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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
(File No. 002-77092)
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 20 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
(File No. 811-00594)
Amendment No. 20 /X/
(Check appropriate box or boxes.)
GENERAL SECURITIES, INCORPORATED
(Exact Name of Registrant as Specified in Charter)
5100 EDEN AVENUE, SUITE 204, EDINA, MN 55436
(Address of Principal Executive Offices) (Zip Code)
(952) 927-6799
(Registrant's Telephone Number, including Area Code)
CRAIG H. ROBINSON
5100 EDEN AVENUE, SUITE 204, EDINA, MN 55436
(Name and Address of Agent for Service)
COPIES TO:
John R. Houston Matthew L. Thompson P. Graham van der Leeuw
Robins, Kaplan, Miller Faegre & Benson LLP Faegre & Benson LLP
& Ciresi LLP 90 South Seventh Street, 90 South Seventh Street,
800 LaSalle Avenue, Suite 2200 Suite 2200
Suite 2800 Minneapolis, Minneapolis,
Minneapolis, Minnesota 55402 Minnesota 55402 Minnesota 55402
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ On [March 31, 2000] pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / On [date] pursuant to paragraph (a)(1) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2) of Rule 485
/ / 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.
Approximate date of proposed public offering: As soon as practicable following
the effective date of this registration statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
elected to register an indefinite number of shares of common stock under the
Securities Act of 1933. The Registrant's most recent Rule 24f-2 Notice was filed
with the Commission on or about February 24, 2000.
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GENERAL SECURITIES, INCORPORATED
REGISTRATION STATEMENT ON FORM N-1A
PART A
PROSPECTUS
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GENERAL SECURITIES INCORPORATED
5100 Eden Avenue, Suite 204, Edina, Minnesota 55436
Telephone (800) 577-9217
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[LOGO] General Securities, Incorporated (the "Fund") is a
FOCUS ON diversified open- end management investment company which seeks
- -------------- possible long-term capital appreciation for its shareholders.
QUALITY The Fund invests primarily, but not exclusively, in selected
MANAGEMENT common stocks of companies that have implemented a Quality
SYSTEMS Management System. The Fund's Investment Advisor is Robinson
- -------------- Capital Management, Inc. The Fund was incorporated in Minne-
sota in 1951, and has been in operation as a mutual fund since
then.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 31, 2000.
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PROSPECTUS
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CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary.................................................................... 3
Investment Objectives, Strategies and Risks............................................ 6
Fund Management........................................................................ 8
Purchase of Shares..................................................................... 9
Dividend and Distribution Policies..................................................... 14
Distribution Arrangements.............................................................. 15
Financial Highlights................................................................... 15
General Information.................................................................... 16
</TABLE>
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2
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FUND SUMMARY
RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
INVESTMENTS
The Fund's investment objective is to seek long-term capital appreciation.
Consistent with that objective, the Investment Advisor seeks to select common
stocks of companies that the Investment Advisor determines have implemented or
are implementing a "Quality Management System" (QMS) which is a management
philosophy where a company undertakes a systematic process of evaluating its
business practices and engages in a continuous effort to improve its operations
throughout the organization. The Investment Advisor also uses fundamental and
quantitative analysis techniques to evaluate QMS companies and identify those
that the Investment Advisor believes are undervalued in the marketplace. These
are typically known as "value" stocks. The Investment Advisor attempts to
diversify investments (subject to certain restrictions set forth herein) as a
matter of course as to individual companies and as to industries most likely to
achieve these objectives.
PRINCIPAL INVESTMENT RISKS
There is no assurance that the investment objectives of the Fund will be
achieved or that a focus on investments in companies implementing QMS principles
and practices will provide a greater return than investments in other companies.
Loss of money is a risk of investing in the Fund. The Fund's principal
investment risks include:
STOCK MARKET VOLATILITY. Stock markets are volatile and can decline
significantly in response to adverse issuer, political, regulatory, market or
economic developments. Different parts of the market can react differently to
these developments.
COMPANY SPECIFIC RISKS. The value of an individual security or particular
type of security can be more volatile than the market as a whole and can perform
differently than the value of the market as a whole.
QMS STRATEGY RISK. A non-traditional screening process that limits
investments to generally those companies the Fund's Investment Advisor believes
are quality oriented may not correctly identify "QMS" companies. Furthermore,
investments in such companies may provide no better and possibly lower returns
than other companies.
"VALUE" INVESTING STRATEGY RISK. "Value" stocks can perform differently
than the market as a whole and other types of stocks and can continue to be
undervalued by the market for long periods of time.
FUND PERFORMANCE
The following bar chart and table provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year over a 10-year period, and by showing how the Fund's average annual returns
for one, five and ten years compare to those of three broad-based securities
market indices. The Fund's past performance is not necessarily an indication of
how the Fund will perform in the future.
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BAR CHART OF TOTAL ANNUAL RETURNS FOR LAST 10 CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 -0.21%
91 35.74%
92 6.05%
93 6.17%
94 5.41%
95 27.90%
96 20.40%
97 13.37%
98 5.63%
99 34.54%
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 19.24% (quarter ending March 31, 1991) and the lowest return for a
quarter was -12.20% (quarter ending September 30, 1991).
AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST PAST PAST
(FOR THE PERIODS ENDING DECEMBER 31, 1999) ONE YEAR FIVE YEARS TEN YEARS
- ----------------------------------------------- ----------- ------------- -----------
<S> <C> <C> <C>
General Securities, Incorporated............... 34.54% 19.93% 14.84%
S&P 500*....................................... 21.04% 28.54% 18.20%
Russell 3000 Index**........................... 20.89% 26.94% 17.68%
Russell 3000 Value Index***.................... 6.65% 22.15% 15.31%
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 stocks, a
widely-recognized unmanaged index of common stock prices of large
capitalization U.S. companies.
** The Russell 3000 Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market.
*** The Russell 3000 Value Index measures the performance of those companies
within the Russell 3000 Index companies with lower price-to-book ratios and
lower forecasted growth values. It is widely recognized as a performance
benchmark for funds with a "value" investment objective. However, because
the Russell 3000 Index is better suited to the investment objectives of the
Fund, the Russell 3000 Index will be used in future prospectuses and the
Russell 3000 Value Index will be eliminated from future prospectuses.
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RISK/RETURN SUMMARY: FEE TABLE
The following table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)...................................... None
Maximum Deferred Sales Charge (Load)...................................... None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Other Distributions............................. None
Redemption Fees........................................................... None(1)
</TABLE>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a percentage of average net assets)
<TABLE>
<S> <C>
Management and Administrative Fees.......................................... 1.00%
Distribution or Service Fees (12b-1 fees)................................... None
Other Expenses.............................................................. .49%
---------
Total Annual Fund Operating Expenses........................................ 1.49%
</TABLE>
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(1) The Fund charges $20 for wire transfer of redemption proceeds.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. 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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------- ----------- ----------- -----------
<S> <C> <C> <C>
$ 152 $ 471 $ 813 $ 1,779
</TABLE>
The table is intended to assist in assessing the various costs and expenses
which an investor will bear, directly or indirectly, with respect to an
investment in the Fund. For a complete description of these expenses, you should
review "FUND MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE" and "SHAREHOLDER
INFORMATION" in this Prospectus and the Statement of Additional Information
available from the Fund. The expenses or the annual rate of return should not be
considered a representation of past or future expenses or the annual rate of
return. Actual future expenses or the annual rate of return may be greater or
lesser than those shown.
5
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES AND STRATEGIES
The Fund's investment objective is to seek long-term capital appreciation.
The Fund invests a majority of its Fund's assets in common stocks of companies
that the Fund's Investment Advisor believes have implemented a Quality
Management System (QMS). The Investment Advisor also uses fundamental and
quantitative analysis techniques to identify quality oriented companies that the
Investment Advisor believes are undervalued in the marketplace. There can be no
assurance that the objective of the Fund will be realized.
When determining whether a company being considered as an investment
candidate has implemented a QMS, the Investment Advisor evaluates published
reports by the company as well as reports from various organizations that the
Investment Advisor believes are knowledgeable in one or more of the practices of
QMS. Reports may include announcements made by companies that have won
QMS-oriented awards, or other information that otherwise identifies a company as
actively using one or more of the components of a QMS. As a result of this
evaluation, the Investment Advisor develops a judgment, principally subjective,
as to the level of commitment a company has to QMS principles and practices, and
the extent of a company's deployment of those principles and practices.
The Investment Advisor also seeks to identify QMS companies that the
Investment Advisor believes are undervalued in the marketplace in relation to
factors such as the issuing company's assets, earnings or growth potential. The
Investment Advisor uses fundamental and quantitative analysis to identify
companies that generally have one or more of the following characteristics:
(1) valuable fixed assets; (2) valuable consumer or commercial franchises;
(3) selling at low market valuations of assets relative to the securities market
in general, or that may be currently earning a very low return on assets but
which have the potential to earn higher returns if conditions in their industry
improve; (4) undervalued in relation to their potential for growth in earnings,
dividends or book value; or (5) have recently changed management or control and
have the potential for a "turnaround" in earnings.
Once an investment is made by the Fund, the Investment Advisor continually
monitors, reviews and evaluates the company's performance. If a portfolio
company is determined to have dropped its QMS focus, or otherwise to have ceased
to meet performance expectations, the policy of the Investment Advisor is to
sell the Fund's shares in that company.
From time to time, the Investment Advisor may determine that market
conditions or other factors warrant that the Fund adopt defensive strategies to
limit losses or lock-in gains. This could include investments in United States
Treasury bills, notes and bonds, certificate of deposits and bank depository
accounts of banks which have total assets in excess of $500 million. The Fund's
defensive strategy could also include buying or selling options. The Fund may
buy or sell options on broad market indexes or particular securities within the
Fund's portfolio in order to hedge the Fund's exposure to downward price
fluctuations. If the Investment Advisor applies a hedge strategy at an
inappropriate time or judges market conditions incorrectly, these defensive
strategies may lower the Fund's return. Consequently, the Fund may not achieve
its investment objective.
6
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No guarantee can be made that any of the Fund's objectives will be achieved,
and inherent in this policy are risks of unpredictable market fluctuations. The
investment objective of the Fund is a fundamental policy of the Fund and may not
be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities.
PRINCIPAL INVESTMENT RISKS
Any investment carries with it some level of risk that generally reflects
its potential for return. The principal risks that could adversely affect the
value of the Fund's shares and total return on your investment include:
COMMON STOCKS. Common stock represents an ownership interest in a company.
The value of a company's stock price may fall as a result of factors relating
directly to that company, such as decisions made by its management or lower
demand for the company's products or services. Similarly, a stock's value may
fall because of factors affecting not just the company, but companies in a
number of industries, such as increases in production costs. The value of a
company's stock price may also be affected by changes in financial markets that
may be unrelated to the company or its industry such as changes in interest
rates or currency exchange rates. In addition, a company's stock generally pays
dividends only after the company makes required payments to holders of its bonds
and other debt. Accordingly, the value of a company's stock price may react more
than bonds or other debt to actual or perceived changes in the company's
financial condition or prospects.
VALUE STOCKS. The Fund may invest in stocks of companies that the
Investment Advisor considers to be inexpensive relative to their earnings or
assets compared to other types of stocks. These "value" stocks can react
differently to issuer, political, market and economic developments than the
market as a whole and to other types of stocks. Value stocks can continue to be
inexpensive for long periods of time and may never realize the value that the
Investment Advisor expects.
QMS. Companies that the Investment Advisor selects who have either
implemented or are implementing a QMS approach may not be best-positioned for
growth or may be unable to weather economic downturns. The Investment Advisor
may select companies who are not firmly following these practices, or these
practices may not necessarily translate into stock performance that the
Investment Advisor expects, or that satisfies the Fund's objective of long-term
capital appreciation.
GROWTH STOCKS. Within the confines of the Fund's investment objective, the
Fund may invest in stocks of companies that the Investment Advisor believes have
earnings that will grow faster than the economy as a whole. Financial
professionals typically call these stocks "growth stocks". They typically trade
at higher multiples of current earnings to their stock price than other stocks.
The values of growth stocks may be more sensitive to changes to in current or
expected earnings than the values of other stocks. If the Investment's Advisor's
assessment of the prospects for a company's earnings growth is wrong, or if its
judgment of how other investors will value the company's earnings growth is
wrong, then the price of the company's stock price may fall or fail to
appreciate in the manner that the Investment Advisor expects.
7
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DEBT SECURITIES. The Fund may invest in U.S. government securities and
corporate bonds and debentures rated A or higher at the time of purchase by
reputable credit rating agencies.
There is risk that a bond issuer will fail to make timely payments of
principal or interest. Additionally, corporate bonds and U. S. government
securities fluctuate in price based on changes in market conditions.
FUND MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
THE FUND'S INVESTMENT ADVISOR
Robinson Capital Management, Inc. serves as Investment Advisor to the Fund
pursuant to an Investment Advisory Agreement, and manages the Fund's business
affairs pursuant to a Management Agreement. Robinson Capital has served as the
Investment Advisor to the Fund since 1994. Robinson Capital is a Minnesota
corporation with offices at 5100 Eden Avenue, Suite 204, Edina, Minnesota 55436.
Robinson Capital does not serve as investment advisor to any other registered
investment companies.
The officers of the Fund, along with Robinson Capital, manage the Fund's
investment activities and day-to-day operations, subject to supervision by the
Board of Directors. The Board of Directors sets broad policies for the Fund and
chooses the Fund's officers and the companies that provide the Fund with
services. Craig Robinson is President of the Fund and Robinson Capital.
Mr. Robinson also serves as the Fund's Associate Portfolio Manager.
Mr. Robinson has held various sales and marketing positions at Robinson Capital
since 1995, and served as an account executive at Paine Webber, Inc. from 1994
to 1995. Mark Billeadeau is Vice-President of the Fund and Robinson Capital, and
serves as the Fund's Senior Portfolio Manager. Mr. Billeadeau has served as a
Vice-President of the Fund since 1997, and a Vice-President and Financial
Analyst of Robinson Capital since 1995. From 1990 to 1995, he also served as
Manager (Consulting Service) at Craig-Hallum, Inc. and its successor, Principal
Financial Services, Inc.
Pursuant to an Investment Advisory Agreement which was approved by the
Fund's shareholders on December 9, 1998, Robinson Capital provides the Fund all
necessary information, advice, recommendation services and determinations
relating to investments and portfolio management. Orders for securities are
placed by Robinson Capital with the view to obtaining the best combination of
price and execution available. Robinson Capital attempts to evaluate the overall
quality and reliability of the broker-dealers and the services provided,
including research services, general execution capability, reliability and
integrity, willingness to take a position in securities, general operational
capabilities and financial condition. Robinson Capital is authorized to place
orders with various broker-dealers, subject to all applicable legal
requirements. Robinson Capital may also place orders with broker-dealers that
sell the Fund's shares, provided Robinson Capital believes the price and
execution are comparable to other broker-dealers. A greater spread, discount or
commission may be paid to broker-dealers that provide research services, which
may be used by Robinson Capital in managing assets of its clients, including the
Fund. Although it is believed that research services received directly or
indirectly benefit all of Robinson Capital's clients, the degree of benefit
varies by account and is not directly related to the commissions or remuneration
paid by the account.
As compensation for its services under the Investment Advisory Agreement,
Robinson Capital is paid an investment advisory fee, payable monthly, at an
annual rate of 0.60% for average net
8
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assets up to and including $100 million, 0.35% for the next $150 million of
average net assets and 0.10% for net assets over $250 million. While the
advisory fee paid Robinson Capital is comparable to the advisory fee paid by
other mutual funds, the total expenses of the Fund are higher than total
expenses paid by most mutual funds, many of which have net assets that are
substantially larger than the net assets of the Fund. For the fiscal year ended
November 30, 1999, the advisory fees paid Robinson Capital were $273,311.
Robinson Capital also provides the Fund with non-investment advisory
management and administrative services necessary for the conduct of the Fund's
business pursuant to a Management Agreement which was approved by the Fund's
shareholders on December 9, 1998. Robinson Capital prepares and updates
securities registration statements and filings, shareholder reports and other
documents. In addition, Robinson Capital provides office space and facilities
for the management of the Fund and provides accounting, record-keeping and data
processing facilities and services. Robinson Capital also provides information
and certain administrative services for shareholders of the Fund. For managing
the business affairs and providing certain shareholder services pursuant to the
Management Agreement, the Fund pays Robinson Capital a management administration
fee, payable monthly, at an annual rate of 0.40% of the average daily net assets
of the Fund, plus out-of-pocket expenses incurred in connection with shareholder
servicing activities such as postage, data entry, stationery, tax forms and
other printed material. Robinson Capital may subcontract with other entities to
provide certain shareholder servicing activities.
The Fund pays the investment management advisory fee, administrative fee,
shareholder services expenses, transaction costs, interest, taxes, legal,
accounting, audit, transfer agent and custodial fees, brokerage commissions and
other costs incurred in buying and selling assets, fees paid to directors not
affiliated with Robinson Capital, the cost of stationery and envelopes, the cost
of qualification and registration of shares under state and federal laws, the
cost of solicitation of proxies and certain other operational expenses. However,
Robinson Capital is obligated to pay all Fund expenses (exclusive of brokerage
expenses and fees, interest and any federal or state income taxes) which exceed
11/2% of the Fund's average net assets for any fiscal year on the first $100
million of average net assets, 11/4% of the Fund's average net assets for any
fiscal year on the next $150 million of average net assets, and 1% of the Fund's
average net assets for any fiscal year on average net assets in excess of $250
million. During the fiscal year ended November 30, 1999, total expenses of the
Fund amounted to $680,561, or 1.49% of average net assets.
SHAREHOLDER INFORMATION
PURCHASE OF SHARES
MECHANICS OF PURCHASE. Shares of the Fund may be purchased directly from
the Fund or through authorized investment dealers. Initial investments in the
Fund may be made by mailing a completed application, together with a check for
the total purchase price, to General Securities, Incorporated, State Street
Corporation, P.O. Box 219249, Kansas City, Missouri 64121, or by contacting an
authorized investment dealer. Initial investments may also be made by submitting
a completed application and check to an authorized investment dealer who will
forward them to the Fund's Transfer Agent. Applications may be obtained by
calling the Fund at (800) 577-9217 or writing to the Fund at General Securities
Incorporated, 5100 Eden Avenue, Suite 204, Edina, Minnesota 55436. The dealer is
responsible for transmitting the order promptly to the Transfer Agent in order
to permit the investor to obtain the current price. Subsequent purchases in the
9
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Fund may be made by mailing a check directly to the Transfer Agent at General
Securities, Incorporated, State Street Corporation, P.O. Box 219249, Kansas
City, Missouri 64121, or by contacting an authorized investment dealer. Checks
should be made payable to General Securities, Incorporated, subsequent purchases
should indicate the account number on the check and checks must be drawn on a
U.S. bank or its foreign branch or subsidiary and must be payable in U.S.
dollars. Third party checks, except those payable to an existing shareowner who
is a natural person (as opposed to a corporation or partnership), credit cards
and cash will not be accepted.
Initial and subsequent investments may also be made by wiring Federal Funds
to State Street Corporation; Routing #ABA 101003621; Deposit Account: Bank
Account 7523491; From: Shareholder Name, Address, Tax Identification Number-For
purchase of: General Securities, Incorporated shares. In order for a wire
investment to be processed on the same day, (1) the investor must notify the
Transfer Agent of his or her intention to make such investment by 12:00 noon
Eastern time on the day of his or her investment by calling the Transfer Agent
at 1-800-939-9990; and (2) the wire must be received by 4:00 p.m. Eastern time
that same day.
Shares may be purchased in any amount not less than $1,500 initially with a
$100 minimum on subsequent investments (reduced pursuant to the Low Minimum
Initial Investment Plan/ Automatic Investment Plan described below and subject
to waiver at the discretion of the Investment Advisor). Dividends and capital
gains distributions, if any, will be reinvested regardless of amount at the net
asset value determined on the distribution date, unless requested in cash,
although they will be taxable in the manner set forth in the section of this
Prospectus entitled DIVIDEND AND DISTRIBUTION POLICIES. When the dollar amount
of a purchase is not evenly divisible by the current price of shares, the
purchaser will receive a number of whole shares plus a fractional share which is
proportionately the same as a whole share. Investments may thus be made in any
dollar amount (subject to the minimum described above) regardless of the current
price of shares.
The Fund reserves the right to withdraw all or any part of the offering made
by this Prospectus and to reject purchase orders in whole or in part. Also, from
time to time, the Fund may temporarily suspend the offering of its shares to new
investors. During the period of such suspension, persons who are already
shareholders of the Fund normally are permitted to continue to purchase
additional shares and to have dividends reinvested.
PRICE PER SHARE. The Fund is offering its shares at a public offering price
equal to the next determined net asset value per share. Net asset value is based
upon and varies with changes in the market value of securities owned by the Fund
and is determined for purposes of a purchase at the close of business
immediately following the receipt of a subscription by the Fund. Subscription
forms and other information concerning the purchase of shares may be obtained
from the Fund at the address and telephone number listed on the cover page of
this Prospectus or from securities dealers offering shares of the Fund. Stock
certificates will not be issued.
Shares of the Fund may be purchased at a price equal to their net asset
value. The net asset value of a Fund share is the proportionate interest of each
share (or a fractional share) in the net corporate assets. It is computed not
less frequently than once daily. For the purposes of determining the net
corporate assets, securities are valued, as of the market close New York time,
on the basis of the last sale (if a sale occurred that day). If no sale occurred
that day, securities traded on a national securities exchange are valued at the
last bid price, whereas securities traded on
10
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the Nasdaq Stock Market or in the over-the-counter market are valued at the mean
between the last bid and asked price, in all cases excluding brokerage
commissions and odd lot premiums.
LOW MINIMUM INITIAL INVESTMENT PLAN/AUTOMATIC INVESTMENT PLAN. A
shareholder may automatically purchase additional shares of the Fund through the
Low Minimum Initial Investment Plan or Automatic Investment Plan. The minimum
initial investment in the Fund is $1,500. However, the Low Minimum Initial
Investment Plan allows an account to be opened with an initial investment of
$100 and subsequent monthly investments of $100 or more for a one year period.
Under these Plans, monthly investments (minimum $100, except where reduced in
certain cases by the Fund) are made automatically from the shareholder's account
at a bank, savings and loan or credit union into the shareholder's account.
By enrolling in either Plan, the shareholder authorizes the Fund and its
agents to either draw checks or initiate Automated Clearing House debits against
the designated account at a bank or other financial institution. Such account
must have check or draft writing privileges. This privilege may be selected by
completing the appropriate section on the Account Application or by contacting
the Transfer Agent for appropriate forms. If the shareholder also has expedited
wire transfer redemption privileges, the same bank, savings and loan or credit
union account must be designated for both the Automatic Investment Plan and the
wire redemption programs. You may terminate your Plan by sending written notice
to the Transfer Agent. Termination by a shareholder will become effective within
five days after the Transfer Agent has received the written request. The Fund
may immediately terminate a shareholder's Plan in the event that any item is
unpaid by the shareholder's financial institution. The payment of proceeds from
the redemption of Fund shares purchased through the Automatic Investment Plan
may be delayed to allow the check or transfer of funds for payment of the
purchase to clear, which may take up to 15 calendar days from the purchase date.
If a shareholder cancels the Low Minimum Initial Investment Plan before a one
year period, the Fund reserves the right to redeem the shareholder's account if
the balance is below the minimum investment level, currently $1,500. The Fund
may terminate or modify this privilege at any time.
AUTOMATIC WITHDRAWAL PLAN. The owner of $10,000 or more of Fund shares at
net asset value may provide for the payment from the owner's account of any
requested dollar amount of $100 or more to be paid to the owner or a designated
payee monthly, quarterly, semi-annually or annually. Shares are redeemed on the
5th business day from the end of the month so that the payee will receive
payment approximately the first week of the following month. When receiving
payments under the Automatic Withdrawal Plan, any income and capital gain
dividends will be automatically reinvested at net asset value on the
reinvestment date. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested and fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the account.
The Fund reserves the right to amend the Automatic Withdrawal Plan on thirty
days written notice and to terminate this privilege at any time. The plan may be
changed or terminated at any time by you in writing, with all registered owners'
signatures guaranteed.
SERVICING ORGANIZATIONS. Shares of the Fund may also be purchased through a
"Servicing Organization" which is a broker-dealer, bank or other financial
institution that purchases shares for its customers. When shares are purchased
this way, the Servicing Organization, rather than
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its customer, may be the shareholder of record of the shares. The minimum
initial and subsequent investments in the Fund for shareholders who invest
through a Servicing Organization generally will be set by the Servicing
Organization. Servicing Organizations may also impose other charges,
restrictions or procedures in addition to or different from those applicable to
investors who remain the shareholder of record of their shares. The procedures
for purchases or redemptions through Servicing Organizations may vary slightly
from that which is described elsewhere in this Prospectus. Thus, an investor
contemplating investing with the Fund through a Servicing Organization should
read materials provided by the Servicing Organization in conjunction with this
Prospectus. Furthermore, the Fund may apply different procedures and charge
different costs to Servicing Organizations than as described elsewhere in this
Prospectus.
Although Servicing Organizations will sell and redeem shares at net asset
value, they may charge their customers a fee in connection with services offered
to customers. Shares held through a Servicing Organization may be transferred
into the investor's name following procedures established by the investor's
Servicing Organization and the Fund's Transfer Agent. Certain Servicing
Organizations may receive compensation from Robinson Capital.
REDEMPTION OF SHARES
SELLING YOUR SHARES. You may redeem all or a portion of your shares on any
day that the New York Stock Exchange is open. Your shares will be redeemed at
the next net asset value calculated after the Transfer Agent has received a
properly executed redemption request. Payment for shares will be made as
promptly as practicable but in no event later than seven days after receipt of a
properly executed request. When the Fund is requested to redeem shares for which
it may not have yet received good payment, it may delay the mailing of a
redemption draft until it has determined that collected funds have been received
for the purchase of such shares, which may take up to 15 days from the purchase
date.
SELLING BY TELEPHONE. If the proceeds of the redemption are $50,000 or less
and the proceeds are to be payable to the shareholder(s) of record and mailed to
the address of record, normally a telephone request by any one account owner is
sufficient for redemptions unless the account application has denied such
privilege. Telephone requests may be made by calling 1-800-939-9990.
Institutional account owners may exercise this special privilege of redeeming
shares by telephone request subject to the same conditions as individual account
owners provided that this privilege has been pre-authorized by the institutional
account owner by written instruction to the Transfer Agent with signatures
guaranteed. This privilege of redeeming shares by telephone request may not be
used if any address change for the shareholder's account has been effected
within 30 days of the redemption request. During periods when it is difficult to
contact the Transfer Agent by telephone, it may be difficult to implement the
telephone redemption privilege. The Fund reserves the right to terminate or
modify this privilege at any time. Additional information concerning telephone
redemptions appears under the section entitled "Important Information."
EXPEDITED WIRE REDEMPTION. If you give authorization for expedited wire
redemption, shares of the Fund can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. Requests received
by the Transfer Agent prior to the close of the Exchange (currently 4:00 p.m.
Eastern time) will result in shares being redeemed that day at the
12
<PAGE>
next determined net asset value of the Fund and normally the proceeds being sent
to the designated bank account the following business day. Delivery of the
proceeds of a wire redemption request of $250,000 or more may be delayed by the
Fund for up to 7 days if the Investment Advisor deems it appropriate under then
current market conditions. Once authorization is on file, the Transfer Agent
will honor requests by telephone at 1-800-939-9990. The Fund cannot be
responsible for the efficiency of the Federal wire system or the shareholder's
financial institution.
The Fund currently charges $20 for wire transfer of redemption proceeds. The
shareholder is responsible for any charges imposed by the shareholder's bank.
The minimum amount that may be wired is $2,500. The Fund reserves the right to
change this minimum or to terminate the wire redemption privilege. To change the
name of the single designated bank account to receive wire redemption proceeds,
it is necessary to send a written request with signatures guaranteed to the
Transfer Agent. During periods when it is difficult to contact the Transfer
Agent by telephone, it may be difficult to implement the expedited redemption
privilege.
SELLING BY MAIL. When shares are held for the account of a shareholder by
the Transfer Agent, the shareholder may redeem them by making a written request
to the Transfer Agent, Attention: Redemption Department, PO. Box 219249, Kansas
City, Missouri 64121. If the proceeds of the redemption are $50,000 or less on
an account, no signature guarantee will be required, unless a change in address
for the shareholder's account has been effected within 30 days of the redemption
request. For all other redemptions, signatures must be guaranteed by a bank,
broker/dealer, municipal securities broker, government securities dealer or
broker, credit union, savings association, national securities exchange,
registered securities association or clearing agency.
The purpose of a signature guarantee is to protect shareholders against the
possibility of fraud. The Transfer Agent may reject redemption instructions if
the guarantor is neither a member of nor a participant in a signature guarantee
program (currently known as "STAMP-SM-"). Guarantees from institutions or
individuals who do not provide reimbursement in case of fraud, such as notaries
public, will not be accepted. Further documentation may be requested from
institutional or fiduciary accounts, such as corporations, custodians (e.g.,
under the Uniform Gifts to Minors Act), executors, administrators, trustees or
guardians ("institutional account owners").
The redemption request must be signed by all registered owners exactly as
the account is registered, including any special capacity of the registered
owner. The Fund currently charges for actual costs of special delivery service
of redemption proceeds.
IMPORTANT INFORMATION. The Transfer Agent employs procedures designed to
confirm that instructions communicated by telephone are genuine, including
requiring certain identifying information prior to acting upon instructions,
recording all telephone instructions and sending written confirmations of
telephone instructions. To the extent such procedures are reasonably designed to
prevent unauthorized or fraudulent instructions, neither the Transfer Agent nor
the Fund would be liable for any losses from unauthorized or fraudulent
instructions. However, if such reasonable procedures are not followed, the
Transfer Agent and the Fund may be liable for losses due to unauthorized
telephone transactions.
MINIMUM ACCOUNT BALANCE REQUIREMENT. Because of the high cost of
maintaining small accounts, the Fund reserves the right to redeem a shareholder
account that falls below the
13
<PAGE>
minimum investment level, currently $1,500, unless the shareholder account falls
below the minimum due to changes in the market value of the portfolio.
Currently, Individual Retirement Accounts, employee benefit plan accounts,
Employer Sponsored Payroll Deduction Plans and other accounts with respect to
which the Investment Advisor, in its sole discretion, has waived the minimum
purchase amount, are not subject to this procedure. You will be notified in
writing and will be allowed 60 days to make additional purchases to bring the
account value up to the minimum investment level before the Fund redeems the
account.
DIVIDEND AND DISTRIBUTION POLICIES
AND CERTAIN TAX CONSEQUENCES DIVIDENDS.
The Fund follows a policy of distributing substantially all income on an
annual basis to shareholders. The Fund also distributes realized capital gains,
including both long-, mid- and short-term, if any, on an annual basis to
shareholders. As an investment company, and so long as certain diversification
of assets and source of income requirements prescribed by the Internal Revenue
Code are met and at least 90% of its "investment company taxable income" plus
certain other amounts are distributed to its shareholders, the Fund is allowed
to deduct certain dividends paid to shareholders and "pass through" the tax
character of certain dividends and long-term and mid-term capital gains to
shareholders who receive distributions. The Fund always has qualified for such
tax treatment (including with respect to the last fiscal year) and intends to
continue to do so.
CERTAIN TAX CONSEQUENCES. Distributions from dividend and interest income,
including short-term capital gains, whether paid in cash or reinvested in
shares, are taxable to shareholders as ordinary income for federal income tax
purposes. Long-term capital gains distributions, whether paid in cash or
reinvested, will be taxable as long-term and mid-term capital gains to
shareholders regardless of the length of time Fund shares have been owned by
shareholders, but will not be eligible for the dividends received deduction
generally available to corporate shareholders. If the net asset value of shares
should be reduced below a shareholder's cost by distribution of gain realized on
sale of securities, such distribution would be a return of investment, the
shareholder's basis in the Fund's shares would remain unchanged and the
distribution would be taxable as stated above. Accordingly, it may not
necessarily be advantageous for a shareholder to purchase shares in anticipation
of the payment of dividends or of capital gain distributions.
Under current federal tax laws, an individual's net long-term capital gains
on property held for more than 12 months are taxed at a maximum rate of 20%,
while an individual's ordinary income and net short-term capital gains on
property held for less than 12 months are taxed at a maximum rate of 39.6%.
However, a corporation's net long-term capital gains continue to be taxed at the
corporate ordinary income tax rate, which is 35%.
The preceding discussion is based on the Internal Revenue Code of 1986, as
amended, regulations, rulings and decisions in effect on the date of this
Prospectus, all of which are subject to change. This summary does not discuss
any aspect of state, local or foreign taxation and does not discuss all the tax
considerations that may be relevant to particular shareholders in light of their
personal investment circumstances, or to certain types of shareholders that may
be subject to special tax rules. Shareholders should consult their own tax
advisors concerning the application to distributions of federal, state, local,
foreign or other tax laws.
14
<PAGE>
DISTRIBUTION ARRANGEMENTS
The Fund serves as its own underwriter and distributor of its shares.
State Street Corporation, 330 W. 9th Street, P.O. Box 219249, Kansas City,
Missouri 64121, serves as the Fund's Transfer and Dividend Paying Agent
("Transfer Agent") and Custodian. State Street Corporation maintains the Fund's
shareholder records and assets and performs certain accounting services for the
Fund. Assets of the Fund may also be held by sub-custodians selected by State
Street Corporation and approved by the Board of Directors.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the Fund's
financial statements, are included in the Fund's Annual Report, which is
available on request.
FINANCIAL HIGHLIGHTS:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
-----------------------------------------------------
SELECTED PER SHARE HISTORICAL DATA WERE AS FOLLOWS: 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..................... $16.34 $16.55 $16.08 $14.61 $12.08
Operations:
Investment income -- net............................. .12 .15 .18 .17 .25
Net realized and unrealized gains (losses) on
investments........................................ 3.11 .72 2.08 2.46 3.49
--------- --------- --------- --------- ---------
Total from operations.................................. 3.23 .87 2.26 2.63 3.74
--------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income -- net........................ (.06) (.15) (.18) (.17) (.25)
Excess distributions of net investment income........ -- (.03) -- (.01) --
From net realized gains.............................. (2.58) (.90) (1.61) (.98) (.96)
--------- --------- --------- --------- ---------
Total distributions to shareholders.................... (2.64) (1.08) (1.79) (1.16) (1.21)
--------- --------- --------- --------- ---------
Net asset value, end of year........................... $16.93 $16.34 $16.55 $16.08 $14.61
========= ========= ========= ========= =========
Total return*.......................................... 19.85% 5.26% 14.08% 18.15% 31.15%
Net assets, end of year (000's omitted)................ $ 41,638 $ 43,791 $ 46,006 $ 39,974 $ 32,541
Ratio of expenses to average daily net assets.......... 1.49% 1.47% 1.44% 1.50% 1.50%
Ratio of net investment income to average daily net
assets................................................ .70% .90% 1.02% 1.11% 1.79%
Portfolio turnover rate................................ 22% 25% 20% 18% 24%
</TABLE>
* These are the Fund's total returns during the years, including reinvestment
of all dividend and capital gain distributions.
15
<PAGE>
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Fund's fiscal year ends on November 30. The Fund will send to its
shareholders, at least semiannually, reports showing its portfolio securities
and other information. An annual report containing financial statements audited
by the Fund's independent auditors will be sent to shareholders each year.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover and back page of this Prospectus.
16
<PAGE>
ADDITIONAL INFORMATION
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. Investors should read and retain this
Prospectus for future reference. A Statement of Additional Information (the
"Statement of Additional Information"), containing additional information about
the Fund, has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference into this Prospectus. Additional information
about the Fund is available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will also find a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance during its fiscal year. A copy of the Statement of Additional
Information as well as the Fund's annual and semi-annual reports can be obtained
without charge by telephone (collect) or written request to the Fund at the
following address and telephone number:
GENERAL SECURITIES INCORPORATED
5100 Eden Avenue, Suite 204,
Edina, Minnesota 55436
Telephone (800) 577-9217
You may also request additional information or direct shareholder inquiries
to the Fund. In addition, the Commission maintains a Website at
http://www.sec.gov that contains this Prospectus, the Statement of Additional
Information and certain other electronic filings including exhibits made by the
Fund with the Commission. This information may also be examined without charge
at the Public Reference Room of the Commission at 450 Fifth Street, N.W,
Washington, D.C. 20549, or may be obtained by calling the Commission at
1-800-SEC-0330 and copies thereof may be obtained from the Commission upon
payment of the prescribed fees.
Our Investment Company Act file number is 811-00594.
GENERAL SECURITIES is the registered service mark of General Securities,
Incorporated. The third party marks appearing above are the marks of their
respective owners.
[LOGO]
GENERAL SECURITIES
INCORPORATED
5100 EDEN AVENUE, SUITE 204, EDINA, MINNESOTA 55436
PROSPECTUS
-------------------------------------------
[LOGO]
FOCUS ON
---------------
QUALITY
MANAGEMENT
SYTEMS
---------------
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
GENERAL SECURITIES INCORPORATED
REGISTRATION STATEMENT ON FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
LOGO
FOCUS ON
----
QUALITY
MANAGEMENT
SYSTEMS
----
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 31, 2000
GENERAL SECURITIES, INCORPORATED
5100 Eden Avenue, Suite 204, Edina, Minnesota 55436
Telephone (952) 927-6799
General Securities, Incorporated (the "Fund") is a diversified open-end
management investment company which seeks possible long-term capital
appreciation for its shareholders. The Fund invests primarily, but not
exclusively, in selected common stocks. Shares of the Fund may be purchased
directly from the Fund at a price equal to the net asset value, as determined at
the close of business immediately following receipt by the Fund of a
subscription.
This Statement of Additional Information provides certain detailed information
concerning the Fund. It is not a prospectus and should be read in conjunction
with the Fund's current Prospectus, a copy of which may be obtained by telephone
or written request to the Fund at the address and telephone number printed
above.
This Statement of Additional Information relates to the Fund's Prospectus dated
March 31, 2000.
<PAGE>
----------
TABLE OF CONTENTS
Page
Description of the Fund and its Investment Risks...........................3
Management of the Fund Directors and Officers..............................5
Control Persons and Principal Holders of Securities........................7
Investment Advisory and Other Services.....................................8
Brokerage Allocation and Other Practices..................................10
Capital Stock and Other Securities........................................11
Purchase, Redemption and Pricing of Shares................................11
Taxation of the Fund......................................................15
Calculation of Performance Date...........................................16
Financial Statements......................................................17
2
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS RISKS
FUND CLASSIFICATION
The Fund is organized and existing under the laws of the state of
Minnesota. The Fund has been an investment company since its formation in 1951.
The Fund is a diversified, open-end, management investment company.
INVESTMENT STRATEGIES AND RISKS
As described in the Fund's Prospectus, the Fund's objective is to seek
long-term capital appreciation. Consistent with that objective, the Investment
Advisor seeks to select common stocks of companies that the Investment Advisor
determines have implemented or are implementing a "Quality Management System"
(QMS) which is a management philosophy where a company undertakes a systematic
process of evaluating its business practices and engages in a continuous effort
to improve its operations throughout the organization. The Investment Advisor
also uses fundamental and quantitative analysis techniques to evaluate QMS
companies that the Investment Advisor believes are undervalued in the
marketplace. The Fund intends to invest most of its assets in common stocks,
although investments in corporate bonds, debentures or preferred stocks and
United States Government Securities, in addition to certificates of deposit,
bank depository accounts and other short-term investments, have and will be made
as economic conditions dictate.
From time to time, the Fund may enter into repurchase agreements for
short-term investments. A repurchase agreement is a contract under which a Fund
acquires a security for a relatively short period (usually not more than one
week) subject to the obligation of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the Fund's cost
plus interest). The Investment Advisor will monitor such transactions to ensure
that the value of the underlying securities will be at least equal at all times
to the total amount of the repurchase obligation, including the interest factor.
The Fund intends to enter into repurchase agreements only with member banks of
the Federal Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition as may be established by the Board of
Directors and only with respect to obligations of the U.S. Government or its
agencies or instrumentalities or other high-quality short-term debt obligations.
If the seller defaults, the Fund could realize a loss on the sale of the
underlying security to the extent that the proceeds of sale are less than the
resale price provided in the agreement including interest.
FUND POLICIES
In order to define its investment policies, the Fund has established
certain rules and guidelines. Some have been voluntarily adopted and others
have been required to meet either federal or state statutes. As indicated,
some policies are in the form of fundamental policies or charter restrictions
which may be changed only with the approval of a majority of the Fund's
outstanding voting securities while others are subject to change by the Board
of Directors. Without the affirmative vote of the lesser of (i) a majority of
all outstanding shares of the Fund, or (ii) 67% or more of the Fund's shares
represented at a meeting if more than 50% of all outstanding shares of the
Company are represented in person or by proxy at such meeting, the Fund may
not, among other things,:
3
<PAGE>
1. Buy "on margin" or sell "short";
2. Borrow money;
3. Issue securities senior to the outstanding shares of common stock;
4. Act as underwriter;
5. Invest more than 5% of the value of its total assets (taken at cost)
in the securities of any one company, or purchase more than 10% of any class of
voting securities or more than 10% of any class of securities of any one
company;
6. Invest more than 25% of the value of its total assets (taken at
cost) in the securities of companies all of which conduct their principal
business activities in the same industry;
7. Invest in commodities or commodity contracts, or interests in real
estate;
8. Lend money or assets;
9. Purchase or retain the securities of any issuer if those officers
and directors of the Fund or the advisor owning beneficially more than 1/2 of 1%
of the securities of such issuer together own more than 5% of the securities of
such issuer;
10. Purchase the securities of any other investment company; or
11. Invest in companies for the purpose of exercising control or
management.
TEMPORARY DEFENSIVE POSITIONS
From time to time, the Fund's portfolio managers may determine that
market conditions or other factors warrant that the Fund adopt defensive
strategies to limit losses or lock-in gains. This could include investments in
United States Treasury bills, notes and bonds, certificate of deposits and bank
depository accounts of banks which have total assets in excess of $500 million.
The Fund's defensive strategy could also include buying or selling
exchange-traded options on particular securities or a broad index of securities.
An option entitles the holder to receive (in the case of a call option) or to
sell (in the case of a put option) a particular security at a specified exercise
price at any time during its term.
The Fund may buy put options ("puts"). When the Fund buys a put, it
gives the purchaser the right to sell the underlying security to the Fund at the
exercise price at any time during the option period. When the Fund purchases a
put, it pays a premium in return for the right to sell the underlying security
at the exercise price at any time during the option period. If any put is not
exercised or sold, it will become worthless on its expiration date.
The Fund may buy or sell options on particular securities within the
Fund's portfolio or on a group of securities in an index in order to hedge the
Fund's exposure to downward price fluctuations. If the Investment Advisor
applies a hedge strategy at an inappropriate time or judges market
4
<PAGE>
conditions incorrectly, these defensive strategies may lower the Fund's
return and limit the Fund's ability to achieve its objective of capital
appreciation.
The Fund considers the use of a limited option strategy to be
consistent with the Fund's stated objectives because the strategy is utilized to
lock-in gains on particular securities or for the market as a whole, upon
achieving certain capital appreciation-oriented performance goals for certain
Fund investments. The Fund also considers this strategy useful to limiting Fund
losses and risk.
The use of options involves risks. One risk arises because of the
imperfect correlation between movements in the price of options and movements in
the price of securities that are the subject of the hedge. The Fund's hedging
strategy may not be fully effective if such imperfect correlation exists. Price
movement correlation may be distorted by illiquidity in the options market and
the participation of speculators in such markets. If an insufficient number of
contracts are traded, commercial users may not deal in options because they do
not want to assume the risk that they may not be able to close out their
positions within a reasonable amount of time. In such instances, options market
prices may be driven by different forces than those driving the market in the
underlying securities, and price spreads between these markets may widen. The
participation of speculators in the market typically enhances liquidity.
Nevertheless, the trading activities of speculators in the options market may
create temporary price distortions unrelated to the market in the underlying
securities.
An exchange-traded option may be closed out only on an exchange which
generally provides a liquid secondary market for an option of the same series.
If a liquid secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to a
particular option, with the result that the Fund would have to exercise the
option in order to accomplish the desired hedge. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) insufficient
trading interest in certain options; (ii) restrictions imposed by an exchange on
opening or closing transactions for the option; (iii) trading halts, suspensions
or other restrictions may be imposed for options or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange or (v) the facilities of an exchange or the Options Clearing
Corporation or other clearing organization may not be adequate to handle current
trading volume.
MANAGEMENT OF THE FUND DIRECTORS AND OFFICERS
The officers of the Fund, along with Robinson Capital, the Investment
Advisor and Administrator, manage the Fund's investment activities and
day-to-day operations, subject to supervision by the Board of Directors. The
Board of Directors sets broad policies for the Fund and chooses the Fund's
officers and the companies that provide the Fund with services.
The directors and officers of the Fund are listed below together with
their addresses and information as to their principal business occupations
during the last five years (if other than their present business occupations)
and other current business affiliations, including affiliation with the
Investment Advisor.
M. MICHELLE COADY, Ph.D., age 41, Chairperson of the Board of Directors
of the Fund, 3236 48th Avenue South, Minneapolis, Minnesota 55406. She is
Director of Client Services, Major Markets, at St. Paul Fire and Marine
Companies, a St. Paul-based property and casualty insurer. From 1991 to 1994,
Dr. Coady was Senior Director of Continuous Quality Improvement at
5
<PAGE>
HealthPartners, Inc., Minneapolis, Minnesota. She has also been the proprietor
of a consulting business since 1985.
GARY D. FLOSS, age 58, Director of the Fund, 1444 18th Street, N.W.,
New Brighton, Minnesota 55112. He is Director of Customer-Focused Quality for
Medtronic Corporation, a Minneapolis, Minnesota manufacturer of medical devices.
From 1990-1997 he was Vice President, Quality & Productivity for Consulting
Devices International, a business unit of Ceridian Corporation. Ceridian
Corporation is a Minneapolis, Minnesota provider of information services in the
human resources and transportation areas.
DAVID W. PREUS, age 77, Director of the Fund, 60 Seymour Avenue S.E.,
Minneapolis, Minnesota 55414. He is the Presiding Bishop Emeritus of The
American Lutheran Church and a Distinguished Visiting Professor at
Luther Northwestern Theological Seminary, St. Paul, Minnesota.
CHARLES J. WALTON, age 76, Director of the Fund, 653 S.W. Thorn Hill
Lane, Palm City, Florida 34990. He is President of Walton Enterprise Leasing
Co., a Minneapolis, Minnesota automobile, truck and equipment leasing
corporation.
ARNOLD M. WEIMERSKIRCH, age 63, Director of the Fund, 2831 Sandpiper
Trail, Excelsior, Minnesota 55331. He is Vice President for Corporate Quality
for Honeywell, Inc., a Minneapolis, Minnesota manufacturer
of temperature control systems and avionics.
*MARK D. BILLEADEAU, age 43, Director of the Fund, Vice President of
the Fund and Senior Portfolio Manager since September 1998, 5100 Eden Avenue,
Suite 204, Edina, Minnesota 55436. He has been Treasurer and Chief Financial
Officer of Robinson Capital since September 1998, and has served as a Financial
Analyst at Robinson Capital since February 1995. From September 1990 to February
1995, he was a Manager of Consulting Service of Craig-Hallum and its successor,
Principal Financial Services, Inc.
*CRAIG H. ROBINSON, age 42, Director and President of the Fund, and
Associate Portfolio Manager, 5100 Eden Avenue, Suite 204, Edina, Minnesota 55436
since September 1998. He has worked in sales and marketing at Robinson Capital
since August 1995. He also served as Vice President of the Fund from February
1997 through September 1998. He has been President and Chief Executive Officer
of Robinson Capital since September 1998 and was a Vice President from February
1997 through September 1998. From August 1994 to August 1995, he worked as an
Account Executive at Paine Webber Incorporated. From 1990 to August 1994, he
worked as a Sales Manager at Comprehensive Loss Management, Inc.
RENEE A. RASMUSSON, age 56, Treasurer of the Fund, 5100 Eden Avenue,
Suite 204, Edina, Minnesota 55436 since November 1998. She also has served as
Assistant Treasurer of the Fund from December 1994 through September 1998, and
Assistant Treasurer of Robinson Capital Management, Inc. since December 1994.
From July 1993 to July 1994, she was an employee of Hamilton Investments, Inc.
and prior to July 1993 she was a Vice President of Craig-Hallum, Inc.
LORY M. HASSLER, age 68, Assistant Secretary and Assistant Treasurer of
the Fund, 5100 Eden Avenue, Suite 204, Edina, Minnesota 55436, since December
1994. She has also served as Secretary of Robinson Capital Management, Inc.
since September 1998 and Assistant Secretary from December 1994 through
September 1998. From July 1993 to December 1994, she was a registered
representative of Hamilton Investments, Inc. Prior to July 1993, she was a
registered representative and Vice President of Craig-Hallum, Inc.
6
<PAGE>
JOHN R. HOUSTON, age 47, Secretary of the Fund, 800 LaSalle Avenue,
Suite 2800, Minneapolis, Minnesota 55402. He is partner of Robins, Caplan,
Miller & Ciresi, LLP, legal counsel for the Fund.
- ---------------------------
*Designates a director who is an "interested person" with respect t o the Fund
as defined in the Investment Company Act of 1940.
REMUNERATION OF OFFICERS AND DIRECTORS
The Fund does not pay any remuneration directly to its officers, but
compensation of officers and employees is paid by Robinson Capital Management,
Inc., its current Investment Advisor. During the last fiscal year, the Fund paid
Robinson Capital Management, Inc., a Minnesota corporation, its Investment
Advisor for the year, $273,311 for investment advisory services.
The directors who have no substantial interest in the Investment
Advisor or its affiliates (Dr. Coady and Messrs. Floss, Preus, Victor, Walton,
and Weimerskirch) receive a nominal honorarium from the Fund for each directors'
meeting attended (an aggregate of $8,000 during the last fiscal year).
Compensation Table
<TABLE>
<CAPTION>
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM FUND PAID TO
NAME OF PERSON, POSITION FROM FUND PART OF FUND EXPENSES RETIREMENT DIRECTORS
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
M. Michelle Coady, Ph.D., Director $1,200 $0 $0 $1,200
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Gary D. Floss, Director $1,600 $0 $0 $1,600
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
David W. Preus, Director $2,000 $0 $0 $2,000
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Oscar Victor, Director* $400 $0 $0 $400
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Charles J. Walton, Director $1,600 $0 $0 $1,600
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Arnold M. Weimerskirch, Director $1,200 $0 $0 $1,200
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Craig H. Robinson, President and $0 $0 $0 $0
Director
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Mark D. Billeadeau, Vice President $0 $0 $0 $0
and Director
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Renee A. Rasmusson, Treasurer $0 $0 $0 $0
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
Lory M. Hassler, Assistant $0 $0 $0 $0
Secretary and Assistant Treasurer
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
John R. Houston, Secretary $0 $0 $0 $0
- ------------------------------------- --------------- ------------------------- ------------------ ---------------------
</TABLE>
* Resigned as a Director of the Fund on June 30, 1999.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The Fund does not know of any person who owns of record more than five
percent of the Fund's outstanding securities. On March 22, 2000, the Fund's
officers and directors owned 35,188 shares, or 1.33% of the total number of the
Fund shares outstanding.
7
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Robinson Capital Management, Inc. ("Robinson Capital"), a Minnesota
corporation with offices at 5100 Eden Avenue, Suite 204, Edina, Minnesota 55436,
is the Investment Advisor for the Fund and provides the Fund with professional
investment supervision and management. Robinson Capital is an investment
advisory firm controlled by Craig H. Robinson, John C. Robinson, Susan A.
Peterson and Beth E. Robinson, who each own 18.06% of the outstanding common
stock of Robinson Capital. These shareholders are the children of John P.
Robinson, who served as Fund's President and served on the Board of Directors
from the Fund's inception in 1951 until his death in 1998. Craig H. Robinson is
President of Robinson Capital and President of the Fund. Since 1995, John C.
Robinson owns and operates a business that provides inventory data management
for retail pharmacies. Susan A. Peterson is Chief Financial Officer and founder
of Decision Support Software, Inc., and Beth A. Robinson is an independent
business consultant, and owns and operates a ceramics business.
Pursuant to an Investment Advisory Agreement which was approved by
the Fund's shareholders on December 9, 1998, Robinson Capital provides the
Fund all necessary information, advice, recommendation services and
determinations relating to investments and portfolio management. Orders for
securities are placed by Robinson Capital with the view to obtaining the best
combination of price and execution available. Robinson Capital attempts to
evaluate the overall quality and reliability of the broker-dealers and the
services provided, including research services, general execution capability,
reliability and integrity, willingness to take a position in securities,
general operational capabilities and financial condition. Robinson Capital is
authorized to place orders with various broker-dealers, subject to all
applicable legal requirements. Robinson Capital may also place orders with
broker-dealers that sell the Fund's shares, provided Robinson Capital
believes the price and execution are comparable to other broker-dealers. A
greater spread, discount or commission may be paid to broker-dealers that
provide research services which may be used by Robinson Capital in managing
assets of its clients, including the Fund. Although it is believed that
research services received directly or indirectly benefit all of Robinson
Capital's clients, the degree of benefit varies by account and is not
directly related to the commissions or remuneration paid by the account.
As compensation for its services under the Investment Advisory
Agreement, Robinson Capital is paid an investment advisory management fee,
payable monthly, at an annual rate of 0.60% for average net assets up to and
including $100 million, 0.35% for the next $150 million of average net assets
and 0.10% for net assets over $250 million. For the fiscal years ended November
30, 1999, 1998, and 1997, the advisory fees paid Robinson Capital were 273,311,
294,321, and $289,638, respectively.
Robinson Capital also provides the Fund with non-investment advisory
management and administrative services necessary for the conduct of the Fund's
business pursuant to a Management Agreement which was approved by the Fund's
shareholders on December 9, 1998. Robinson Capital prepares and updates
securities registration statements and filings, shareholder reports and other
documents. In addition, Robinson Capital provides office space and facilities
for the management of the Fund and provides accounting, record-keeping and data
processing facilities and services. Robinson Capital also provides information
and certain administrative services for shareholders of the Fund. For managing
the business affairs and providing certain shareholder services pursuant to the
Management Agreement, the Fund pays Robinson Capital an administrative fee,
payable monthly, at an annual rate of 0.40% of the average daily net assets of
the Fund, plus out-of-pocket expenses incurred in connection with shareholder
servicing activities such as postage, data entry,
8
<PAGE>
stationery, tax forms and other printed material. Robinson Capital may
subcontract with other entities to provide certain shareholder servicing
activities.
During the fiscal year ended November 30, 1999 the Fund paid total fees
to Robinson Capital amounting to $455,519. Of this amount, $273,311 was paid for
investment advisory services and $182,208 was paid for non-investment management
or administrative services. For the fiscal year ended November 30, 1998,
Robinson Capital received $490,535 in total advisory and management fees from
the Fund. Of this amount, $294,321 was paid for investment advisory services and
$196,214 was paid for non-investment management or administrative services. For
the fiscal year ended November 30, 1997, Robinson Capital received $482,730 in
total advisory and management fees from the Fund. Of this amount, $289,638 was
paid for investment advisory services and $193,092 was paid for non-investment
management or administrative services.
The Fund's total net assets at the beginning and end of fiscal 1999
were $43,790,861 and $41,638,165, respectively. The combined advisory management
fees and non-investment management and administrative fees of 1% on the first
$100 million of the Fund's net assets and 3/4 of 1% on the next $150 million of
the Fund's net assets are higher than similar fees paid by most mutual funds,
many of which have net assets that are substantially larger than the net assets
of the Fund.
The Fund pays the investment advisory management fee, administrative
fee, shareholder services expenses, transaction costs, interest, taxes, legal,
accounting, audit, transfer agent and custodial fees, brokerage commissions and
other costs incurred in buying and selling assets, fees paid to directors not
affiliated with Robinson Capital, the cost of stationery and envelopes, the cost
of qualification and registration of shares under state and federal laws, the
cost of solicitation of proxies and certain other operational expenses. However,
Robinson Capital is obligated to pay all Fund expenses (exclusive of brokerage
expenses and fees, interest and any federal or state income taxes) which exceed
1-1/2% of the Fund's average net assets for any fiscal year on the first $100
million of average net assets, 1-1/4% of the Fund's average net assets for any
fiscal year on the next $150 million of average net assets, and 1% of the Fund's
average net assets for any fiscal year on average net assets in excess of $250
million. For the fiscal year ended November 30, 1999, total expenses of the Fund
amounted to $680,561 or 1.49% of average net assets. For the fiscal year ended
November 30, 1998, total expenses of the Fund amounted to $722,839 or 1.47% of
average net assets. For the fiscal year ended November 30, 1997, total expenses
of the Fund amounted to $696,963 or 1.44% of average net assets.
Each of the Investment Advisory Agreement and Management Agreement will
continue in force from year to year so long as the continuance is specifically
approved at least annually (1) by the Board of Directors of the Fund or (2) by a
vote of the majority of the outstanding voting securities of the Fund, provided
that in either event the continuance is also approved by the vote of a majority
of directors who are not interested persons of the Fund or Robinson Capital,
cast in person at a meeting called for the purpose of voting on such approval.
Each of the Investment Advisory Agreement and Management Agreement may be
terminated at any time, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of the majority of the Fund's outstanding
voting securities, or by Robinson Capital on 60 days' written notice. They each
terminate automatically in the event of an assignment.
The Fund serves as its own underwriter and distributor of its shares.
9
<PAGE>
State Street Corporation, 330 W. 9th Street, P.O. Box 219249, Kansas
City, Missouri 64121, currently serves as the Fund's Registrar, Transfer Agent
and Dividend Paying Agent and Custodian. State Street Corporation, which is not
affiliated with either the Fund or Robinson Capital, maintains the Fund's
shareholder records and assets and performs certain accounting services for the
Fund. Assets of the Fund may also be held by sub-custodians selected by State
Street Corporation and approved by the Board of Directors.
LEGAL COUNSEL
Robins, Kaplan, Miller & Ciresi LLP, Minneapolis, Minnesota, are
counsel for the Fund.
INDEPENDENT AUDITORS
KPMG LLP, 4200 Norwest Center, 90 South 7th Street, Minneapolis,
Minnesota 55402, has been selected as the independent auditors of the Fund. The
selection of independent auditors is subject to annual ratification by the
Fund's Board of Directors.
BROKERAGE ALLOCATION AND OTHER PRACTICES
During the past fiscal year, the Fund had total purchases of portfolio
securities, other than short-term securities, of $7,534,545, and sales of such
securities of $15,195,111, resulting in portfolio turnover in that year of 22%;
compared with a portfolio turnover rate of 25% during fiscal year 1998, 20%
during fiscal 1997 and 18% in fiscal 1996. The Fund's total net assets at the
beginning of fiscal 1999 were $43,790,861 and $41,638,165 at the end of the
year. The total amount of brokerage fees for handling portfolio transactions of
the Fund during the three fiscal years ended November 30, 1999, 1998, and 1997
were 28,764, $31,320, and $23,060 respectively.
The Fund's brokerage business is distributed among various brokers and
dealers, and the allocation is determined primarily at the discretion of the
Investment Advisor. The Fund always seeks to effect its transactions in
portfolio securities where it can get prompt execution of orders at the most
favorable prices ("best execution"). The commissions charged by brokers and
dealers vary and the Fund is not required by law to utilize the services of
national securities exchange members or other brokers or dealers charging the
lowest commission for any particular transaction.
It is the practice of the Fund and its Investment Advisor to consider
statistical and factual information, as well as reports on general market
conditions, industry analysis and analysis of particular companies whose
securities are publicly traded, furnished to them by investment banking firms as
a factor in connection with allocation of brokerage business to such firms,
provided the best execution is still obtained. Such services are generally
provided to the Investment Advisor, to the extent that such services are used by
it in rendering investment advice to the Fund, they tend to reduce the advisor's
expenses. During fiscal 1999, certain brokers rendered research services to the
Fund and in exchange for such services the Fund directed brokerage transactions
to them. However, such placement of brokerage transactions was not pursuant to
binding written agreement with such brokers. The aggregate amount of such
transactions was $21,540,604; the aggregate amount of related commissions was
$28,764.
Where the concept of best execution is satisfied by two brokers and
one broker charges a lower commission but does not provide such services, the
advisor has indicated that it may place its orders with the broker charging a
higher commission where the amount of such commission is
10
<PAGE>
reasonable in relation to the value of the brokerage and research services
provided. If the Investment Advisor purchases such information its expenses
will increase without reimbursement from the Fund. If it is concluded that it
would be impractical for the Investment Advisor to attempt to provide the
full range of services which are available from brokerage firms or if the
advisor deems that it cannot afford purchasing such information and services,
it may become necessary to pay a higher level of commissions to firms
offering these services. The Investment Advisor will not institute such a
policy without the prior authorization of the Fund's Board of Directors,
however, and any such payments will be reviewed by the directors on at least
a quarterly basis.
The Fund made no allocation of brokerage business during the last fiscal year to
those dealers and brokers who were sellers of the Fund's shares and no
reciprocal brokerage business was received by the Investment Advisor. When
appropriate, the Investment Advisor may make brokerage allocation to sellers of
Fund shares in the current fiscal year. Purchases and sales of securities which
are not listed or traded on a securities exchange will ordinarily be executed
with primary market makers acting as principals, except where best execution may
otherwise be obtained.
Robinson Capital is not registered as a broker/dealer and,
consequently, did not in fiscal 1997, 1998 or 1999 and will not in fiscal 2000,
be acting as broker in the execution of any orders for the Fund.
CAPITAL STOCK AND OTHER SECURITIES
CAPITAL STOCK
General Securities, Incorporated is authorized to issue 10 million
shares of the nominal par value of one cent per share. On March 22, 2000], there
were 2,654,257 shares outstanding. All shares are fully paid, nonassessable, and
transferable and have equal rights in earnings, in voting and on liquidation.
There are no junior or senior securities and no preemptive rights. No securities
senior to the shares of common stock can be issued.
The shares have noncumulative voting rights which means that the
holders of more than 50% of the shares voting for the election of directors can
elect 100% of the directors if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
directors will not be able to elect any person or persons to the Board of
Directors.
PURCHASE, REDEMPTION AND PRICING OF SHARES
In addition to the methods of purchase described in the Prospectus, the
Fund offers the following plans and services in connection with purchasing
shares.
LOW MINIMUM INITIAL INVESTMENT PLAN/AUTOMATIC INVESTMENT PLAN
A shareholder may automatically purchase additional shares of the
Fund through the Low Minimum Initial Investment Plan or Automatic Investment
Plan. The minimum initial investment in the Fund is $1,500. However, the Low
Minimum Initial Investment Plan allows an account to be opened with an
initial investment of $100 and subsequent monthly investments of $100 or more
for a one year period. Under these Plans, monthly investments (minimum $100,
except where reduction in certain cases by the Fund) are made automatically
from the shareholder's account at a bank, savings
11
<PAGE>
and loan or credit union into the shareholder's account. By enrolling in
either Plan, the shareholder authorizes the Fund and its agents to either
draw checks or initiate Automated Clearing House debits against the
designated account at a bank or other financial institution. Such account
must have check or draft writing privileges. This privilege may be selected
by completing the appropriate section on the Account Application or by
contacting the Transfer Agent for appropriate forms. If the shareholder also
has expedited wire transfer redemption privileges, the same bank, savings and
loan or credit union account must be designated for both the Automatic
Investment Plan and the wire redemption programs. You may terminate your Plan
by sending written notice to the Transfer Agent. Termination by a shareholder
will become effective within five days after the Transfer Agent has received
the written request. The Fund may immediately terminate a shareholder's Plan
in the event that any item is unpaid by the shareholder's financial
institution. The payment of proceeds from the redemption of Fund shares
purchased through the Automatic Investment Plan may be delayed to allow the
check or transfer of funds for payment of the purchase to clear, which may
take up to 15 calendar days from the purchase date. If a shareholder cancels
the Low Minimum Initial Investment Plan before a one year period, the Fund
reserves the right to redeem the shareholder's account if the balance is
below the minimum investment level, currently $1,500. The Fund may terminate
or modify this privilege at any time.
INDIVIDUAL RETIREMENT ACCOUNT (IRA PLAN), ROTH IRA, SEP-IRA PLANS AND SIMPLE IRA
PLANS
Any individual with earned income can establish an individual
retirement account (IRA) to provide retirement benefits to the individual. The
Fund offers an IRA Plan funded with shares of the Fund. The Fund's IRA Plan
follows the basic format of the Internal Revenue Service model plan, and
accordingly, upon submission to the Service for approval, the Fund was advised
that no further qualifying action was required by individuals adopting the IRA
Plan. Any person with earned income may establish his or her own IRA by adopting
the IRA Plan and may make annual contributions in an amount not exceeding the
lesser of 100% of his or her adjusted gross income or $2,000. An individual can
make an additional contribution of up to $2,000 to an IRA for a nonworking
spouse if the combined contributions for both the individual's and his or her
spouse's IRAs do not exceed 100% of the individual's or spouse's adjusted gross
income. Such contributions are tax deductible by all individuals except those
who are active participants, or whose spouses are active participants, in a
qualified employer sponsored profit sharing or pension plan. For these
individuals, the tax deduction is reduced or eliminated but income on such
contributions continues to be currently tax deferred. Minimum annual
distributions from the IRA are required beginning no later than April 1, of the
year following the year in which the individual attains age 70-1/2. Substantial
tax penalties exist for premature distributions from the IRA Plan prior to age
59-1/2 or for failure to make timely distributions. The adoption of the IRA Plan
should be reviewed by the individual and his or her attorney prior to investing.
For tax years beginning after December 31, 1997, the IRA Plan may be
used by individuals to establish a so-called "Roth IRA." Contributions to a
Roth IRA are nondeductible; however, the accumulations on the contributions
may be withdrawn tax-free, provided the Roth IRA has been maintained for at
least five years and distributions are made only after the individual attains
the age 59-1/2 dies, becomes disabled, or to pay for first time homebuying
expenses. However, substantial tax penalties exist for premature distributions
of contributions or accumulations from a Roth IRA. The annual limit on
contributions to a Roth IRA is $2,000; as with an ordinary IRA, up to $2,000
may be contributed to a Roth IRA for a nonworking spouse. This limit is phased
out for single taxpayers with an adjusted gross income between $95,000 and
$110,000, or joint filers with adjusted gross income between $150,000 and
$160,000. Individuals with adjusted gross income of less than
12
<PAGE>
$100,000 may also contribute to a Roth IRA, amounts distributed from a
regular IRA that have been included in the taxpayer's gross income.
Contributions to a Roth IRA may be made after age 70-1/2 and distributions
are not required to begin at age 70-1/2.
The IRA Plan may also be utilized by any person under age 70-1/2 to
maintain the tax-sheltered treatment of benefits distributed from an employer's
tax qualified pension plan because of the employee's termination of employment.
Benefits distributed in a lump sum or installments for a period less than ten
years can be invested in the IRA Plan, provided the employee elects either to
make a direct rollover from the trustee of the employee's plan to the IRA Plan,
or if the employee receives the distribution directly, to invest in the IRA Plan
within 60 days of such receipt. In this manner, assets from the previous
employer's pension plan are reinvested, the tax consequences stemming from the
distribution are deferred, and the assets deposited in the IRA Plan, at the
option of the holder, may in the future be "rolled over" to a tax qualified
pension plan of a subsequent employer.
In addition, individuals covered by an employer sponsored Savings
Incentive Match Plan for employees ("SIMPLE Plan") or Simplified Employee
Pension-IRA Plan ("SEP-IRA Plan") may establish an IRA to which the employer can
make tax deductible contributions as a uniform percentage of compensation. The
employer sponsoring a SIMPLE Plan is required to make either a matching
contribution of 100% of the employee's contributions up to 3% of the employee's
compensation (1% for certain years) or a uniform contribution to all eligible
employees equal to 2% of compensation. The employer sponsoring the SEP-IRA may
contribute up to the lesser of $30,000 or 15% of the employee's compensation, up
to a maximum compensation of $160,000 for 1999. SIMPLE Plans are a form of
qualified retirement plan authorized by tax law changes in 1996 that are
available to employers who employ 100 or less employees. SIMPLE Plans are exempt
from many of the testing and other requirements imposed on qualified retirement
plans. SIMPLE Plans and certain salary reduction SEP-IRA Plans (SARSEP) in
existence prior to January 1, 1997 also permit employees to elect to contribute
portions of their pre-tax compensation to such plans in addition to the
employer's contribution, subject to the above limitations. No new SARSEP's may
be established after December 31, 1996. Generally, such individual contributions
are limited to a maximum dollar amount of compensation each year ($6,000 for
SIMPLE Plans and $10,000 for SARSEP Plans for 1999). The employee covered by a
SEP-IRA Plan that prohibits individual pre-tax contributions may make additional
contributions of the lesser of $2,000 or 100% of compensation either to the
SEP-IRA Plan or to a separate IRA which may be deductible. An IRA established
pursuant to a SEP-IRA Plan, SIMPLE Plan or SARSEP may invest in the Fund.
Under the Fund's IRA Plan, State Street Corporation serves as custodian
of the assets. State Street Corporation will charge an annual maintenance fee of
$12 for its custodial services. In addition, there will be a fee of $15 for a
lump sum benefit distribution, but no fee for each periodic cash distribution
received from the Fund. This fee schedule may be altered at any time by State
Street Corporation on 60 days' written notice. Persons opening an IRA Plan may
rescind it upon written notice to the custodian on or before the seventh day
following acceptance of the IRA Plan by the custodian. Any individual rescinding
an IRA Plan during the seven-day period will be fully reimbursed even though it
is the Fund's practice to invest all proceeds immediately upon receipt. If the
proceeds so invested depreciate prior to rescission, the investment advisor will
absorb the loss. If the proceeds invested appreciate, the Fund will realize the
gain. Shares held in an IRA Plan may be redeemed at any time pursuant to a
proper redemption request. See "Redemption of Shares" in the Prospectus.
13
<PAGE>
EMPLOYER SPONSORED QUALIFIED RETIREMENT PLANS
Employer sponsored pension plans and their related trusts that are
qualified under the Internal Revenue Code, including so-called Section 401(k)
salary reduction plans, may invest in mutual funds such as General
Securities, Incorporated. A SIMPLE Plan may be established by an employer
with 100 or less employees under which contributions are made to a tax exempt
trust (rather than individual IRAs as described above) may also invest in the
Fund. The employer sponsoring a SIMPLE Plan is required to make either a
matching contribution of 100% of the employee's contributions up to 3% of the
employee's compensation or a uniform contribution to all eligible employees
equal to 2% of compensation. Certain retirement plans permit employees to
elect to contribute portions of their compensation pre-tax to such plans in
addition to the employer's contribution, subject to the above limits.
Generally, such individual contributions are limited to a maximum dollar
amount of compensation each year described above.
Such qualified retirement plans may also be established by self
employed individuals for themselves and their eligible employees, if any. These
individuals may make annual tax deductible contributions out of earned income to
their self-employed plan, in amounts up to the lesser of $30,000 or 15 % of
earned income (after such contributions) if the contribution is discretionary
(e.g., a profit sharing plan) or $30,000 or 25% of earned income (after such
contribution) if the contribution is fixed in full or in part (e.g., a pension
plan or a combination of pension and profit sharing plan) to purchase shares of
the Fund. Prior to 1997, the Fund provided a Self-Employed Retirement Plan
document and Custodial Agreement for adoption by self-employed individuals.
After 1996, self-employed individuals are responsible for amending the documents
to maintain compliance with tax and other laws, or adopting new documents to
maintain compliance with such laws. Initial and annual maintenance fees,
withdrawal, termination and distribution fees are charged by State Street
Corporation, the custodian bank, according to a schedule of fees established in
the Custodial Agreement. The fees are the same as the fees State Street
Corporation charges for IRA Plan services. The custodian has reserved the right
to increase fees for its services on 60 days' written notice.
It is recommended that interested persons consult with an attorney and
a qualified trustee regarding the nature of such plans, including their tax
consequences and dollar limitations. Since such a retirement investment program
involves commitments covering future years and tax penalties for premature
distributions, it is important that the investor consider the investment
objectives of the Fund as described in the Prospectus and this Statement. The
Fund may elect to provide quarterly statements containing information regarding
transactions for the period covered in lieu of confirming each transaction to
persons making purchases pursuant to the IRA Plan, SEP-IRA, SIMPLE IRA, SARSEP
or employer sponsored qualified retirement plans.
AUTOMATIC WITHDRAWAL PLAN
The owner of $10,000 or more of Fund shares at net asset value may
provide for the payment from the owner's account of any requested dollar amount
of $100 or more to be paid to the owner or a designated payee monthly,
quarterly, semi-annually or annually. Shares are redeemed on the 5th business
day from the end of the month so that the payee will receive payment
approximately the first week of the following month. When receiving payments
under the Automatic Withdrawal Plan, any income and capital gain dividends will
be automatically reinvested at net asset value on the reinvestment date. A
sufficient number of full and fractional shares will be redeemed to make the
designated payment. Depending upon the size of the payments requested and
fluctuations in the net
14
<PAGE>
asset value of the shares redeemed, redemptions for the purpose of making
such payments may reduce or even exhaust the account.
The Fund reserves the right to amend the Automatic Withdrawal Plan on
thirty days' written notice and to terminate this privilege at any time. The
plan may be changed or terminated at any time by you in writing, with all
registered owners' signatures guaranteed. Additional information concerning
signature guarantees appears under the section entitled "Redemption of Shares -
Selling by Mail."
DETERMINATION OF OFFERING PRICE AND NET ASSET VALUE
Shares of the Fund may be purchased at a price equal to their net asset
value. The net asset value of a Fund share is the proportionate interest of each
share (or fractional share) in the net corporate assets. Net asset value varies
as prices of portfolio securities fluctuate. It is computed not less frequently
than once daily. For the purposes of determining the net corporate assets,
securities are valued, as of the market close New York time, on the basis of the
last sale (if a sale occurred that day). If no sale occurred that day,
securities traded on a national securities exchange are valued at the last bid
price, whereas securities traded on the Nasdaq Stock Market or in the
over-the-counter market are valued at the mean between the last bid and asked
price, in all cases excluding brokerage commissions and odd lot premiums.
Securities having no readily available market quotation and all other assets are
valued in good faith at fair value under the direction of the Board of
Directors.
Computation of net asset value as of November 30, 1999 is illustrated
below:
<TABLE>
<S> <C>
Market value of portfolio securities . . . . $39,321,038
Cash and receivables less liabilities. . . . $2,317,127
Net assets . . . . . . . . . . . . . . . . . $41,638,165
Number of shares outstanding . . . . . . . . 2,460,121
Net asset value per share (net assets
divided by shares outstanding) . . . . . . $16.93
</TABLE>
The net asset value used by General Securities, Incorporated in selling and
redeeming shares is that of the computation at the close of business immediately
following the receipt of a subscription for shares or of a request for
redemption.
TAXATION OF THE FUND
As an investment company, and so long as certain diversification of
assets and source of income requirements prescribed by the Internal Revenue Code
are met and at least 90% of its "investment company taxable income" plus certain
other amounts are distributed to its shareholders, the Fund is allowed to deduct
certain dividends paid to shareholders and "pass through" the tax character of
certain dividends and long-term and mid-term capital gains to shareholders who
receive dividend distributions. The Fund always has qualified for such tax
treatment (including with respect to the last fiscal year) and intends to
continue to do so.
15
<PAGE>
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to
"average annual total return" and "cumulative total return." Average annual
total return is computed by finding the average annual compounded rates of
return over the periods indicated in the advertisement that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T) TO THE POWER OF n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
The average annual compounded total return on investments in the Fund
for the one, five and ten year periods ended December 31, 1999 were 34.54%,
19.93% and 14.84%, respectively.
Cumulative total return figures are computed by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR = (ERV - P)
---------- 100
Where:
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period; and
P = initial payment of $1,000
The cumulative total return on investments in the Fund for the one,
five and ten year periods ended December 31, 1999 were 34.54, 148.10% and
298.89%, respectively.
The calculations for both average annual total return and cumulative
total return assume all dividends and all capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and include all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
16
<PAGE>
FINANCIAL STATEMENTS
GENERAL SECURITIES
INCORPORATED
[LOGO]
FOCUS ON
-------------
TQM
-------------
TOTAL QUALITY
MANAGEMENT
Annual Report November 30, 1999
TO THE SHAREHOLDERS OF
GENERAL SECURITIES
INCORPORATED
The past year has been one of incremental change for General Securities, Inc.
The process of systematically shifting the portfolio holdings to be more
representative of the overall market is progressing smoothly. We have had a
few surprises along the way, some pleasant, some less pleasant. On the
pleasant side, performance of our holdings in Ortel, Corning and Motorola
have significantly exceeded our expectations owing to the markets surging
interest in companies that supply products that help their customers meet the
"insatiable demand for bandwidth". To put it simply, the greater the demand
for services we place on telephone and
cable providers in the form of more programming choices, greater convenience or
internet access, the greater the demand for products that help them meet our
demands. Products manufactured by Ortel, Corning and Motorola help providers
meet our demands. In fact, nearly all of General Securities positive performance
can be attributed to holdings in these companies, particularly Ortel, in
addition to our holdings in several other technology oriented companies
including Intel, Solectron and Zygo. In contrast, several new and longer term
"value oriented" holdings didn't do as well as expected; however, no one company
had a significant negative influence on the overall portfolio. The cash position
in the portfolio has been reduced a little over the past year but remains high
relative to our long-term goal of being fully invested.
Our strategy to diversify the portfolio continues to be influenced, in part by
the potential tax consequences. We distributed a larger than usual $2.58 capital
gain this past year and based upon the unrealized gains in the portfolio as of
11/30/99 it is possible, depending upon market conditions, that we will realize
a portion of those gains in the upcoming fiscal year. For the year ending
November 30, 1999, the Fund's total return of 19.8% compared reasonably well to
the 20.9% return of the S&P 500-TM- and 10.5% return of the Russell 1000 Value
Index.
We are firm in our belief that a more fully invested and diversified portfolio
in "leading quality companies" will provide you with superior long-term risk
adjusted performance. We define a "leading quality company" as any company
having a relatively high composite quality score such that we are confident a
successful "quality oriented" management system is in place. We have developed a
set of indicators which are scored individually and then aggregated to provide
us with the composite quality score we use to make our assessment. In future
letters we will explain in more detail what specific indicators attempt to
measure and how they have evolved over time.
On behalf of all of us at Robinson Capital Management, we would like to thank
each of you for your continued confidence in us.
Mark Billeadeau
Senior Portfolio Manager
17
<PAGE>
PERFORMANCE
November 30, 1999
General Securities, Incorporated
The following graph was prepared assuming a hypothetical investment of $10,000
on November 30,1989. The investment return and prinicipal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
General Securities Inc.
<TABLE>
<CAPTION>
- ---------------------------
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 YEAR 5 YEAR 10 YEAR
+19.82% +17.38% +13.61%
- ---------------------------
</TABLE>
[GRAPH]
AVERAGE ANNUAL RETURN
INVESTMENT GROWTH OF $10,000
<TABLE>
<CAPTION>
GSI* Rus. 1000 Value** S&P 500**
<S> <C> <C> <C> <C>
Nov. 89 $10,000.00 $ 10,000.00 $10,000.00
Nov. 90 -1.95% $ 9,805.30 $ 9,162.00 $ 9,652.00
Nov. 91 34.41% $13,178.92 $ 10,801.00 $11,616.00
Nov. 92 10.30% $14,536.96 $ 13,014.00 $13,762.00
Nov. 93 5.48% $15,334.16 $ 15,445.00 $15,149.00
Nov. 94 4.83% $16,074.14 $ 15,249.00 $15,307.00
Nov. 95 31.21% $21,090.41 $ 20,818.00 $20,961.00
Nov. 96 18.15% $24,918.93 $ 26,280.00 $26,797.00
Nov. 97 14.07% $28,424.63 $ 34,076.00 $34,435.00
Nov. 98 5.17% $29,895.39 $ 39,222.00 $42,583.00
Nov. 99 19.82% $35,819.25 $ 43,330.00 $51,480.00
</TABLE>
Past Performance is not indicative of future performance.
*These are the portfolios total returns during the period including reinvestment
of all dividend and capital gains distributions.
**This is an unmanaged index.
18
<PAGE>
STATEMENT OF NET ASSETS NOVEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
Number of Market
shares value (a)
--------- ---------
<S> <C> <C>
INVESTMENT SECURITIES (percentages
represent value of investments
compared to total net assets):
COMMON STOCKS (84.86%):
Aerospace/Defense (.72%):
Lockheed Martin Corp. (b) .................... 15,000 $ 298,125
Auto Parts - Original Equipment (3.77%): ------------
Dana Corp. .................................... 35,000 971,250
Tower Automotive (c) .......................... 40,000 600,000
------------
1,571,250
Banking (1.69%): ------------
Banc One (c) .................................. 20,000 705,000
Chemicals (1.87%): ------------
Eastman Chemical Company ...................... 20,000 777,500
Communications Equipment (12.30%): ------------
Ortel Corp. ................................... 80,000 5,120,000
Computer Peripherals (2.19%): ------------
Microsoft Corp. (b) ........................... 10,000 910,469
Electrical Equipment, Machinery ------------
and Supplies (6.52%):
General Electric Co. (b) ...................... 10,000 1,300,000
Grainger (W.W.), Inc. (c) ..................... 30,000 1,413,750
------------
2,713,750
Electronics (13.76%): ------------
Intel Corp. (d) ............................... 25,000 1,917,187
Motorola, Inc. (c) ............................ 7,000 799,750
Solectron Corp. (c) ........................... 10,000 823,750
Xerox Corp. (d) ............................... 10,000 270,625
Zygo Corp. .................................... 100,000 1,918,750
------------
5,730,062
Farm & Construction Machinery (3.09%): ------------
Deere & Co. (d) ............................... 30,000 1,288,125
Food Processing Equipment (2.04%): ------------
Sara Lee Corp. (b) ............................ 35,000 848,750
Hospital Suppliers (3.74%): ------------
Johnson & Johnson ............................. 15,000 1,556,250
Information Services (2.73%): ------------
Hewlett-Packard (c) ........................... 12,000 1,138,500
Instruments & Related Products (4.30%): ------------
Honeywell, Inc. (c) ........................... 16,000 1,791,000
Medical Instruments & Supplies (1.82%): ------------
Adac Laboratories ............................. 65,000 759,688
Paper & Forest Products (2.94%): ------------
Weyerhauser & Co. (c) ......................... 20,000 1,225,000
------------
Petroleum - Equipment & Service (2.79%):
Halliburton Co. (b) ........................... 30,000 1,160,625
Pharmaceuticals (2.92%): ------------
Covance, Inc. (b) ............................. 25,000 271,875
Merck (d) ..................................... 12,000 942,000
------------
1,213,875
Printing & Publishing (1.58%): ------------
Banta Corp. ................................... 30,000 658,125
Retail & Wholesale (2.25%): ------------
Corning, Inc. ................................. 10,000 936,875
Steel/Producers (4.61%): ------------
Worthington Industries ........................ 120,000 1,920,000
Transportation - Road (1.71%): ------------
CSX Corp. (b) ................................. 20,000 711,250
------------
</TABLE>
19
<PAGE>
STATEMENT OF NET ASSETS NOVEMBER 30, 1999
ASSETS (Cont.)
<TABLE>
<CAPTION>
Number of Market
shares value (a)
--------- ---------
<S> <C> <C>
COMMON STOCKS (Cont.):
Utilities (5.52%):
AT&T Corp. (b) ................................ 15,000 838,125
GTE (c) ....................................... 20,000 1,460,000
------------
2,298,125
------------
Total common stock (cost $ 21,376,276) 35,332,344
------------
U.S. TREASURY BILLS (9.58%):
$4,000,000, 4.76%, due 12/23/99 (e) .................... 3,988,694
------------
Total U.S. Treasury Bills (cost $3,988,694) ......... 3,988,694
------------
Total investment securities
(cost $25,364,970)(f) ...................................... 39,321,038
Cash ........................................................ 8,725,365
Receivable for capital shares sold .......................... 100
Prepaid expenses ............................................ 24
Dividends receivable ........................................ 54,275
Interest receivable ......................................... 848
------------
Total assets ........................................ $ 48,101,650
------------
LIABILITIES
Accrued investment advisory fees ............................ 23,108
Accrued management administration fees ...................... 15,406
Other accrued expenses ...................................... 52,009
Payable for shares redeemed ................................. 25,786
Dividend payable ............................................ 6,347,176
------------
Total liabilities ......................................... 6,463,485
------------
Net assets applicable to outstanding capital stock .......... $ 41,638,165
------------
Represented by:
Capital stock - authorized 10,000,000 shares of $.01
par value per share; outstanding 2,460,121 shares ......... 24,601
Capital surplus ........................................... 27,610,374
Undistributed net investment income ....................... 23,557
Accumulated net realized gain on investments .............. 23,565
Unrealized appreciation of investments .................... 13,956,068
------------
Net assets applicable to outstanding capital stock .......... $ 41,638,165
------------
------------
Net asset value per share of outstanding capital stock ...... $16.93
------
------
</TABLE>
See accompanying notes to investment securities list and financial statements.
20
<PAGE>
NOTES TO INVESTMENT SECURITIES LIST:
NOVEMBER 30, 1999
(a) Investment securities are valued by the procedures described
in note 1 to the financial statements.
(b) New holding in fiscal 1999.
(c) Holding decreased in fiscal 1999. (d) Holding increased in
fiscal 1999.
(e) Rate shown is annualized yield on date of purchase.
(f) At November 30, 1999 the cost of securities for federal income
tax purposes was $25,364,970, and the aggregate unrealized
appreciation and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation ................................. $15,525,386
Unrealized depreciation ................................. (1,569,318)
-----------
$13,956,068
-----------
-----------
</TABLE>
21
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends ......................................... $ 540,824
Interest .......................................... 458,010
----------
Total income ................................... 998,834
----------
Expenses (note 2):
Investment advisory fees .......................... 273,311
Management administration fees .................... 182,208
Shareholder notices and reports ................... 26,800
Auditing and tax services ......................... 23,867
Custodian and portfolio accounting fees ........... 47,450
Transfer agent, registrar and disbursing agent fees 71,383
Legal services .................................... 30,600
Directors' fees ................................... 8,872
Federal and state registration fees and expenses .. 14,295
Other ............................................. 1,775
----------
Total expenses ................................. 680,561
----------
Investment income - net ........................... 318,273
----------
Realized and unrealized gains from Investments - net:
Net realized gains on securities
transactions (note 3) ............................. 6,369,580
Net change in unrealized appreciation
or depreciation of investments .................... 1,565,600
----------
Net gain on investments .............................. 7,935,180
----------
Net increase in net assets resulting
from operations ................................... $8,253,453
----------
----------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS: YEAR ENDED NOVEMBER 30
SELECTED PER SHARE HISTORICAL DATA WERE AS FOLLOWS: 1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................... $ 16.34 $ 16.55 $ 16.08 $ 14.61 $ 12.08
------- ------- ------- ------- -------
Operations:
Investment income - net ........................................ .12 .15 .18 .17 .25
Net realized and unrealized gains (losses) on investments ...... 3.11 .72 2.08 2.46 3.49
------- ------- ------- ------- -------
Total from operations ............................................ 3.23 .87 2.26 2.63 3.74
------- ------- ------- ------- -------
Distributions to shareholders:
From investment income - net ................................... (.06) (.15) (.18) (.17) (.25)
Excess distributions of net investment income (.03) - (.01) -
From net realized gains ........................................ (2.58) (.90) (1.61) (.98) (.96)
------- ------- ------- ------- -------
Total distributions to shareholders .............................. (2.64) (1.08) (1.79) (1.16) (1.21)
------- ------- ------- ------- -------
Net asset value, end of year ..................................... $ 16.93 $ 16.34 $ 16.55 $ 16.08 $ 14.61
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return* .................................................... 19.85% 5.26% 14.08% 18.15% 31.15%
Net assets, end of year (000's omitted) .......................... $41,638 $43,791 $46,006 $39,974 $32,541
Ratio of expenses to average daily net assets .................... 1.49% 1.47% 1.44% 1.50% 1.50%
Ratio of net investment income to average daily net assets ....... .70% .90% 1.02% 1.11% 1.79%
Portfolio turnover rate .......................................... 22% 25% 20% 18% 24%
</TABLE>
*These are the Fund's total returns during the years, including reinvestment of
all dividend and capital gain distributions.
23
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1999
AND YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 318,273 $ 439,630
Net realized gains on investments............. 6,369,580 2,429,181
Net change in unrealized appreciation
or depreciation of investments............. 1,565,600 (472,241)
---------- ----------
Net increase in assets from
operations................................. 8,253,453 2,396,570
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... (164,449) (439,630)
Excess distributions of net
investment income........................ - (74,394)
Net realized gains on investments.......... (6,346,015) (2,425,433)
---------- ----------
Total distributions........................ (6,510,464) (2,939,457)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of 48,932 and
74,357 shares, respectively................ 823,327 1,280,766
Net asset value of 143,859 and 260,180
shares, respectively, issued in
reinvestment of net investment income
and net realized gain distributions........ 2,359,568 4,361,571
Payments for redemptions of 412,694
and 434,124 shares, respectively........... (7,078,580) (7,314,188)
---------- ----------
(Decrease) in net assets from
capital share transactions, representing
net (decrease) of (219,903) and
(99,587) shares, respectively.............. (3,895,685) (1,671,851)
---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... (2,152,696) (2,214,738)
NET ASSETS:
Beginning of period........................... 43,790,861 46,005,599
---------- ----------
End of period (Including undistributed
net investment income of $23,557
and $(130,267) respectively)............... $41,638,165 $43,790,861
---------- ----------
---------- ----------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Securities,
Incorporated (the Fund) is registered under the Investment Company Act
of 1940, as amended, as a diversified open end management investment
company. The Fund invests primarily in common stocks of companies
believed to be undervalued.
The significant accounting policies followed by the Fund are summarized
as follows:
INVESTMENTS IN SECURITIES
Securities listed on national securities exchanges are valued on the
basis of the last reported sale each day, or if no sale is made, at the
mean of the last reported bid and asked price for such securities.
Short-term securities are valued at amortized cost which approximates
market value.
Security transactions are recorded on the date securities are purchased
or sold. Realized gains or losses and unrealized appreciation or
depreciation of investments are determined on the basis of identified
cost. Dividend income is recorded on the ex-dividend date. Interest is
recognized on the accrual basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increase
and decrease in net assets from operations during the period. Actual
results could differ from those estimates.
FEDERAL INCOME TAXES
It is the Fund's policy to continue meeting the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute taxable income to its shareholders in amounts which will
relieve it from all, or substantially all, federal income and excise
taxes. Therefore, the Fund does not provide for federal income or
excise taxes.
DISTRIBUTIONS
Distributions to shareholders from investment income are made quarterly
and realized capital gain distributions, if any, are made annually.
These distributions are recorded on the record date and are payable in
cash or reinvested in additional shares of the Fund's capital stock.
Due to the timing of dividend distributions, the fiscal year in which
amounts are distributed for tax purposes may differ from the year that
income or realized gains were recorded by the Fund. The effect on
distributions of this book-to-tax difference is presented as "excess
distributions of net investment income" in the statement of changes in
net assets and the financial highlights.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Robinson Capital Management, Inc. is the Fund's investment advisor and
administrator. As compensation for its services under the Investment
Advisory Agreement, Robinson Capital is paid an investment management
advisory fee, payable monthly, at an annual rate of 0.60% for average
net assets up to and including $100 million, 0.35% for next $150
million of average net assets and 0.10% for net assets over $250
million. Robinson Capital is obligated to pay all Fund expenses
(exclusive of brokerage expenses and fees, interest and any federal or
state income taxes) which exceed 1.50% of the Fund's average net assets
for any fiscal year on the first $100 million of average net assets,
1.25% of the Fund's average net assets for any fiscal year on the next
$150 million of average net assets, and 1% of the Fund's average net
assets for any fiscal year on average net assets in excess of $250
million. For managing the business affairs and providing certain
shareholder services pursuant to the Management Agreement, the Fund
pays Robinson Capital an administrative fee, payable monthly, at an
annual rate of 0.40% of the average daily assets of the Fund, plus
out-of-pocket expenses incurred. Robinson Capital may subcontract with
other entities to provide certain shareholder servicing activities.
Legal service fees were paid to a law firm in which the secretary of
the Fund is a partner.
25
<PAGE>
(3) SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $7,534,545 and $15,195,111,
respectively, for the year ended November 30, 1999.
INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders General
Securities, Incorporated:
We have audited the accompanying statement of net assets of General
Securities, Incorporated as of November 30, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period ended November 30, 1999, and the
financial highlights for each of the years in the five-year period ended
November 30, 1999. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of General Securities, Incorporated at November 30, 1999 and the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period ended November 30, 1999, and the
financial highlights for each of the years in the five-year period ended
November 30, 1999, in conformity with generally accepted accounting principles.
26
<PAGE>
GENERAL SECURITIES
INCORPORATED
PRESIDENT Craig H. Robinson
VICE PRESIDENT Mark D. Billeadeau
SECRETARY John R. Houston
TREASURER Renee A. Rasmusson
DIRECTORS M. Michelle Coady, Chairman
Gary D. Floss
David W. Preus
Charles Walton
Arnold M. Weimerskirch
INVESTMENT MANAGER Robinson Capital
Management, Inc.
CUSTODIAN, REGISTRAR State Street Corporation
AND TRANSFER AGENT
GENERAL COUNSEL Robins, Kaplan, Miller &
Ciresi L.L.P.
INDEPENDENT AUDITORS KPMG LLP
This report has been prepared primarily for the benefit of existing
stockholders of the company and is not intended as an offer to sell the
company's shares. When used otherwise, it must be accompanied or preceded
by the current prospectus.
27
<PAGE>
FOR FURTHER
INFORMATION ABOUT
GENERAL SECURITIES
INCORPORATED
CONTACT:
ROBINSON CAPITAL MANAGEMENT, INC.
5100 EDEN AVENUE, SUITE 204
EDINA, MINNESOTA 55436
(612) 927-6799
800-577-9217
GENERAL SECURITIES
INCORPORATED
ROBINSON CAPITAL MANAGEMENT, INC.
5100 EDEN AVENUE, SUITE 204
EDINA, MINNESOTA 55436
(612) 927-6799
800-577-9217
28
<PAGE>
GENERAL SECURITIES, INCORPORATED
REGISTRATION STATEMENT ON FORM N-1A
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
ITEM 23 -- EXHIBITS
(a) Articles of Incorporation(1)
(b) Bylaws(1)
(c) Not applicable
(d)(1) Investment Advisory Agreement(3)
(d)(2) Management Agreement(3)
(e) Not applicable
(f) Not applicable
(g) Custody Agreement(2)
(h) Transfer Agency Agreement(2)
(i) Opinion of Counsel(1)
(j) Consent of Independent Auditors
(k) Not applicable
(l) Not applicable
(m) Not applicable
(n) Not applicable
(p) Code of Ethics
(1) (Incorporated by reference to the initial Form N-1A Registration
Statement, File No. 2-77092.)
(2) (Incorporated by reference to Form N-1A Registration Statement,
Amendment 13, File No. 2-77092.)
(3) (Incorporated by reference to Form N-1A Registration Statement,
Amendment 19, File No. 2-77092.)
ITEM 24 -- PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
All of the officers except the Secretary and two of the directors of
the Fund are employees of Robinson Capital Management, Inc., the Fund's
Investment Advisor.
ITEM 25 -- INDEMNIFICATION
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines, including, without limitation, excise taxes
assessed against such person with respect to an employee benefit plan,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan; (2) acted in good faith; (3) received no
improper personal benefit and Section 302A.255 (with respect to director
conflicts of interest), if applicable, has been satisfied; (4) in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and (5) reasonably believed that the conduct was in the best
C-1
<PAGE>
interest of the corporation in the case of acts or omissions in such person's
official capacity for the corporation, or reasonably believed that conduct was
not opposed to the best interests of the corporation in the case of acts or
omissions in such person's official capacity for other affiliated organizations.
ITEM 26 -- BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Information on the business of the Registrant's investment advisor and
on the officers and directors of the investment advisor is set forth under the
caption "The Fund's Investment Advisor" in the accompanying Prospectus (Part A
of this Registration Statement) and under the caption "Management of the Fund;
Directors and Officers" in the accompanying Statement of Additional Information
(Part B of this Registration Statement).
ITEM 27 -- PRINCIPAL UNDERWRITERS
(a) As set forth in the accompanying Prospectus and Statement of
Additional Information, the Registrant acts as its own underwriter.
(b) Not applicable
(c) 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
rules promulgated thereunder are in the possession of Robinson Capital
Management, Inc. at its offices at 5100 Eden Avenue, Suite 204, Edina, Minnesota
55436 except those books, records and other documents maintained by the
custodian, transfer agent and registrar, State Street Corporation, which are
located at its offices at 330 W. 9th Street, P. O. Box 219249, Kansas City,
Missouri 64121.
ITEM 29 -- MANAGEMENT SERVICES
Not applicable.
ITEM 30 -- UNDERTAKINGS
Not applicable.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis, and State of Minnesota, on the __
day of March, 2000.
GENERAL SECURITIES, INCORPORATED
By /s/ Craig H. Robinson
---------------------------------
Craig H. Robinson
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated.
Name/Signature Title Date
- -------------- ----- ----
/s/ Craig H. Robinson President and Director March __, 2000
- ------------------------
Craig H. Robinson
/s/ M. Michelle Coady, Ph.D. Director March __, 2000
- ------------------------
M. Michelle Coady
/s/ Gary D. Floss Director March __, 2000
- ------------------------
Gary D. Floss
/s/ David W. Preus Director March __, 2000
- ------------------------
David W. Preus
/s/ Charles J. Walton Director, March __, 2000
- ------------------------
Charles J. Walton
/s/ Arnold M. Weimerskirch Director March __, 2000
- ------------------------
Arnold M. Weimerskirch
/s/ Mark D. Billeadeau Vice President and Director March __, 2000
- ------------------------
Mark D. Billeadeau
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
(a) Articles of Incorporation(1)
(b) Bylaws(1)
(c) Not applicable
(d)(1) Investment Advisory Agreement(3)
(d)(2) Management Agreement(3)
(e) Not applicable
(f) Not applicable
(g) Custody Agreement(2)
(h) Transfer Agency Agreement(2)
(i) Opinion of Counsel(1)
(j) Consent of Independent Auditors Filed Electronically
(k) Not applicable
(l) Not applicable
(m) Not applicable
(n) Not applicable
(p) Code of Ethics Filed Electronically
- --------------------------------------------------------------------------------
(1) (Incorporated by reference to the initial Form N-1A Registration
Statement, File No. 2-77092.)
(2) (Incorporated by reference to Form N-1A Registration Statement,
Amendment 13, File No. 2-77092.)
(3) (Incorporated by reference to Form N-1A Registration Statement,
Amendment 19, File No. 2-77092.)
<PAGE>
EXHIBIT (J)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
General Securities, Incorporated
We consent to the use of our report dated January 7, 2000 included herein, and
to the reference to our Firm under the headings "FINANCIAL HIGHLIGHTS" in Part A
and "INVESTMENT ADVISORY AND OTHER SERVICES - Independent Auditors" in Part B of
the Registration Statement.
KPMG LLP
Minneapolis, Minnesota
March 24, 2000
<PAGE>
EXHIBIT (P)
CODE OF ETHICS
FOR
ROBINSON CAPITAL MANAGEMENT, INC.
AND
GENERAL SECURITIES, INCORPORATED
I. PURPOSE AND CONSTRUCTION
This Code of Ethics (the "Code") is adopted by Robinson Capital Management,
Inc. ("RCM") and General Securities, Incorporated (the "Fund") in an effort to
prevent violations of Section 17 of the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder. The focus of
this Code is the prevention of investment activities by persons with access to
certain information that might be harmful to the interests of the Fund or that
might enable such persons to illicitly profit from their relationship with the
Fund.
II. DEFINITIONS
(a) "ACCESS PERSON" shall mean any director, officer or Advisory
Person of the Fund or, with respect to RCM, any director or officer who in the
ordinary course of his or her business makes, participates in or obtains
information regarding the purchase or sale of securities of the Fund or whose
functions or duties as part of the ordinary course of his or her business relate
to the making of any recommendation to the Fund regarding the purchase or sale
of securities.
(b) "ADVISORY PERSON" means:
(1) any employee of the Fund or RCM (or of any company in a
control relationship to the Fund or RCM) who, in connection with his or
her regular functions or duties, makes, participates in or obtains
information regarding the purchase or sale of a security by the Fund, or
whose functions or duties relate to the making of any recommendations with
respect to such purchases or sales; or
(2) any natural person in a control relationship to the Fund or
RCM who obtains information concerning recommendations made to the Fund
with regard to the purchase or sale of a security.
(c) "AFFILIATED PERSON" of another person means:
(1) any person directly or indirectly owning, controlling or
holding with power to vote five percent (5%) or more of the outstanding
voting securities of such other person;
(2) any person five percent (5%) or more of whose outstanding
voting securities are directly or indirectly owned, controlled or held
with power to vote by such other person;
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(3) any person directly or indirectly controlling, controlled by
or under common control with such other person;
(4) any officer, director, partner, co-partner or employee of such
other person;
(5) if such other person is an investment company, any investment
adviser thereof or any member of an advisory board thereof, and
(6) if such other person is an unincorporated investment company
not having a board of directors, the depositor thereof
(d) "CONTROL" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.
(e) "INSIDER" means an executive officer or an Advisory Person of RCM
or any member of his or her immediate family.
(f) "MEMBER OF IMMEDIATE FAMILY" of a person includes such person's
spouse, children under the age of twenty-five (25) years residing with such
person, and any trust or estate in which such person or any other member of his
or her immediate family has a substantial beneficial interest, unless neither
such person nor any other member of his or her immediate family is able to
control or participate in the investment decisions of such trust or estate.
(g) "PURCHASE OR SALE OF A SECURITY" includes, inter alia, the writing
of an option to purchase or sell a Security.
(h) "SECURITY" shall have the meaning set forth in Section 2(a)(36) of
the 1940 Act, except that it shall not include securities issued by the
government of the United States, bankers' acceptances, bank certificates of
deposit, commercial paper, shares of registered open-end investment companies or
other securities which may not be purchased by the Fund because of investment
limitations set forth in the Registration Statement of the Fund filed with the
Securities and Exchange Commission.
(i) "SECURITY HELD OR TO BE ACQUIRED" by a registered investment
company means any security which, within the most recent three (3) days, (i) is
or has been held by such company, or (ii) is being or has been considered by
such company or its investment adviser for purchase by such company.
(j) "1940 ACT" means the Investment Company Act of 1940, 15 U.S.C.
Section 80a-1 to 80a-52.
III. RESTRICTIONS
(a) NONDISCLOSURE OF INFORMATION. An Access Person shall not divulge to
any person contemplated or completed securities transactions of the Fund, except
in the
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performance of his or her duties, unless such information previously has become
a matter of public knowledge.
(b) SECTION 17(d) LIMITATIONS. No Affiliated Person of the Fund or RCM,
or any Affiliated Person of such persons, acting as principal, shall effect any
transaction in which the Fund, or a company controlled by the Fund, is a joint
or a joint and several participant with such person, RCM or any Affiliated
Person, in contravention of such rules and regulations as the Securities and
Exchange Commission may prescribe under Section 17(d) of the 1940 Act for the
purpose of limiting or preventing participation by the Fund or controlled
companies on a basis different from or less advantageous than that of such other
participant.
(c) PRESCRIBED ACTIVITIES UNDER RULE 17j-1(a). Rule 17j-1(a) under the
1940 Act provides:
It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company, or any affiliated
person of an investment adviser of or principal underwriter for a
registered investment company in connection with the purchase or
sale, directly or indirectly, by such person of a security held or
to be acquired, as defined in this section, by such registered
investment company -
(1) To employ any device, scheme or artifice to defraud
such registered investment company;
(2) To make to such registered investment company any
untrue statement of a material fact or omit to state to such
registered investment company a material fact necessary in order to
make the statements made, in light of the circumstances under which
they were made, not misleading;
(3) To engage in any act, practice or course of
business which operates or would operate as a fraud or deceit upon
any such registered investment company; or
(4) To engage in any manipulative practice with respect
to such registered investment company.
Any violation of Rule 17j- 1(a) shall be deemed to be a violation of this
Code.
(d) COVENANT TO EXERCISE BEST JUDGMENT. An Advisory Person shall act on
his or her best judgment in effecting, or failing to effect, any transaction by
the Fund, and such Advisory Person shall not take into consideration his or her
personal financial situation in connection with decisions regarding portfolio
transactions by the Fund.
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(e) LIMITATIONS ON INITIAL AND SUBSEQUENT TRANSACTIONS.
(1) An Insider shall not purchase Securities of an
issuer prior to an initial purchase by the Fund of that issuer's
Securities nor shall an Insider sell Securities of an issuer prior
to a sale by the Fund of all of its holdings of that issuer's
Securities. However, the purchase of a Security of an issuer by an
Insider more than three (3) days prior to the Fund's purchase of
such issuer's Securities, or a sale of such issuer's Securities by
an Insider more than three (3) days prior to the Fund's sale of all
Securities it holds of such issuer, shall not be a violation of
this Paragraph III (e) (1).
(2) After the Fund has made an initial purchase of
Securities of an issuer, an Insider shall not purchase or sell
Securities of such issuer if the Fund is contemplating an
additional purchase or a partial sale of such issuer's Securities.
However, a violation of this Paragraph III(e)(2) shall not occur if
the additional purchase or partial sale of said issuer's Securities
by the Fund is made more than three (3) days after a sale or
purchase of such Securities by the Insider.
IV. REPORTING REQUIREMENTS
(a) QUARTERLY REPORT. No later than ten (10) days after the end of each
calendar quarter, each Access Person shall submit a report to the company of
which he or she is an Access Person which shall specify the following
information with respect to transactions during the then ended calendar quarter
in any Security in which such Access Person has, or by reason of such
transaction acquired, any direct or indirect beneficial ownership in the
Security:
(1) the date of the transaction, the title and the number of
shares, and the principal amount of each Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(3) the price at which the transaction was effected; and
(4) the name of the broker, dealer or bank with or through whom
the transaction was effected.
If no transactions have occurred during the period, the report shall so
indicate.
(b) LIMITATIONS ON REPORTING REQUIREMENTS. Notwithstanding the provisions
of Section IV(a), no Access Person shall be required to make a report:
(1) with respect to transactions effected for any account over
which such person does not have any direct or indirect influence or
control;
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(2) if such a person is not an "interested person" of the Fund as
defined in Section 2(a)(19) of the 1940 Act and would be required to make
such a report solely by reason of being a director of the Fund, EXCEPT
where such director knew or, in the ordinary course of fulfilling his or
her official duties as a director of the Fund, should have known that
during the 3-day period immediately preceding or after the date of the
transactions in a Security by the director, such Security is or was
purchased or sold by the Fund or such purchase or sale by the Fund is or
was considered by the Fund or RCM, or
(3) where a report made to RCM would duplicate information
recorded pursuant to Rules 204-2(a)(12) or 204-2(a)(13) under the
Investment Advisers Act of 1940.
(c) REPORTS OF VIOLATIONS. In addition to the quarterly reports
required under this Article IV, Access Persons promptly shall report any
transaction which is, or might appear to be, in violation of this Code. Such
report shall contain the information required in quarterly reports filed
pursuant to Section IV(a).
(d) FILING OF REPORTS. All reports prepared pursuant to this Article IV
shall be filed with the President of RCM, except that reports prepared by the
President of RCM shall be filed with the Secretary or Assistant Secretary of
RCM;
(e) CERTIFICATION TO THE PRESIDENT OF THE FUND. Prior to January 1 of
each year, any two (2) of the following, President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary, shall prepare and deliver to the
President of the Fund a report which shall describe in detail violations of this
Code for the prior fiscal year, unless such violations have been previously
reported to the President of the Fund.
(f) DISSEMINATION OF REPORT. The President of the Fund shall have the
right at any time to receive copies of any reports submitted pursuant to this
Article IV. Such President shall keep all reports confidential except as
disclosure thereof to the Board of Directors of the Fund, RCM, or other
appropriate persons may be reasonably necessary to accomplish the purposes of
this Code.
V. ENFORCEMENT AND SANCTIONS
(a) GENERAL. Any Affiliated Person of RCM who is found to have violated
any provision of this Code may be permanently dismissed, reduced in salary or
position, temporarily suspended from employment or sanctioned in such other
manner as may be determined by the Board of Directors of RCM, in their
discretion. If an alleged violator is not affiliated with RCM, the Board of
Directors of the Fund shall have the responsibility for enforcing this Code and
determining appropriate sanctions. In determining sanctions to be imposed for
violations of this Code, such Board of Directors may consider any factors deemed
relevant, including, without limitation:
(1) the degree of wilfulness of the violation;
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(2) the severity of the violation;
(3) the extent, if any, to which the violator profited or
benefited from the violation;
(4) the adverse effect, if any, of the violation on the Fund;
(5) the market value and liquidity of the class of Securities
involved in the violation;
(6) the prior violations of this Code, if any, by the violator;
(7) the circumstances of discovery of the violation; and
(8) If the violation involved the purchase or sale of Securities
in violation of this Code, (A) the price at which the purchase or sale was
made, and (B) the violator's justification for making the purchase or
sale, including the violator's tax situation, the extent of the
appreciation or depreciation of the Securities involved, and the period
the Securities have been held.
(b) VIOLATIONS OF SECTION III(e).
(1) At its election, the Fund may choose to treat a transaction
prohibited under Section III(e) of this Code as having been made for its
account. Such an election may be made only by a majority vote of the
directors of the Fund who are not Affiliated Persons of RCM. Notice of an
election under this Paragraph (b)(1) shall not be effective unless given
to RCM within sixty (60) days after the Fund is notified of such
transaction. A violator shall be obligated to pay the Fund any sums due to
the Fund pursuant to Paragraph (b)(2) below due to a violation by a member
of the immediate family of such violator.
(2) If securities purchased in violation of Section III(e) of this
Code have been sold by the violator in a bona fide sale, the Fund shall be
entitled to recover the profit made by the violator. If such Securities
are still owned by the violator, or have been disposed of by such violator
other than by a bona fide sale at the time such notice of election is
given by the Fund, the Fund shall be entitled to recover the difference
between the cost of such Securities to the violator and the fair market
value of such Securities on the date the Fund acquired such Securities. If
the violation consists of a sale of Securities in violation of Section
III(e) of this Code, the Fund shall be entitled to recover the difference
between the net sale price per share received by the Fund, multiplied by
the number of shares sold by the violator. Each violation shall be treated
individually and no offsetting or netting of violations shall be
permitted.
(3) Knowledge on the part of the President of the Fund of a
transaction in violation of Section III(e) of this Code shall be deemed to
be notice to the Fund under
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Paragraph V(b)(1). Knowledge on the part of a director or officer of the
Fund who is an Affiliated Person of RCM of a transaction in violation of
this Code shall not be deemed to be notice under Paragraph V(b)(1).
(4) If the Board of Directors of the Fund determines that a
violation of this Code has caused financial detriment to the Fund, upon
reasonable notice to RCM, RCM shall use its best efforts, including such
legal action as may be required, to cause a person who has violated this
Code to deliver to the Fund such Securities, or to pay to the Fund such
sums, as the Fund shall declare to be due under this Section V(b),
provided that:
(A) RCM shall not be required to bring legal action if the
amount recoverable reasonably would not be expected to exceed
$2,500;
(B) in lieu of bringing a legal action against the violator,
RCM may elect to pay to the Fund such sums as the Fund shall declare
to be due under this Section V(b); and
(C) RCM shall have no obligation to bring any legal action if
the violator was not an Affiliated Person of RCM.
(c) RIGHTS OF ALLEGED VIOLATOR. A person charged with a violation of
this Code shall have the opportunity to appear before the Board of Directors as
may have authority to impose sanctions pursuant to this Code, at which time such
person shall have the opportunity, orally or in writing, to deny any and all
charges, set forth mitigating circumstances and set forth reasons why the
sanctions for any violations should not be severe.
(d) NOTIFICATION TO THE PRESIDENT OF THE FUND. The President of the Fund
shall be advised promptly of the initiation and outcome of any enforcement
actions hereunder.
(e) DELEGATION OF DUTIES. The Board of Directors of the Fund may
delegate its enforcement duties under this Article V to a special committee of
the Board of Directors comprised of at least three persons; provided, however,
that no director shall serve on such committee or participate in the
deliberations of the Board of Directors hereunder who is charged with a
violation of this Code.
(f) NON-EXCLUSIVITY OF SANCTIONS. The imposition of sanctions hereunder
by the Board of Directors of RCM shall not preclude the imposition of additional
sanctions by the Board of Directors of the Fund and shall not be deemed a waiver
of any rights by the Fund.
VI. MISCELLANEOUS PROVISIONS
(a) IDENTIFICATION OF ACCESS PERSONS. RCM shall, on behalf of the Fund
identify all Access Persons who are under a duty to make reports under Article
IV and shall inform such persons of such duty.
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(b) MAINTENANCE OF RECORDS. RCM shall, on behalf of the Fund, maintain
and make available records as required by Rule 17j-1(d).
(c) PRIOR CLEARANCE PROCEDURE. Prior to effecting a transaction in a
Security, an Access Person may notify the President or any Vice President of RCM
of the proposed transaction and the name, title and amount of the Security
involved. The President or any Vice President of RCM shall, after investigation,
determine that such proposed transaction would, may or would not be consistent
with this Code. Such conclusion shall be promptly communicated to the Access
Person making such request. Absent extraordinary circumstances, no Access Person
shall be deemed to have violated this Code for effecting a Security transaction
if such Access Person has been advised by the President or any Vice President of
RCM that the transaction would be consistent with this Code. The President or
any Vice President of RCM shall make written records of actions under this
Section VI(c), which records shall be maintained and made available in the
manner required by Rule 17j-1(d). Neither the President nor Vice President can
pre-clear themselves.
(d) Effective Date. The effective date of this Code shall be December 1,
1994.
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