
and of delivering them to stockholders of the Fund, (o) payment of fees and
expenses provided for in the Investment Management Contract, Administrative
Services Agreement and Distribution Agreement and (p) any other distribution or
promotional expenses pursuant to a distribution and service plan.
Distribution and Service Plan
The Fund has adopted a distribution and service plan (the "Plan"), pursuant to
Rule 12b-1 under the Act (the "Rule") for the Fund. The Rule provides that an
investment company which bears any direct or indirect expense of distributing it
shares must do so only in accordance with a plan permitted by the Rule. Although
there are no fees or expenses chargeable to the Fund under the Plan, the Fund's
Board of Directors has adopted the Plan in case certain expenses of the Fund
might be considered to constitute indirect payments by the Fund of distribution
expenses. If a payment by the Fund to the Advisor of advisory fees should be
deemed to be indirect financing by the Fund of the distribution of its shares,
such payments would be authorized under the Plan.
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The Plan provides that the Advisor may make payments from time to time from its
own resources, which may include the advisory fee and past profits for the
following purposes: to pay promotional and administrative expenses in connection
with the offer and sale of the shares of the Fund, including payments to
participating organizations for performing shareholder servicing and related
administrative functions and for providing assistance in distributing the Fund's
shares. These payments include payment to Internet.com(TM) for advertising on
its website and for the use of the ISDEX Index. The Advisor, in its sole
discretion, will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Advisor for any fiscal year under the Advisory Agreement
in effect for that year.
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Advisor for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Advisor, any such payments will be
terminated and any shares registered in the banks' names, for their underlying
customers, will be re-registered in the name of the customers at no cost to the
Fund or its shareholders. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Plan provides that they may continue in effect for successive annual periods
provided that they are approved by the shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plan, or in the agreements related to the Plan. On [June__, 1999] the Board of
Directors approved the continuance of the Plan until June 30, 2000. The Plan was
approved by a majority of the Fund's shareholders at the annual meeting on [June
__, 1999.] The Plan further provides that it may not be amended to increase
materially the costs which may be spent by the Fund for distribution pursuant to
the Plans without shareholder approval, and the other material amendments must
be approved by the directors in the manner described in the preceding sentence.
The Plan may be terminated at any time by a vote of a majority of the
disinterested directors of the Fund or the Fund's shareholders.
Custodian and Transfer Agent
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
NY 10020, is transfer agent and dividend agent for the shares of the Fund. The
custodian and transfer agents do not assist in, and are not responsible for,
investment decisions involving assets of the Fund.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
McGladrey & Pullen LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager makes the Fund's portfolio decisions and determines the broker to be
used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). When consistent with the
objective of obtaining the best price and execution available, brokerage may be
directed to persons or firms supplying investment information to the Manager or
portfolio transactions may be effected by the Manager. Neither the Fund nor the
Manager has entered into agreements or understandings with any brokers regarding
the placement of securities transactions because of research services they
provide. To the extent that such persons or firms supply investment information
to the Manager for use in rendering investment advice to the Fund, such
information may be supplied at no cost to the Manager and, therefore, may have
the effect of reducing the expenses of the Manager in rendering advice to the
Fund. While it is impossible to place an actual dollar value on such investment
information, its receipt by the Manager probably does not reduce the overall
expenses of the Manager to any material extent. Consistent with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and
subject to seeking best execution, the Manager may consider sales of shares of
the Fund as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The investment information provided to the Manager is of the type described in
Section 28(e) of the Securities Exchange Act of 1934 and is designed to augment
the Manager's own internal research and investment strategy capabilities.
Research services furnished by brokers through which the Fund effects securities
transactions are used by the Manager in carrying out its investment management
responsibilities with respect to all its clients' accounts. There may be
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<PAGE>
occasions where the transaction cost charged by a broker may be greater than
that which another broker may charge if the Manager determines in good faith
that the amount of such transaction cost is reasonable in relation to the value
of brokerage and research services provided by the executing broker.
The Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the third market. Where transactions
are executed in the over-the-counter market or third market, the Fund will seek
to deal with the primary market makers; but when necessary in order to obtain
best execution, it will utilize the services of others. In all cases the Fund
will attempt to negotiate best execution.
The Distributor may from time to time effect transactions in the Fund's
portfolio securities. In such instances, the placement of orders with the
Distributor would be consistent with the Fund's objective of obtaining best
execution. With respect to orders placed with the Distributor for execution on a
national securities exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which permit an
affiliated person of a registered investment company (such as the Fund) to
receive brokerage commissions from such registered investment company provided
that such commissions are reasonable and fair compared to commissions received
by other brokers in connection with comparable transactions involving similar
securities during a comparable period of time. In addition, pursuant to Section
11(a) of the Securities Exchange Act of 1934, the Distributor is restricted as
to the nature and extent of the brokerage services it may perform for the Fund.
The Securities and Exchange Commission has adopted rules under Section 11(a)
which permit a distributor to a registered investment company to receive
compensation for effecting, on a national securities exchange, transactions in
portfolio securities of such investment company, including causing such
transactions to be transmitted, executed, cleared and settled and arranging for
unaffiliated brokers to execute such transactions. To the extent permitted by
such rules, the Distributor may receive compensation relating to transactions in
portfolio securities of the Fund provided that the Fund enters into a written
agreement, as required by such rules, with the Distributor authorizing it to
retain compensation for such services. Transactions in portfolio securities
placed with the Distributor which are executed on a national securities exchange
must be effected in accordance with procedures adopted by the Board of Directors
of the Fund pursuant to Rule 17e-1.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of one hundred million shares
of common stock having a par value of one-tenth of one cent ($.001) per share.
Each share has equal dividend, distribution, liquidation and voting rights.
There are no conversion or preemptive rights in connection with any shares of
the Fund. All shares when issued in accordance with the terms of the offering
will be fully paid and non-assessable.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's stockholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Annual and other meetings may be required
with respect to such additional matters relating to the Fund as may be required
by the 1940 Act including the removal of Fund director(s) and communication
among stockholders, any registration of the Fund with the SEC or any state, or
as the Directors may consider necessary or desirable. Each Director serves until
the next meeting of the stockholders called for the purpose of considering the
election or reelection of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the stockholders.
VIII. PURCHASE, REDEMPTION AND PRICING SHARES
The material relating to the purchase and redemption of shares in the Prospectus
is herein incorporated by reference.
IX. TAXATION OF THE FUND
The Fund intends to continue to qualify to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a regulated investment company, the Fund must distribute
to shareholders at least 90% of its investment company taxable income (which
includes, among other items, dividends, taxable interest and the excess of net
short-term capital gains over net long-term capital losses), and meet certain
diversification of assets, source of income, and other requirements. By meeting
these requirements, the Fund generally will not be subject to Federal income tax
on investment company taxable income and net capital gains (the excess of net
long-term capital gains over net short-term capital losses) designated by the
Fund as capital gain dividends and distributed to shareholders. In determining
the amount of net capital gains to be distributed, any capital loss carryover
from prior years will be applied against capital gains to reduce the amount of
distributions paid. If the Fund does not meet all of these requirements, it will
be taxed as an ordinary corporation and distributions will generally be taxed to
shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely basis in
accordance with a calendar year distribution
- --------------------------------------------------------------------------------
-10-
834320.2
<PAGE>
- --------------------------------------------------------------------------------
requirement may be subject to a nondeductible 4% of excise tax. To prevent
imposition of the excise tax, the Fund must distribute for the calendar year an
amount equal to the sum of (1) at least 98% of its ordinary income (excluding
any capital gains or losses) for the calendar year, (2) at least 98% of the
excess of its capital gains over capital losses (adjusted for certain losses)
for the one-year period ending December 31 of such year, and (3) all ordinary
income and capital gain net income (adjusted for certain ordinary losses) for
previous years that were not distributed during such years.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from the Fund may be eligible for
the dividends-received deduction available to corporations other than S
Corporations. However, any dividends received by the Fund that are attributable
to foreign corporations will not be eligible for the dividends-received
deduction, since that deduction is generally available only with respect to
dividends paid by domestic corporations. In addition, the dividends-received
deduction will be disallowed for shareholders who do not hold their shares in
the Fund for at least 45 days during the 90 day period beginning 45 days before
a share in the Fund becomes ex dividend with respect to such dividend and will
be disallowed with respect to an investment in the Fund that is debt financed.
Distributions of net capital gains, if any, designated by the Fund as capital
gain dividends are taxable to shareholders as long-term capital gains,
regardless of the length of time the Fund's shares have been held by the
shareholder. All distributions are taxable to the shareholder whether reinvested
in additional shares or received in cash. Shareholders will be notified annually
as to the Federal tax status of distributions.
Investors should be careful to consider the tax implications of buying shares
just prior to a distribution by the Fund. The price of shares purchased at that
time includes the amount of the forthcoming distribution. Distributions by the
Fund reduce the net asset value of the Fund's shares, and if a distribution
reduces the net asset value below a stockholder's cost basis, such distribution,
nevertheless, would be taxable to the shareholder as ordinary income or capital
gain as described above, even though, from an investment standpoint, it may
constitute a partial return of capital.
Upon the taxable disposition (including a sale or redemption) of shares of the
Fund, a shareholder may realize a gain or loss depending upon its basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. Such gain or loss will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. Non-corporate shareholders are subject to tax at a
maximum rate of 20% on capital gains resulting from the disposition of shares
held for more than 12 months (10% if the taxpayer is, and would be after
accounting for such gains, subject to the 15% tax bracket for ordinary income).
However, a loss realized by a shareholder on the disposition of Fund shares with
respect to which capital gains dividends have been paid will, to the extent of
such capital gain dividends, also be treated as long-term capital loss if such
shares have been held by the shareholder for six months or less. Further, a loss
realized on a disposition will be disallowed to the extent the shares disposed
of are replaced (whether by reinvestment of distributions or otherwise) within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date.
Under certain circumstances, the sales charge incurred in acquiring shares of
the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of the Fund are
exchanged within 90 days after the date they were purchased and new shares of
the Fund are acquired without sales charge or at a reduced sales charge. In that
case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred the sales charge
initially. Instead, the portion of the sales charge affected by this rule will
be treated as a sales charge paid for the new shares.
Gains or losses attributable to fluctuations in exchange rates resulting from
transactions in a foreign currency generally are treated as ordinary income or
ordinary loss. These gains or losses may increase, decrease, or eliminate the
amount of the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
Income received by the Fund from sources within foreign countries may be subject
to withholding and other similar income taxes imposed by the foreign country.
The Fund does not expect to be eligible to elect to allow shareholders to claim
such foreign taxes or a credit against their U.S. tax liability.
The Fund is required to report to the IRS all distributions to shareholders
except in the case of certain exempt shareholders. Distributions by the Fund
(other than distributions to exempt shareholders) are generally subject to
backup withholding of Federal income tax at a rate of 31% if (1) the shareholder
fails to furnish the Funds with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the IRS notifies
the Fund or a shareholder that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to
- --------------------------------------------------------------------------------
-11-
834320.2
<PAGE>
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions (whether reinvested in additional shares or taken in cash) will be
reduced by the amounts required to be withheld.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and the treatment of distributions under state and
local income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax advisors with respect to particular
questions of Federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisors regarding U.S. foreign tax
consequences of ownership of shares of the Fund, including the likelihood that
distributions to them would be subject to withholding of U.S. tax at a rate of
30% (or at a lower rate under a tax treaty).
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register ad dealers pursuant to
state law.
XI. CALCULATION OF PERFORMANCE DATA
From time to time the Fund may distribute sales literature or publish
advertisements containing "total return" quotations for the Fund. Such sales
literature or advertisements will disclose the Fund's average annual compounded
total return for the Fund's last one year period, five year period and the
period since the Fund's inception, and may include total return information for
other periods. The Fund's total return for each period is computed by finding,
through the use of a formula prescribed by the Securities and Exchange
Commission, the average annual compounded rates of return over the period that
would equate an assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of the Fund are assumed
to have been reinvested when received.
The Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in the Fund's portfolio and the Fund's expenses. Total return
information is useful in reviewing the Fund's performance but such information
may not provide a basis for comparison with bank deposits or other investments
which pay a fixed return for a stated period of time. An investor's principal
invested in the Fund is not fixed and will fluctuate in response to prevailing
market conditions.
XII. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended
________, 1999 and the report thereon of McGladrey & Pullen, LLP are herein
incorporated by reference to the Fund's Annual Report. The Annual Report is
available upon request and without charge.
- --------------------------------------------------------------------------------
-12-
834320.2
<PAGE>
PART C - OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation of the Registrant.
(b) By-Laws of the Registrant.
(c) Not applicable.
* (d) Form of Investment Management Contract between the
Registrant and Reich & Tang Asset Management L.P.
* (e) See Distribution Agreement filed as Exhibit m.1.
(f) Not applicable.
* (g) Custody Agreement between the Registrant and Investors
Fiduciary Trust Company.
(h) Not Applicable.
* (i) Consent Opinion of Messrs. Battle Fowler LLP
as to the use of their name under the headings
"Federal Income Taxes" in the Prospectus and
"Counsel and Auditors" in the Statement of
Additional Information.
* (j) Consent of Independent Auditors filed as Exhibit j
herein.
* (k) Audited Financial Statements for the Fiscal Year ended
[___________].
* (l) Written assurance of Reich & Tang Asset Management L.P.
that its purchase of shares of the Registrant was for
investment purposes without any present intention of
redeeming or reselling.
* (m) Form of Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940.
* (m.1) Form of Distribution Agreement between the Registrant and
Reich & Tang Distributors, Inc.
* (m.2) Form of Shareholder Servicing Agreement between the
Registrant and Reich & Tang Distributors, Inc.
* (m.3) Form of Administrative Services Agreement between the
Registrant and Reich & Tang Asset Management L.P.
* (n) Financial Data Schedule (For EDGAR Filing Only)
(o) Not applicable.
* (p) Powers of Attorney
Item 24. Persons controlled by or Under Common Control with Registrant.
None.
- ------------------------------------------
* To be filed by amendment.
837532.1
C-1
<PAGE>
Item 25. Indemnification.
In accordance with Section 2-418 of the General Corporation Law of the
State of Maryland, Article NINTH of the Registrant's Articles of
Incorporation provides as follows:
"NINTH: (a) The Corporation shall indemnify (i) its currently acting
and former directors and officers, whether serving the Corporation or
at its request any other entity, to the fullest extent required or
permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the
procedures and to the fullest extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the
Board of Directors or the By-Laws and as permitted by law. Nothing
contained herein shall be construed 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. The
foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled.
The Board of Directors may take such action as is necessary to carry
out these indemnification provisions and is expressly empowered to
adopt, approve and amend from time to time such by-laws, resolutions
or contracts implementing such provisions or such indemnification
arrangements as may be permitted by law. No amendment of the charter
of the Corporation or repeal of any of its provisions shall limit or
eliminate the right of indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal.
(b) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment Company
Act of 1940, no director or officer of the Corporation shall be
personally liable to the Corporation or its stockholders for money
damages; provided, however, that nothing herein shall be construed 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. No amendment of the charter of the Corporation
or repeal of any of its provisions shall limit or eliminate the
limitation of liability provided to directors and officers hereunder
with respect to any act or omission occurring prior to such amendment
or repeal."
In Section 7 of the Distribution Agreement relating to the securities
being offered hereby, the Registrant agrees to indemnify
internet.com(TM) Index Fund, Inc. and any person who controls
internet.com(TM) Index Fund, Inc., within the meaning of the
Securities Act of 1933, against certain types of civil liabilities
arising in connection with the Registration Statement or Prospectus.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than a
payment by the Registrant of expenses incurred or paid by a director,
officer or the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
Insofar as the Investment Company Act of 1940 may be concerned, in the
event that a claim for indemnification is asserted by a director,
officer or controlling person of the Registrant
837532.1
C-2
<PAGE>
in connection with the securities being registered, the Registrant
will not make such indemnification unless (i) the Registrant has
submitted, before a court or other body, the question of whether the
person to be indemnified was liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties, and has
obtained a final decision on the merits that such person was not
liable by reason of such conduct or (ii) in the absence of such
decision, the Registrant shall have obtained a reasonable
determination, based upon a review of the facts, that such person was
not liable by virtue of such conduct, by (a) the vote of a majority of
directors who are neither interested persons as such term is defined
in the Investment Company Act of 1940, nor parties to the proceeding
or (b) an independent legal counsel in a written opinion.
The Registrant will not advance attorneys' fees or other expenses
incurred by the person to be indemnified unless the Registrant shall
have received an undertaking by or on behalf of such person to repay
the advance unless it is ultimately determined that such person is
entitled to indemnification and one of the following conditions shall
have occurred: (x) such person shall provide security for his
undertaking, (y) the Registrant shall be insured against losses
arising by reason of any lawful advances or (z) a majority of the
disinterested, non-party directors of the Registrant, or an
independent legal counsel in a written opinion, shall have determined
that based on a review of readily available facts there is reason to
believe that such person ultimately will be found entitled to
indemnification.
Item 26. Business and Other Connections of the Investment Adviser.
The description of the Reich & Tang Asset Management L.P. ("RTAMLP")
under the caption "Management, Organization and Capital Structure" in the
Prospectus and "Investment Advisory and Other Services" in the Statement of
Additional Information of the Registration Statement is incorporated herein by
reference.
The Registrant's investment adviser, RTAMLP, is a registered
investment adviser. RTAMLP's investment advisory clients include Back Bay Funds,
Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Florida Daily Municipal Income Fund, Georgia Daily Municipal Income Fund, Inc.,
Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pax Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Short Term Income Fund,
Inc., Tax Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income Fund,
Inc., registered investment companies whose addresses are 600 Fifth Avenue, New
York, New York 10020. These entities invest principally in money market
instruments. RTAMLP is also the adviser for Delafield Fund, Inc. and Reich &
Tang Equity Fund, Inc., registered investment companies whose addresses are 600
Fifth Avenue, New York, New York 10020. These entities invest principally in
equity securities. In addition, RTAMLP is the sole general partner of Alpha
Associates L.P., August Associates L.P., Reich & Tang Minutus I, L.P., Reich &
Tang Minutus II, L.P., Reich & Tang Equity Partners L.P., Reich & Tang Micro Cap
L.P., Reich & Tang Concentrated Portfolio L.P. and Tucek Partners, L.P., private
investment partnerships organized as limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of
Nvest Corporation (formerly New England Investment Companies, Inc.) since
October 1992, Chairman of the Board of Nvest since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies, a wholly owned subsidiary of
Security Pacific Corporation, from April 1988 to April 1992, Director of The New
England since March 1993, Chairman of the Board of Directors of Nvest
Corporation's subsidiaries other than Loomis, Sayles & Company, L.P. ("Loomis")
and Back Bay Advisors, L.P. ("Back Bay"), where he serves as a Director, and
Chairman of the Board of Trustees of all of the mutual funds in the TNE Fund
Group and the Zenith Funds. G. Neal Ryland, Executive Vice President, Treasurer
and Chief Financial Officer Nvest Corporation since July 1993, Executive Vice
President and Chief Financial Officer of The Boston Company, a diversified
financial services company, from March 1989 until July 1993; from September 1985
to December 1988, Mr. Ryland was employed by Kenner Parker Toys, Inc. as Senior
Vice President and Chief Financial Officer. Edward N. Wadsworth, Executive Vice
President, General Counsel, Clerk and Secretary of Nvest Corporation since
December 1989, Senior Vice President and Associate General Counsel of The New
England from 1984 until December 1992, and Secretary of Westpeak
837532.1
C-3
<PAGE>
and Draycott and the Treasurer of Nvest Corporation. Lorraine C. Hysler has been
Secretary of RTAMLP since July 1994, Assistant Secretary of Nvest since
September 1993, Vice President of the Mutual Funds Group of NEICLP from
September 1993 until July 1994, and Vice President of Reich & Tang Mutual Funds
since July 1994. Ms. Hysler joined Reich & Tang, Inc. in May 1977 and served as
Secretary from April 1987 until September 1993. Richard E. Smith, III has been a
Director of RTAMLP since July 1994, President and Chief Operating Officer of the
Capital Management Group of NEICLP from May 1994 until July 1994, President and
Chief Operating Officer of the Reich & Tang Capital Management Group since July
1994, Executive Vice President and Director of Rhode Island Hospital Trust from
March 1993 to May 1994, President, Chief Executive Officer and Director of USF&G
Review Management Corp. from January 1988 until September 1992. Steven W. Duff
has been a Director of RTAMLP since October 1994, President and Chief Executive
Officer of Reich & Tang Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994; Mr. Duff is President and a
Director of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pax World Money Market Fund, Inc., Short Term
Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc., President and
Trustee of Florida Daily Municipal Income Fund, Institutional Daily Municipal
Income Fund, Pennsylvania Daily Municipal Income Fund, President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc., and Executive Vice
President of Reich & Tang Equity Fund, Inc. Bernadette N. Finn has been Vice
President - Compliance of RTAMLP since July 1994, Vice President of Mutual Funds
Division of NEICLP from September 1993 until July 1994, Vice President of Reich
& Tang Funds since July 1994. Ms. Finn joined Reich & Tang, Inc. in September
1970 and served as Vice President from September 1982 until May 1987 and as Vice
President and Assistant Secretary from May 1987 until September 1993. Ms. Finn
is also Secretary of Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Georgia Daily Municipal Income Fund, Inc., Institutional Daily
Municipal Income Fund, Michigan Daily Tax Free Income Funds, Inc., New Jersey
Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pax World Money Market Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc., a Vice President and Secretary
of Delafield Fund, Inc., Reich & Tang Equity Fund, Inc. and Short Term Income
Fund, Inc. Richard De Sanctis has been Vice President and Treasurer of RTAMLP
since July 1994, Assistant Treasurer of Nvest since September 1993 and Treasurer
of the Mutual Funds Group of NEICLP from September 1993 until July 1994,
Treasurer of the Reich & Tang Funds since July 1994. Mr. De Sanctis joined Reich
& Tang, Inc. in December 1990 and served as Controller of Reich & Tang, Inc.,
from January 1991 to September 1993. Mr. De Sanctis was Vice President and
Treasurer of Cortland Financial Group, Inc. and Vice President of Cortland
Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer
of AEW Commercial Mortgage Securities Fund, Inc., Back Bay Funds, Inc.,
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida
Daily Municipal Income Fund, Georgia Daily Municipal Income Fund, Inc.,
Institutional Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.,
and Virginia Daily Municipal Income Fund, Inc., and is Vice President and
Treasurer of Cortland Trust, Inc. Richard I. Weiner has been Vice President of
RTAMLP since July 1994, has been Vice President of Nvest Corporation since
September 1993, Vice President of the Capital Management Group of NEIC from
September 1993 until July 1994, Vice President of Reich & Tang Asset Management
L.P. Capital Management Group since July 1994. Mr. Weiner joined Reich & Tang,
Inc. in August 1970 and has served as a Vice President since September 1982.
Rosanne D. Holtzer has been Vice President of the Mutual Funds division of the
Manager since December 1997. Ms. Holtzer was formerly Manager of Fund Accounting
for the Manager with which she was associated with from June 1986. She is also
Assistant Treasurer of Back Bay Funds, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida
Daily Municipal Income Fund, Inc., Georgia Daily Municipal Income Fund, Inc.,
Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World Money Market
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Short Term Income Fund,
Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc. and is Vice President and Assistant Treasurer of Cortland Trust, Inc.
Item 27. Principal Underwriters.
(a) Reich & Tang Distributors, Inc., the Registrant's Distributor is
also the distributor for Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily
837532.1
C-4
<PAGE>
Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income
Fund, Georgia Daily Municipal Income Fund, Inc., Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income, Inc., Pax World Money Market Fund, Inc., Pennsylvania
Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income
Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily Municipal Income
Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons the principal address is 600 Fifth Avenue, New York, New York 10020.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name With the Distributor With Registrant
<S> <C> <C>
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III President Chairman
Peter J. DeMarco Executive Vice President None
Steven W. Duff Director Executive Vice President
Bernadette N. Finn Vice President Vice President and Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Treasurer Treasurer
Richard I. Weiner Vice President None
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at Reich &
Tang Asset Management L.P., 600 Fifth Avenue, New York, New York 10020, the
Registrant's Manager; Reich & Tang Services, Inc., 600 Fifth Avenue, New York,
New York 10020, the Registrant's transfer agent and dividend distributing agent;
and at Investors Fiduciary Trust Company, 801 Pennsylvania Avenue, Kansas City,
Missouri 64105, the Registrant's custodian.
Item 29. Management Services.
Not Applicable.
Item 30. Undertakings.
Not applicable.
837532.1
C-5
<PAGE>
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 New York, and State of New York, on the 14th day of
May, 1999.
INTERNET.COM INDEX FUND, INC.
By: /s/ Bernadette N. Finn
------------------------------
Bernadette N. Finn, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated below.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C> <C>
(1) Principal Executive Officer: Vice President May 14, 1999
Richard E. Smith III
By: /s/ Richard E. Smith III
------------------------
Richard E. Smith III
(2) Majority of Directors
Richard E. Smith III Director May 14, 1999
Bernadette N. Finn Director
By: /s/ Richard E. Smith III
------------------------
Richard E. Smith III
By: /s/ Bernadette N. Finn
----------------------
Bernadette N. Finn
</TABLE>
837532.1
C-6
<PAGE>
Exhibit Index
(a) Articles of Incorporation of the Registrant.
(b) By-Laws of the Registrant.
(c) Not applicable.
* (d) Form of Investment Management Contract between
the Registrant and Reich & Tang Asset Management
L.P.
* (e) See Distribution Agreement filed as Exhibit m.1.
* (f) Not applicable.
* (g) Custody Agreement between the Registrant and
Investors Fiduciary Trust Company.
(h) Not Applicable.
* (i) Consent Opinion of Messrs. Battle Fowler LLP as
to the use of their name under the headings
"Federal Income Taxes" in the Prospectus and
"Counsel and Auditors" in the Statement of
Additional Information.
* (j) Consent of Independent Auditors filed as Exhibit
j herein.
* (k) Audited Financial Statements for the Fiscal Year
ended [__________].
* (l) Written assurance of Reich & Tang Asset
Management L.P. that its purchase of shares of
the Registrant was for investment purposes
without any present intention of redeeming or
reselling.
* (m) Form of Distribution and Service Plan pursuant to
Rule 12b-1 under the Investment Company Act of
1940.
* (m.1) Form of Distribution Agreement between the
Registrant and Reich & Tang Distributors, Inc.
* (m.2) Form of Shareholder Servicing Agreement between
the Registrant and Reich & Tang Distributors,
Inc.
* (m.3) Form of Administrative Services Agreement between
the Registrant and Reich & Tang Asset Management
L.P.
* (n) Financial Data Schedule (For EDGAR Filing Only)
(o) Not applicable.
* (p) Powers of Attorney
- ------------------------------------------
* To be filed by amendment.
837532.1
C-7
ARTICLES OF INCORPORATION
OF
internet.com(TM) Index Fund, Inc.
FIRST: (1) The name of the incorporator is Amy Foley.
(2) The incorporator's post office address is 75 East 55th
Street, New York, New York 10022.
(3) The incorporator is over eighteen years of age.
(4) The incorporator is forming the corporation named in
these Articles of Incorporation under the General Corporation Law of the State
of Maryland.
SECOND: The name of the corporation (hereinafter called the
"Corporation") is internet.com(TM) Index Fund, Inc.
THIRD: The purposes for which the Corporation is formed are:
(1) to conduct, operate and carry on the business of an
investment company;
(2) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise dispose of notes, bills, bonds, debentures and
other negotiable or non-negotiable instruments, obligations and
evidences of indebtedness issued or guaranteed as to principal and
interest by the United States Government, or any agency or
instrumentality thereof, any State or local government, or any agency
or instrumentality thereof, or any other securities of any kind issued
by any corporation or other issuer organized under the laws of the
United States or any State, territory or possession thereof or any
foreign country or any subdivision thereof or otherwise, to pay for
the same in cash or by the issue of stock, including treasury stock,
bonds and notes of the Corporation or otherwise; and to exercise any
and all rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including and without limitation, the right to consent and otherwise
act with respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said rights,
powers and privileges in respect of any said investments;
<PAGE>
(3) to conduct research and investigations in respect of
securities, organizations, business and general business and financial
conditions in the United States of America and elsewhere for the
purpose of obtaining information pertinent to the investment and
employment of the assets of the Corporation and to procure any and all
of the foregoing to be done by others as independent contractors and
to pay compensation therefor;
(4) to borrow money or otherwise obtain credit and to secure
the same by mortgaging, pledging or otherwise subjecting as security
the assets of the Corporation, and to endorse, guarantee or undertake
the performance of any obligation, contract or engagement of any other
person, firm, association or corporation;
(5) to issue, sell, distribute, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in, shares of stock of the Corporation, including
shares of stock of the Corporation in fractional denominations, and to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of shares of stock of the Corporation, any funds or
property of the Corporation, whether capital or surplus or otherwise,
to the full extent now or hereafter permitted by the laws of the State
of Maryland and by these Articles of Incorporation;
(6) to conduct its business, promote its purposes, and carry
on its operations in any and all of its branches and maintain offices
both within and without the State of Maryland, in any and all States
of the United States of America, in the District of Columbia, and in
any or all commonwealths, territories, dependencies, colonies,
possessions, agencies, or instrumentalities of the United States of
America and of foreign governments;
(7) to carry out all or any part of the foregoing purposes
or objects as principal or agent, or in conjunction with any other
person, firm, association, corporation or other entity, or as a
partner or member of a partnership, syndicate or joint venture or
otherwise, and in any part of the world to the same extent and as
fully as natural persons might or could do;
(8) to have and exercise all of the powers and privileges
conferred by the laws of the State of Maryland upon corporations
formed under the laws of such State; and
(9) to do any and all such further acts and things and to
exercise any and all such further powers and privileges as may be
necessary, incidental, relative, conducive, appropriate or desirable
for the foregoing purposes.
2
<PAGE>
The enumeration herein of the objects and purposes of the Corporation
shall be construed as powers as well as objects and purposes and shall not be
deemed to exclude by inference any powers, objects or purposes which the
Corporation is empowered to exercise, whether expressly by force of the laws of
the State of Maryland now or hereafter in effect, or impliedly by the reasonable
construction of the said law.
FOURTH: The post office address of the principal office of the
Corporation within the State of Maryland is 11 East Chase Street, Baltimore
City, Maryland 21202.
FIFTH: The resident agent of the Corporation in the State of Maryland
is National Registered Agents, Inc. of MD, at 11 East Chase Street, Baltimore,
Maryland 21202.
SIXTH: (1) The total number of shares of stock of all classes and
series which the Corporation initially has authority to issue is twenty billion
(20,000,000,000) shares of capital stock (par value of One Tenth of One Cent
$.001 per share), amounting in aggregate par value to $20,000,000. All of such
shares are classified as "Common Stock".
(2) The Board of Directors may classify or reclassify any unissued
shares of capital stock (whether or not such shares have been previously
classified or reclassified) from time to time by setting or changing in any one
or more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock.
(3) Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end management company under the Investment Company Act of
1940, the Board of Directors shall have the power and authority, without the
approval of the holders of any outstanding shares, to increase or decrease the
number of shares of capital stock or the number of shares of capital stock of
any class or series that the Corporation has authority to issue.
(4) Until such time as the Board of Directors shall provide otherwise
in accordance with Section (2) of this Article SIXTH four billion
(4,000,000,000) shares of the authorized shares of stock of the Corporation
shall be allocated to the following class of Common Stock: internet.com(TM)
Index Fund, Inc. Common Stock. The balance of sixteen billion (16,000,000,000)
shares of such stock may be issued in this class, or in any new class or classes
each comprising such number of shares and having such designations, limitations
and restrictions thereof as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such stock adopted by
the Board of Directors.
(5) Any series of Common Stock shall be referred to herein
individually as a "Series" and collectively, together with any further series
from time to time established, as the "Series".
3
<PAGE>
(6) The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of Common
Stock of the Corporation (unless provided otherwise by the Board of Directors
with respect to any such additional Series at the time it is established and
designated):
(a) Asset Belonging to Series. All consideration received by
the Corporation from the issue or sale of shares of a particular
Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
investment or reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors, and shall be so recorded upon
the books of account of the Corporation. Such consideration, assets,
income, earnings, profits and proceeds, together with any General
Items allocated to that Series as provided in the following sentence,
are herein referred to collectively as "assets belonging to" that
Series. In the event that there are any assets, income, earnings,
profits or proceeds which are not readily identifiable as belonging to
any particular Series (collectively, "General Items"), such General
Items shall be allocated by or under the supervision of the Board of
Directors to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as the
Board of Directors, in its sole discretion, deems fair and equitable;
and any General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Board of Directors shall
be conclusive and binding for all purposes.
(b) Liabilities of Series. The assets belonging to each
particular Series shall be charged with the liabilities of the
Corporation in respect of that Series and all expenses, costs, charges
and reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Corporation which are not
readily identifiable as pertaining to any particular Series, shall be
allocated and charged by or under the supervision of the Board of
Directors to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as the
Board of Directors, in its sole discretion, deems fair and equitable.
The liabilities, expenses, costs, charges and reserves allocated and
so charged to a Series are herein referred to collectively as
"liabilities of" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves by or under the supervision of
the Board of Directors shall be conclusive and binding for all
purposes.
(c) Dividends and Distributions. Dividends and capital gains
distributions on shares of a particular Series may be paid with such
frequency,
4
<PAGE>
in such form and in such amount as the Board of Directors may
determine by resolution adopted from time to time, or pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Board of Directors may determine, after providing for
actual and accrued liabilities of that Series. All dividends on shares
of a particular Series shall be paid only out of the income belonging
to that Series and all capital gains distributions on shares of a
particular series shall be paid only out of the capital gains
belonging to that Series. All dividends and distributions on shares of
a particular Series shall be distributed pro rata to the holders of
that Series in proportion to the number of shares of that Series held
by such holders at the date and time of record established for the
payment of such dividends or distributions, except that in connection
with any dividend or distribution program or procedure, the Board of
Directors may determine that no dividend or distribution shall be
payable on shares as to which the stockholder's purchase order and/or
payment have not been received by the time or times established by the
Board of Directors under such program or procedure.
Dividends and distributions may be paid in cash, property or
additional shares of the same or another Series, or a combination
thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for
the election by stockholders of the form in which dividends or
distributions are to be paid. Any such dividend or distribution paid
in shares shall be paid at the current net asset value thereof.
(d) Voting. On each matter submitted to a vote of the
stockholders, each holder of shares shall be entitled to one vote for
each share standing in his name on the books of the Corporation,
irrespective of the Series thereof, and all shares of all Series shall
vote as a single class ("Single Class Voting"); provided, however,
that (i) as to any matter with respect to which a separate vote of any
Series is required by the Investment Company Act of 1940 or by the
Maryland General Corporation Law, such requirement as to a separate
vote by that Series shall apply in lieu of Single Class Voting; (ii)
in the event that the separate vote requirement referred to in clause
(i) above applies with respect to one or more Series, then, subject to
clause (iii) below, the shares of all other Series shall vote as a
single class; and (iii) as to any matter which does not affect the
interest of a particular Series, including liquidation of another
Series as described in subsection (7) below, only the holders of
shares of the one or more affected Series shall be entitled to vote.
(e) Redemption by Stockholders. Each holder of shares of a
particular Series shall have the right at such times as may be
permitted by the Corporation to require the Corporation to redeem all
or any part of his shares of that Series, at a redemption price per
share equal to the net asset value per share of that
5
<PAGE>
Series next determined after the shares are properly tendered for
redemption, less such redemption fee or sales charge, if any, as may
be established from time to time by the Board of Directors in its sole
discretion. Payment of the redemption price shall be in cash;
provided, however, that if the Board of Directors determines, which
determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Corporation may, to
the extent and in the manner permitted by the Investment Company Act
of 1940, make payment wholly or partly in securities or other assets
belonging to the Series of which the shares being redeemed are a part,
at the value of such securities or assets used in such determination
of net asset value.
Payment by the Corporation for shares of stock of the
Corporation surrendered to it for redemption shall be made by the
Corporation within such period from surrender as may be required under
the Investment Company Act and the rules and regulations thereunder.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of
shares of any Series to require the Corporation to redeem shares of
that Series during any period or at any time when and to the extent
permissible under the Investment Company Act of 1940.
(f) Redemption by Corporation. The Board of Directors may
cause the Corporation to redeem at their net asset value the shares of
any Series held in an account having, because of redemptions or
exchanges, a net asset value on the date of the notice of redemption
less than the Minimum Amount, as defined below, in that Series
specified by the Board of Directors from time to time in its sole
discretion, provided that at least 30 days prior written notice of the
proposed redemption has been given to the holder of any such account
by first class mail, postage prepaid, at the address contained in the
books and records of the Corporation and such holder has been given an
opportunity to purchase the required value of additional shares.
(i) The term "Minimum Amount" when used herein shall
mean One Thousand Dollars ($1,000) unless otherwise fixed by the
Board of Directors from time to time, provided that the Minimum
Amount may not in any event exceed Twenty-Five Thousand Dollars
($25,000). The Board of Directors may establish differing Minimum
Amounts for each class and series of the Corporation's stock and
for holders of shares of each such class and series of stock
based on such criteria as the Board of Directors may deem
appropriate.
(ii) The Corporation shall be entitled but not required
to redeem shares of stock from any stockholder or stockholders,
as
6
<PAGE>
provided in this subsection (6), to the extent and at such times
as the Board of Directors shall, in its absolute discretion,
determine to be necessary or advisable to prevent the Corporation
from qualifying as a "personal holding company", within the
meaning of the Internal Revenue Code of 1986, as amended from
time to time.
(g) Liquidation. In the event of the liquidation of a
particular Series, the stockholders of the Series that is being
liquidated shall be entitled to receive, as a class, when and as
declared by the Board of Directors, the excess of the assets belonging
to that Series over the liabilities of that Series. The holders of
shares of any particular Series shall not be entitled thereby to any
distribution upon liquidation of any other Series. The assets so
distributable to the stockholders of any particular Series shall be
distributed among such stockholders in proportion to the number of
shares of that Series held by them and recorded on the books of the
Corporation. The liquidation of any particular Series in which there
are shares then outstanding may be authorized by vote of a majority of
the Board of Directors then in office, subject to the approval of a
majority of the outstanding voting securities of that Series, as
defined in the Investment Company Act of 1940, and without the vote of
the holders of shares of any other Series. The liquidation of a
particular Series may be accomplished, in whole or in part, by the
transfer of assets of such Series to another Series or by the exchange
of shares of Series for the shares of another Series.
(h) Net Asset Value Per Share. The net asset value per share
of any Series shall be the quotient obtained by dividing the value of
the net assets of that Series (being the value of the assets belonging
to that Series less the liabilities of that Series) by the total
number of shares of that Series outstanding, all as determined by or
under the direction of the Board of Directors in accordance with
generally accepted accounting principles and the Investment Company
Act of 1940. Subject to the applicable provisions of the Investment
Company Act of 1940, the Board of Directors, in its sole discretion,
may prescribe and shall set forth in the By-Laws of the Corporation or
in a duly adopted resolution of the Board of Directors such bases and
times for determining the value of the assets belonging to, and the
net asset value per share of outstanding shares of, each Series, or
the net income attributable to such shares, as the Board of Directors
deems necessary or desirable. The Board of Directors shall have full
discretion, to the extent not inconsistent with the Maryland General
Corporation Law and the Investment Company Act of 1940, to determine
which item shall be treated as income and which items as capital and
whether any item of expense shall be charged to income or capital.
Each such determination and allocation shall be conclusive and binding
for all purposes.
7
<PAGE>
The Board of Directors may determine to maintain the net
asset value per share of any Series at a designated constant dollar
amount and in connection therewith may adopt procedures not
inconsistent with the Investment Company Act of 1940 for the
continuing declaration of income attributable to that Series as
dividends and for the handling of any losses attributable to that
Series. Such procedures may provide that in the event of any loss,
each stockholder shall be deemed to have contributed to the capital of
the Corporation attributable to that Series his pro rata portion of
the total number of shares required to be canceled in order to permit
the net asset value per share of that Series to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
stockholder of the Corporation shall be deemed to have agreed, by his
investment in any Series with respect to which the Board of Directors
shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(i) Equality. All shares of each particular Series shall
represent an equal proportionate interest in the assets belonging to
that Series (subject to the liabilities of that Series), and each
share of any particular Series shall be equal to each other share of
that Series. The Board of Directors may from time to time divide or
combine the shares of any particular Series into a greater or lesser
number of shares of that series without thereby changing the
proportionate interest in the assets belonging to that Series or in
any way affecting the rights of holders of shares of any other Series.
(j) Conversion or Exchange Rights. Subject to compliance
with the requirements of the Investment Company Act of 1940, the Board
of Directors shall have the authority to provide that holders of
shares of any Series shall have the right to convert or exchange said
shares into shares of one or more other Series of shares in accordance
with such requirements and procedures as may be established by the
Board of Directors.
(7) The Board of Directors may, from time to time and without
stockholder action, classify shares of a particular Series into one or more
additional classes of that Series, the voting, dividend, liquidation and other
rights of which shall differ from the classes of common stock of that Series to
the extent provided in Articles Supplementary for such additional class, such
Articles to be filed for record with the appropriate authorities of the State of
Maryland. Each class so created shall consist, until further changed, of the
lesser of (x) the number of shares classified in Section (5) of this Article
SIXTH or (y) the number of shares that could be issued by issuing all of the
shares of that Series currently or hereafter classified less the total number of
shares of all classes of such Series then issued and outstanding. Any class of a
Series of Common Stock shall be referred to herein individually as a "Class" and
collectively, together with any further class or classes of such Series from
time to time established, as the "Classes".
8
<PAGE>
(8) All Classes of a particular Series of Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation and other rights with any other shares
of Common Stock of that Series; provided, however, that notwithstanding anything
in the charter of the Corporation to the contrary:
(a) Any class of shares may be subject to such sales loads,
contingent deferred sales charges, Rule 12b-1 fees, administrative
fees, service fees, or other fees, however designated, in such amounts
as may be established by the Board of Directors from time to time in
accordance with the Investment Company Act of 1940.
(b) Expenses related solely to a particular Class of a
Series (including, without limitation, distribution expenses under a
Rule 12b-1 plan and administrative expenses under an administration or
service agreement, plan or other arrangement, however designated)
shall be borne by that Class and shall be appropriately reflected (in
the manner determined by the Board of Directors) in the net asset
value, dividends, distributions and liquidation rights of the shares
of that Class.
(c) As to any matter with respect to which a separate vote
of any Class of a Series is required by the Investment Company Act of
1940 or by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other arrangement
referred to in subsection (b) above), such requirement as to a
separate vote by that Class shall apply in lieu of Single Class
Voting, and if permitted by the Investment Company Act of 1940 or the
Maryland General Corporation Law, the Classes of more than one Series
shall vote together as a single class on any such matter which shall
have the same effect on each such Class. As to any matter which does
not affect the interest of a particular Class of a Series, only the
holders of shares of the affected Classes of that Series shall be
entitled to vote.
(9) The Corporation may issue and sell fractions of shares of capital
stock having pro rata all the rights of full shares, including, without
limitation, the right to vote and to receive dividends, and wherever the words
"share" or "shares" are used in the charter or By-Laws of the Corporation, they
shall be deemed to include fractions of shares where the context does not
clearly indicate that only full shares are intended.
(10) The Corporation shall not be obligated to issue certificates
representing shares of any Class or Series of capital stock. At the time of
issue or transfer of shares without certificates, the Corporation shall provide
the stockholder with such information as may be required under the Maryland
General Corporation Law.
9
<PAGE>
(11) No holder of any shares of stock of the Corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any such
shares which the Corporation shall issue or propose to issue; and any and all of
the shares of stock of the Corporation, whether now or hereafter authorized, may
be issued, or may be reissued or transferred if the same have been reacquired
and have treasury status, by the Board of Directors to such persons, firms,
corporations and associations, and for such lawful consideration, and on such
terms, as the Board of Directors in its discretion may determine, without first
offering same, or any thereof, to any said holder.
(12) All persons who shall acquire stock or other securities of the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation, as from time to time amended.
SEVENTH: The number of directors of the Corporation, until such number
shall be increased pursuant to the By-Laws of the Corporation, shall be two. The
number of directors shall never be less than the number prescribed by the
General Corporation Law of the State of Maryland and shall never be more than
twenty. The names of the persons who shall act as directors of the Corporation
until their successors are duly chosen and qualify are Richard E. Smith III and
Bernadette N. Finn.
EIGHTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(1) The business and affairs of the Corporation shall be managed under
the direction of the Board of Directors which shall have and may exercise all
powers of the Corporation except those powers which are by law, by these
Articles of Incorporation or by the By-Laws conferred upon or reserved to the
stockholders. In furtherance and not in limitation of the powers conferred by
law, the Board of Directors shall have power:
(a) to make, alter and repeal the By-Laws of the
Corporation;
(b) to issue and sell, from time to time, shares of any
class or series of the Corporation's stock in such amounts and on such
terms and conditions, and for such amount and kind of consideration,
as the Board of Directors shall determine, provided that the
consideration per share to be received by the Corporation shall be not
less than the greater of the net asset value per share of that class
of stock at such time computed in accordance with Article SIXTH hereof
or the par value thereof;
(c) from time to time to set apart out of any assets of the
Corporation otherwise available for dividends a reserve or reserves
for working capital or for any other proper purpose or purposes, and
to reduce, abolish or add to any such
10
<PAGE>
reserve or reserves from time to time as said Board of Directors may
deem to be in the best interests of the Corporation; and to determine
in its discretion what part of the assets of the Corporation available
for dividends in excess of such reserve or reserves shall be declared
in dividends and paid to the stockholders of the Corporation; and
(d) from time to time to determine to what extent and at
what times and places and under what conditions and regulations the
accounts, books and records of the Corporation, or any of them, shall
be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any account or book or document of the
Corporation, except as conferred by the laws of the State of Maryland,
unless and until authorized to do so by resolution of the Board of
Directors or of the stockholders of the Corporation.
(2) Notwithstanding any provision of the General Corporation Law of the
State of Maryland requiring a greater proportion than a majority of the votes of
all classes or of any class of the Corporation's stock entitled to be cast in
order to take or authorize any action, any such action may be taken or
authorized upon the concurrence of a majority of the aggregate number of votes
entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as from time to time in effect, or rules or
orders of the Securities and Exchange Commission or any successor thereto.
(3) Except as may otherwise be expressly provided by applicable
statutes or regulatory requirements, the presence in person or by proxy of the
holders of one-third of the shares of stock of the Corporation entitled to vote
shall constitute a quorum at any meeting of the stockholders.
(4) Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the discretion of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the Corporation, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purposes for creating such reserves or charges, as to the use,
alteration or cancellation of any reserves or charges (whether or not any debt,
obligation or liability for which such reserves or charges shall have been
created shall have been paid or discharged or shall by then or thereafter
required to be paid or discharged), as to the value of or the method of valuing
any investment owned or held by the Corporation, as to the market value or fair
value of any investment or fair value of any other asset of the Corporation, as
to the allocation of any asset of the Corporation to a particular class or
classes of the Corporation's stock, as to the charging of any liability of the
Corporation to a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the estimated expense
to the Corporation in connection with purchases of its shares, as to the ability
to liquidate investments in orderly fashion, or as to any other matters relating
to the issue, sale, purchase and/or other acquisition or disposition of
investments or
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shares of the Corporation, shall be final and conclusive and shall be binding
upon the Corporation and all holders of its shares, past, present and future,
and shares of the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be binding as
aforesaid.
(5) Except to the extent prohibited by the Investment Company Act of
1940, as amended, or rules, regulations or orders thereunder promulgated by the
Securities and Exchange Commission or any successor thereto or by the By-Laws of
the Corporation, a director, officer or employee of the Corporation shall not be
disqualified by his position from dealing or contracting with the Corporation,
nor shall any transaction or contract of the Corporation be void or voidable by
reason of the fact that any director, officer or employee or any firm of which
any director, officer or employee is a member or any corporation of which any
director, officer or employee is a stockholder, officer or director, is in any
way interested in such transaction or contract; provided that in case a
director, or a firm or corporation of which a director is a member, stockholder,
officer or director, is so interested, such fact shall be disclosed to or shall
have been known by the Board of Directors or a majority thereof; and any
director of the Corporation who is so interested, or who is a member,
stockholder, officer or director of such firm or corporation, may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
of the Corporation which shall authorize any such transaction or contract, with
like force and effect as if he were not such director, or member, stockholder,
officer or director of such firm or corporation.
(6) Specifically and without limitation of the foregoing subsection (e)
but subject to the exception therein prescribed, the Corporation may enter into
management or advisory, underwriting, distribution and administration contracts
and other contracts, and may otherwise do business, with Reich & Tang Asset
Management L.P., and any parent, subsidiary, partner, or affiliate of such firm
or any affiliates of any such affiliate, or the stockholders, directors,
officers, partners and employees thereof, and may deal freely with one another
notwithstanding that the Board of Directors of the Corporation may be composed
in part of directors, officers, partners or employees of such firm and/or its
parents, subsidiaries or affiliates and that officers of the Corporation may
have been, be or become directors, officers, or employees of such firm, and/or
its parents, subsidiaries or affiliates, and neither such management or
advisory, underwriting, distribution or administration contracts nor any other
contract or transaction between the Corporation and such firm and/or its
parents, subsidiaries or affiliates shall be invalidated or in any way affected
thereby, nor shall any director or officer of the Corporation be liable to the
Corporation or to any stockholder or creditor thereof or to any person for any
loss incurred by it or him under or by reason of such contract or transaction;
provided that nothing herein shall protect any director or officer of the
Corporation against any liability to the Corporation or to 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; and provided always that such contract or transaction
shall have been on terms that were not unfair to the Corporation at the time at
which it was entered into.
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NINTH: (1) The Corporation shall indemnify (i) its currently acting and
former directors and officers, whether serving the Corporation or at its request
any other entity, to the fullest extent required or permitted by the General
Laws of the State of Maryland now or hereafter in force, including the advance
of expenses under the procedures and to the fullest extent permitted by law, and
(ii) other employees and agents to such extent as shall be authorized by the
Board of Directors or the By-Laws and as permitted by law. Nothing contained
herein shall be construed 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. The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The Board
of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing such
provisions or such indemnification arrangements as may be permitted by law. No
amendment of the charter of the Corporation or repeal of any of its provisions
shall limit or eliminate the right of indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or repeal.
(2) To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, and the Investment Company Act of 1940, no
director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however, that
nothing herein shall be construed 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. No amendment of the charter of the Corporation or repeal of any of
its provisions shall limit or eliminate the limitation of liability provided to
directors and officers hereunder with respect to any act or omission occurring
prior to such amendment or repeal.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation or in any
amendment hereto in the manner now or hereafter prescribed by the laws of the
State of Maryland and all rights conferred upon stockholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the incorporator of the
Corporation, has adopted and signed these Articles of Incorporation for the
purpose of forming the corporation described herein pursuant to the General
Corporation law of the State of Maryland and does hereby acknowledge that said
adoption and signing are her act.
/s/ Amy Foley
-------------------------------
Amy Foley
Dated: May 12, 1999
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BY-LAWS
OF
internet.com(TM) Index Fund, Inc.
a Maryland corporation
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The Corporation shall have a
principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have offices also at such
other places within and without the State of Maryland as the Board of Directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall be held at
such place, either within the State of Maryland or at such other place within
the United States, as shall be fixed from time to time by the Board of
Directors.
Section 2. Annual Meetings. The Corporation shall not be required to
hold an annual meeting of its stockholders in any year in which none of the
following is required to be acted on by the holders of any class or series of
stock under the Investment Company Act of 1940: (a) election of the directors,
(b) approval of the Corporation's investment advisory agreement with respect to
a particular class or series; (c) ratification of the selection of independent
public accountants; and (d) approval of the Corporation's distribution agreement
with respect to a particular class or series. In the event that the Corporation
shall be required to hold an annual meeting of stockholders by the Investment
Company Act of 1940, such meeting of stockholders shall be held on a date fixed
from time to time by the Board of Directors not less than ninety nor more than
one hundred twenty days following the end of such fiscal year of the
Corporation.
Section 3. Notice of Annual Meeting. Written or printed notice of an
annual meeting, stating the place, date and hour thereof, shall be given to each
stockholder entitled to
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vote thereat not less than ten nor more than ninety days before the date of the
meeting.
Section 4. Special Meetings. Special meetings of stockholders may be
called by the chairman, the president or by the Board of Directors and shall be
called by the secretary upon the written request of holders of shares entitled
to cast not less than twenty-five percent of all the votes entitled to be cast
at such meeting. Such request shall state the purpose or purposes of such
meeting and the matters proposed to be acted on thereat. In the case of such
request for a special meeting, upon payment by such stockholders to the
Corporation of the estimated reasonable cost of preparing and mailing a notice
of such meeting, the secretary shall give the notice of such meeting. The
secretary shall not be required to call a special meeting to consider any matter
which is substantially the same as a matter acted upon at any special meeting of
stockholders held within the preceding twelve months unless requested to do so
by the holders of shares entitled to cast not less than a majority of all votes
entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or printed notice of a
special meeting of stockholders, stating the place, date, hour and purpose
thereof, shall be given by the secretary to each stockholder entitled to vote
thereat not less than ten nor more than ninety days before the date fixed for
the meeting.
Section 6. Business of Special Meetings. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice thereof.
Section 7. Quorum. Except as may otherwise be expressly provided by
applicable statutes or regulations, the holders of one-third of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business.
Section 8. Voting. When a quorum is present at any meeting, the
affirmative vote of a majority of the votes cast shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the Investment Company Act of 1940, as from time to time in effect,
or other statutes or rules or orders of the Securities and Exchange Commission
or any successor thereto or of the Articles of Incorporation, a different vote
is required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Proxies. Each stockholder shall at every meeting of
stockholders be entitled to one vote in person or by proxy for each share of the
stock having voting power held by such stockholder, but no proxy shall be voted
after eleven months from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment
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thereof, to express consent to corporate action in writing without a meeting, or
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date which shall be not more than ninety
days and, in the case of a meeting of stockholders, not less than ten days prior
to the date on which the particular action requiring such determination of
stockholders is to be taken. In lieu of fixing a record date, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period, but not to exceed, in any case, twenty days. If the stock transfer books
are closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. If no record date is fixed and the
stock transfer books are not closed for the determination of stockholders: (1)
the record date for the determination of stockholders entitled to notice of, or
to vote at, a meeting of stockholders shall be at the close of business on the
day on which notice of the meeting of stockholders is mailed or the day thirty
days before the meeting, whichever is the closer date to the meeting; and (2)
the record date for the determination of stockholders entitled to receive
payment of a dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of Directors, declaring
the dividend or allotment of rights, is adopted, provided that the payment or
allotment date shall not be more than ninety days after the date of the adoption
of such resolution.
Section 11. Inspectors of Election. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his or her
ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge, question or
matter determined by him or her or them and execute a certificate of any fact
found by him or her or them.
Section 12. Informal Action by Stockholders. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, any action required or permitted to be taken at any meeting
of stockholders may be taken without a meeting if a
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consent in writing, setting forth such action, is signed by all the stockholders
entitled to vote on the subject matter thereof and any other stockholders
entitled to notice of a meeting of stockholders (but not to vote thereat) have
waived in writing any rights which they may have to dissent from such action,
and such consent and waiver are filed with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of directors shall be fixed
at no less than two nor more than twenty. Within the limits specified above, the
number of directors shall be fixed from time to time by the Board of Directors,
but the tenure of office of a director in office at the time of any decrease in
the number of directors shall not be affected as a result thereof. The directors
shall be elected to hold office at the annual meeting of stockholders, except as
provided in Section 2 of this Article, and each director shall hold office until
the next annual meeting of stockholders or until his successor is elected and
qualified. Any director may resign at any time upon written notice to the
Corporation. Any director may be removed, either with or without cause, at any
meeting of stockholders duly called and at which a quorum is present by the
affirmative vote of the majority of the votes entitled to be cast thereon, and
the vacancy in the Board of Directors caused by such removal may be filled by
the stockholders at the time of such removal. Directors need not be
stockholders.
Section 2. Vacancies and Newly Created Directorships. Any vacancy
occurring in the Board of Directors for any cause, including an increase in the
number of directors, may be filled by the stockholders or by a majority of the
remaining members of the Board of Directors even if such majority is less than a
quorum. So long as the Corporation is a registered investment company under the
Investment Company Act of 1940, vacancies in the Board of Directors may be
filled by a majority of the remaining members of the Board of Directors only if,
immediately after filing any such vacancy, at least two-thirds of the directors
then holding office shall have been elected to such office at a meeting of
stockholders. A director elected by the Board of Directors to fill a vacancy
shall be elected to hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies.
Section 3. Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors which shall exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by statute or by the Articles of Incorporation or by these By-Laws conferred
upon or reserved to the stockholders.
Section 4. Annual Meeting. The first meeting of each newly elected
Board of Directors shall be held immediately following the adjournment of the
annual meeting of stockholders and at the place thereof. No notice of such
meeting to the directors shall be
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necessary in order legally to constitute the meeting, provided a quorum shall be
present. In the event such meeting is not so held, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors.
Section 5. Other Meetings. The Board of Directors of the Corporation or
any committee thereof may hold meetings, both regular and special, either within
or without the State of Maryland. Regular meetings of the Board of Directors may
be held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the chairman, the president or by two or more
directors. Notice of special meetings of the Board of Directors shall be given
by the secretary to each director at least three days before the meeting if by
mail or at least 24 hours before the meeting if given in person or by telephone
or by telegraph. The notice need not specify the business to be transacted.
Section 6. Quorum and Voting. At meetings of the Board of Directors,
two of the directors in office at the time, but in no event less than one-third
of the entire Board of Directors, shall constitute a quorum for the transaction
of business. When required pursuant to Section 15(c) under the Investment
Company Act of 1940 or Rule 12b-1 thereunder a quorum shall also require the
presence in person of a majority of directors who are not parties to a contract
or agreement to be voted upon or interested persons of any such party. The
action of a majority of the directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 7. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, appoint from among its members
an executive committee and other committees of the Board of Directors, each
committee to be composed of two or more of the directors of the Corporation. The
Board of Directors may, to the extent provided in the resolution, delegate to
such committees, in the intervals between meetings of the Board of Directors,
any or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to declare dividends,
to issue stock, to recommend to stockholders any action requiring stockholders'
approval, to amend the By-Laws or to approve any merger or share exchange which
does not require stockholders' approval. Such committee or committees shall have
the name or names as may be determined from time to time by resolution adopted
by the Board of Directors. Unless the Board of Directors designates one or more
directors as alternate members of any committee, who may replace an absent or
disqualified member at any meeting of the committee, the members of any such
committee present at any meeting and not disqualified from voting may, whether
or not they constitute a quorum, unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any absent or disqualified
member of such committee. At meetings of any such committee, a majority of the
members or alternate members of such
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committee shall constitute a quorum for the transaction of business and the act
of a majority of the members or alternate members present at any meeting at
which a quorum is present shall be the act of the committee.
Section 8. Minutes of Committee Meetings. The committees shall keep
regular minutes of their proceedings.
Section 9. Informal Action by Board of Directors and Committees. Any
action, except approving the Rule 12b-1 Plan and the Advisory Agreement,
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if a written consent
thereto is signed by all members of the Board of Directors or of such committee,
as the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.
Section 10. Meetings by Conference Telephone. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, the members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and such participation shall constitute presence in person at such meeting.
Section 11. Fees and Expenses. The directors may be paid their expenses
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and stockholders mailed to
them at their post office addresses appearing on the books of the Corporation
shall be deemed to be given at the time when deposited in the United States
mail.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes, of the Articles of Incorporation or
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed the equivalent of notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the
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person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors at its first meeting after each annual meeting of
stockholders and shall be a chairman of the Board of Directors, a president, a
secretary and a treasurer. The Board of Directors may also choose such vice
presidents and additional officers or assistant officers as it may deem
advisable. Any number of offices, except the offices of president and vice
president, may be held by the same person. No officer shall execute, acknowledge
or verify any instrument in more than one capacity if such instrument is
required by law to be executed, acknowledged or verified by two or more
officers.
Section 2. Other Officers and Agents. The Board of Directors may
appoint such other officers and agents as it desires who shall hold their
offices for such terms and shall exercise such power and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the Corporation shall
hold office at the pleasure of the Board of Directors. Each officer shall hold
his or her office until his or her successor is elected and qualifies or until
his or her earlier resignation or removal. Any officer may resign at any time
upon written notice to the Corporation. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors when, in
its judgment, the best interests of the Corporation will be served thereby. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman of the
Board of Directors shall be the chief executive officer of the Corporation,
shall preside at all meetings of the stockholders and of the Board of Directors,
shall have general and active management of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The chairman shall execute on behalf of the Corporation, and may
affix the seal or cause the seal to be affixed to, all instruments requiring
such execution except to the extent that signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
Section 5. President. The president shall, in the absence of the
chairman of the Board of Directors, preside at all meetings of the stockholders
or of the Board of Directors. The president shall have general and active
management of the business of the Corporation and
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shall see that all orders and resolutions of the Board of Directors are carried
into effect. The president shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
Section 6. Vice Presidents. The vice presidents shall act under the
direction of the president and in the absence or disability of the president
shall perform the duties and exercise the power of the president. They shall
perform such other duties and have such other powers as the president or the
Board of Directors may from time to time prescribe. The Board of Directors may
designate one or more executive vice presidents or may otherwise specify the
order of seniority of the vice presidents and, in that event, the duties and
powers of the president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under the direction of
the president. Subject to the direction of the president, the secretary shall
attend all meetings of the Board of Directors and all meetings of stockholders
and record the proceedings in a book to be kept for that purpose and shall
perform like duties for the committees designated by the Board of Directors when
required. The secretary shall give, or cause to be given, notice of all meetings
of stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the president or the Board of
Directors. The secretary shall keep in safe custody the seal of the Corporation
and shall affix the seal or cause it to be affixed to any instrument requiring
it.
Section 8. Assistant Secretaries. The assistant secretaries in the
order of their seniority, unless otherwise determined by the president or the
Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the president or the Board of
Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the direction of
the president. Subject to the direction of the president he shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The treasurer shall disburse the funds of the Corporation as may
be ordered by the president or the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the president and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his or her transactions as treasurer and of the financial
condition of the Corporation.
Section 10. Assistant Treasurers. The assistant treasurers in the order
of their seniority, unless otherwise determined by the president or the Board of
Directors, shall, in the
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absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. They shall perform such other duties and have such
other powers as the president or the Board of Directors may from time to time
prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation who has
made full payment of the consideration for such stock shall be entitled upon
request to have a certificate, signed by, or in the name of the Corporation by,
the president or a vice president and countersigned by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, certifying the number and class of whole shares of stock owned by
such holder in the Corporation.
Section 2. Fractional Share Interests or Scrip. The Corporation may,
but shall not be obliged to, issue fractions of a share of stock, arrange for
the disposition of fractional interests by those entitled thereto, pay in cash
the fair value of fractions of a share of stock as of the time when those
entitled to receive such fractions are determined, or issue scrip or other
evidence of ownership which shall entitle the holder to receive a certificate
for a full share of stock upon the surrender of such scrip or other evidence of
ownership aggregating a full share. Fractional shares of stock shall have
proportionately to the respective fractions represented thereby all the rights
of whole shares, including the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate representing such
fractional shares. The Board of Directors may cause such scrip or evidence of
ownership to be issued subject to the condition that it shall become void if not
exchanged for certificates representing full shares of stock before a specified
date or subject to the condition that the shares of stock for which such scrip
or evidence of ownership is exchangeable may be sold by the Corporation and the
proceeds thereof distributed to the holders of such scrip or evidence of
ownership, or subject to any other reasonable conditions which the Board of
Director shall deem advisable, including provision for forfeiture of such
proceeds to the Corporation if not claimed within a period of not less than
three years after the date of the original issuance of scrip certificates.
Section 3. Signatures on Certificates. Any of or all the signatures on
a certificate may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be such
officer before such certificate is issued, it may be issued with the same effect
as if he or she were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed to certificates
of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors may
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direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the registered owner of
shares, and if a certificate has been issued to represent such shares upon
surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares of stock duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, subject to the Corporation's
rights to redeem or purchase such shares, it shall be the duty of the
Corporation, if it is satisfied that all provisions of the Articles of
Incorporation, of the By-Laws and of the law regarding the transfer of shares
have been duly complied with, to record the transactions upon its books, issue a
new certificate to the person entitled thereto upon request for such
certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be entitled to
recognize the person registered on its books as the owner of shares to be the
exclusive owner for all purposes including, redemption, voting and dividends,
and the Corporation 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 it shall have express or other notice thereof, except as otherwise
provided by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for repairing or maintaining any property of
the Corporation, or for the purchase of additional property, or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve.
Section 2. Dividends. Dividends upon the stock of the Corporation may,
subject to the provisions of the Articles of Incorporation and of the provisions
of applicable law, be declared by the Board of Directors at any time. Dividends
may be paid in cash, in
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property or in shares of the Corporation's stock, subject to the provisions of
the Articles of Incorporation and of applicable law.
Section 3. Capital Gains Distributions. The amount and number of
capital gains distributions paid to the stockholders during each fiscal year
shall be determined by the Board of Directors. Each such payment shall be
accompanied by a statement as to the source of such payment, to the extent
required by law.
Section 4. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 6. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words, "Corporate
Seal, Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in another manner reproduced.
Section 7. Filing of By-Laws. A certified copy of the By-Laws,
including all amendments, shall be kept at the principal office of the
Corporation in the State of Maryland.
Section 8. Annual Report. The books of account of the Corporation shall
be examined by an independent firm of public accountants at the close of each
annual fiscal period of the Corporation and at such other times, if any, as may
be directed by the Board of Directors of the Corporation. Within one hundred and
twenty days of the close of each annual fiscal period a report based upon such
examination at the close of that fiscal period shall be mailed to each
stockholder of the Corporation of record at the close of such annual fiscal
period, unless the Board of Directors shall set another record date, at his
address as the same appears on the books of the Corporation. Each such report
shall contain such information as is required to be set forth therein by the
Investment Company Act of 1940 and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder. Such report shall also be
submitted at the annual meeting of the stockholders and filed within twenty days
thereafter at the principal office of the Corporation in the State of Maryland.
Section 9. Stock Ledger. The Corporation shall maintain at its
principal office outside of the State of Maryland an original or duplicate stock
ledger containing the names and addresses of all stockholders and the number of
shares of stock hold by each stockholder. Such stock ledger may be in written
form or in any other form capable of being converted into written form within a
reasonable time for visual inspection.
Section 10. Ratification of Accountants by Stockholders. At every
annual
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meeting of the stockholders of the Corporation otherwise called there shall be
submitted for ratification or rejection the name of the firm of independent
public accountants which has been selected for the current fiscal year in which
such annual meeting is held by a majority of those members of the Board of
Directors who are not investment advisers of, or interested person (as defined
in the Investment Company Act of 1940) of an investment adviser of, or officers
or employees of, the Corporation.
Section 11. Custodian. All securities and similar investments owned by
the Corporation shall be held by a custodian which shall be either a trust
company or a national bank of good standing, having a capital surplus and
undivided profits aggregating not less than two million dollars ($2,000,000), or
a member firm of the New York Stock Exchange, Inc. The terms of custody of such
securities and cash shall include such provisions required to be contained
therein by the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
Upon the resignation or inability to serve of any such custodian the
Corporation shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the Corporation held by the custodian to be
delivered directly to the successor custodian, and (c) in the event that no
successor custodian can be found, submit to the stockholders of the Corporation,
before permitting delivery of such cash and securities to anyone other than a
successor custodian, the question whether the Corporation shall be dissolved or
shall function without a custodian; provided, however, that nothing herein
contained shall prevent the termination of any agreement between the Corporation
and any such custodian by the affirmative vote of the holders of a majority of
all the stock of the Corporation at the time outstanding and entitled to vote.
Upon its resignation or inability to serve and pending action by the Corporation
as set forth in this section, the custodian may deliver any assets of the
Corporation held by it to a qualified bank or trust company in the City of New
York, or to a member firm of the New York Stock Exchange, Inc. selected by it,
such assets to be held subject to the terms of custody which governed such
retiring custodian.
Section 12. Investment Advisers. The Corporation may enter into one or
more management or advisory, underwriting, distribution or administration
contract with any person, firm, partnership, association or corporation but such
contract or contracts shall continue in effect only so long as such continuance
is specifically approved annually by a majority of the Board of Directors or by
vote of the holders of a majority of the voting securities of the Corporation,
and in either case by vote of a majority of the directors who are not parties to
such contracts or interested persons (as defined in the Investment Company Act
of 1940) of any such party cast in person at a meeting called for the purpose of
voting on such approval.
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ARTICLE VIII
Amendments
The Board of Directors shall have the power, by a majority vote of the
entire Board of Directors at any meeting thereof, to make, alter and repeal
By-Laws of the Corporation.
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