Securities Act Registration No. __-_____
Investment Company Act Reg. No. ___-____
UNITED STATES
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. [ ]
(Check appropriate box or boxes.)
-----------------------------------
THE FORESTER FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
612 Paddock Lane
Libertyville, Illinois 60048
(Address of Principal Executive Offices) (Zip Code)
(847) 573-8399
(Registrant's Telephone Number, including Area Code)
Thomas H. Forester
Forester Capital Mangement, Ltd.
612 Paddock Lane
Libertyville, Illinois 60048
---------------------------------------- --------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective.
It is proposed that this filing 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) (1)
[ ] on (date) pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
THE FORESTER FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus
and the Statement of Additional Information of the responses to the
Items of Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Objective and Investment Approach;
Registrant Management of the Funds
5. Management of the Fund Objective and Investment
Approach; Management of the
Funds; Distribution Plan
5A. Management's Discussion of Included in Annual Report
Fund Performance to Shareholders
6. Capital Stock and Other Dividends, Distributions and
Securities Taxes;
7. Purchase of Securities Being Purchase of Shares;
Offered Fund's Share Price;
Dividends, Distributions and Taxes
8. Redemption or Repurchase Redeeming Shares
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Fund History and Classification
History
13. Investment Objectives and Fund History and Classification;
Policies Investment Restrictions and
Considerations; Investment
Policies and Techniques
14. Management of the Fund Directors and Officers of
the Company
15. Control Persons and Directors and Officers of
Principal Holders of the Company; Investment
Securities Adviser and Administrator
16. Investment Advisory and Investment Adviser and
Other Services Administrator; Custodian;
Independent Accountants;
Distribution Plan
17. Brokerage Allocation Portfolio Transactions;
Allocation of Portfolio Brokerage
18. Capital Stock and Other Capital Structure
Securities
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under "Fund's Share Price";
Offered "Purchase of Shares";
"Redeeming Shares";
"Dividends, Distributions and Taxes";
Included in SAI under Redemptions
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Performance Information
Data
23. Financial Statements Financial Statements
_______________________
* Answer negative or inapplicable
LONG TERM
INVESTING
IN VALUE
June 30, 1999
Prospectus
Mutual funds:
are not FDIC-insured
have no bank guarantees
may lose value
Forester Funds
Forester Small Cap Value Fund
Forester Value Fund
The Securities and Exchange Commission does not make any
judgments as to whether any mutual fund is a good investment.
Nor does it judge the accuracy or completeness of any
mutual fund prospectus. It is a federal offense to suggest otherwise.
PROSPECTUS JUNE 30, 1999
THE FORESTER FUNDS, INC.
612 Paddock Lane
Libertyville, Illinois 60048
1-847-573-8399
The Forester Funds, Inc. (the "Company") is an open-end management
investment company, commonly known as a mutual fund. The Company
presently consists of two investment portfolios designed to offer
investors a choice of equity-oriented investment opportunities. Each
investment portfolio is individually referred to as a "Fund" and
collectively as the "Funds."
THE FORESTER SMALL CAP VALUE FUND seeks long-term growth
of capital. The Forester Small Cap Value Fund is diversified and invests
primarily in equity securities of undervalued small companies, many of
which are similar in size to the stocks in the Russell 2000 Index. The
fund's investment objective and policies may be changed without a vote
of shareholders.
THE FORESTER VALUE FUND seeks long-term growth of capital,
with current income as a secondary objective. The Forester Value Fund
is diversified and invests primarily in equity securities of companies
with market capitalizations of $1 billion or more. The fund's investment
objective and policies may be changed without a vote of shareholders.
This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. This
Prospectus does not set forth all of the information included in the
Registration Statement and Exhibits thereto which the Funds have filed
with the Securities and Exchange Commission.
A Statement of Additional Information, dated June 30, 1999, which is a
part of such Registration Statement, is incorporated herein by reference.
A copy of the Statement of Additional Information may be obtained,
without charge, by writing to the address, or calling the telephone
number, stated above. The Securities and Exchange Commission
maintains a web site (http://www.sec.gov) that contains the Funds'
Prospectus, Statement of Additional Information, material incorporated
by reference, and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 30,
1999 AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FORESTER FUNDS, INC. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
Investment Approach . . . . . . . . . . . . . . . . . 3
Fund Performance. . . . . . . . . . . . . . . . . . . 3
Fund Expenses . . . . . . . . . . . . . . . . . . . . 4
Objective and Investment Approach . . . . . . . . . . 5
Management of the Funds . . . . . . . . . . . . . . . 6
Funds' Share Price . . . . . . . . . . . . . . . . . 7
Purchase of Shares . . . . . . . . . . . . . . . . . 7
Distribution Plan . . . . . . . . . . . . . . . . . . 8
Redeeming Shares . . . . . . . . . . . . . . . . . . 9
Dividends, Distributions and Taxes . . . . . . . . . 11
Financial Highlights . . . . . . . . . . . . . . . . 11
INVESTMENT APPROACH
Each of the funds presented in this prospectus uses a value approach to
investing - that is, they look for common stocks that the investment
manager believes are undervalued. The principal factor considered by a
manager in identifying a value stock is its price to earnings (P/E) ratio.
The objective of value investing is to reduce the risk of owning stocks by
investing in companies with sound finances whose current market prices
are low in relation to earnings. In determining whether a company's
finances are sound, the investment manager considers, among other
things, its cash position and current ratio of assets compared to current
liabilities.
In selecting among stocks with low P/E ratios, the investment manager
also considers factors such as the following about the issuer:
Financial strength
Book-to-market value
Price-to-cash flow ratio
Price-to-sales ratio
Earnings estimates for the next 12 months
Five-year return on equity
Size of institutional ownership
PRINCIPAL RISK FACTORS
Investors in the Funds may lose money. There are risks associated with
investments in the types of securities in which the Funds invest. These
risks include:
Market Risk: The prices of the securities in which the Funds invest may
decline for a number of reasons. The price declines of common stocks,
in particular, may be steep, sudden and/or prolonged.
Smaller Capitalization Companies Risk: Smaller capitalization
companies typically have relatively lower revenues, limited product lines
and lack of management depth, and may have a smaller share of the
market for their products or services, than larger capitalization
companies. The stocks of smaller capitalization companies tend to have
less trading volume than stocks of larger capitalization companies. Less
trading volume may make it more difficult for our investment adviser to
sell securities of smaller capitalization companies at quoted market
prices. Finally, there are periods when investing in smaller
capitalization stocks falls out of favor with investors and the stocks of
smaller capitalization companies underperform.
Value Investing Risk: From time to time "value" investing falls out of
favor with investors. When it does, there is the risk that the market will
not recognize a company's improving fundamentals as quickly as it
normally would. During these periods, the Funds' relative performance
may suffer.
Because of these risks the Funds are a suitable investment only for those
investors who have long-term investment goals. Prospective investors
who are uncomfortable with an investment that will increase and
decrease in value should not invest in the Funds.
FUND PERFORMANCE
Both of the Funds are being offered to the public for the first time. As
such, they have no past performance.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if
you buy and hold shares of the Forester Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
Forester Small Cap Forester Value
Value Fund Fund
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)....... No Sales Charge No Sales Charge
Maximum Deferred Sales Charge (Load). No Deferred Charge No Deferred Charge
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
And Distributions................... No Sales Charge No Sales Charge
Redemption Fee....................... None (1) None (1)
(1) Our transfer agent charges a fee of $12.00 for each wire redemption.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees...................... 1.00% 1.00%
Distribution and/or Service
(12b-1) Fees........................ 0.25% 0.25%
Other Expenses....................... 0.25% 0.25%
Total Annual Fund Operating Expenses. 1.50% 1.50%
Total Annual Fund Operating Expenses
AFTER Expense Reductions ........... 0.00% 0.00%
All expenses are estimated as The Forester Small Cap Value Fund and
The Forester Value Fund did not commence operations until June 30,
1999.
The Total Fund Operating Expenses AFTER Expense Reductions shown
in the table for the Small Cap Value Fund and the Value Fund give
effect to Forester Capital Management's' voluntary undertaking to waive
the entire management fee and to reimburse all other expenses. Without
such waivers and reimbursement, the Management fee, 12b-1 fee and
Other Expenses may have been 1.00%, .25% and .25%, respectively, for
a total of 1.50%. Forester Capital Management expects to continue the
waivers and reimbursement for the current fiscal year; however, it may
reinstate all or a portion of such fees or discontinue reimbursement at
any time.
EXAMPLE
This Example is intended to help you compare the cost of investing in
the Forester Funds with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of these
periods. The Example also assumes 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 5 Years 10 Years
The Forester Small Cap Value Fund $153 $474 N/A N/A
The Forester Value Fund $153 $474 N/A N/A
INVESTMENT OBJECTIVE AND STRATEGIES
Each of the Funds seeks long-term capital appreciation, and, to a lesser
extent, current income. Each Fund may change its investment objective
without obtaining shareholder approval. Please remember that an
investment objective is not a guarantee. An investment in the Forester
Funds might not appreciate and investors could lose money.
The Funds mainly invest in common stocks of United States companies,
some, but not all of which, pay dividends. However, each may, in
response to adverse market, economic, political or other conditions, take
temporary defensive positions. This means a Fund will invest some or
all of its assets in money market instruments (like U.S. Treasury Bills,
commercial paper or repurchase agreements) or bonds. The Funds will
not be able to achieve their investment objective of capital appreciation
to the extent that they invest in money market instruments since these
securities earn interest but do not appreciate in value. When a Fund is
not taking a temporary defensive position, it still will hold some cash
and money market instruments so that it can pay its expenses, satisfy
redemption requests or take advantage of investment opportunities.
Each of the funds presented in this prospectus uses a value approach to
investing - that is, they look for common stocks that the investment
manager believes are undervalued. The principal factor considered by a
manager in identifying a value stock is its price to earnings (P/E) ratio.
The objective of value investing is to reduce the risk of owning stocks by
investing in companies with sound finances whose current market prices
are low in relation to earnings. In determining whether a company's
finances are sound, the investment manager considers, among other
things, its cash position and current ratio of assets compared to current
liabilities.
In selecting among stocks with low P/E ratios, the investment manager
also considers factors such as the following about the issuer:
Financial strength
Book-to-market value
Price-to-cash flow ratio
Price-to-sales ratio
Earnings estimates for the next 12 months
Five-year return on equity
Size of institutional ownership
THE FORESTER SMALL CAP VALUE FUND
This fund invests in common stocks of undervalued small companies,
many of which are similar in size to the stocks in the Russell 2000 Index.
In addition, the fund's investment focus on smaller companies involves
greater risk than a fund that invests primarily in larger, more established
companies.
The fund invests principally in a diversified portfolio of undervalued
equity securities. Securities may be undervalued as a result of
overreaction by investors to unfavorable news about a company, industry
or the stock markets in general or as a result of a market decline, poor
economic conditions, or actual or anticipated unfavorable developments
affecting the company. Under normal market conditions, the fund
invests at least 65% of its total assets in securities of companies that are
similar in size to those comprising the Russell 2000 Index. Typically,
most companies selected for inclusion in the fund have market
capitalizations ranging from approximately $100 million to $1.5 billion.
The fund sells securities of companies that have grown in market
capitalization above the maximum of the Russell 2000 Index, as
necessary to keep focused on smaller companies.
Investments in securities of companies with small market capitalizations
are generally considered to offer greater opportunity for appreciation and
to involve greater risks of depreciation than securities of companies with
larger market capitalizations. Since the securities of such companies are
not as broadly traded as those of companies with larger market
capitalizations, these securities are often subject to wider and more
abrupt fluctuations in market price.
Among the reasons for the greater price volatility of these securities are
the less certain growth prospects of smaller firms, a lower degree of
liquidity in the markets for such stocks compared to larger capitalization
stocks, and the greater sensitivity of small companies to changing
economic conditions. In addition to exhibiting greater volatility, small
company stocks may, to a degree, fluctuate independently of larger
company stocks. Small company stocks may decline in price as large
company stock prices rise, or rise in price as large company stock prices
decline. Investors should therefore expect that the share value of the
fund may be more volatile than the shares of a fund that invests in larger
capitalization stocks.
THE FORESTER VALUE FUND
This fund invests in common stocks of larger publicly traded companies
(generally $1 billion or more).
The fund invests principally in a diversified portfolio of undervalued
equity securities. Securities may be undervalued as a result of
overreaction by investors to unfavorable news about a company, industry
or the stock markets in general or as a result of a market decline, poor
economic conditions or actual or anticipated unfavorable developments
affecting the company.
We follow many more companies than we actually buy. Since our
investment adviser is a disciplined investor, we will increase our cash
position if we cannot find companies that meet our investment
requirements.
Our investment adviser is a patient investor. We do not attempt to
achieve our investment objectives by active and frequent trading of
common stocks.
MANAGEMENT OF THE FUNDS
Forester Capital Management, Ltd. manages the Funds' investments.
Forester Capital Management, Ltd. (the "Adviser") is the investment
adviser to each of the Forester Funds. The Adviser's address is:
612 Paddock Lane
Libertyville, Illinois 60048
As the investment adviser to the Funds, the Adviser manages the
investment portfolio of each Fund. It makes the decisions as to which
securities to buy and which securities to sell. Each Fund pays the
Adviser an annual investment advisory fee equal to the following
percentages of average net assets:
The Forester Small Cap Value Fund 1.00%
The Value Fund 1.00%
Thomas H. Forester is primarily responsible for the day-to-day
management of the portfolios of the Funds and has been so since their
inception. He is the portfolio manager. Mr. Forester has been President
of the Adviser since its organization in 1999. He was an officer and
portfolio manager from May 1997 through January, 1999 with Dreman
Value Advisors, Inc. and its successor firm, Scudder Kemper
Investments Inc., and an officer and portfolio manager from 1995 to
1997 with Peregrine Capital Management Inc.; and an officer and
portfolio manager from 1992 to 1995 with an unaffiliated asset
management firm.
Since March 1998 through the Fund's registration, Mr. Forester has been
the portfolio manager of the Forester Small Cap Value Fund as a private
investment company, and throughout that period had full discretionary
authority over the selection of investments for that fund. Average
annual total returns for the Forester Small Cap Value Fund for the
following periods were:
5/1/98 - 4/30/99 (1 YEAR) 4.00%
4/1/98 - 4/30/99 (1 YEARS, 1 MONTH) 4.35%
Past performance is not a guarantee of future results, and the information
shown reflects the performance of the Fund prior to registration, not the
performance of the Fund as a public fund. The returns achieved by Mr.
Forester as portfolio manager of the Fund reflect its expenses and the
value of its assets as a private fund; the expenses of the Fund as a public
fund are estimated to be higher and the effect of those expenses may
result in less favorable performance. However, actual expenses may be
higher or lower than those estimated.
Year 2000
The Funds are addressing the "Year 2000" issue. The "Year 2000" issue
stems from the use of a two-digit format to define the year in certain
date-sensitive computer application systems rather than the use of a four
digit format. As a result, date-sensitive software programs could
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in major systems or process failures or the generation
of erroneous data, which would lead to disruptions in the Funds'
business operations.
The Funds have no application systems of their own and are entirely
dependent on their service providers' systems and software. The Funds
are working with their service providers (including the Adviser and their
custodian) to identify and remedy any Year 2000 issues. However, the
Funds cannot guarantee that all Year 2000 issues will be identified and
remedied, and the failure to successfully identify and remedy all Year
2000 issues could result in an adverse impact on the Funds.
THE FUNDS' SHARE PRICE
The price at which investors purchase shares of each Fund and at which
shareholders redeem shares of each Fund is called its net asset value.
Each Fund calculates its net asset value as of the close of regular trading
on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on
each day the New York Stock Exchange is open for trading. The New
York Stock Exchange is closed on holidays and weekends. Each Fund
calculates its net asset value based on the market prices of the securities
(other than money market instruments) it holds. Each Fund values most
money market instruments it holds at their amortized cost. Each Fund
will process purchase orders that it receives and accepts and redemption
orders that it receives prior to the close of regular trading on a day that
the New York Stock Exchange is open at the net asset value determined
later that day. It will process purchase orders that it receives and accepts
and redemption orders that it receives after the close of regular trading at
the net asset value determined at the close of regular trading on the next
day the New York Stock Exchange is open.
PURCHASE OF SHARES
How to Purchase Shares from the Funds
1. Read this Prospectus carefully
2. Determine how much you want to invest keeping in mind the
following minimums:
o New accounts $2500
o Dividend reinvestment No Minimum
o Additions to existing accounts $ 100
3. Complete the Share Purchase Application accompanying this
Prospectus, carefully following the instructions. For additional
investments, complete the reorder form attached to your Fund's
confirmation statements (The Fund has additional Purchase Applications
and reorder forms if you need them.) If you have any questions, please
call 1-847-573-8399.
4. Make your check payable to "The Forester Funds, Inc." All
checks must be drawn on U.S. banks. The Funds will not accept cash or
third party checks. A $25 fee against a shareholder's account for any
payment check returned for insufficient funds. The shareholder will also
be responsible for any losses suffered by a Fund as a result.
5. Send the application and check to:
BY FIRST CLASS MAIL, OVERNIGHT DELIVERY
SERVICE OR REGISTERED MAIL
The Forester Funds, Inc.
612 Paddock Lane
Libertyville, Illinois 60048
Purchasing Shares from Broker-dealers, Financial Institutions and Others
Some broker-dealers may sell shares of the Forester Funds. These
broker-dealers may charge investors a fee either at the time of purchase
or redemption. The fee, if charged, is retained by the broker-dealer and
not remitted to the Funds or the Adviser.
The Funds may enter into agreements with broker-dealers, financial
institutions or other service providers ("Servicing Agents") that may
include the Funds as investment alternatives in the programs they offer
or administer. Servicing agents may:
1. Become shareholders of record of the Funds. This
means all requests to purchase additional shares and all
redemption requests must be sent through the Servicing Agent.
This also means that purchases made through Servicing Agents
are not subject to the Funds' minimum purchase requirements.
2. Use procedures and impose restrictions that may be in
addition to, or different from, those applicable to investors
purchasing shares directly from the Funds.
3. Charge fees to their customers for the services they
provide them. Also, the Funds and/or the Adviser may pay fees
to Servicing Agents to compensate them for the services they
provide their customers.
4. Be allowed to purchase shares by telephone with
payment to follow the next day. If the telephone purchase is
made prior to the close of regular trading on the New York
Stock Exchange, it will receive same day pricing.
5. Be authorized to accept purchase orders on behalf of
the Funds. This means that a Fund will process the purchase
order at the net asset value which is determined following the
Servicing Agent's acceptance of the customer's order.
If you decide to purchase shares through Servicing Agents, please
carefully review the program materials provided to you by the Servicing
Agent. When you purchase shares of the Funds through a Servicing
Agent, it is the responsibility of the Servicing Agent to place your order
with the Fund on a timely basis. If the Servicing Agent does not, or if it
does not pay the purchase price to the Funds within the period specified
in its agreement with the Funds, it may be held liable for any resulting
fees or losses.
Other Information about Purchasing Shares of the Funds
The Funds may reject any share purchase applications for any reason.
The Funds will not accept initial purchase orders made by telephone
unless they are from a Servicing Agent which has an agreement with the
Fund.
The Funds will issue certificates evidencing shares purchased only upon
request. The Funds will send investors a written confirmation for all
purchases of shares.
THE DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan which, among other things,
requires it to pay Forester Capital Management, Ltd., as distributor, a
quarterly distribution fee of up to 0.25 of 1% of its average daily net
assets computed on an annual basis. Under each Plan, the Fund is
obligated to pay distribution fees only to the extent of expenses actually
incurred by Forester Capital Management, Ltd., as distributor, for the
current year, and thus there will be no carry-over expenses from previous
years. These expenses may include expenses incurred for media
advertising, the printing and mailing of prospectuses to persons other
than shareholders, the printing and mailing of sales literature, answering
routine questions relating to a Fund, and payments to selling
representatives, authorized securities dealers, financial institutions, or
other service providers for providing services in assisting investors with
their investments and/or for providing administrative, accounting and
other services with respect to a Fund's shareholders. No fee paid by a
Fund under the Plan may be used to reimburse Forester Capital
Management, Ltd. for expenses incurred in connection with another
Fund. Each Distribution Plan will continue in effect, if not sooner
terminated in accordance with its terms, for successive one-year periods,
provided that each such continuance is specifically approved by the vote
of the Directors, including a majority of the Directors who are not
interested persons, of Forester Capital Management, Ltd. For further
information regarding the Distribution Plan, see the Statement of
Additional Information.
REDEEMING SHARES
How to Redeem (Sell) Shares by Mail
1. Prepare a letter of instruction containing:
o the name of the Fund(s)
o account number(s)
o the amount of money or number of shares being
redeemed
o the name(s) on the account
o daytime phone number
o additional information that the Funds may require for
redemptions by corporations, executors,
administrators, trustees, guardians, or others who hold shares in
a fiduciary or representative capacity. Please contact
the Fund, in advance, at 1-847-573-8399 if you have any
questions.
2. Sign the letter of instruction exactly as the shares are registered.
Joint ownership accounts must be signed by all owners.
3. If there are certificates representing your shares, endorse the
certificates or execute a stock power. Again you must endorse
certificates and sign stock powers exactly as your shares are registered.
4. Have the signatures guaranteed by a commercial bank or trust
company in the United States, a member firm of the New York Stock
Exchange or other eligible guarantor institution in the following
situations:
o The redemption request exceeds $25,000
o The redemption proceeds are to be sent to a person other than
the person in whose name the shares are registered
o The redemption proceeds are to be sent to an address other
than the address of record
o The Funds receive the redemption request within 10 business
days of an address change.
A notarized signature is not an acceptable substitute for a signature
guarantee.
5. Send the letter of instruction and certificates, if any, to:
BY FIRST CLASS MAIL, OVERNIGHT DELIVERY
SERVICE OR REGISTERED MAIL
The Forester Funds, Inc.
612 Paddock Lane
Libertyville, Illinois 60048
How to Redeem (Sell) Shares through Servicing Agents
If your shares are held by a Servicing Agent, you must redeem your
shares through the Servicing Agent. Contact the Servicing Agent for
instructions on how to do so.
Payment of Redemption Proceeds
The redemption price per share you receive for redemption requests is
the next determined net asset value after:
1. The Fund receives your written request in proper form
with all required information.
2. A Servicing Agent that has been authorized to accept
redemption requests on behalf of the Funds
receives your request in accordance with its procedures.
For those shareholders who redeem shares by mail the Fund will mail a
check in the amount of the redemption proceeds no later than the seventh
day after it receives the redemption request in proper form with all
required information. Those shareholders who redeem shares through
Servicing Agents will receive their redemption proceeds in accordance
with the procedures established by the Servicing Agent.
Other Redemption Considerations
When redeeming shares of the Funds, shareholders should consider the
following:
1. The redemption may result in a taxable gain.
2. The Funds may delay the payment of
redemption proceeds for up to seven days in all cases.
3. If you purchased shares by check, the Funds
may delay the payment of redemption proceeds until
they are reasonably satisfied the check has cleared
(which may take up to 15 days from the date of
purchase).
4. If your account balance falls below $1,000
because you redeem shares, you will be given 60 days to
make additional investments so that your account
balance is $1,000 or more. If you do not, the Funds may
close your account and mail the redemption proceeds to
you.
5. The Funds may pay redemption requests "in
kind." This means that the Funds will pay redemption
requests entirely or partially with securities rather than
with cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund distributes substantially all of its net investment income and
its capital gains annually. You have two distribution options:
o Automatic Reinvestment Option - Both dividend and
capital gains distributions will be reinvested in
additional Fund Shares.
o All Cash Option - Both dividend and capital gains
distributions will be paid in cash.
You may make this election on the Share Purchase Application. You
may change your election by writing to the Fund or by calling 1-847-
573-8399.
Each Fund's distributions, whether received in cash or additional shares
of the Fund, may be subject to federal and state income tax. These
distributions may be taxed as ordinary income and capital gains (which
may be taxed at different rates depending on the length of time the Fund
holds the assets generating the capital gains). In managing the Funds,
our Adviser considers the tax effects of its investment decisions to be of
secondary importance.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand a
Fund's financial performance for the period of the Fund's operations.
Since the Funds are new, there are no financial highlights to show.
The Forester Small The Forester
Cap Value Value
As of June 30, 1999 (1) Fund Fund
- - ----------------------------------------------------------------------------
Net asset value, beginning of period......... $10.00 $10.00
----- -----
Income from investment operations:
Net investment income ........................ 0.00 0.00
Net realized and unrealized gain on investments 0.00 0.00
---- ----
Total from investment operations .............. 0.00 0.00
---- ----
Less distributions:
Dividends from net investment income.......... (0.00) (0.00)
Distributions from net realized gains......... (0.00) (0.00)
------ ------
Total distributions........................... (0.00) (0.00)
------ ------
Net asset value, end of period ............... $10.00 $10.00
====== ======
Total return.................................. 0.00% 0.00%
===== ======
Supplemental data and ratios:
Net assets, end of period (000s) ............. $50 $50
====== ======
Ratio of net expenses to average net assets... 0.00% 0.00%
==== ====
Ratio of net investment income to average net
assets....................................... 0.00% 0.00%
====== ======
Portfolio turnover rate ...................... 0.00% 0.00%
===== =====
- - ---------------
(1) Commencement of operations.
To learn more about the Forester Funds you may want to read the
Forester Funds' Statement of Additional Information (or "SAI") which
contains additional information about the Funds. The Forester Funds
have incorporated by reference the SAI into the Prospectus. This means
that you should consider the contents of the SAI to be part of the
Prospectus.
The SAI are all available to shareholders and prospective investors
without charge, simply by calling 1-847-573-8399.
Prospective investors and shareholders who have questions about the
Forester Funds may also call the above number or write to the following
address:
The Forester Funds, Inc.
612 Paddock Lane
Libertyville, Illinois 60048
The general public can review and copy information about the Forester
Funds (including the SAI) at the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. (Please call 1-800-SEC-
0330 for information on the operations of the Public Reference Room.)
Reports and other information about the Forester Funds are also
available at the Securities and Exchange Commission's Internet site at
http://www.sec.gov and copies of this information may be obtained,
upon payment of a duplicating fee, by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
Please refer to the Forester Funds' Investment Company Act File
No.___-____, when seeking information about the Forester Funds from
the Securities and Exchange Commission.
STATEMENT OF ADDITIONAL INFORMATION June 30, 1999
for THE FORESTER FUNDS
THE FORESTER SMALL CAP VALUE FUND
THE FORESTER VALUE FUND
THE FORESTER FUNDS, INC.
612 Paddock Lane
Libertyville, Illinois 60048
1-847-573-8399
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus of The Forester Funds, Inc.
(the "Company") dated June 30, 1999 (the "Prospectus"), for The
Forester Small Cap Value Fund and The Forester Value Fund (each
referred to individually as a "Fund" and collectively as the "Funds").
Requests for copies of the Prospectus should be made by writing to The
Forester Funds, Inc., 612 Paddock Lane Libertyville, Illinois 60048,
Attention: Corporate Secretary, or by calling 1-847-573-8399.
THE FORESTER FUNDS, INC.
TABLE OF CONTENTS
FUND HISTORY AND CLASSIFICATION............................................ 2
INVESTMENT RESTRICTIONS AND CONSIDERATIONS................................. 2
INVESTMENT POLICIES AND TECHNIQUES ........................................ 3
PORTFOLIO TRANSACTIONS .................................................... 7
DETERMINATION OF NET ASSET VALUE........................................... 8
DIRECTORS AND OFFICERS OF THE COMPANY...................................... 8
INVESTMENT ADVISER AND ADMINISTRATOR....................................... 10
REDEMPTIONS ............................................................... 11
CUSTODIAN ................................................................. 11
INDEPENDENT ACCOUNTANTS.................................................... 11
DISTRIBUTION PLAN ......................................................... 11
ALLOCATION OF PORTFOLIO BROKERAGE.......................................... 11
TAXES ..................................................................... 12
STOCKHOLDER MEETINGS....................................................... 13
CAPITAL STRUCTURE ......................................................... 14
SHAREHOLDER REPORTS........................................................ 14
PERFORMANCE INFORMATION.................................................... 15
LEGAL PROCEEDINGS.......................................................... 15
DESCRIPTION OF SECURITIES RATINGS.......................................... 16
FUND HISTORY AND CLASSIFICATION
The Forester Funds, Inc. (the "Company") is an open-end management
investment company consisting of two diversified portfolios, The
Forester Small Cap Value Fund and The Forester Value Fund (each a
"Fund" and together, the "Funds"). The Forester Small Cap Value Fund
began operations as a private investment company, not registered under
the Investment Company Act of 1940 (the "1940 Act"), on March 31,
1998. Both Funds registered under the 1940 Act on May 12, 1999 and
began offering their shares to the public on June 30, 1999. The
Company was incorporated as a Maryland corporation on April 7, 1999.
INVESTMENT RESTRICTIONS AND CONSIDERATIONS
Each Fund has adopted certain fundamental investment restrictions
which cannot be changed without approval of a majority of its
outstanding voting shares. As defined in the Investment Company Act of
1940, this means the lesser of the vote of (a) 67% of the shares of the
Fund present at a meeting where more than 50% of the outstanding
shares are present in person or by proxy or (b) more than 50% of the
outstanding shares of the Fund.
Each Fund has elected to be classified as a diversified series of an open-
end investment company.
A Fund may not, as a fundamental policy:
1. Borrow money, except for temporary or emergency purposes, and
then only from banks, in an amount not exceeding 10% of the value
of a Fund's total assets. A Fund will not borrow money for the
purpose of investing in securities, and a Fund will not purchase any
portfolio securities for so long as any borrowed amounts remain
outstanding.
2. Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
3. Concentrate its investments in a particular industry, as that term is
used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time.
4. Make loans except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
5. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investment
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate as acquired
as a result of the Fund's ownership of securities.
6. Purchase physical commodities or contracts relating to physical
commodities.
7. Engage in the business of underwriting securities issued by others,
except to the extent that a Fund may be deemed to be an underwriter
in connection with the disposition of portfolio securities.
The Funds may not, as a non-fundamental policy:
1. Invest for the purpose of exercising control over management of any
company.
2. Invest its assets in securities of any investment company, except by
open market purchases, including an ordinary broker's commission,
or in connection with a merger, acquisition of assets, consolidation
or reorganization, and any investments in the securities of other
investment companies will be in compliance with the Investment
Company Act of 1940.
3. Purchase securities on margin or make short sales of securities,
provided that the Funds may enter into futures contracts and related
options and make initial and variation margin deposits in connection
therewith.
4. Mortgage, pledge, or hypothecate any assets except in connection
with borrowings in amounts not in excess of the lesser of the amount
borrowed or 10% of the value of its total assets at the time of such
borrowing; provided that the Funds may enter into futures contracts
and related options. Optioned securities are not considered to be
pledged for purposes of this limitation.
5. Invest more than 10% of the value of its net assets in illiquid
securities, including restricted securities and repurchase agreements
with remaining maturities in excess of seven days, and other
securities for which market quotations are not readily available.
6. Invest in oil, gas or mineral exploration or development programs
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting
from a change in values or net assets will not be considered a violation.
INVESTMENT POLICIES AND TECHNIQUES
General. Each Fund may engage in options and financial futures and
other derivatives transactions in accordance with its respective
investment objectives and policies. Each such Fund intends to engage in
such transactions if it appears to the investment manager to be
advantageous to do so in order to pursue its investment objective and
also to hedge against the effects of market risks but not for speculative
purposes. The use of futures and options, and possible benefits and
attendant risks, are discussed below along with information concerning
other investment policies and techniques.
While it is anticipated that under normal circumstances all Funds will be
fully invested, in order to conserve assets during temporary defensive
periods when the investment manager deems it appropriate, each Fund
may invest up to 100% of its assets in cash or defensive-type securities,
such as high-grade debt securities, securities of the U.S. Government or
its agencies and high quality money market instruments, including
repurchase agreements. Investments in such interest-bearing securities
will be for temporary defensive purposes only.
Common Stocks. Each Fund may invest in common stocks. Common
stock is issued by companies to raise cash for business purposes and
represents a proportionate interest in the issuing companies. Therefore, a
Fund participates in the success or failure of any company in which it
holds stock. The market values of common stock can fluctuate
significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market
movements. Smaller companies are especially sensitive to these factors.
An investment in common stock entails greater risk of becoming
valueless than does an investment in fixed-income securities. Despite
the risk of price volatility, however, common stock also offers the
greatest potential for long-term gain on investment, compared to other
classes of financial assets such as bonds or cash equivalents.
Convertible Securities. Each Fund may invest in convertible securities
which may offer higher income than the common stocks into which they
are convertible. The convertible securities in which a Fund may invest
include bonds, notes, debentures and preferred stocks which may be
converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. Prior to their conversion,
convertible securities may have characteristics similar to both
nonconvertible debt securities and equity securities. While convertible
securities generally offer lower yields than nonconvertible debt
securities of similar quality, their prices may reflect changes in the value
of the underlying common stock. Convertible securities generally entail
less credit risk than the issuer's common stock.
Repurchase Agreements. Each Fund may invest in repurchase
agreements, under which it acquires ownership of a security and the
broker-dealer or bank agrees to repurchase the security at a mutually
agreed upon time and price, thereby determining the yield during the
Fund's holding period. In the event of a bankruptcy or other default of a
seller of a repurchase agreement, a Fund might have expenses in
enforcing its rights, and could experience losses, including a decline in
the value of the underlying securities and loss of income. The securities
underlying a repurchase agreement will be marked-to-market every
business day so that the value of such securities is at least equal to the
investment value of the repurchase agreement, including any accrued
interest thereon. In addition, the Fund must take physical possession of
the security or receive written confirmation of the purchase and a
custodial or safekeeping receipt from a third party or be recorded as the
owner of the security through the Federal Reserve Book-Entry System.
Repurchase agreements will be limited to transactions with financial
institutions believed by the investment manager to present minimal
credit risk. The investment manager will monitor on an on-going basis
the creditworthiness of the broker-dealers and banks with which the
Funds may engage in repurchase agreements. Repurchase agreements
maturing in more than seven days will be considered as illiquid for
purposes of each Fund's limitation on illiquid securities. The Funds will
not invest more than 10% of the value of their net assets in illiquid
securities.
Depository Receipts. Each Fund may invest up to 20% of its assets in
securities of foreign companies through the acquisition of American
Depository Receipts ("ADRs") as well as through the purchase of
securities of foreign companies that are publicly traded in the United
States. ADRs are bought and sold in the United States and are issued by
domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in the domestic bank or a correspondent bank.
ADRs do not eliminate all the risk inherent in investing in the securities
of foreign issuers, such as changes in foreign currency exchange rates.
However, by investing in ADRs rather than directly in foreign issuers'
stock, the Fund avoids currency risks during the settlement period. In
general, there is a large, liquid market in the United States for most
ADRs.
Borrowing. Each Fund is authorized to borrow from banks in amounts
not in excess of 10% of their respective total assets, although they do not
presently intend to do so. If, in the future, they do borrow from banks,
they would not purchase additional securities at any time when such
borrowings exceed 5% of their respective net assets.
Small Cap Securities. Investments in securities of companies with small
market capitalizations are generally considered to offer greater
opportunity for appreciation and to involve greater risks of depreciation
than securities of companies with larger market capitalizations. Since
the securities of such companies are not as broadly traded as those of
companies with larger market capitalizations, these securities are often
subject to wider and more abrupt fluctuations in market price.
Among the reasons for the greater price volatility of these securities are
the less certain growth prospects of smaller firms, a lower degree of
liquidity in the markets for such stocks compared to larger capitalization
stocks, and the greater sensitivity of small companies to changing
economic conditions. In addition to exhibiting greater volatility, small
company stocks may, to a degree, fluctuate independently of larger
company stocks. Small company stocks may decline in price as large
company stock prices rise, or rise in price as large company stock prices
decline. Investors should therefore expect that the share value of the
Small Cap Value Fund may be more volatile than the shares of a fund
that invests in larger capitalization stocks.
Derivatives. In addition to options and financial futures transactions,
consistent with its objective, each Fund may invest in a broad array of
financial instruments and securities in which the value of the instrument
or security is "derived" from the performance of an underlying asset or a
"benchmark" such as a security index or an interest rate ("derivatives").
Derivatives are most often used in an effort to manage investment risk,
to increase or decrease exposure to an asset class or benchmark (as a
hedge or to enhance return), or to create an investment position
indirectly (often because it is more efficient or less costly than direct
investment). There is no guarantee that these results can be achieved
through the use of derivatives. The types of derivatives used by each
Fund and the techniques employed by the investment manager may
change over time as new derivatives and strategies are developed or
regulatory changes occur.
Options on Securities. A Fund may write (sell) "covered" call options
on securities as long as it owns the underlying securities subject to the
option or an option to purchase the same underlying securities, having an
exercise price equal to or less than the exercise price of the "covered"
option, or will establish and maintain for the term of the option a
segregated account consisting of cash or other liquid securities ("eligible
securities") to the extent required by applicable regulation in connection
with the optioned securities. A Fund may write "covered" put options
provided that, as long as the Fund is obligated as a writer of a put option,
the Fund will own an option to sell the underlying securities subject to
the option, having an exercise price equal to or greater than the exercise
price of the "covered" option, or it will deposit and maintain in a
segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser
the right to buy, and the writer the obligation to sell, the underlying
security at the exercise price during or at the end of the option period. A
put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying security at the exercise price during or
at the end of the option period. The premium received for writing an
option will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to such market
price, the price volatility of the underlying security, the option period,
supply and demand and interest rates. The Funds may write, and also
purchase, spread options, which are options for which the exercise price
may be a fixed dollar spread or yield spread between the security
underlying the option and another security that is used as a bench mark.
The exercise price of an option may be below, equal to or above the
current market value of the underlying security at the time the option is
written. The buyer of a put who also owns the related security is
protected by ownership of a put option against any decline in that
security's price below the exercise price less the amount paid for the
option. The ability to purchase put options allow the Funds to protect
capital gains in an appreciated security it owns, without being required
to actually sell that security. At times a Fund would like to establish a
position in a security upon which call options are available. By
purchasing a call option, a Fund is able to fix the cost of acquiring the
security, this being the cost of the downturn in the market, because the
Fund is only at risk for the amount of the premium paid for the call
option which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the potential
for capital appreciation above the exercise price should the underlying
security rise in value, and the secured put writer retains the risk of loss
should the underlying security decline in value. For the covered call
writer, substantial appreciation in the value of the underlying security
would result in the security being "called away." For the secured put
writer, substantial depreciation in the value of the underlying security
would result in the security being "put to" the writer. If a covered call
option expires unexercised, the writer realizes a gain in the amount of
the premium received. If the covered call option writer has to sell the
underlying security because of the exercise of a call option, it realizes a
gain or loss from the sale of the underlying security, with the proceeds
being increased by the amount of the premium.
If a secured put option expires unexercised, the writer realizes a gain
from the amount of the premium. If the secured put writer has to buy the
underlying security because of the exercise of the put option, the secured
put writer incurs an unrealized loss to the extent that the current market
value of the underlying security is less than the exercise price of the put
option. However, this would be offset in whole or in part by gain from
the premium received.
Over-the-Counter Options. The Funds may deal in over-the-counter
traded options ("OTC options"). OTC options are purchased from or
sold to securities dealers, financial institutions or other parties
("Counterparties") through direct bilateral agreement with the
Counterparty. In contrast to exchange listed options, which generally
have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term,
exercise price, premium, guarantees and security, are set by negotiation
of the parties. The Funds will only sell OTC options that are subject to a
buy-back provision permitting the Funds to require the Counterparty to
sell the option back to the Fund at a formula price within seven days.
The Funds expect generally to enter into OTC options that have cash
settlement provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make
or take delivery of the security, or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the
Fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the investment
manager must assess the creditworthiness of each such Counterparty or
any guarantor or credit enhancement of the Counterparty's credit to
determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with
U.S. government securities dealers recognized by the Federal Reserve
Bank of New York as "primary dealers" or broker/dealers, domestic or
foreign banks or other financial institutions which have received (or the
guarantors of the obligation of which have received) a short-term credit
rating of A-1 from S&P or P-1 from Moody's or an equivalent rating
from any nationally recognized statistical rating organization
("NRSRO"). The staff of the Securities and Exchange Commission (the
"SEC") currently takes the position that OTC options purchased by the
Fund, and portfolio securities "covering" the amount of the Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back
plus the in-the-money amount, if any) are illiquid, and are subject to the
Fund's limitation on investing in illiquid securities.
Options on Securities Indices. Each Fund may write call options on
securities indices, and each Fund may write put options on securities
indices, and each Fund may purchase call and put options on securities
indices, in an attempt to hedge against market conditions affecting the
value of securities that the Fund owns or intends to purchase, and not for
speculation. Through the writing or purchase of index options, a Fund
can achieve many of the same objectives as through the use of options
on individual securities. Options on securities indices are similar to
options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the securities index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the
exercise price of the option. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike
security options, all settlements are in cash and gain or loss depends
upon price movements in the market generally (or in a particular
industry or segment of the market), rather than upon price movements in
individual securities. Price movements in securities that the Fund owns
or intends to purchase will probably not correlate perfectly with
movements in the level of an index since the prices of such securities
may be affected by somewhat different factors and, therefore, the Fund
bears the risk that a loss on an index option would not be completely
offset by movements in the price of such securities.
When a Fund writes an option on a securities index, it will segregate,
and mark-to-market, eligible securities to the extent required by
applicable regulation. In addition, where the Fund writes a call option
on a securities index at a time when the contract value exceeds the
exercise price, the Fund will segregate and mark-to-market, until the
option expires or is closed out, cash or cash equivalents equal in value to
such excess.
A Fund may also deal in options on other appropriate indices as
available. Options on a securities index involve risks similar to those
risks relating to transactions in financial futures contracts described
below. Also, an option purchased by a Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
Financial Futures Contracts. The Funds may enter into financial futures
contracts for the future delivery of a financial instrument, such as a
security or the cash value of a securities index. This investment
technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions which otherwise might
affect adversely the value of securities or other assets which the Fund
holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the
cash value of an index called for by the contract at a specified price
during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the
securities or cash value of an index at a specified price during a specified
delivery period. In some cases, securities called for by a futures contract
may not have been issued at the time the contract was written.
Although some futures contracts by their terms call for the actual
delivery or acquisition of securities or other assets, in most cases a party
will close out the contractual commitment before delivery of the
underlying assets by purchasing (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for delivery
in the same month. Such a transaction, if effected through a member of
an exchange, cancels the obligation to make or take delivery of the
underlying securities or other assets. All transactions in the futures
market are made, offset or fulfilled through a clearing house associated
with the exchange on which the contracts are traded. A Fund will incur
brokerage fees when it purchases or sells contracts, and will be required
to maintain margin deposits. At the time a Fund enters into a futures
contract, it is required to deposit with its custodian, on behalf of the
broker, a specified amount of cash or eligible securities, called "initial
margin." The initial margin required for a futures contract is set by the
exchange on which the contract is traded. Subsequent payments, called
"variation margin," to and from the broker are made on a daily basis as
the market price of the futures contract fluctuates. The costs incurred in
connection with futures transactions could reduce a Fund's return.
Futures contracts entail risks. If the investment manager's judgment
about the general direction of markets is wrong, the overall performance
may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the
market prices of futures contracts may be affected by certain factors. If
participants in the futures market elect to close out their contracts
through offsetting transactions rather than meet margin requirements,
distortions in the normal relationship between the assets and futures
markets could result. Price distortions could also result if investors in
futures contracts decide to make or take delivery of underlying securities
or other assets rather than engage in closing transactions because of the
resultant reduction in the liquidity of the futures market. In addition,
because, from the point of view of speculators, the margin requirements
in the futures markets are less onerous than margin requirements in the
cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager may still not result in a successful
hedging transaction. If any of these events should occur, the Fund could
lose money on the financial futures contracts and also on the value of its
portfolio assets.
Options on Financial Futures Contracts. Each Fund may write call
options on financial futures contracts; each Fund may write put options
on financial futures contracts; and may purchase call and put options on
financial futures contracts. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position
in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. A Fund would be
required to deposit with its custodian initial margin and maintenance
margin with respect to put and call options on futures contracts written
by it. A Fund will establish segregated accounts or will provide cover
with respect to written options on financial futures contracts in a manner
similar to that described under "Options on Securities." Options on
futures contracts involve risks similar to those risks relating to
transactions in financial futures contracts described above. Also, an
option purchased by a Fund may expire worthless, in which case the
Fund would lose the premium paid therefor.
Lending Portfolio Securities. A Fund may lend its portfolio securities to
brokers, dealers and institutional investors who need to borrow securities
in order to complete certain transactions, such as covering short sales,
avoiding failures to deliver securities or completing arbitrage operations.
By lending its securities, a portfolio can increase its income by the
receipt of interest on the loan. Any gain or loss in the market value of
the securities loaned that might occur during the term of the loan would
accrue to the Fund. Securities' loans will be made on terms which
require that (a) the borrower pledge and maintain (on a daily basis) with
the Fund collateral consisting of cash, a letter of credit or United States
Government securities having a value at all times not less than 100% of
the value of the securities loaned, (b) the loan can be terminated by the
Fund at any time, (c) the Fund receives reasonable interest on the loan
which may include the Fund's investing any cash collateral in interest
bearing short-term investments), and (d) any distributions on the loaned
securities must be paid to the Fund. The Fund will not lend its securities
if, as a result, the aggregate of such loans exceeds 33% of the value of
the Fund's total assets. Loan arrangements made by a Fund will comply
with all other applicable regulatory requirements, including the rules of
the New York Stock Exchange, which require the borrower, after notice,
to redeliver the securities within the normal settlement time of five
business days. All relevant facts and circumstances, including the credit
worthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to
review by the Fund's Board of Directors. While voting rights may pass
with the loaned securities, if a material event occurs affecting an
investment on loan, the loan must be called and the securities voted.
Each Fund does not intend to lend any of its securities if as a result more
than 5% of the net assets of the Fund would be on loan.
Warrants. Each Fund may invest in warrants up to 5% of the value of its
respective net assets. The holder of a warrant has the right, until the
warrant expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a greater
potential for profit or loss than an equivalent investment in the
underlying security. Prices of warrants do not necessarily move,
however, in tandem with the prices of the underlying securities and are,
therefore, considered speculative investments. Warrants pay no
dividends and confer no rights other than a purchase option. Thus, if a
warrant held by a Fund were not exercised by the date of its expiration,
the Fund would lose the entire purchase price of the warrant.
Regulatory Restrictions. To the extent required to comply with
applicable regulation, when purchasing a futures contract or writing a
put option, a Fund will maintain eligible securities in a segregated
account. A Fund will use cover in connection with selling a futures
contract.
A Fund will not engage in transactions in financial futures contracts or
options thereon for speculation, but only in an attempt to hedge against
changes in interest rates or market conditions affecting the value of
securities that the Fund holds or intends to purchase.
PORTFOLIO TRANSACTIONS
Allocation of brokerage is supervised by Forester Capital Management,
Ltd. ("FCM").
The primary objective of FCM in placing orders for the purchase and
sale of securities for a Fund's portfolio is to obtain the most favorable
net results taking into account such factors as price, commission where
applicable, size of order, difficulty of execution and skill required of the
executing broker/dealer. FCM seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable)
through its familiarity with commissions charged on comparable
transactions, as well as by comparing commissions paid by a Fund to
reported commissions paid by others. FCM reviews on a routine basis
commission rates, execution and settlement services performed, making
internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is FCM's practice to place such orders with
broker/dealers who supply research, market and statistical information to
a Fund. The term "research, market and statistical information" includes
advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or
purchasers or sellers of securities; and analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy and the performance of accounts. FCM is authorized when
placing portfolio transactions for a Fund to pay a brokerage commission
in excess of that which another broker might charge for executing the
same transaction on account of the receipt of research, market or
statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the
security being traded unless, after exercising care, it appears that more
favorable results are available elsewhere.
In selecting among firms believed to meet the criteria for handling a
particular transaction, FCM may give consideration to those firms that
have sold or are selling shares of a Fund managed by FCM.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to FCM, it is the opinion of
FCM that such information only supplements its own research effort
since the information must still be analyzed, weighed and reviewed by
FCM's staff. Such information may be useful to FCM in providing
services to clients other than the Funds and not all such information is
used by FCM in connection with the Funds. Conversely, such
information provided to FCM by broker/dealers through whom other
clients of FCM effect securities transactions may be useful to FCM in
providing services to a Fund.
The Board members for a Fund review from time to time whether the
recapture for the benefit of a Fund of some portion of the brokerage
commissions or similar fees paid by a Fund on portfolio transactions is
legally permissible and advisable.
Each Fund's average portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio
securities owned during the year, excluding all securities with maturities
or expiration dates at the time of acquisition of one year or less. A higher
rate involves greater brokerage transaction expenses to a Fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed. Purchases and sales are made for a
Fund's portfolio whenever necessary, in management's opinion, to meet
a Fund's objective.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Funds will be determined as of the close of
regular trading (normally 4:00 p.m. Eastern time) on each day the New
York Stock Exchange is open for trading. The New York Stock
Exchange is open for trading Monday through Friday except New Year's
Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Additionally, if any of the aforementioned holidays falls
on a Saturday, the New York Stock Exchange will not be open for
trading on the succeeding Monday, unless unusual business conditions
exist, such as the ending of a monthly or the yearly accounting period.
Securities which are traded on a recognized stock exchange are valued at
the last sale price on the securities exchange on which such securities are
primarily traded or at last sale price on the national securities market.
Exchange-traded securities for which there were no transactions are
valued at the current bid prices. Securities traded on only over-the-
counter markets are valued on the basis of closing over-the-counter bid
prices. Put options are valued at the last sales price on the valuation date
if the last sales price is between the closing bid and asked prices.
Otherwise, put options are valued at the mean of the closing bid and
asked prices. Debt securities (other than short-term instruments) are
valued at prices furnished by a national pricing service, subject to review
by the Adviser and determination of the appropriate price whenever a
furnished price is significantly different from the previous day's
furnished price. Debt instruments maturing within 60 days are valued by
the amortized cost method. Any securities for which market quotations
are not readily available are valued at their fair value as determined in
good faith by the Board of Directors.
DIRECTORS AND OFFICERS OF THE COMPANY
As a Maryland corporation, the business and affairs of the Company are
managed by its officers under the direction of its Board of Directors.
The name, age, address, principal occupations during the past five years,
and other information with respect to each of the directors and officers
of the Company are as follows:
*Thomas H. Forester - Director , President and Treasurer. Mr. Forester,
40, has been President of Forester Capital Management, Ltd. (the
"Adviser") since February, 1999. Prior to that time, he was an officer
and portfolio manager from May 1997 through January 1999 with
Dreman Value Advisors, Inc. and its successor firm Scudder Kemper
Investments Inc.; and an officer and portfolio manager from 1995 to
1997 with Peregrine Capital Management Inc.; and an officer and
portfolio manager from 1992 to 1995 with Thomas White Asset
Management Inc.
*Kaye E. Forester - Director. Mrs. Forester, 39, is an investor. Her
address is c/o Forester Capital Management, Ltd., 612 Paddock Lane,
Libertyville, Illinois 60048.
Wayne A. Grudem - Director. Mr. Grudem, 51, has been a Professor at
Trinity International University for more than five years. His address is
c/o Forester Capital Management, Ltd., 612 Paddock Lane, Libertyville,
Illinois 60048.
Michael B. Kelley - Director. Mr. Kelley, 37, has been a Territory
Executive at WW Grainger, a national distribution firm to commercial
and industrial industries since 1995. From 1993 to 1995, Mr. Kelley
was an account executive for Lyons Safety, a national distribution firm
to commercial and industrial industries. His address is c/o Forester
Capital Management, Ltd., 612 Paddock Lane, Libertyville, Illinois
60048.
*Mr. and Mrs. Forester are directors who are "interested persons" of the
Funds (as defined in the Act.)
The Funds' standard method of compensating directors is to pay each
disinterested director an annual fee of $100 for services rendered,
including attending meetings of the Board of Directors. The Funds also
may reimburse their directors for travel expenses incurred in order to
attend meetings of the Board of Directors.
COMPENSATION TABLE
Total
Aggregate Retirement Estimated Annual Compensation
Name of Compensation Benefits Accrued Benefits Upon Company Paid
Person from Company As Fund Expenses Retirement to Directors
----- ------------ --------------- --------------- ----------
Thomas H. Forester $0 $0 $0 $0
Kaye E. Forester $0 $0 $0 $0
Wayne Grudem $0 $0 $0 $0
Michael Kelley $0 $0 $0 $0
As of June 30, 1999 , all officers and directors of the Company as a
group beneficially owned 5,000 shares of The Forester Small Cap Value
Fund or 100.00% of the then outstanding shares. Other than the
foregoing, The Forester Small Cap Value Fund was not aware of any
person who, as of June 30, 1999, owned of record or beneficially 5% or
more of the shares of The Forester Small Cap Value Fund.
As of June 30, 1999, all officers and directors of the Company as a
group beneficially owned 5,000 shares of The Forester Value Fund or
100.00% of the then outstanding shares. Other than the foregoing, The
Forester Value Fund was not aware of any person who, as of June 30,
1999, owned of record or beneficially 5% or more of the shares of The
Forester Value Fund.
INVESTMENT ADVISER AND ADMINISTRATOR
As a Maryland corporation, the business and affairs of the Company are
managed by its Board of Directors. The Company, on behalf of each of
the Funds, has entered into Investment Advisory Agreements (the
"Advisory Agreements") with Forester Capital Management, Ltd., 612
Paddock Lane, Libertyville, Illinois 60048. Pursuant to such Advisory
Agreements, the Adviser furnishes continuous investment advisory
services to each of the Funds. The Adviser does not advise any other
mutual funds, but may act as the investment adviser to individuals and
institutional clients. The Adviser was organized in February 1999. Mr.
Thomas H. Forester, the president and sole stockholder of the Adviser, is
the portfolio manager for each of the Funds and, as such, is responsible
for the day-to-day management of the portfolios. Mr. Forester has
managed each of the Funds' portfolios since inception and was an officer
and portfolio manager from May 1997 through February 1999 with
Dreman Value Advisors, Inc. and its successor firm Scudder Kemper
Investments Inc. where he ran over $1.4 billion in small cap value assets;
and an officer and portfolio manager from 1995 to 1997 with Peregrine
Capital Management Inc.; and an officer and portfolio manager from
1992 to 1995 with Thomas White Asset Management Inc.
The Adviser supervises and manages the investment portfolios of the
Funds and, subject to such policies as the Board of Directors of the
Company may determine, directs the purchase or sale of investment
securities in the day-to-day management of the Funds' investment
portfolios. Under the Advisory Agreements, the Adviser, at its own
expense and without reimbursement from the Funds, furnishes office
space and all necessary office facilities, equipment and executive
personnel for managing the investments of the Funds and pays the
salaries and fees of all officers and directors of the Funds (except the
fees paid to directors who are not interested persons of the Adviser). For
the foregoing, the Adviser receives a monthly fee from each Fund based
on that Fund's average daily net assets at the annual rate of 1% of
average daily net assets. The Adviser also acts as administrator and fund
accountant, providing clerical, compliance, regulatory and other
administrative services, as well as calculating each Fund's net asset
value.
The Funds pay all of their own expenses, including, without limitation,
the cost of preparing and printing the registration statement required
under the Securities Act of 1933 and any amendments thereto, the
expense of registering shares with the Securities and Exchange
Commission and in the various states, the printing and distribution costs
of prospectuses mailed to existing investors, reports to investors, reports
to government authorities and proxy statements, fees paid to directors
who are not interested persons of the Adviser, interest charges, taxes,
legal expenses, association membership dues, auditing services,
insurance premiums, brokerage commissions and expenses in connection
with portfolio transactions, fees and expenses of the custodian of the
Funds' assets, printing and mailing expenses and charges and expenses
of dividend disbursing agents, accounting services agents, registrars and
stock transfer agents.
The Adviser has voluntarily undertaken to waive the entire management
fee and to reimburse each Fund for all operating expenses, however, it
may reinstate all or a portion of such fees or discontinue reimbursement
at any time.
Each Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Company or by the vote of a majority (as defined in the
Act) of the outstanding shares of the applicable Fund, and (ii) by the
vote of a majority of the directors of the Company who are not parties to
the Advisory Agreement or interested persons of the Adviser, cast in
person at a meeting called for the purpose of voting on such approval.
Each Advisory Agreement provides that it may be terminated at any time
without the payment of any penalty, by the Board of Directors of the
Company or by vote of the majority of the applicable Fund's
stockholders on sixty (60) days' written notice to the Adviser, and by the
Adviser on the same notice to the applicable Fund, and that it shall be
automatically terminated if it is assigned.
The Advisory Agreements provide that the Adviser shall not be liable to
the Funds or its stockholders for anything other than willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or
duties. The Advisory Agreements also provide that the Adviser and their
officers, directors and employees may engage in other businesses, devote
time and attention to any other business whether of a similar or
dissimilar nature, and render services to others.
REDEMPTIONS
The Funds reserve the right to suspend redemptions during any period
when the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and to postpone
redemptions for any period during which (a) trading on the New York
Stock Exchange is restricted pursuant to rules and regulations of the
Securities and Exchange Commission, (b)the Securities and Exchange
Commission has by order permitted such suspension or(c) an emergency,
as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable
for a Fund to dispose of its securities or fairly to determine the value of
its net assets.
Each of the Funds has reserved the right to pay the redemption price of
its shares in assets other than cash.
CUSTODIAN
Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA
94104-4122, acts as custodian for the Funds. As such, Charles Schwab
& Co., Inc. holds all securities and cash of the Funds, delivers and
receives payment for securities sold, receives and pays for securities
purchased, collects income from investments and performs other duties,
all as directed by officers of the Company. Charles Schwab & Co., Inc.
does not exercise any supervisory function over the management of the
Funds, the purchase and sale of securities or the payment of
distributions to stockholders.
INDEPENDENT ACCOUNTANTS
_________________, ____ ________Avenue, Suite ____,
_____________, __ 600__, serves as the independent accountants for
the Funds.
DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan, which is described in the
Prospectus (see "The Distribution Plan"). Under the Plan, Forester
Capital Management, Ltd. provides the Directors for their review
promptly after the end of each quarter a written report setting forth all
amounts expended under the Plan, including all amounts paid to dealers
as distribution or service fees. In approving the Plan in accordance with
the requirements of Rule 12b-1, the Directors considered various factors,
including the amount of the distribution fee. The Directors determined
that there is a reasonable likelihood that the Plan will benefit each Fund
and its shareholders. The Plan may be terminated with respect to either
Fund by vote of a majority of the Directors who are not interested
persons, or by vote of a majority of the outstanding voting securities of
the Fund. Any change in the Plan that would materially increase the
distribution cost to a Fund requires shareholder approval; otherwise, it
may be amended by the Directors, including a majority of the Directors
who are not interested persons, by vote cast in person at a meeting called
for the purpose of voting upon such amendment.
So long as a Distribution Plan is in effect, the selection or nomination of
the Directors who are not interested persons is committed to the
discretion of such Directors. The Distribution Plan of a Fund may be
terminated with respect to either Fund by the Directors at any time on 60
days written notice without payment of any penalty by Forester Capital
Management, Ltd., by vote of a majority of the outstanding voting
securities of the Fund, or by vote of a majority of the Directors who are
not interested persons. The Distribution Plan will continue in effect for
successive one-year periods with respect to a Fund, if not sooner
terminated in accordance with its terms, provided that each such
continuance is specifically approved by the vote of the Directors,
including a majority of the Directors who are not interested persons.
ALLOCATION OF PORTFOLIO BROKERAGE
The Funds' securities trading and brokerage policies and procedures are
reviewed by and subject to the supervision of the Board of Directors of
the Company. Decisions to buy and sell securities for each Fund are
made by the Adviser subject to review by the Company's Board of
Directors. In placing purchase and sale orders for portfolio securities for
the Funds, it is the policy of the Adviser to seek the best execution of
orders at the most favorable price in light of the overall quality of
brokerage and research services provided, as described in this and the
following paragraph. Many of these transactions involve payment of a
brokerage commission by the Funds. In some cases, transactions are
with firms who act as principals of their own accounts. In selecting
brokers to effect portfolio transactions, the determination of what is
expected to result in best execution at the most favorable price involves
a number of largely judgmental considerations. Among these are the
Adviser's evaluation of the broker's efficiency in executing and clearing
transactions, block trading capability (including the broker's willingness
to position securities) and the broker's reputation, financial strength and
stability. The most favorable price to a Fund means the best net price
without regard to the mix between purchase or sale price and
commission, if any. Over-the-counter securities are generally purchased
and sold directly with principal market makers who retain the difference
in their cost in the security and its selling price (i.e. "markups" when the
market maker sells a security and "markdowns" when the market maker
buys a security). In some instances, the Adviser feels that better prices
are available from non-principal market makers who are paid
commissions directly. The Funds may place portfolio orders with
broker-dealers who place orders for, or recommend the purchase of,
shares of the Funds to clients (if the Adviser believes the commissions
and transaction quality are comparable to that available from other
brokers) and may allocate portfolio brokerage on that basis.
In allocating brokerage business for the Funds, the Adviser also takes
into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general
economic reports and information, computer hardware and software,
market quotations, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance
of its duties under the Advisory Agreements. Other clients of the
Adviser may indirectly benefit from the availability of these services to
the Adviser, and the Funds may indirectly benefit from services
available to the Adviser as a result of transactions for other clients. The
Advisory Agreements provide that the Adviser may cause the Fund to
pay a broker which provides brokerage and research services to the
Adviser a commission for effecting a securities transaction in excess of
the amount another broker would have charged for effecting the
transaction, if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of brokerage and
research services provided by the executing broker viewed in terms of
either the particular transaction or the Adviser's overall responsibilities
with respect to the Fund and the other accounts as to which he exercises
investment discretion.
TAXES
Each Fund annually will endeavor to qualify for and elect tax treatment
applicable to a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986 (the "Code"). Each Fund has so
qualified in each of its fiscal years. If a Fund fails to qualify as a
regulated investment company under Subchapter M in any fiscal year, it
will be treated as a corporation for federal income tax purposes. As such
the Fund would be required to pay income taxes on its net investment
income and net realized capital gains, if any, at the rates generally
applicable to corporations. Stockholders of a Fund that did not qualify as
a regulated investment company under Subchapter M would not be liable
for income tax on the Fund's net investment income or net realized
capital gains in their individual capacities. Distributions to stockholders,
whether from the Fund's net investment income or net realized capital
gains, would be treated as taxable dividends to the extent of current or
accumulated earnings and profits of the Fund.
Each Fund intends to distribute all of its net investment income and net
capital gain each fiscal year. Dividends from net investment income
(including short-term capital gain) are taxable to investors as ordinary
income, whereas distributions of net realized long-term capital gains are
taxable as long-term capital gains regardless of the stockholder's holding
period for the shares. Such dividends and distributions are taxable to
stockholders, whether received in cash or in additional shares of the
respective Funds. A portion of the Funds' income distributions may be
eligible for the 70% dividends-received deduction for domestic
corporate stockholders.
Any dividend or capital gain distribution paid shortly after a purchase of
shares of a Fund will have the effect of reducing the per share net asset
value of such shares by the amount of the dividend or distribution.
Furthermore, if the net asset value of the shares of a Fund immediately
after a dividend or distribution is less than the cost of such shares to the
investor, the dividend or distribution will be taxable to the investor.
Redemption of shares will generally result in a capital gain or loss for
income tax purposes. The tax treatment of such capital gain or loss will
depend upon the stockholder's holding period. However, if a loss is
realized on shares held for six months or less, and the stockholder
received a capital gain distribution during that period, then such loss is
treated as along-term capital loss to the extent of the capital gain
distribution received.
Investors may also be subject to state and local taxes.
Each Fund will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividend payments and redemption
and exchange proceeds if an investor fails to furnish such Fund with his
social security number or other tax identification number or fails to
certify under penalty of perjury that such number is correct or that he is
not subject to backup withholding due to the underreporting of income.
The certification form is included as part of the share purchase
application and should be completed when the account is opened.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on an investor.
Investors are urged to consult with their respective tax advisers for a
complete review of the tax ramifications of an investment in a Fund.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered investment
companies, such as the Funds, to operate without an annual meeting of
stockholders under specified circumstances if an annual meeting is not
required by the Act. The Company has adopted the appropriate
provisions in its Bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Act.
The Company's Bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect
a successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to not less than
ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Company shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of
any director. Whenever ten or more stockholders of record who have
been such for at least six months preceding the date of application, and
who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the Company's Secretary in writing,
stating that they wish to communicate with other stockholders with a
view to obtaining signatures to a request for a meeting as described
above and accompanied by a form of communication and request which
they wish to transmit, the Secretary shall within five business days after
such application either: (1) afford to such applicants access to a list of
the names and addresses of all stockholders as recorded on the books of
the Funds; or (2) inform such applicants as to the approximate number of
stockholders of record and the approximate cost of mailing to them the
proposed communication and form of request.
If the Secretary elects to follow the course specified in clause(2) of the
last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all stockholders of record at their
addresses as recorded on the books unless within five business days after
such tender the Secretary shall mail to such applicants and file with the
Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority of
the Board of Directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
After opportunity for hearing upon the objections specified in the written
statement so filed, the Securities and Exchange Commission may, and if
demanded by the Board of Directors or by such applicants shall, enter an
order either sustaining one or more of such objections or refusing to
sustain any of them. If the Securities and Exchange Commission shall
enter an order refusing to sustain any of such objections, or if, after the
entry of an order sustaining one or more of such objections, the
Securities and Exchange Commission shall find, after notice and
opportunity for hearing, that all objections so sustained have been met,
and shall enter an order so declaring, the Secretary shall mail copies of
such material to all stockholders with reasonable promptness after the
entry of such order and the renewal of such tender.
CAPITAL STRUCTURE
The Company's authorized capital consists of 1,000,000,000 shares of
Common Stock, $0.0001 par value. The Common Stock is divisible into
an unlimited number of "series," each of which is a separate Fund.
Stockholders are entitled: (i) to one vote per full share of Common
Stock; (ii) to such distributions as may be declared by the Company's
Board of Directors out of funds legally available; and (iii) upon
liquidation, to participate ratably in the assets available for distribution.
There are no conversion or sinking fund provisions applicable to the
shares, and the holders have no preemptive rights and may not cumulate
their votes in the election of directors. Consequently the holders of more
than 50% of the shares of Common Stock voting for the election of
directors can elect the entire Board of Directors and, in such event, the
holders of the remaining shares voting for the election of directors will
not be able to elect any person or persons to the Board of Directors.
Shares of Common Stock are redeemable and are transferable. All
shares issued and sold by the Funds will be fully paid and nonassessable.
Fractional shares of Common Stock entitle the holder to the same rights
as whole shares of Common Stock.
Pursuant to the Company's Articles of Incorporation, the Board of
Directors may classify or reclassify any unissued shares of the Funds and
may designate or redesignate the name of any outstanding class of shares
of the Funds. As a general matter, shares are voted in the aggregate and
not by class, except where class voting is required by Maryland law or
the Act (e.g., a change in investment policy or approval of an
investment advisory agreement). All consideration received from the
sale of shares of any class of the Funds' shares, together with all income,
earnings, profits and proceeds thereof, belong to that class and are
charged with the liabilities in respect of that class and of that class' share
of the general liabilities of the Funds in the proportion that the total net
assets of the class bear to the total net assets of all classes of the Funds'
shares. The net asset value of a share of any class is based on the assets
belonging to that class less the liabilities charged to that class, and
dividends may be paid on shares of any class of Common Stock only out
of lawfully available assets belonging to that class. In the event of
liquidation or dissolution of the Funds, the holders of each class would
be entitled, out of the assets of the Funds available for distribution, to
the assets belonging to that class.
SHAREHOLDER REPORTS
Investors will be provided at least semi-annually with a report showing
each Fund's portfolio and other information and annually after the close
of the Funds' fiscal year, which ends December 31, with an annual report
containing audited financial statements. An individual account
statement will be sent to the investor by the Transfer Agent after each
purchase, including reinvestment of dividends, or redemption of shares
of the Funds. Each investor will also receive an annual statement after
the end of the calendar year listing all transactions in shares of the Funds
during such year.
Investors who have questions about their respective accounts should call
the Transfer Agent at 1-847-573-8399. In addition, investors who wish
to make a change in their address of record or a change in the manner in
which dividends are received may also do so by calling the Transfer
Agent at 1-847-573-8399. Investors who have questions regarding the
investment strategy and historical performance of the Funds should call
Forester Capital Management, Ltd. at 1-847-573-8399 and ask to speak
to a member of the portfolio management group. Alternatively,
investors may also write to The Forester Funds, Inc., 612 Paddock Lane,
Libertyville, Illinois 60048.
PERFORMANCE INFORMATION
Each of the Funds may provide from time to time in advertisements,
reports to stockholders and other communications with investors its
average annual total return and its total return. Average annual total
return measures both the net investment income generated by, and the
effect of any realized or unrealized appreciation or depreciation of, the
underlying investments in a Fund's investment portfolio. A Fund's
average annual total return figures are computed in accordance with the
standardized method prescribed by the Securities and Exchange
Commission by determining the average annual compounded rates of
return over the periods indicated, that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end
of the period of a hypothetical $1,000
payment made at the beginning of such
period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the applicable reinvestment dates , and
(ii) deducts all recurring fees, such as advisory fees, charged as expenses
to all investor accounts.
Total return is the cumulative rate of investment growth which assumes
that income dividends and capital gains are reinvested. It is determined
by assuming a hypothetical investment at the net asset value at the
beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the
investment at the net asset value as of the end of the specified time
period, subtracting the amount of the original investment, and dividing
this amount by the amount of the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100.
In reports or other communications to investors and in advertising
material, a Fund may compare its performance to the Consumer Price
Index, the Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index, the Standard & Poor's 600 Stock Index, the Russell 2000
Stock Index, the Russell 2000 Value Stock Index, the Russell 1000
Stock Index, the Russell 1000 Value Stock Index and to the performance
of mutual fund indexes as reported by Lipper Analytical Services,
Inc.("Lipper"), CDA Investment Technologies, Inc. ("CDA") or
Morningstar, Inc. ("Morningstar"), three widely recognized independent
mutual fund reporting services. Lipper, CDA and Morningstar
performance calculations include reinvestment of all capital gain and
income dividends for the periods covered by the calculations. The
Consumer Price Index is generally considered to be a measure of
inflation. The Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index, the Russell 1000 Stock Index, and the Russell 1000 Value
Stock Index are unmanaged indices of common stocks which are
considered to be generally representative of the United States stock
market. The Standard & Poor's 600 Stock Index, the Russell 2000 Stock
Index, and the Russell 2000 Value Stock Index are unmanaged indices of
common stocks which are considered to be generally representative of
the United States small stock market. The market prices and yields of
these stocks will fluctuate. A Fund also may quote performance
information from publications such as The Wall Street Journal,
Kiplinger's Personal Finance Magazine, Money Magazine, Forbes, Smart
Money, Barron's, Worth Magazine, USA Today, and local newspapers.
LEGAL PROCEEDINGS
The Company is not aware of any litigation to which it is a party.
DESCRIPTION OF SECURITIES RATINGS
The Funds may invest in non-convertible bonds and debentures assigned
one of the two highest ratings of either Standard & Poor's Corporation
("Standard & Poor's") or Moody's Investors Service, Inc.("Moody's").
The Funds may invest in non-convertible bonds and debentures assigned
at least an investment grade by Standard & Poor's or Moody's(or unrated
but deemed by the Adviser to be of comparable quality), and up to 5% of
the assets of each of The Funds may be invested in convertible bonds
and debentures rated below investment grade. The Funds may invest in
commercial paper and commercial paper master notes rated A-2 or better
by Standard & Poor's or P-2 by Moody's. A brief description of the
ratings symbols and their meanings follows.
Standard & Poor's Debt Ratings. A Standard & Poor's corporate debt
rating is a current assessment of the creditworthiness of an obligor with
respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform any audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness
of the obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of
the obligation in the event of bankruptcy, reorganization
or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights;
Investment Grade
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation
and `C' the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
BB - Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BBB-` rating.
B - Debt rated 'B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The 'B' rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied 'BB' or 'BB-` rating.
CCC - Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and repay
principal. The 'CCC' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'B' or 'B-` rating.
CC - Debt rated 'CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C - Debt rated 'C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The `C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no interest is
being paid.
D - Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Moody's Bond Ratings.
Investment Grade
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large, or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude, or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured).Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Speculative Grade
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issuesmay
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each of the foregoing
generic rating classifications. The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the
company ranks in the lower end of its generic rating category.
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The three highest
categories are as follows:
A-1. This highest category indicates that the degree of safety regarding
timely payment is strong. Those issuers determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)designation.
A-2. Capacity for timely payment on issues with this designation is
satisfactory. However the relative degree of safety is not as high as for
issuers designated "A-1".
A-3. Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying a higher designation.
Moody's Commercial Paper Ratings. Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's
industry or industries which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term
debt; (6) trend of earnings over a period of ten years;(7) financial
strength of a parent company and the relationships which exist with the
issuer; and (8) recognition by the management of obligations which
maybe present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative differences in these
factors determine whether the issuer's commercial is rated P-1, P-2 or P-3.
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Registrant's Articles of Incorporation, as amended.
(b) Registrant's Bylaws.
(c) None.
(d)(i) Investment Advisory Agreement with Forester Capital
Management, Ltd. on behalf of The Forester Small Cap
Value Fund.
(d)(ii) Investment Advisory Agreement with Forester Capital
Management, Ltd. on behalf of The Forester Value Fund .
(e) None.
(f) None.
(g) Custodian Agreement with Charles Schwab.
(h) None
(i) Opinion of Forester & Associates, counsel for Registrant.
(j) None.
(k) None.
(l) Subscription Agreement.
(m) Distribution Plan.
(n) None
(o) None.
Item 24. Persons Controlled by or under Common
Control with Registrant
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any other person.
Item 25. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or canceled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
The corporation shall indemnify directors, officers, employees
and agents of the corporation against judgments, fines, settlements and
expenses to the fullest extent authorized, and in the manner permitted by
applicable federal and state law.
The corporation shall advance the expenses of its directors,
officers, employees and agents who are parties to any Proceeding to the
fullest extent authorized, and in the manner permitted, by applicable
federal and state law. For purposes of this paragraph, "Proceeding"
means any threatened, pending or contemplated action, suit or
proceeding, whether civil, criminal, administrative, or investigative.
This Section 7 of Article VII constitutes vested rights in favor of
all directors, officers, employees and agents of the corporation. Neither
the amendment nor repeal of this Article, nor the adoption or amendment
of any other provision of the Bylaws or charter of the corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of this Article with respect to any act or failure to act which
occurred prior to such amendment, repeal or adoption. For purposes of
this Section 7, the terms "director" and "officer" have the same meaning
ascribed to such terms in Section 2-418 of the Maryland General
Corporation Law.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person or 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, 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 is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 26. Business and Other Connections of Investment
Adviser
Incorporated by reference to pages 10 through 14 of the
Statement of Additional Information pursuant to Rule 411 under the
Securities Act of 1933.
Item 27. Principal Underwriters
Not Applicable.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Registrant.
Item 29. Management Services
All management-related services are performed by the Adviser.
Item 30. Undertakings
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to each person to whom a
prospectus is delivered.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Libertyville and
State of Illinois on the 7th day of May, 1999.
THE FORESTER FUNDS, INC.
(Registrant)
/s/ Thomas H. Forester
Thomas H. Forester,
President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Name Title Date
/s/ Thomas H. Forester President and Treasurer (Principal May 7, 1999
- - --------------------- Executive, Financial and Accounting
Thomas H. Forester Officer) and a Director
/s/ Kaye E. Forester Director and Secretary May 7, 1999
- - ---------------------
Kaye E. Forester
/s/ Wayne A. Grudem Director May 7, 1999
- - ---------------------
Wayne A. Grudem
/s/ Michael B. Kelley Director May 7, 1999
- - ---------------------
Michael B. Kelley
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(a) Registrant's Articles of Incorporation
(b) Registrant's Bylaws
(c) None
(d)(i) Investment Advisory Agreement with Forester Capital
Management, Ltd. on behalf of The Forester Small Cap Value Fund
(d)(ii) Investment Advisory Agreement with Forester Capital
Management, Ltd., on behalf of The Forester Value Fund
(e) None
(f) None
(g) Custodian Agreement with Charles Schwab
(h) None
(i) Opinion of Forester & Associates, counsel for Registrant
(j) None
(k) None
(l) Subscription Agreement
(m) Distribution Plan
(n) None
(o) None
ARTICLES OF INCORPORATION
OF
THE FORESTER FUNDS, INC.
The undersigned sole incorporator, being at least
eighteen years of age, hereby adopts the following Articles of
Incorporation for the purpose of forming a Maryland corporation under
the general laws of the State of Maryland:
ARTICLE I
The name of the corporation (hereinafter called "Corporation") is:
THE FORESTER FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are
to engage in any lawful business for which corporations may be
organized under the Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares of capital stock
which the Corporation shall have authority to issue is One Billion
(1,000,000,000) shares, all with a par value of One Hundredth of a Cent
($0.0001) per share, to be known and designated as "Common Stock."
The aggregate par value of the authorized shares of the Corporation is
One Hundred Thousand Dollars ($100,000). The Board of Directors of
the Corporation may increase or decrease the aggregate number of
authorized shares of Common Stock pursuant to Section 2-105 of the
Maryland General Corporation Law or any successor provision thereto.
The Board of Directors of the Corporation may classify or reclassify any
unissued shares of Common Stock and may designate or redesignate the
name of any class of outstanding Common Stock. The Board of
Directors may fix the number of shares of Common Stock in any such
class and, except as specifically set forth in these Articles of
Incorporation, may set or change the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms or conditions of redemption of any class of
unissued shares of Common Stock. A total of Seven Hundred Million
(700,000,000) shares of Common Stock shall initially be classified as
follows:
Class Fund Shares
A The Forester Small Cap Value Fund 200,000,000
B The Forester Value Fund 500,000,000
B. Notwithstanding the authority granted to the
Board of Directors of the Corporation with respect to the designation,
classification and reclassification of the unissued shares of Common
Stock of the Corporation, each class of Common Stock shall have the
following preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the class, shall be entitled to one (1) vote for
each full share (and a fractional vote for each fractional share) then
standing in his or her name on the books of the Corporation; provided,
however, that shares of any class of Common Stock owned, other than in
a fiduciary capacity, by the Corporation or by another corporation in
which the Corporation owns shares entitled to cast a majority of all the
votes entitled to be cast by all shares outstanding and entitled to vote of
such corporation, shall not be voted at any meeting of stockholders. On
any matter submitted to a vote of stockholders all shares of the
Corporation's Common Stock then issued and outstanding and entitled to
vote, irrespective of the class, shall be voted in the aggregate and not by
class, except that: (a) when otherwise expressly provided by the
Maryland General Corporation Law, the Investment Company Act of
1940 and the regulations thereunder, or other applicable law, shares shall
be voted by individual class; and (b) when the matter to be acted upon
does not affect any interest of a particular class of the Corporation's
Common Stock, then only shares of the affected class shall be entitled to
vote thereon. At all elections of directors of the Corporation, each
stockholder shall be entitled to vote the shares owned of record by him
for as many persons as there are directors to be elected, but shall not be
entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation
for the issue or sale of shares of any class of the Corporation's Common
Stock, together with all assets in which such consideration is invested
and reinvested, income, earnings, profits and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation thereof, and
any such funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to
the class of the Corporation's Common Stock with respect to which such
assets, payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be so handled
upon the books of account of the Corporation. Such consideration,
assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any
assets derived from any reinvestment of such proceeds in whatever form,
are herein referred to as "assets belonging to" such class. Any assets,
income, earnings, profits and proceeds thereof, funds or payments which
are not readily attributable to any particular class of the Corporation's
Common Stock shall be allocable among any one or more of the classes
of the Corporation's Common Stock in such manner and on such basis as
the Board of Directors, in its sole discretion, shall deem fair and
equitable. The power to make such allocations may be delegated by the
Board of Directors from time to time to one or more of the officers of the
Corporation.
3. The assets belonging to any class of the
Corporation's Common Stock shall be charged with the liabilities in
respect of such class of the Corporation's Common Stock, and shall also
be charged with the share of the general liabilities of the Corporation
allocated to such class determined as hereinafter provided. The
determination of the Board of Directors shall be conclusive as to: (a) the
amount of such liabilities, including the amount of accrued expenses and
reserves; (b) any allocation of the same to a given class; and (c) whether
the same are allocable to one or more classes. The liabilities so
allocated to a class are herein referred to as "liabilities belonging to"
such class. Any liabilities which are not readily attributable to any
particular class of the Corporation's Common Stock shall be allocable
among any one or more of the classes of the Corporation's Common
Stock in such manner and on such basis as the Board of Directors, in its
sole discretion, shall deem fair and equitable. The power to make such
allocations may be delegated by the Board of Directors from time to time
to one or more of the officers of the Corporation.
4. Shares of a class of the Corporation's Common
Stock shall be entitled to such dividends and distributions, in stock or in
cash or both, as may be declared from time to time by the Board of
Directors, acting in its sole discretion, with respect to such class;
provided, however, that dividends and distributions on shares of a class
of the Corporation's Common Stock shall be paid only out of the
lawfully available "assets belonging to" such class as such phrase is
defined in this Article IV.
5. In the event of the liquidation or dissolution of
the Corporation, stockholders of a class of the Corporation's Common
Stock shall be entitled to receive, as a class, out of the assets of the
Corporation available for distribution to stockholders, but other than
general assets not belonging to any particular class, the assets belonging
to such class, and the assets so distributable to the holders of any class of
the Corporation's Common Stock shall be distributed among such
holders in proportion to the number of shares of such class of the
Corporation's Common Stock held by them and recorded on the books of
the Corporation. In the event that there are any general assets not
belonging to any particular class of the Corporation's Common Stock
and available for distribution, such distribution shall be made to the
holders of all classes of the Corporation's Common Stock in proportion
to the net asset value of the respective class of the Corporation's
Common Stock determined as set forth in the Bylaws of the Corporation.
6. Each share of each class of Common Stock of
the Corporation now or hereafter issued shall be subject to redemption
by the stockholders of the Corporation and, subject to the suspension of
such right of redemption as provided in the Bylaws, each holder of
shares of any class of Common Stock of the Corporation, upon request
to the Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer and after
complying with any other redemption procedures established by the
Board of Directors, shall be entitled to require the Corporation to redeem
all or any part of the shares of such class of Common Stock standing in
the name of such holder on the books of the Corporation at the net asset
value of such shares. In the event that no certificates have been issued to
the holder, the Board of Directors may require the submission of a stock
power with an appropriate signature guarantee. All shares of any class
of its Common Stock redeemed by the Corporation shall be deemed to
be cancelled and restored to the status of authorized but unissued shares.
The method of computing the net asset value of shares of each class of
Common Stock of the Corporation for purposes of the issuance and sale,
or redemption, thereof, as well as the time as of which such net asset
value shall be computed, shall be as set forth in the Bylaws. Payment of
the net asset value of each share of each class of Common Stock of the
Corporation surrendered to it for redemption shall be made by the
Corporation within seven (7) days after surrender of such stock to the
Corporation for such purpose, or within such other reasonable period as
may be determined from time to time by the Board of Directors. The
Board of Directors of the Corporation may, upon reasonable notice to
the stockholders of the Corporation, impose a fee for the privilege of
redeeming shares, such fee to be not in excess of one percent (1.0%) of
the proceeds of any such redemption. The Board shall have
discretionary authority to rescind the imposition of any such fee and to
reimpose the redemption fee from time to time upon reasonable notice.
Any fee so imposed shall be uniform as to all stockholders.
7. If, at any time when a request for transfer or
redemption of the shares of any class of Common Stock is received by
the Corporation or its agent, the value (computed as set forth in the
Bylaws) of the shares of such class in a stockholder's account is less than
Five Hundred Dollars ($500.00), after giving effect to such transfer or
redemption, the Corporation may cause the remaining shares of such
class in such stockholder's account to be redeemed in accordance with
such procedures as the Board of Directors shall adopt.
8. Each holder of shares of the Corporation's
Common Stock, irrespective of the class, may, upon request to the
Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer and after
complying with any other conversion procedures established by the
Board of Directors, convert such shares into shares of any other class of
the Corporation's Common Stock on the basis of their relative net asset
values (determined in accordance with the Bylaws of the Corporation)
less a conversion charge or discount determined by the Board of
Directors. Any fee so imposed shall be uniform as to all stockholders.
9. No holder of shares of any class of Common
Stock of the Corporation shall, as such holder, have any right to
purchase or subscribe for any shares of any class of the Common Stock
of the Corporation which it may issue or sell (whether out of the number
of shares authorized by these Articles of Incorporation, or out of any
shares of any class of Common Stock of the Corporation acquired by it
after the issue thereof, or otherwise) other than such right, if any, as the
Board of Directors, in its discretion, may determine.
ARTICLE V
The number of directors constituting the Board of
Directors shall initially be four (4), and the names of the initial directors
are Thomas H. Forester, Kaye E. Forester, Wayne A. Grudem, and
Michael B. Kelley. Thereafter, the number of directors shall be such
number as is fixed from time to time by the Bylaws.
ARTICLE VI
The Corporation reserves the right to enter into, from
time to time, investment advisory and administration agreements
providing for the management and supervision of the investments of the
Corporation, the furnishing of advice to the Corporation with respect to
the desirability of investing in, purchasing or selling securities or other
property and the furnishing of clerical and administrative services to the
Corporation. Such agreements shall contain such other terms, provisions
and conditions as the Board of Directors of the Corporation may deem
advisable and as are permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, transfer
agents, registrars and/or disbursing agents for the stock and assets of the
Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such custodian, transfer agent,
registrar and/or disbursing agent.
ARTICLE VII
The following provisions define, limit and regulate the
powers of the Corporation, the Board of Directors and the stockholders:
A. The Corporation may issue and sell shares of
any class of its own Common Stock in such amounts and on such terms
and conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the laws of the State of
Maryland, the Bylaws and these Articles of Incorporation, as its Board
of Directors may determine; provided, however, that the consideration
per share to be received by the Corporation upon the sale of any shares
of any class of its Common Stock shall not be less than the net asset
value per share of such class of Common Stock outstanding at the time
as of which the computation of said net asset value shall be made.
B. The Board of Directors may, in its sole and
absolute discretion, reject in whole or in part orders for the purchase of
shares of any class of Common Stock and may, in addition, require such
orders to be in such minimum amounts as it shall determine.
C. The holders of any fractional shares of any class
Common Stock shall be entitled to the payment of dividends on such
fractional shares, to receive the net asset value thereof upon redemption,
to share in the assets of the Corporation upon liquidation and to exercise
voting rights with respect thereto.
D. The Board of Directors shall have full power in
accordance with good accounting practice: (a) to determine what
receipts of the Corporation shall constitute income available for payment
of dividends and what receipts shall constitute principal and to make
such allocation of any particular receipt between principal and income as
it may deem proper; and (b) from time to time, in its discretion (i) to
determine whether any and all expenses and other outlays paid or
incurred (including any and all taxes, assessments or governmental
charges which the Corporation may be required to pay or hold under any
present or future law of the United States of America or of any other
taxing authority therein) shall be charged to or paid from principal or
income or both, and (ii) to apportion any and all of said expenses and
outlays, including taxes, between principal and income.
E. The Board of Directors shall have the power to
determine from time to time whether and to what extent and at what time
and places and under what conditions and regulations the books,
accounts and documents of the Corporation or any of them, shall be open
to the inspection of stockholders, except as otherwise provided by
applicable law; and except as so provided, no stockholder shall have any
right to inspect any book, account or document of the Corporation unless
authorized to do so by resolution of the Board of Directors.
ARTICLE VIII
The address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 300 Lombard
Street, Baltimore, Maryland 21202.
ARTICLE IX
The address of the initial registered office is c/o The Corporation Trust
Incorporated, 300 Lombard Street, Baltimore, Maryland 21202.
ARTICLE X
The name of the initial registered agent at such address is The
Corporation Trust, Incorporated, a Maryland corporation.
ARTICLE XI
The name and address of the sole incorporator is:
Name Address
Thomas H. Forester c/o Forester Capital Management, Ltd.
612 Paddock Lane
Libertyville, IL 60048
IN WITNESS WHEREOF, the undersigned incorporator
who executed the foregoing Articles of Incorporation hereby
acknowledges the same to be his act and further acknowledges that, to
the best of his knowledge, the matters and facts set forth therein are true
in all material respects under the penalties of perjury.
Dated this 31st day of March, 1999.
Thomas H. Forester
Sole Incorporator
BYLAWS
OF
THE FORESTER FUNDS, INC.
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of
stockholders shall beheld at such location as the Board of Directors shall
direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election
of directors and the transaction of such other business as may properly
come before it, if the annual meeting shall be held, shall be held during
the month of May of each year (or during such other month as the Board
of Directors shall determine), commencing in 1999, at such date and
time as shall be fixed by the Board of Directors and stated in the notice
of such meeting, but in no event more than one hundred twenty (120)
days after the occurrence of the event requiring the meeting to elect
directors. Any business of the corporation may be transacted at the
annual meeting without being specifically designated in the notice,
except such business as is specifically required by statute to be stated in
the notice.
(b) The corporation shall not be required to hold an
annual meeting in any year in which the election of directors is not
required to be acted on by stockholders under the Investment Company
Act of 1940.
Section 3. Special Meeting. Special meetings of the
stockholders maybe called by the board of directors, the president, any
vice president, or the secretary, and shall be called by the secretary upon
the written request of the holders of shares entitled to not less than ten
percent (10%) of all the votes entitled to be cast at such meeting;
provided that such holders prepay the costs to the corporation of
preparing and mailing the notice of the meeting. The business transacted
at any special meeting of stockholders shall be limited to the purposes
stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10)
days nor more than ninety (90) days before the date of every
stockholders' meeting, the secretary shall give to each stockholder
entitled to vote at such meeting and to each other stockholder entitled to
notice of such meeting under applicable law, written or printed notice
stating the time and place of the meeting, and in the case of a special
meeting (or where required by applicable law) the purpose or purposes
for which the meeting is called, either by mail, by presenting it to him
personally or by leaving it at his residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the stockholder at his post office address
as it appears on the records of the corporation, with postage thereon
prepaid.
Section 5. Quorum. At any meeting of stockholders
the presence in person or by proxy of stockholders entitled to cast a
majority of the votes there at shall constitute a quorum; but this section
shall not affect any requirement under statute or under the charter for the
vote necessary for the adoption of any measure. If at any meeting a
quorum is not present or represented, the chairman of the meeting or the
holders of a majority of the stock present or represented may adjourn the
meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present or represented. At such adjourned
meeting at which a quorum is present or represented, any business may
be transacted which might have been transacted at the meeting as
originally called.
Section 6. Stock Entitled to Vote. Each issued share of
each class of stock shall be entitled to vote at any meeting of
stockholders except shares owned, other than in a fiduciary capacity, by
the corporation or by another corporation in which the corporation owns
shares entitled to cast a majority off all the votes entitled to be cast by all
shares outstanding and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class
of stock entitled to vote at a meeting of stockholders shall be entitled to
one vote one each matter submitted to a vote. In all elections for
directors every stockholder shall have the right to vote the shares of each
class owned of record by him for as many persons as there are directors
to be elected, but shall not be entitled to exercise any right of cumulative
voting. A stock holder may vote the shares owned of record by him
either in person or by proxy executed in writing by the stockholder or by
his authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters, the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman
of the meeting. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize any action which may properly come
before the meeting, unless a greater number is required by statute or by
the charter.
Section 8. Informal Action. Any action required or
permitted to betaken at any meeting of stockholders may be taken
without a meeting, if a consent in writing, setting forth such action, is
signed by all the stockholders entitled to vote on the subject matter
thereof and such consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the
corporation shall be four (4). By vote of a majority of the entire board of
directors, the number of directors fixed by the charter or by these bylaws
may be increased or decreased from time to time to not more than fifteen
nor less than three, but the tenure of office of a director shall not be
affected by any decrease in the number of directors so made by the
board.
Section 2. Election and Qualification. Until the first
annual meeting of stockholders and until successors are duly elected and
qualify, the board of directors shall consist of the persons named as such
in the charter. At the first annual meeting of stockholders, the
stockholders shall elect directors to hold office until their successors are
elected and qualify. A director need not be a stockholder of the
corporation, but must be eligible to serve as a director of a registered
investment company under the Investment Company Act of 1940.
Section 3. Vacancies. Any vacancy on the board of
directors occurring between stockholders' meetings called for the
purpose of electing directors maybe filled, if immediately after filling
any such vacancy at least two-thirds of the directors then holding office
shall have been elected to such office at an annual or special meeting of
stockholders, in the following manner: (i) for a vacancy occurring other
than by reason of an increase in directors, by a majority of the remaining
members of the board, although such majority is less than a quorum; and
(ii) for a vacancy occurring by reason of an increase in the number of
directors, by action of a majority of the entire board. A director elected
by the board 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. If by reason of the death, disqualification or bona fide
resignation of any director or directors, more than sixty percent (60%) of
the members of the board of directors are interested persons of the
corporation, as defined in the Investment Company Act of 1940, such
vacancy shall be filled within thirty(30) days if it may be filled by the
board, or within sixty (60) days if a vote of stockholders is required to
fill such vacancy; provided that such vacancy maybe filled within such
longer period as the Securities and Exchange Commission may prescribe
by rules and regulations, upon its own motion or by order upon
application. In the event that at any time less than a majority of the
directors were elected by the stockholders, the board or proper officer
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of the stockholders for the purpose of
electing directors to fill any existing vacancies in the board, unless the
Securities and Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the
corporation shall be managed under the direction of the board of
directors, which may exercise all of the powers of the corporation,
except such as are by law or by the charter or by these bylaws conferred
upon or reserved to the stockholders.
Section 5. Removal.
(a) At any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote
of the holders of a majority of the votes entitled to be cast thereon,
remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors.
(b) Notwithstanding any other provisions of these
bylaws, the secretary of the corporation shall promptly call a special
meeting of stockholders for the purpose of voting upon the question of
removal of any director upon the written request of the holders of shares
entitled to not less than ten percent (10%) of all the votes entitled to be
cast at such meeting.
(c) Whenever ten or more stockholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's secretary in writing,
stating that they wish to communicate with other stockholders with a
view to obtaining signatures to a request for a meeting pursuant to
subsection (b) above and accompanied by a form of communication and
request which they wish to transmit, the secretary shall within five
business days after such application either: (1) afford to such applicants
access to a list of the names and addresses of all stockholders as
recorded on the books of the corporation; or (2) inform such applicants
as to the approximate number of stockholders of record and the
approximate cost of mailing to them the proposed communication and
form of request.
(d) If the secretary elects to follow the course specified
in clause(2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all stockholders of record at their
addresses as recorded on the books, unless within five (5) business days
after such tender the secretary shall mail to such applicants and file with
the Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority of
the board of directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
After opportunity for hearing upon the objections
specified in the written statement so filed, the Securities and Exchange
Commission may, and if demanded by the board of directors or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Securities and
Exchange Commission shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more
of such objections, the Securities and Exchange Commission shall find,
after notice and opportunity for hearing, that all objections so sustained
have been met, and shall enter an order so declaring, the secretary shall
mail copies of such material to all shareholders with reasonable
promptness after the entry of such order and the renewal of such
Section 6. Place of Meetings. Meetings of the board of
directors, regular or special, may be held at any place in or out of the
State of Maryland as the board may from time to time determine or as
may be specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The
first meeting of each newly elected board of directors shall be held
without notice immediately after and at the same general place as the
annual meeting of the stockholders, for the purpose of organizing the
board, electing officers and transacting any other business that may
properly come before the meeting.
Section 8. Regular Meetings. Regular meetings of the
board of directors may be held without notice at such time and place as
shall from time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the
board of directors may be called at any time either by the board, the
president, a vice president or a majority of the directors in writing with
or without a meeting. Notice of special meetings shall either be sent via
U.S. mail by the secretary to each director, at such director's business
address, at least three (3) days before the meeting or shall be given
personally or telegraphed or sent by facsimile to each director, at such
director's business address, at least one(1) day before the meeting. Such
notice shall set forth the time and place of such meeting but need not,
unless otherwise required by law, state the purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At
all meetings of the board of directors a majority of the entire board shall
constitute a quorum for the transaction of business, and the action of a
majority of the directors present at any meetings at which a quorum is
present shall be the action of the board of directors unless the
concurrence of a greater proportion is required for such action by statute,
the articles of incorporation or these bylaws. If at any meeting a quorum
is not present, a majority of the directors present may adjourn the
meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present. Members of the board of
directors or a committee of the board may participate in a meeting by
means of a conference telephone or similar communications equipment
if all persons participating in the meeting can hear each other at the same
time; provided, however, that a director may not participate in a meeting
by means of a conference telephone or similar communications
equipment if the purpose of the meeting is to approve the corporation's
investment advisory agreement and/or to approve the selection of the
corporation's auditors, or if participation in such a manner would
otherwise violate the Investment Company Act of 1940 or other
applicable laws. Except as set forth in the preceding sentence,
participation in a meeting by these means constitutes presence in person
at the meeting.
Section 11. Executive and Other Committees. The
board of directors may appoint from among its members an executive
and other committees composed of two(2) or more directors. The board
may delegate to such committees in the intervals between meetings of
the board any of the powers of the board to manage the business and
affairs of the corporation, except the power to: (i) declare dividends or
distributions upon the stock of the corporation; (ii) issue stock of the
corporation; (iii) recommend to the stockholders any action which
requires stockholder approval; (iv) amend the bylaws; (v) approve any
merger or share exchange which does not require stockholder approval;
or (vi) take any action required by the Investment Company Act of 1940
to be taken by the independent directors of the corporation or by the full
board of directors.
Section 12. Informal Action. Except as set forth in the
following sentence, any action required or permitted to be taken at any
meeting of the board of directors or of a committee of the board may be
taken without a meeting, if a written consent to such action is -5-
<PAGE> signed by all members of the board or the committee, as the
case may be, and such written consent is filed with the minutes of
proceedings of the board or committee. Notwithstanding the preceding
sentence, no action may be taken by the board of directors pursuant to a
written consent with respect to the approval of the corporation's
investment advisory agreement, the approval of the selection of the
corporation's auditors, or any action required by the Investment
Company Act of 1940 or other applicable law to be taken at a meeting of
the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first
meeting of each newly elected board of directors there shall be elected a
president, one or more vice presidents, a secretary and a treasurer. The
board may also elect one or more assistant secretaries and assistant
treasurers. No officer need be a director. Any two or more offices,
except the offices of president and vice president, may be held by the
same person but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by
law, charter or these bylaws to be executed, acknowledged or verified by
two or more officers. Each officer must be eligible to serve as an officer
of a registered investment company under the Investment Company Act
of 1940. Nothing herein shall preclude the employment of other
employees or agents by the corporation from time to time without action
by the board.
Section 2. Term, Removal and Vacancies. The officers
shall be elected to serve until the next first meeting of a newly elected
board of directors and until their successors are elected and qualify. Any
officer may be removed by the board, with or without cause, whenever
in its judgment the best interests of the corporation will be served
thereby, but such removal shall be without prejudice to the contractual
rights, if any, of the person so removed. A vacancy in any office shall be
filled by the board for the unexpired term.
Section 3. Bonding. Each officer and employee of the
corporation who singly or jointly with others has access to securities or
funds of the corporation, either directly or through authority to draw
upon such funds, or to direct generally the disposition of such securities
shall be bonded against larceny and embezzlement by a reputable fidelity
insurance company authorized to do business in Illinois and Wisconsin.
Each such bond, which may be in the form of an individual bond, a
schedule or blanket bond covering the corporation's officers and
employees and the officers and employees of the investment adviser to
the corporation and other corporations to which said investment adviser
also acts as investment adviser, shall be in such form and for such
amount (determined at least annually) as the board of directors shall
determine in compliance with the requirements of Section 17(g) of the
Investment Company Act of 1940, as amended from time to time, and
the rules, regulations or orders of the Securities and Exchange
Commission thereunder.
Section 4. President. The president shall be the
principal executive officer of the corporation. He shall preside at all
meetings of the stockholders and directors, have general and active
management of the business of the corporation, see that all orders and
resolutions of the board of directors are carried into effect, and execute
in the name of the corporation all authorized instruments of the
corporation, except where the signing shall be expressly delegated by the
board to some other officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if
there be more than one, the vice presidents in the order determined by
the board of directors, shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president, and shall
have such other duties and powers as the board may from time to time
prescribe or the president delegate.
Section 6. Secretary and Assistant Secretaries. The
secretary shall give notice of, attend and record the minutes of meetings
of stockholders and directors, keep the corporate seal and, when
authorized by the board, affix the same to any instrument requiring it,
attesting to the same by his signature, and shall have such further duties
and powers as are incident to his office or as the board may from time to
time prescribe. The assistant secretary, if any, or, if there be more than
one, the assistant secretaries in the order determined by the board, shall
in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary, and shall have such other duties and
powers as the board may from time to time prescribe or the secretary
delegate.
Section 7. Treasurer and Assistant Treasurers. The
treasurer shall be the principal financial and accounting officer of the
corporation. He shall be responsible for the custody and supervision of
the corporation's books of account and subsidiary accounting records,
and shall have such further duties and powers as are incident to his
office or as the board of directors may from time to time prescribe. The
assistant treasurer, if any, or, if there be more than one, the assistant
treasurers in the order determined by the board, shall in the absence or
disability of the treasurer, perform all duties and exercise the powers of
the treasurer, and shall have such other duties and powers as the board
may from time to time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and
executive officers as such shall not receive any salary for their services
or reimbursement for expenses from the corporation; provided that the
corporation may pay fees in such amounts and at such times as the board
of directors shall determine to directors who are not interested persons
of any investment adviser of, or principal underwriter for, if any, the
corporation for attendance at meetings of the board of directors. Clerical
employees shall receive compensation for their services from the
corporation in such amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and
Sales. No affiliated person of the corporation, as defined in the
Investment Company Act of 1940, or affiliated person of such person,
shall, except as permitted by Section 17(e) of the Act, or the rules,
regulations or orders of the Securities and Exchange Commission
thereunder, (i) acting as agent, accept from any source any compensation
for the purchase or sale of any property or securities to or for the
corporation or any controlled company of the corporation, as defined in
such Act, or (ii) acting as a broker, in connection with the sale of
securities to or by the corporation or any controlled company of the
corporation, receive from any source a commission, fee or other
remuneration for effecting such transaction. The investment adviser to
the corporation shall not profit directly or indirectly from sales of
securities to or from the corporation.
Section 3. Transactions with Affiliated Person. No
affiliated person of the corporation, as defined in the Investment
Company Act of 1940, or affiliated person of such person shall
knowingly (i) sell any security or other property to the corporation or to
any company controlled by the corporation, as defined in the Act, except
shares of stock of the corporation or securities of which such person is
the issuer and which are part of a general offering to the holders of a
class of its securities, (ii) purchase from the corporation or any such
controlled company any security or property except shares of stock of
the corporation or securities of which such person is the issuer, (iii)
borrow money or other property from the corporation or any such
controlled company, or (iv)acting as a principal effect any transaction in
which the corporation or controlled company is a joint or joint and
several participant with such person; provided, however, that this section
shall not apply to any transaction permitted by Sections 17(a), (b), (c),
(d) or 21(b) of the Investment Company Act of 1940 or the rules,
regulations or orders of the Securities and Exchange Commission
thereunder, and shall not prohibit the joint participation by the
corporation and an affiliate in a fidelity bond arrangement.
Section 4. Investment Adviser. The corporation shall
employ only one investment adviser, the employment of which shall be
pursuant to a written agreement in accordance with Section 15 of the
Investment Company Act of 1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each holder of shares of any
class of stock of the corporation shall be entitled to a certificate or
certificates, in such form as the board of directors shall from time to time
approve, representing and certifying the number of shares of such class
of stock owned by him in the corporation. Each certificate shall be
signed, manually or by facsimile signature, by the president or a vice
president, countersigned, manually or by facsimile signature, by the
secretary, an assistant secretary, the treasurer or an assistant treasurer
and sealed with the corporate seal or facsimile thereof. In case any
officer who has signed any certificate, or whose facsimile signature
appears thereon, ceases to be an officer of the corporation before the
certificate is issued, the certificate may nevertheless be issued with the
same effect as if the officer had not ceased to be such officer as of the
date of its issue. Each certificate shall contain on its face or back a full
statement or summary of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms of each class of stock of the
corporation or shall state that the corporation will furnish such
information to the stockholder on request and without charge. Any
certificate representing stock which is restricted or limited as to
transferability also shall have a full statement of such restriction or
limitation plainly stated thereon or shall state that the corporation will
furnish such information to the stockholder on request and without
charge.
Section 2. Lost Certificates. The board of directors
may 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, destroyed or mutilated (or may delegate such
authority to one or more officers of the corporation) upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen, destroyed or mutilated. The board or such officer may, in its or
his discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall
maintain at its office in Chicago, Illinois, or at the office of its principal
transfer agent, if any, an original or duplicate stock ledger containing the
names and addresses of all stockholders and the number of shares of
each class of stock held by each stockholder.
Section 4. Registered Stockholders. The corporation
shall be entitled to recognize the exclusive right of a person registered on
its books as such, as the owner of shares for all purposes, and shall not
be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as other provided by the laws of
Maryland.
Section 5. Transfer Agent and Registrar. The
corporation may maintain one or more transfer offices or agencies, each
in charge of a transfer agent designated by the board of directors, where
the shares of each class of stock of the corporation shall be transferable.
The corporation may also maintain one or more registry offices, each in
charge of a registrar designated by the board, where the shares of such
classes of stock shall be registered.
Section 6. Transfers of Stock. Upon surrender to the
corporation or a transfer agent of a certificate for shares of any class
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the corporation
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 7. Fixing of Record Dates and Closing of
Transfer Books. The board of directors may fix, in advance, a date as
the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any
rights, or in order to make a determination of stockholders for any other
proper purpose. Such date, in any case, shall be not more than ninety
(90) days, and in case of a meeting of stockholders not less than ten (10)
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 may provide that the stock transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If
the stock transfer books are closed or a record date is fixed for the
purpose of determining stockholders entitled to vote at a meeting of
stockholders, such books shall be closed for at least ten (10) days
immediately preceding such action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT
ADVISER
Section 1. Inspection of Books. The board of directors
shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations the accounts and books of the
corporation (except such as may by statute be specifically open to
inspection) or any of them, shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
limited accordingly.
Section 2. Reliance on Records. Each director and
officer shall, in the performance of his duties, be fully protected in
relying in good faith on the books of account or reports made to the
corporation by any of its officials or by an independent public
accountant.
Section 3. Preparation and Maintenance of Accounts,
Records and Statements. The president, a vice president or the treasurer
shall prepare or cause to be prepared annually, a full and correct
statement of the affairs of the corporation, including a balance sheet or
statement of financial condition and a financial statement of operations
for the preceding fiscal year, which shall be submitted at the annual
meeting of the stockholders and filed within twenty (20) days thereafter
at the principal office of the corporation in the State of Illinois. If the
corporation is not required to hold an annual meeting of stockholders,
the statement of affairs shall be placed on file at the corporation's
principal office within one hundred twenty (120) days after the end of
the fiscal year. The proper officers of the corporation shall also
prepare, maintain and preserve or cause to be prepared, maintained and
preserved the accounts, books and other documents required by Section
2-111 of the Maryland General Corporation Law and Section 31 of the
Investment Company Act of 1940 and shall prepare and file or cause to
be prepared and filed the reports required by Section 30 of such Act.
No financial statement shall be filed with the Securities and Exchange
Commission unless the officers or employees who prepared or
participated in the preparation of such financial statement have been
specifically designated for such purpose by the board of directors.
Section 4. Auditors. No independent public
accountant shall be retained or employed by the corporation to examine,
certify or report on its financial statements for any fiscal year unless
such selection: (i) shall have been approved by a majority of the entire
board of directors within thirty (30) days before or after the beginning of
such fiscal year or before the annual ratification by the stockholders; (ii)
shall have been ratified by the stockholders, provided that any vacancy
occurring between such annual ratification due to the death or
resignation of such accountant may be filled by the board of directors;
and (iii) shall otherwise meet the requirements of Section 32 of the
Investment Company Act of 1940.
Section 5. Custodianship. All securities owned by the
corporation and all cash, including, without limiting the generality of the
foregoing, the proceeds from sales of securities owned by the
corporation and from the issuance of shares of the capital stock of the
corporation, payments of principal upon securities owned by the
corporation, and distributions in respect of securities owned by the
corporation which at the time of payment are represented by the
distributing corporation to be capital distributions, shall be held by a
custodian or custodians which shall be a bank, as that term is defined in
the Investment Company Act of 1940, having capital, surplus and
undivided profits aggregating not less than $2,000,000. The terms of
custody of such securities and cash shall include provisions to the effect
that the custodian shall deliver securities owned by the corporation only
(a) upon sales of such securities for the account of the corporation and
receipt by the custodian of payment therefor,(b) when such securities are
called, redeemed or retired or otherwise become payable, (c) for
examination by any broker selling any such securities in accordance with
"street delivery" custom, (d) in exchange for or upon conversion into
other securities alone or other securities and cash whether pursuant to
any plan of merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise, (e) upon conversion of such securities
pursuant to their terms into other securities, (f) upon exercise of
subscription, purchase or other similar rights represented by such
securities, (g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities, (h) for the purpose of
redeeming in kind shares of the capital stock of the corporation, or (i) for
other proper corporate purposes. Such terms of custody shall also
include provisions to the effect that the custodian shall hold the
securities and funds of the corporation in a separate account or accounts
and shall have sole power to release and deliver any such securities and
draw upon any such account, any of the securities or funds of the
corporation only on receipt by such custodian of written instruction from
one or more persons authorized by the board of directors to give such
instructions on behalf of the corporation, and that the custodian shall
deliver cash of the corporation required by this Section 5 to be deposited
with the custodian only upon the purchase of securities for the portfolio
of the corporation and the delivery of such securities to the custodian,
for the purchase or redemption of shares of the capital stock of the
corporation, for the payment of interest, dividends, taxes, management
or supervisory fees or operating expenses, for payments in connection
with the conversion, exchange or surrender of securities owned by the
corporation, or for other proper corporate purposes. 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
shares of the capital stock of the corporation at the time outstanding and
entitled to vote. Upon its resignation or inability to serve, the custodian
may deliver any assets of the corporation held by it to a qualified bank or
trust company selected by it, such assets to be held subject to the terms
of custody which governed such retiring custodian, pending action by
the corporation as set forth in this Section 5.
Section 6. Termination of Custodian Agreement. Any
employment agreement with a custodian shall be terminable on not more
than sixty (60) days' notice in writing by the board of directors or the
custodian and upon any such termination the custodian shall turn over
only to the succeeding custodian designated by the board of directors all
funds, securities and property and documents of the corporation in its
possession.
Section 7. Checks and Requisitions. Except as
otherwise authorized by the board of directors, all checks and drafts for
the payment of money shall be signed in the name of the corporation by
a custodian, and all requisitions or orders for the payment of money by a
custodian or for the issue of checks and drafts therefore, all promissory
notes, all assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board of
directors) at least one of which shall be an officer. Promissory notes,
checks or drafts payable to the corporation may be endorsed only to the
order of a custodian or its nominee by the treasurer or president or by
such other person or persons as shall be thereto authorized by the board
of directors.
Section 8. Investment Advisory Contract. Any
investment advisory contract in effect after the first annual meeting of
stockholders of the corporation, to which the corporation is or shall
become a party, whereby, subject to the control of the board of directors
of the corporation, the investment portfolio with respect to any class of
Common Stock of the corporation shall be managed or supervised by the
other party to such contract, shall be effective and binding only upon the
affirmative vote of a majority of the outstanding voting securities of such
class of Common Stock of the corporation (as defined in the Investment
Company Act of 1940), and the investment advisory contract currently
in effect with respect to any class of Common Stock shall be submitted
to the holders of shares of such class of Common Stock for ratification
by the affirmative vote of such majority. Any investment advisory
contract to which the corporation shall be a party whereby, subject to the
control of the board of directors of the corporation, the investment
portfolio with respect to any class of Common Stock of the corporation
shall be managed or supervised by the other party to such contract, shall
provide, among other things, that such contract cannot be assigned.
Such investment advisory contract shall prohibit the other party thereto
from making short sales of shares of capital stock of the corporation; and
such investment advisory contract shall prohibit such other party from
purchasing shares otherwise than for investment, and shall require such
other party to advise the corporation of any sales of shares of the capital
stock of the corporation made by such person or organization less than
two months after the date of any purchase by him or it of shares of the
capital stock of the corporation. Unless any such contract shall
expressly otherwise provide, any provisions therein for the termination
thereof by action of the board of directors of the corporation shall be
construed to require that such termination can be accomplished only
upon the vote of a majority of the entire board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the
corporation in the State of Maryland shall be in the City of Baltimore.
The corporation shall also have an office in Chicago, Illinois. The
corporation may also have offices at such other places within and
without the State of Maryland as the board of directors may from time to
time determine. Except as otherwise required by statute, the books and
records of the corporation may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed
thereon the name of the corporation, and the words "Corporate Seal" and
"Maryland". The seal may be used by causing it or a facsimile thereof to
be impressed, affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the
corporation shall be fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any
notice of the time, place or purpose of any meeting of stockholders or
directors is required to be given under the statute, the charter or these
bylaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, either
before or after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom
communication is made unlawful by any law of the United States or any
rule, regulation, proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered
by the board of directors, the president shall have full power and
authority, in the name and on behalf of the corporation, (i) to attend, act
and vote at any meeting of stockholders of any company in which the
corporation may own shares of stock of record, beneficially (as the
proxy or attorney-in-fact of the record holder) or of record and
beneficially, and (ii) to give voting directions to the record stockholder
of any such stock beneficially owned. At any such meeting, he shall
possess and may exercise any and all rights and powers incident to the
ownership of such shares which, as the holder or beneficial owner and
proxy of the holder thereof, the corporation might possess and exercise if
personally present, and may delegate such power and authority to any
officer, agent or employee of the corporation.
Section 6. Dividends. Dividends upon any class of
stock of the corporation, subject to the provisions of the charter, if any,
may be declared by the board of directors in -13- <PAGE>any lawful
manner. The source of each dividend payment shall be disclosed to the
stockholders receiving such dividend, to the extent required by the laws
of the State of Maryland and by Section 19 of the Investment Company
Act of 1940 and the rules and regulations of the Securities and Exchange
Commission thereunder.
Section 7. Indemnification. The corporation shall
indemnify directors, officers, employees and agents of the corporation
against judgments, fines, settlements and expenses to the fullest extent
authorized, and in the manner permitted, by applicable federal and state
law. The corporation shall advance the expenses of its directors,
officers, employees and agents who are parties to any Proceeding to the
fullest extent authorized, and in the manner permitted, by applicable
federal and state law. For purposes of this paragraph, "Proceeding"
means any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative. This Section 7
of Article VII constitutes vested rights in favor of all directors, officers,
employees and agents of the corporation. Neither the amendment nor
repeal of this Article, nor the adoption or amendment of any other
provision of the Bylaws or charter of the corporation inconsistent with
this Article, shall apply to or affect in any respect the applicability of
this Article with respect to any act or failure to act which occurred prior
to such amendment, repeal or adoption. For purposes of this Section 7,
the term "director" and "officer" have the same meaning ascribed to such
terms in Section 2-418 of the Maryland General Corporation Law.
Section 8. Amendments.
(a) These bylaws may be altered, amended or repealed
and new bylaws may be adopted by the stockholders by affirmative vote
of not less than a majority of the shares of all classes of stock present or
represented at any annual or special meeting of the stockholders at
which a quorum is in attendance.
(b) These bylaws may also be altered, amended or
repealed and new bylaws may be adopted by the Board of Directors by
affirmative vote of a majority of the number of directors present at any
meeting at which a quorum is in attendance; but no bylaw adopted by the
stockholders shall be amended or repealed by the Board of Directors if
the bylaws so adopted so provides.
(c) Any action taken or authorized by the stockholders
or by the Board of Directors, which would be inconsistent with the
bylaws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to
amend the bylaws so that the bylaws would be consistent with such
action, shall be given the same effect as though the bylaws had been
temporarily amended or suspended so far, but only so far, as was
necessary to permit the specific action so taken or authorized.
Section 9. Reports to Stockholders. 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 -
14-<PAGE> Board of Directors of the corporation. A report to the
stockholders based upon each such examination shall be mailed to each
stockholder of the corporation of record on such date with respect to
each report as may be determined by the Board of Directors at his
address as the same appears on the books of the corporation. Each such
report shall include the financial information required to be transmitted
to stockholders by rules or regulations of the Securities and Exchange
Commission under the Investment Company Act of 1940 and shall be in
such form as the Board of Directors shall determine pursuant to rules
and regulations of the Securities and Exchange Commission.
Section 10. Information to Accompany Dividends. At
the time of the payment by the corporation of any dividend to the holders
of any class of stock of the corporation, each stockholder to whom such
dividend is paid shall be notified of the account or accounts from which
it is paid and the amount thereof paid from each such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sales of Shares. Shares of any class of
Common Stock of the corporation shall be sold by it for the net asset
value per share of such class of Common Stock outstanding at the time
as of which the computation of said net asset value shall be made as
hereinafter provided in these bylaws.
Section 2. Periodic Investment and Dividend
Reinvestment Plans. The corporation acting by and through the Board
of Directors shall have the right to adopt and to offer to the holders of
each class of stock and to the public a periodic investment plan and an
automatic reinvestment of dividend plan subject to the limitations and
restrictions imposed thereon and as set forth in the Investment Company
Act of 1940 and any rule or regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of
shares of any class of stock of the corporation issued in whole or in part
in exchange for securities, there may, at the discretion of the board of
directors of the corporation, be included in the value of said securities,
for the purpose of determining the number of shares of such class stock
of the corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates
payable in connection with the purchase of comparable securities on the
New York Stock Exchange) or other similar costs of acquisition of such
securities paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each
class of Common Stock of the corporation now or hereafter issued shall
be subject to redemption, as provided in the Articles of Incorporation of
the corporation.
Section 5. Suspension of Right of Redemption. The
Board of Directors of the corporation may suspend the right of the
holders of any class of Common Stock of the corporation to require the
corporation to redeem shares of such class:
(a) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings,
or
(b) during which trading on the New York Stock
Exchange is restricted; (b) for any period during which an emergency, as
defined by rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (a) disposal by the
corporation of securities owned by it is not reasonably practicable, or (b)
it is not reasonably practicable for the corporation fairly to determine the
value of its net assets; or
(c) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of securityholders of the corporation.
Section 6. Computation of Net Asset Value. For
purposes of these bylaws, the following rules shall apply:
(a) The net asset value of each share of each class of
Common Stock of the corporation shall be determined at such time or
times as may be disclosed in the then currently effective Prospectus
relating to such class of Common Stock of this corporation. The Board
of Directors may also, from time to time by resolution, designate a time
or times intermediate of the opening and closing of trading on the New
York Stock Exchange on each day that said Exchange is open for trading
as of which the net asset value of each share of each class of Common
Stock of the corporation shall be determined or estimated.
Any determination or estimation of net asset value as
provided in this subparagraph A shall be effective at the time as of
which such determination or estimation is made.
The net asset value of each share of each class of
Common Stock of the corporation for purposes of the issue of such class
of Common Stock shall be the net asset value which becomes effective
as provided in this Subparagraph A, next succeeding receipt of the
subscription to such share of such class Common Stock. The net asset
value of each share of each class of Common Stock of the corporation
tendered for redemption shall be the net asset value which becomes
effective as provided in this Subparagraph A, next succeeding the tender
of such share of such class of Common Stock for redemption.
(b) The net asset value of each share of each class of
Common Stock of the corporation, as of the close of business on any
day, shall be the quotient obtained by dividing the value at such close of
the net assets belonging to such class (meaning the assets belonging to
such class and any other assets allocated to such class less the liabilities
belonging to such class and any other liabilities allocated to such class
excluding capital and surplus) of the corporation by the total number of
shares of such class outstanding at such close.
(i) The assets belonging to any class of Common Stock
shall be that portion of the total assets of the corporation as determined
in accordance with the provisions of Article IV of the Articles of
Incorporation of the corporation. The assets of the corporation shall be
deemed to include (a) all cash on hand, on deposit, or on call, (b) all bills
and notes and accounts receivable, (c) all shares of stock and
subscription rights and other securities owned or contracted for by the
corporation, other than its own common stock, (d)all stock and cash
dividends and cash distributions, to be received by the corporation, and
not yet received by it but declared to stockholders of record on a date on
or before the date as of which the net asset value is being determined, (e)
all interest accrued on any interest-bearing securities owned by the
corporation, and (f) all other property of every kind and nature including
prepaid expenses; the value of such assets to be determined as follows:
In determining the value of any assets of the corporation for the purpose
of obtaining the net asset value of each share of a particular class of
Common Stock, securities traded over the counter or on a national
securities exchange are valued on the basis of market value in their
principal and most representative market. Securities where the principal
and most representative market is a national securities exchange are
valued at the latest reported sale price on such exchange. If there is no
such sale price reported for the valuation date, then such securities are
valued at the latest reported bid price on such exchange. Securities,
other than debt securities, where the over-the-counter market is the
principal and most representative market are valued at the mean between
the latest bid and asked price quotations. Debt securities (other than
short-term instruments) are valued at prices furnished by a national
brokerage firm's pricing service, subject to review by the corporation's
investment adviser and determination of the appropriate price whenever
a furnished price is significantly different from the previous day's
furnished price. When market quotations are not readily available, or
when restricted securities are being valued, such securities are valued at
fair value as determined in good faith by the Board of Directors. All
other assets of the corporation shall be valued at fair value as determined
in good faith by the Board of Directors, except that debt securities
having maturities of less than 60 days may be valued by the amortized
cost method.
(ii) The liabilities belonging to any class of Common
Stock shall be that portion of the total liabilities of the corporation as
determined in accordance with the provisions of Article IV of the
Articles of Incorporation of the corporation. The liabilities of the
corporation shall be deemed to include(a) all bills and notes and
accounts payable, (b) all administration expenses payable and/or accrued
(including investment advisory fees), (c) all contractual obligations for
the payment of money or property including the amount of any unpaid
dividend declared upon the corporation's stock and payable to
stockholders of record on or before the day as of which the value of the
corporation's stock is being determined, (d) all reserves, if any,
authorized or approved by the Board of Directors for taxes, including
reserves for taxes at current rates based on any unrealized appreciation
in the value of the assets of the corporation, and (e) all other liabilities of
the corporation of whatever kind and nature except liabilities represented
by outstanding capital stock and surplus of the corporation.
(iii) For the purposes hereof: (a) shares of each class of
Common Stock subscribed for shall be deemed to be outstanding as of
the time of acceptance of any subscription and the entry thereof on the
books of the corporation and the net price thereof shall be deemed to be
an asset belonging to such class; and (b) shares of each class of Common
Stock surrendered for redemption by the corporation shall be deemed to
be outstanding until the time as of which the net asset value for purposes
of such redemption is determined or estimated.
(c) The net asset value of each share of each class of
Common Stock of the corporation, as of any time other than the close of
business on any day, maybe determined by applying to the net asset
value as of the close of business on the preceding business day,
computed as provided in Paragraph C of this Section of these bylaws,
such adjustments as are authorized by or pursuant to the direction of the
Board of Directors and designed reasonably to reflect any material
changes in the market value of securities and other assets held and any
other material changes in the assets or liabilities of the corporation and
in the number of its outstanding shares which shall have taken place
since the close of business on such preceding business day.
(d) In addition to the foregoing, the Board of Directors
is empowered, in its absolute discretion, to establish other bases or
times, or both, for determining the net asset value of each share of each
class of the Common Stock of the corporation.
INVESTMENT ADVISORY AGREEMENT
Agreement made this 7th day of May, 1999 between The
Forester Funds, Inc., a Maryland corporation The Forester Small Cap
Value Fund (the "Fund"), and Forester Capital Management, Ltd., an
Illinois corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Fund is in the process of registering
with the Securities and Exchange Commission as an open-end
management investment company under the Investment Company Act of
1940 (the "Act"); and
WHEREAS, the Fund desires to retain the Adviser,
which is an investment adviser registered under the Investment Advisers
Act of 1940, as its investment adviser.
NOW, THEREFORE, the Fund and the Adviser do
mutually promise and agree as follows:
1. Employment. The Fund hereby employs the
Adviser to manage the investment and reinvestment of the assets of the
Fund for the period and on the terms set forth in this Agreement. The
Adviser hereby accepts such employment for the compensation herein
provided and agrees during such period to render the services and to
assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser
shall supervise and manage the investment portfolio of the Fund, and,
subject to such policies as the board of directors of the Fund may
determine, direct the purchase and sale of investment securities in the
day to day management of the Fund. The Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the
Fund. However, one or more shareholders, officers, directors or
employees of the Adviser may serve as directors and/or officers of the
Fund, but without compensation or reimbursement of expenses for such
services from the Fund. Nothing herein contained shall be deemed to
require the Fund to take any action contrary to its Articles of
Incorporation, as amended or supplemented, or any applicable statute or
regulation, or to relieve or deprive the board of directors of the Fund of
its responsibility for and control of the affairs of the Fund.
3. Expenses. The Adviser, at its own expense
and without reimbursement from the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Adviser shall not be
required to pay any expenses of the Fund except as provided herein if
the total expenses borne by the Fund, including the Adviser's fee and the
fees paid to the Fund's Administrator but excluding all federal, state and
local taxes, interest, brokerage commissions and extraordinary items, in
any year exceed that percentage of the average net assets of the Fund for
such year, as determined by valuations made as of the close of each
business day, which is the most restrictive percentage provided by the
state laws of the various states in which the Fund's shares are qualified
for sale or, if the states in which the Fund's shares are qualified for sale
impose no such restrictions, 2%. The expenses of the Fund's operations
borne by the Fund include by way of illustration and not limitation,
directors fees paid to those directors who are not officers of the Fund,
the costs of preparing and printing registration statements required under
the Securities Act of 1933 and the Act (and amendments thereto), the
expense of registering its shares with the Securities and Exchange
Commission and in the various states, the printing and distribution cost
of prospectuses mailed to existing shareholders, the cost of stock
certificates (if any), director and officer liability insurance, reports to
shareholders, reports to government authorities and proxy statements,
interest charges, taxes, legal expenses, salaries of administrative and
clerical personnel, association membership dues, auditing and
accounting services, insurance premiums, brokerage and other expenses
connected with the execution of portfolio securities transactions, fees
and expenses of the custodian of the Fund's assets, expenses of
calculating the net asset value and repurchasing and redeeming shares,
printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Fund shall monitor its expense ratio on a monthly
basis. If the accrued amount of the expenses of the Fund exceeds the
expense limitation established herein, the Fund shall create an account
receivable from the Adviser in the amount of such excess. In such a
situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the
balance of the Fund's fiscal year if accrued expenses thereafter fall
below the expense limitation.
4. Compensation of the Adviser. For the services
to be rendered by the Adviser hereunder, the Fund shall pay to the
Adviser an advisory fee, paid monthly, based on the average net assets of
the Fund, as determined by valuations made as of the close of each
business day of the month. The advisory fee shall be 1/12 of 1.00%
(1.% per annum). For any month in which this Agreement is not in
effect for the entire month, such fee shall be reduced proportionately on
the basis of the number of calendar days during which it is in effect and
the fee computed upon the average net asset value of the business days
during which it is so in effect.
5. Ownership of Shares of the Fund. The
Adviser shall not take an ownership position in the Fund, and shall not
permit any of its shareholders, officers, directors or employees to take a
long or short position in the shares of the Fund, except for the purchase
of shares of the Fund for investment purposes at the same price as that
available to the public at the time of purchase or in connection with the
initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to
the Fund hereunder are not to be deemed exclusive and the Adviser shall
be free to furnish similar services to others as long as the services
hereunder are not impaired thereby. Although the Adviser has agreed to
permit the Fund to use the name "Forester", if it so desires, it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund will not use such name
if the Adviser ceases to be the Fund's sole investment adviser. During
the period that this Agreement is in effect, the Adviser shall be the
Fund's sole investment adviser.
7. Liability. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Adviser, the Adviser
shall not be subject to liability to the Fund or to any shareholder of the
Fund for any act or omission in the course of, or connected with,
rendering services hereunder, or for any losses that may be sustained in
the purchase, holding or sale of any security.
8. Brokerage Commissions. The Adviser
may cause the Fund to pay a broker-dealer which provides brokerage and
research services, as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934 (the "Exchange Act"), to the Adviser a
commission for effecting a securities transaction in excess of the amount
another broker-dealer would have charged for effecting such transaction,
if the Adviser determines in good faith that such amount of commission
is reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act).
9. Amendments. This Agreement may be
amended by the mutual consent of the parties; provided, however, that in
no event may it be amended without the approval of the board of
directors of the Fund in the manner required by the Act, and by the vote
of the majority of the outstanding voting securities of the Fund, as
defined in the Act.
10. Termination. This Agreement may be
terminated at any time, without the payment of any penalty, by the board
of directors of the Fund or by a vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act, upon giving sixty
(60) days' written notice to the Adviser. This Agreement may be
terminated by the Adviser at any time upon the giving of sixty (60) days'
written notice to the Fund. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section
2(a)(4) of the Act). Subject to prior termination as hereinbefore
provided, this Agreement shall continue in effect for an initial period
beginning as of the date hereof and ending April 30, 2001 and
indefinitely thereafter, but only so long as the continuance after such
initial period is specifically approved annually by (i) the board of
directors of the Fund or by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act, and (ii) the board of
directors of the Fund in the manner required by the Act, provided that
any such approval may be made effective not more than sixty (60) days
thereafter.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed on the day first above written.
FORESTER CAPITAL MANAGEMENT, LTD
(the "Adviser")
/s/ Thomas H. Forester /s/ Thomas H. Forester
Attest: ___________________ By:__________________
Secretary President
THE FORESTER FUNDS, INC.
THE FORESTER SMALL CAP VALUE FUND
(the "Fund")
/s/ Kaye E. Forester /s/ Thomas H. Forester
Attest: _________________ By: ___________________
Secretary President
